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UNITED STATES OMB Number: 3235-0145
SECURITIES AND EXCHANGE COMMISSION Expires: October 31, 2002
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hours per response....14.90
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SCHEDULE 13D
(RULE 13d-101)
INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT
TO 13d-1(a) AND AMENDMENTS THERETO FILED PURSUANT TO 13d-2(a)
(AMENDMENT NO. *)(1)
HOLLYWOOD CASINO CORPORATION
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(Name of Issuer)
CLASS A COMMON STOCK, $0.0001 PAR VALUE PER SHARE
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(Title Class of Securities)
436132203
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(CUSIP Number)
Kevin DeSanctis, President and Chief Operating Officer
Penn National Gaming, Inc.
825 Berkshire Boulevard, Suite 200
Wyomissing, Pennsylvania 19610
(610) 373-2400
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(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
August 7, 2002
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(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition that is the subject of this Schedule 13D, and is filing
this schedule because of ss.ss.240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check
the following box |_|.
NOTE: Schedules filed in paper format shall include a signed original and
five copies of the schedule, including all exhibits. See ss.240.13d-7 for other
parties to whom copies are to be sent.
- -----------------------
(1) The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject class of
securities, and for any subsequent amendment containing information which would
alter disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 ("Act") or otherwise subject to the liabilities of that section of
the Act but shall be subject to all other provisions of the Act (however, SEE
the NOTES).
CUSIP NO. 436132203 13D PAGE 2 OF 8
--------- --- ---
- -------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION OF ABOVE PERSON
PENN NATIONAL GAMING, INC. 22-2234473
- -------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) / /
(b) /X/
- -------------------------------------------------------------------------------
3 SEC USE ONLY
- -------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
see responses to Items 3 and 4
- -------------------------------------------------------------------------------
5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(D) OR 2(E) / /
- -------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
PENNSYLVANIA
- -------------------------------------------------------------------------------
NUMBER OF SHARES 7 SOLE VOTING POWER
BENEFICIALLY OWNED 100 (see response to Item 5)
BY EACH REPORTING --------------------------------------------------
PERSON WITH 8 SHARED VOTING POWER
13,040,156 shares of Common Stock
(see response to Item 5)
--------------------------------------------------
9 SOLE DISPOSITIVE POWER
100 shares of Common Stock
(see response to Item 5)
--------------------------------------------------
10 SHARED DISPOSITIVE POWER
- -------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
13,040,256 shares of Common Stock (see responses to Items 4 and 5)
- -------------------------------------------------------------------------------
12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
/ /
- -------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
approximately 51.2% as of June 30, 2002 (see response to Item 5)
- -------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON
CO
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*SEE INSTRUCTION BEFORE FILLING OUT
CUSIP NO. 436132203 13D PAGE 3 OF 8
--------- --- ---
ITEM 1. SECURITY AND ISSUER
This Statement relates to Class A Common Stock, par value $0.0001 per share
(the "Common Stock"), of Hollywood Casino Corporation, a Delaware corporation
("Hollywood"). The address of the principal executive offices of Hollywood is
Two Galleria Tower, 13455 Noel Road, Suite 2200, Dallas, Texas 75240.
ITEM 2. IDENTITY AND BACKGROUND
This Statement is filed on behalf of Penn National Gaming, Inc., a
Pennsylvania corporation ("Penn National"). The business address of Penn
National is 825 Berkshire Blvd., Suite 200, Wyomissing Professional Center,
Wyomissing, PA 19610. Set forth on Annex I to this Statement is the name,
present principal occupation or employment and the business address of each of
the persons enumerated in Instruction C of Schedule 13D (the "Additional
Persons"). Each of the Additional Persons is a citizen of the United States.
Penn National expressly disclaims the existence of any "group" within the
meaning of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), between Penn National and any other person, with respect
to the Common Stock. The filing of this Statement and any disclosure contained
in this Statement shall not be construed as an admission that Penn National is,
for the purposes of Section 13(d) or 13(g) of the Exchange Act, the beneficial
owner of any securities covered by this Statement (other than with respect to
the 100 shares of Common Stock of Hollywood directly owned by Penn National).
Penn National is a leading diversified, multi-jurisdictional owner and
operator of gaming properties, as well as horse racetracks and associated
off-track wagering facilities, which are also known as pari-mutuel operations.
Penn National owns or operates six gaming properties located in West Virginia,
Colorado, Mississippi, Louisiana and Ontario, Canada that are focused primarily
on serving customers within driving distance of the properties. Penn National
also owns two racetracks and eleven off-track wagering facilities in
Pennsylvania.
During the past five years, neither Penn National nor any of the Additional
Persons has been convicted in a criminal proceeding (excluding traffic
violations and similar misdemeanors).
During the past five years, neither Penn National nor any of the Additional
Persons has been a party to a civil proceeding of a judicial or administrative
body of competent jurisdiction and as a result of such proceeding was or is
subject to a judgment, decree or final order enjoining future violations of,
prohibiting or mandating activities subject to, federal or state securities laws
or finding any violation with respect to such laws.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
See response to Item 4.
ITEM 4. PURPOSE OF TRANSACTION
On August 7, 2002, Penn National, P Acquisition Corp., a Delaware
corporation and wholly-owned subsidiary of Penn National ("Merger Sub"), and
Hollywood entered into an Agreement and Plan of Merger (the "Merger Agreement"),
pursuant to which, and subject to the terms and conditions thereof, Hollywood
will become a wholly-owned subsidiary of Penn National through the merger of
Merger Sub with and into Hollywood (the "Merger"). Upon the consummation of the
Merger, the composition of the board of directors of Hollywood will change,
Hollywood will be delisted from the American Stock
CUSIP NO. 436132203 13D PAGE 4 OF 8
--------- --- ---
Exchange and Hollywood will cease to be a reporting company for the purposes of
the Securities Exchange Act of 1934.
In connection with the Merger Agreement, Penn National, Hollywood and
certain stockholders of Hollywood executed and delivered Stockholder Agreements,
pursuant to which such stockholders have, among other things, covenanted to vote
in favor of the adoption of and otherwise to support the Merger Agreement. A
copy of the Merger Agreement is attached hereto as Exhibit 1.1. A copy of the
press release dated August 7, 2002 announcing the transactions contemplated by
the Merger Agreement is attached hereto as Exhibit 1.15. Copies of the
Stockholder Agreements are attached hereto as Exhibits 1.2 through 1.13. A copy
of the commitment letter dated August 5, 2002 relating to the transactions
contemplated by the Merger Agreement is attached hereto as Exhibit 1.14. Such
Exhibits are incorporated by reference into this Statement, including Items 3
through 6 herein, and the descriptions contained above, as well as in the
responses to Items 5 and 6 are qualified in their entirety by reference to such
Exhibits.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER
(a) As a result of the execution of the Stockholder Agreements, Penn
National may be deemed to be the beneficial owner of 13,040,156 shares of Common
Stock, which constitute approximately 51.2% of the issued and outstanding shares
Common Stock of Hollywood based on a total of 25,477,625 issued and outstanding
shares of Common Stock of Hollywood as of June 30, 2002 as disclosed by
Hollywood in the Merger Agreement. Penn National also is the direct owner of 100
shares of Common Stock of Hollywood. None of the Additional Persons have any
beneficial ownership of any Common Stock of Hollywood.
(b) As described in the Stockholder Agreements, upon the occurrence of
certain events, Penn National will have voting power over 13,040,156 shares of
the Common Stock with respect to certain actions related to the Merger. Penn
National also has sole voting and dispositive power over 100 shares of Common
Stock of Hollywood that Penn National owns directly.
(c) Other than the transactions that are the subject of this Statement,
neither Penn National nor any of the Additional Persons has effected any
transactions in the Common Stock of Hollywood during the past 60 days.
(d) The following persons have the right to receive or the power to direct
the receipt of dividends from, or the proceeds of the sale of, the shares of
Common Stock of Hollywood that are the subject of this Statement but that are
not directly owned by Penn National:
Edward T. Pratt, Jr. 1,102,544
Edward T. Pratt, III 1,083,713
Sharon Pratt Naftel 479,604
Diana Pratt Wyatt 479,604
Carolyn Pratt Hickey 479,604
Jack E. Pratt, Sr. 4,110,477
C.A. Pratt Partners, Ltd. 1,642,001
MEP Family Partnership 14,000
CLP Family Partnership 7,000
Jack E. Pratt, Sr. as Custodian for Michael Eldon Pratt 487,568
Jack E. Pratt, Sr. as Custodian for Caroline de la Fontaine Pratt 487,568
Jill Pratt LaFerney 408,767
John R. Pratt 521,616
CUSIP NO. 436132203 13D PAGE 5 OF 8
--------- --- ---
Jack E. Pratt, Sr. as trustee under certain trusts for 31,500
the benefit of the family of Jack E. Pratt
Maria A. Pratt 814,970
William D. Pratt 13,200
WDP Family, Ltd. 400,582
WDP Jr. Family Trust 200,294
Michael Shannan Pratt 275,544
Note: In responding to this Item 5, Penn National has relied solely upon the
information and covenants contained in the Stockholder Agreements and the
Exhibits and Schedules that accompany the Stockholder Agreements (see Exhibits
1.2 to 1.13 of this Statement).
(e) Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO SECURITIES OF THE ISSUER
Penn National and certain stockholders of Hollywood have entered into
Stockholder Agreements with respect to certain shares of Common Stock of
Hollywood, pursuant to which such stockholders have, among other things,
covenanted: (i) to vote in favor of the Merger and against certain actions that
would impede or delay the Merger; (ii) subject to approval from any applicable
gaming authorities, in the event that such stockholder does not vote in favor of
the Merger and against certain actions that would impede or delay the Merger, to
irrevocably appoint Penn National or its designees as such stockholder's proxy
to vote in favor of the Merger and against certain actions that would impede or
delay the Merger; and (iii) not to transfer or dispose of any securities held by
such stockholder without Penn National's consent.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS
EXHIBIT NUMBER DESCRIPTION
- -------------- -----------
1.1 - Agreement and Plan of Merger, dated as of August 7, 2002, by and among
Hollywood, Penn National and Merger Sub.
1.2 - Stockholder Agreement, dated as of August 7, 2002, by and among Penn National,
Hollywood and Edward T. Pratt, Jr.
1.3 - Stockholder Agreement, dated as of August 7, 2002, by and among Penn National,
the Hollywood and Lisa Pratt and Edward T. Pratt III
1.4 - Stockholder Agreement, dated as of August 7, 2002, by and among Penn National,
Hollywood, Aileen Pratt and Jack E. Pratt, Sr.
1.5 - Stockholder Agreement, dated as of August 7, 2002, by and among Penn National,
Hollywood and William D. Pratt
1.6 - Stockholder Agreement, dated as of August 7, 2002, by and among Penn National,
Hollywood and Maria A. Pratt
1.7 - Stockholder Agreement, dated as of August 7, 2002, by and among Penn National,
Hollywood and Sharon Pratt Naftel
1.8 - Stockholder Agreement, dated as of August 7, 2002, by and among Penn National,
Hollywood and Diana Pratt Wyatt
1.9 - Stockholder Agreement, dated as of August 7, 2002, by and among Penn National,
Hollywood and Carolyn Pratt Hickey
CUSIP NO. 436132203 13D PAGE 6 OF 8
--------- --- ---
EXHIBIT NUMBER DESCRIPTION
- -------------- -----------
1.10 - Stockholder Agreement, dated as of August 7, 2002, by and among Penn National,
Hollywood and Michael Shannan Pratt
1.11 - Stockholder Agreement, dated as of August 7, 2002, by and among Penn National,
Hollywood and Jill Pratt LaFerney
1.12 - Stockholder Agreement, dated as of August 7, 2002, by and among Penn National,
Hollywood and John R. Pratt
1.13 - Stockholder Agreement, dated as of August 7, 2002, by and among Penn National,
Hollywood and William D. Pratt, Jr.
1.14 - Commitment Letter, dated as of August 5, 2002, by and among Penn National,
Bear, Stearns & Co. Inc., Bear Stearns Corporate Lending Inc. and Merrill
Lynch Capital Corporation
1.15 - Press Release, dated as of August 7, 2002
CUSIP NO. 436132203 13D PAGE 7 OF 8
--------- --- ---
ANNEX I
Additional Persons, as enumerated in Instruction C of Schedule 13D
NAME POSITION BUSINESS ADDRESS
- ---- -------- ----------------
Peter M. Carlino Chairman of the Board and Chief 825 Berkshire Boulevard, Suite 200
Executive Officer Wyomissing, PA 19610
Kevin DeSanctis President and Chief Operating Officer 825 Berkshire Boulevard, Suite 200
Wyomissing, PA 19610
William Clifford Chief Financial Officer 825 Berkshire Boulevard, Suite 200
Wyomissing, PA 19610
Robert S. Ippolito Vice President, Secretary and 825 Berkshire Boulevard, Suite 200
Treasurer Wyomissing, PA 19610
John R. Rauen Vice President/Operations 825 Berkshire Boulevard, Suite 200
Wyomissing, PA 19610
Harold Cramer Member of the Board of Directors and Schnader Harrison Segal & Lewis LLP
Retired Partner, Schnader Harrison 1735 Market Street, Suite 3800
Segal & Lewis LLP Philadelphia, PA 19103
David A. Handler Member of the Board of Directors and Bear Stearns & Co., Inc.
Senior Managing Director, Bear 245 Park Avenue
Stearns & Co., Inc. New York, NY 10167
John M. Jacquemin Member of the Board of Directors and Mooring Financial Corp.
President, Mooring Financial 8614 Westwood Center Drive
Corporation Suite 650
Vienna, VA 22182
Robert P. Levy Member of the Board of Directors and 2 Logan Square
Chairman of the Board of Directors Suite 2450
of DRT Industries, Inc. Philadelphia, PA 19103
CUSIP NO. 436132203 13D PAGE 8 OF 8
--------- --- ---
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Date: August 16, 2002 PENN NATIONAL GAMING, INC.
By: /S/ KEVIN DESANCTIS
---------------------
Name: Kevin DeSanctis
Title: President and Chief
Operating Officer
EXHIBIT 1.1
EXECUTION COPY
================================================================================
AGREEMENT AND PLAN OF MERGER
DATED AS OF AUGUST 7, 2002
AMONG
HOLLYWOOD CASINO CORPORATION,
PENN NATIONAL GAMING, INC.
AND
P ACQUISITION CORP.
================================================================================
TABLE OF CONTENTS
Article I THE MERGER................................................................................1
SECTION 1.1 The Merger......................................................................1
SECTION 1.2 Effective Time..................................................................1
SECTION 1.3 Closing of the Merger...........................................................1
SECTION 1.4 Effects of the Merger...........................................................2
SECTION 1.5 Certificate of Incorporation and Bylaws.........................................2
SECTION 1.6 Directors.......................................................................2
SECTION 1.7 Officers........................................................................2
Article II CONVERSION OF SHARES......................................................................2
SECTION 2.1 Conversion of Shares............................................................2
SECTION 2.2 Stock Options...................................................................3
SECTION 2.3 Exchange Fund...................................................................4
SECTION 2.4 Exchange Procedures.............................................................4
SECTION 2.5 No Further Ownership Rights in Company Common Stock.............................4
SECTION 2.6 Termination of Exchange Fund....................................................4
SECTION 2.7 No Liability....................................................................5
SECTION 2.8 Investment of the Exchange Fund.................................................5
SECTION 2.9 Lost Certificates...............................................................5
SECTION 2.10 Withholding Rights..............................................................5
SECTION 2.11 Stock Transfer Books............................................................5
Article III REPRESENTATIONS AND WARRANTIES OF THE COMPANY.............................................5
SECTION 3.1 Organization and Qualification; Subsidiaries....................................6
SECTION 3.2 Capitalization of the Company and Its Subsidiaries..............................6
SECTION 3.3 Authority Relative to This Agreement; Consents and Approvals....................7
SECTION 3.4 SEC Reports; Financial Statements...............................................8
SECTION 3.5 No Undisclosed Liabilities......................................................9
SECTION 3.6 Absence of Changes..............................................................9
SECTION 3.7 Consents and Approvals; No Violations...........................................9
SECTION 3.8 No Default.....................................................................10
SECTION 3.9 Real Property..................................................................10
i
TABLE OF CONTENTS
(continued)
SECTION 3.10 Litigation.....................................................................11
SECTION 3.11 Compliance with Applicable Law.................................................11
SECTION 3.12 Employee Plans.................................................................11
SECTION 3.13 Labor Matters..................................................................13
SECTION 3.14 Environmental Matters..........................................................14
SECTION 3.15 Tax Matters....................................................................16
SECTION 3.16 Material Contracts.............................................................17
SECTION 3.17 Insurance......................................................................18
SECTION 3.18 Intellectual Property..........................................................18
SECTION 3.19 Opinion of Financial Advisor...................................................19
SECTION 3.20 Brokers........................................................................19
SECTION 3.21 Takeover Statutes..............................................................19
SECTION 3.22 Amendment to the Company Rights Agreement......................................20
SECTION 3.23 Noncompetition Agreements......................................................20
SECTION 3.24 Completeness of Disclosure.....................................................20
Article IV REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB..................................20
SECTION 4.1 Organization...................................................................21
SECTION 4.2 Authority Relative to This Agreement...........................................21
SECTION 4.3 SEC Reports; Financial Statements..............................................21
SECTION 4.4 No Undisclosed Liabilities.....................................................22
SECTION 4.5 Absence of Changes.............................................................22
SECTION 4.6 Consents and Approvals; No Violations..........................................22
SECTION 4.7 Litigation.....................................................................23
SECTION 4.8 Compliance with Applicable Law.................................................23
SECTION 4.9 No Prior Activities............................................................23
SECTION 4.10 Brokers........................................................................23
SECTION 4.11 Financing......................................................................24
SECTION 4.12 No Ownership of Securities.....................................................24
SECTION 4.13 Completeness of Disclosure.....................................................24
ii
TABLE OF CONTENTS
(continued)
Article V COVENANTS RELATED TO CONDUCT OF BUSINESS.................................................24
SECTION 5.1 Conduct of Business of the Company.............................................24
SECTION 5.2 Other Actions..................................................................27
SECTION 5.3 Access to Information..........................................................27
Article VI ADDITIONAL AGREEMENTS....................................................................28
SECTION 6.1 Stockholder Meeting............................................................28
SECTION 6.2 Preparation of the Proxy Statement.............................................28
SECTION 6.3 Company Information Supplied...................................................29
SECTION 6.4 Parent and Merger Sub Information Supplied.....................................29
SECTION 6.5 Efforts; Cooperation...........................................................29
SECTION 6.6 Acquisition Proposals..........................................................31
SECTION 6.7 Public Announcements...........................................................32
SECTION 6.8 Indemnification; Directors' and Officers' Insurance............................33
SECTION 6.9 Notification of Certain Matters................................................34
SECTION 6.10 Employee Matters...............................................................34
SECTION 6.11 SEC Filings....................................................................35
SECTION 6.12 Fees and Expenses..............................................................36
SECTION 6.13 Obligations of Merger Sub......................................................36
SECTION 6.14 Stock Delisting................................................................36
SECTION 6.15 Antitakeover Statutes..........................................................36
SECTION 6.16 Control of the Company's Operations............................................36
SECTION 6.17 Financing......................................................................36
Article VII CONDITIONS TO CONSUMMATION OF THE MERGER.................................................37
SECTION 7.1 Conditions to Each Party's Obligations to Effect the Merger....................37
SECTION 7.2 Conditions to the Obligations of Parent and Merger Sub.........................37
SECTION 7.3 Conditions to the Obligations of the Company...................................38
Article VIII TERMINATION; AMENDMENT; WAIVER...........................................................39
SECTION 8.1 Termination by Mutual Agreement................................................39
SECTION 8.2 Termination by Either Parent or the Company....................................39
SECTION 8.3 Termination by the Company.....................................................40
iii
TABLE OF CONTENTS
(continued)
SECTION 8.4 Termination by Parent..........................................................41
SECTION 8.5 Effect of Termination and Abandonment..........................................41
SECTION 8.6 Termination Amount and Expenses................................................41
SECTION 8.7 Amendment......................................................................42
SECTION 8.8 Extension; Waiver..............................................................42
Article IX MISCELLANEOUS............................................................................43
SECTION 9.1 Nonsurvival of Representations and Warranties..................................43
SECTION 9.2 Entire Agreement; Assignment...................................................43
SECTION 9.3 Notices........................................................................43
SECTION 9.4 Governing Law; Consent to Jurisdiction.........................................44
SECTION 9.5 Descriptive Headings...........................................................45
SECTION 9.6 Parties in Interest............................................................45
SECTION 9.7 Severability...................................................................45
SECTION 9.8 Specific Performance...........................................................45
SECTION 9.9 Counterparts...................................................................45
SECTION 9.10 Interpretation.................................................................45
SECTION 9.11 Definitions....................................................................46
iv
GLOSSARY OF DEFINED TERMS
Defined Terms Defined on Page
- ------------- ---------------
Acquiring Person...........................................................................20
Acquisition Proposal.......................................................................31
Act.........................................................................................8
Agreement...................................................................................1
Antitrust Law..............................................................................30
Assumed Employees..........................................................................35
Audit Date..................................................................................8
Bear.......................................................................................24
Certificate of Merger.......................................................................1
Certificates................................................................................4
Claim......................................................................................11
Class A Preferred Shares....................................................................6
Class B Shares..............................................................................6
Closing.....................................................................................1
Closing Date................................................................................1
Code.......................................................................................46
Commitment Letter..........................................................................24
Company.....................................................................................1
Company Board...............................................................................8
Company Common Stock........................................................................2
Company Disclosure Schedule.................................................................5
Company Financial Advisor..................................................................19
Company Option Plans........................................................................3
Company Permits............................................................................11
Company Requisite Vote......................................................................8
Company Rights Agreement...................................................................20
Company SEC Reports.........................................................................8
Company Securities..........................................................................7
Company Stock Option........................................................................3
Company Stockholder Meeting................................................................28
Confidentiality Agreement..................................................................28
Contracts..................................................................................10
Covered Transactions.......................................................................19
Delaware Court.............................................................................44
DGCL........................................................................................1
Dissenting Shares...........................................................................3
Distribution Date..........................................................................20
Effective Time..............................................................................1
Employee Benefit Plan......................................................................12
Employee Benefit Plans.....................................................................12
Environmental Law..........................................................................14
Environmental Permits......................................................................15
Environmental Reports......................................................................15
i
GLOSSARY OF DEFINED TERMS
(continued)
Defined Terms Defined on Page
- ------------- ---------------
ERISA......................................................................................12
ERISA Affiliate............................................................................12
Exchange Act................................................................................8
Exchange Agent..............................................................................4
Exchange Fund...............................................................................4
Expenses...................................................................................36
Expiration Date............................................................................20
Foreign Sub.................................................................................6
GAAP........................................................................................8
Gaming Authority...........................................................................46
Gaming Law.................................................................................10
Governmental Entity.........................................................................9
Hazardous Materials........................................................................14
HSR Act.....................................................................................9
Indemnified Parties........................................................................33
Indemnified Party..........................................................................33
Intellectual Property......................................................................18
IRS........................................................................................12
know.......................................................................................47
knowledge..................................................................................47
Law........................................................................................10
Lease......................................................................................47
Lien........................................................................................7
Material Adverse Effect....................................................................47
Material Contracts.........................................................................17
Merger......................................................................................1
Merger Consideration........................................................................2
Merger Sub..................................................................................1
Merrill....................................................................................24
Multiemployer Plan.........................................................................12
Nasdaq.....................................................................................22
Parent......................................................................................1
Parent Board...............................................................................21
Parent Disclosure Schedule.................................................................20
Parent Permits.............................................................................23
Parent SEC Reports.........................................................................21
Permitted Exceptions.......................................................................47
person.....................................................................................47
Proxy Statement............................................................................28
real property..............................................................................47
Real Property Leases.......................................................................10
Release....................................................................................15
Rights.....................................................................................20
SEC.........................................................................................8
ii
GLOSSARY OF DEFINED TERMS
(continued)
Defined Terms Defined on Page
- ------------- ---------------
Section 262.................................................................................3
Series A Junior Preferred Shares............................................................6
Series Preferred Shares.....................................................................6
Share.......................................................................................2
Shreveport.................................................................................25
Stock Acquisition Date.....................................................................20
Stockholder Agreements......................................................................1
subsidiary.................................................................................48
Superior Proposal..........................................................................48
Surviving Corporation.......................................................................1
Takeover Statutes..........................................................................19
Tax........................................................................................16
Tax Returns................................................................................16
Termination Amount.........................................................................41
Termination Date...........................................................................39
Termination Payment Date...................................................................41
Triggering Event...........................................................................20
iii
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "AGREEMENT"), dated
as of August 7, 2002 is among HOLLYWOOD CASINO CORPORATION, a Delaware
corporation (the "COMPANY"), PENN NATIONAL GAMING, INC., a Pennsylvania
corporation ("PARENT"), and P ACQUISITION CORP., a Delaware corporation and a
direct wholly owned subsidiary of Parent ("MERGER SUB").
WHEREAS, the Boards of Directors of the Company, Parent and
Merger Sub each have, in light of and subject to the terms and conditions set
forth herein, resolved to deem this Agreement and the transactions contemplated
hereby, including the Merger, taken together, advisable and fair to, and in the
best interests of, their respective stockholders; and
WHEREAS, concurrently with the execution and delivery of
this Agreement, Parent and certain stockholders of the Company are executing and
delivering one or more Stockholder Agreements, dated as of the date hereof, in a
form agreed to by such parties (the "STOCKHOLDER AGREEMENTS") pursuant to which
such stockholders are, among other things, covenanting to vote in favor of the
adoption of and otherwise to support this Agreement.
NOW, THEREFORE, in consideration of the premises and the
representations, warranties, covenants and agreements herein contained, and
intending to be legally bound hereby, the Company, Parent and Merger Sub hereby
agree as follows:
ARTICLE I
THE MERGER
SECTION 1.1 The Merger. At the Effective Time and upon the
terms and subject to the conditions of this Agreement and in accordance with the
Delaware General Corporation Law (the "DGCL"), Merger Sub shall be merged with
and into the Company (the "Merger"). Following the Merger, the Company shall
continue as the surviving corporation (the "SURVIVING CORPORATION") and the
separate corporate existence of Merger Sub shall cease.
SECTION 1.2 Effective Time. Subject to the provisions of
this Agreement, Parent, Merger Sub and the Company shall cause the Merger to be
consummated by filing an appropriate Certificate of Merger or other appropriate
documents (the "CERTIFICATE OF MERGER") with the Secretary of State of the State
of Delaware in such form as required by, and executed in accordance with, the
relevant provisions of the DGCL, as soon as practicable on or after the Closing
Date. The Merger shall become effective upon such filing or at such time
thereafter as is provided in the Certificate of Merger (the "EFFECTIVE TIME").
SECTION 1.3 Closing of the Merger. The closing of the
Merger (the "CLOSING") will take place at a time and on a date to be specified
by the parties (the "CLOSING DATE"), which shall be no later than the second
business day after satisfaction or waiver of the conditions set forth in Article
VII (other than those conditions that by their nature are to be satisfied at the
Closing, but subject to the fulfillment or waiver of those conditions), at the
offices of Morgan, Lewis & Bockius LLP, 1701 Market Street, Philadelphia,
Pennsylvania 19103, or at such other time, date or place as agreed to in writing
by the parties hereto.
SECTION 1.4 Effects of the Merger. 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 the properties,
rights, privileges, powers and franchises of the Company and Merger Sub shall
vest in the Surviving Corporation, and all debts, liabilities and duties of the
Company and Merger Sub shall become the debts, liabilities and duties of the
Surviving Corporation.
SECTION 1.5 Certificate of Incorporation and Bylaws. The
certificate of incorporation of Merger Sub in effect at the Effective Time shall
be the certificate of incorporation of the Surviving Corporation, except that
Article I of the certificate of incorporation of the Surviving Corporation shall
read "The name of the corporation is "Hollywood Casino Corporation"" until
amended in accordance with applicable Law. The bylaws of the Merger Sub in
effect at the Effective Time shall be the bylaws of the Surviving Corporation
until amended in accordance with applicable Law.
SECTION 1.6 Directors. The directors of Merger Sub at the
Effective Time shall be the initial directors of the Surviving Corporation, to
hold office in accordance with the certificate of incorporation and bylaws of
the Surviving Corporation until their successors are duly elected or appointed
and qualified or until their earlier death, resignation or removal.
SECTION 1.7 Officers. The officers of Merger Sub at the
Effective Time shall be the initial officers of the Surviving Corporation, to
hold office in accordance with the certificate of incorporation and bylaws of
the Surviving Corporation until their successors are duly elected or appointed
and qualified or until their earlier death, resignation or removal.
ARTICLE II
CONVERSION OF SHARES
SECTION 2.1 Conversion of Shares. (a) At the Effective
Time, each outstanding share of the common stock, par value $0.01 per share, of
Merger Sub shall, by virtue of the Merger and without any action on the part of
Parent, Merger Sub or the Company, be converted into one fully paid and
non-assessable share of common stock, par value $0.01 per share, of the
Surviving Corporation.
(b) At the Effective Time, each share of Class A common
stock, par value $0.0001 per share, of the Company including the associated
Rights ("COMPANY COMMON STOCK") issued and outstanding immediately prior to the
Effective Time (individually, a "SHARE" and collectively, the "SHARES") (other
than (i) Shares held by the Company, (ii) Shares held by Parent, Merger Sub or
any other subsidiary of Parent and (iii) any Dissenting Shares) shall, by virtue
of the Merger and without any action on the part of Merger Sub, the Company or
any holder thereof, be converted into and be exchangeable for the right to
receive $12.75, without interest, in cash (the "MERGER CONSIDERATION"). At the
Effective Time, the Shares will no longer be outstanding and will automatically
2
be cancelled and retired and will cease to exist, and each holder of a
certificate representing such Share immediately prior to the Effective Time will
cease to have any rights with respect thereto, except the right to receive the
Merger Consideration upon surrender of such certificate in accordance with
Section 2.4.
(c) At the Effective Time, each Share held by Parent,
Merger Sub, any other subsidiary of Parent, or the Company immediately prior to
the Effective Time shall, by virtue of the Merger and without any action on the
part of Merger Sub, the Company or any holder thereof, be canceled, retired and
cease to exist and no payment shall be made with respect thereto.
(d) Notwithstanding anything in this Agreement to the
contrary, shares of Company Common Stock (the "DISSENTING SHARES") issued and
outstanding immediately prior to the Effective Time that are held by any holder
who is entitled to demand and properly demands appraisal of such shares pursuant
to, and who complies in all respects with, the provisions of Section 262 of the
DGCL ("SECTION 262") shall not be converted into the right to receive the Merger
Consideration as provided in Section 2.1(b), but instead such holder shall be
entitled to payment of the fair value of such shares in accordance with the
provisions of Section 262. At the Effective Time, all Dissenting Shares shall no
longer be outstanding and shall automatically be canceled and shall cease to
exist, and each holder of Dissenting Shares shall cease to have any rights with
respect thereto, except the right to receive the fair value of such shares in
accordance with the provisions of Section 262. Notwithstanding the foregoing, if
any such holder shall fail to perfect or otherwise shall waive, withdraw or lose
the right to appraisal under Section 262 or a court of competent jurisdiction
shall determine that such holder is not entitled to the relief provided by
Section 262, then the right of such holder to be paid the fair value of such
holder's Dissenting Shares under Section 262 shall cease and such Dissenting
Shares shall be deemed to have been converted at the Effective Time into, and
shall have become, the right to receive the Merger Consideration as provided in
Section 2.1(b). The Company shall give Parent (i) prompt notice of any written
demands to assert dissenters' rights that are received by the Company with
respect to Shares and (ii) the right to participate in all negotiations and
proceedings with respect to any such demands. The Company shall not, without the
prior written consent of Parent, voluntarily make any payment with respect to or
settle any such demands.
SECTION 2.2 Stock Options. As soon as practicable following
the date of this Agreement, Parent and the Company (or, if appropriate, any
committee of the Company Board administering the Company's 1996 Non-Employee
Director Stock Plan or 1996 Long-Term Incentive Plan (collectively, the "COMPANY
OPTION PLANS")) shall take such action as may be required to effect the
following provisions of this Section 2.2. As of the Effective Time each option
to purchase Shares pursuant to the Company Option Plans (each a "COMPANY STOCK
OPTION") which is then outstanding and has not been exercised shall, by virtue
of the Merger and without any action on the part of Merger Sub, the Company or
any holder thereof, be converted into and exchangeable for the right to receive
an amount equal to the Merger Consideration in cash, less an amount equal to (a)
the exercise price for such Company Stock Option plus (b) any applicable tax
withholding amounts. Notwithstanding the preceding sentence, any Company Stock
Option with respect to which the applicable exercise price is greater than or
equal to the Merger Consideration shall be fully exercisable prior to the
Effective Time in accordance with the terms of the Company Option Plans, and any
such Company Stock Option that is not exercised prior to the Effective Time
3
shall be cancelled as of the Effective Time. The Surviving Corporation shall pay
the cash consideration to be paid for the Company Stock Options, via check, as
promptly as practicable but, in any event, within ten (10) business days after
the Effective Time.
SECTION 2.3 Exchange Fund. Prior to the Effective Time,
Parent shall appoint a commercial bank or trust company reasonably acceptable to
the Company to act as exchange agent hereunder for the purpose of exchanging
Shares for the Merger Consideration (the "EXCHANGE AGENT"). At or prior to the
Effective Time, Parent shall deposit with the Exchange Agent, in trust for the
benefit of holders of Shares, the cash payable pursuant to Section 2.1(b) in
exchange for outstanding Shares. The cash deposited with the Exchange Agent
shall hereinafter be referred to as the "EXCHANGE FUND."
SECTION 2.4 Exchange Procedures. As soon as reasonably
practicable after the Effective Time, the Surviving Corporation shall cause the
Exchange Agent to mail to each holder of a certificate or certificates which
immediately prior to the Effective Time represented outstanding Shares (the
"CERTIFICATES") (a) a letter of transmittal which shall specify that delivery
shall be effective, and risk of loss and title to the Certificates shall pass,
only upon delivery of the Certificates to the Exchange Agent, and which letter
shall be in customary form and have such other provisions as Parent may
reasonably specify; and (b) instructions for effecting the surrender of such
Certificates in exchange for the Merger Consideration. Upon surrender of a
Certificate to the Exchange Agent together with such letter of transmittal, duly
executed and completed in accordance with the instructions thereto, and such
other documents as may reasonably be required by the Exchange Agent, the holder
of such Certificate shall be entitled to receive in exchange therefor a check in
the amount equal to the cash that such holder has the right to receive pursuant
to the provisions of this Article II. No interest will be paid or will accrue on
any cash payable upon the surrender of the Certificates. If payment is made to a
person other than the person in whose name the surrendered Certificate is
registered, it will be a condition of payment that the Certificate so
surrendered will be properly endorsed or otherwise be in proper form for
transfer and that the person requesting such payment shall (i) pay any transfer
or other taxes required by reason of the payment of the Merger Consideration to
a person other than the registered holder of the surrendered Certificate or (ii)
establish to the satisfaction of the Surviving Corporation that such tax has
been paid or is not applicable.
SECTION 2.5 No Further Ownership Rights in Company Common
Stock. All cash paid upon conversion of the Shares in accordance with the terms
of Article I and this Article II shall be deemed to have been paid in full
satisfaction of all rights pertaining to the Shares.
SECTION 2.6 Termination of Exchange Fund. Any portion of
the Exchange Fund which remains undistributed to the holders of Certificates for
one year after the Effective Time shall be delivered to the Surviving
Corporation or otherwise on the instruction of the Surviving Corporation, and
any holders of the Certificates who have not theretofore complied with this
Article II shall thereafter look only to the Surviving Corporation and Parent
for the Merger Consideration with respect to the Shares formerly represented
thereby to which such holders are entitled pursuant to Section 2.1(b) and
Section 2.4. Any such portion of the Exchange Fund remaining unclaimed by
holders of Shares five (5) years after the Effective Time (or such earlier date
4
immediately prior to such time as such amounts would otherwise escheat to or
become subject to the abandoned property Law of any Governmental Entity) shall,
to the extent permitted by Law, become the property of the Surviving Corporation
free and clear of any claims or interest of any person previously entitled
thereto.
SECTION 2.7 No Liability. None of Parent, Merger Sub, the
Company, the Surviving Corporation or the Exchange Agent shall be liable to any
person in respect of any Merger Consideration from the Exchange Fund delivered
to a public official pursuant to any applicable abandoned property, escheat or
similar Law.
SECTION 2.8 Investment of the Exchange Fund. The Exchange
Agent shall invest any cash included in the Exchange Fund as directed by Parent
on a daily basis. Any interest and other income resulting from such investments
shall promptly be paid to Parent.
SECTION 2.9 Lost Certificates. If any Certificate shall
have been lost, stolen or destroyed, upon the making of an affidavit of that
fact by the person claiming such Certificate to be lost, stolen or destroyed
and, if required by Parent, the posting by such person of a bond in the form
reasonably required by the Parent as indemnity against any claim that may be
made against it with respect to such Certificate, the Exchange Agent will
deliver in exchange for such lost, stolen or destroyed Certificate the
applicable Merger Consideration with respect to the Shares formerly represented
thereby.
SECTION 2.10 Withholding Rights. Each of the Surviving
Corporation and Parent shall be entitled to deduct and withhold from the Merger
Consideration otherwise payable pursuant to this Agreement to any holder of
Shares such amounts as it is required to deduct and withhold with respect to the
making of such payment under the Code and the rules and regulations promulgated
thereunder, or any provision of a Tax Law. To the extent that amounts are so
deducted and withheld by the Surviving Corporation or Parent, as the case may
be, such deducted and withheld amounts shall be treated for all purposes of this
Agreement as having been paid to the holder of the Shares in respect to which
such deduction and withholding were made by the Surviving Corporation or Parent,
as the case may be.
SECTION 2.11 Stock Transfer Books. The stock transfer books
of the Company shall be closed immediately upon the Effective Time and there
shall be no further registration of transfers of Shares thereafter on the
records of the Company. On or after the Effective Time, any Certificates
presented to the Exchange Agent or Parent for any reason shall be converted into
the Merger Consideration with respect to the Shares formerly represented
thereby.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the disclosure schedule delivered by
the Company to Parent prior to the execution of this Agreement (the "COMPANY
DISCLOSURE SCHEDULE") (each section of which qualifies the correspondingly
numbered representation and warranty or covenant to the extent specified
5
therein), the Company hereby represents and warrants to each of Parent and
Merger Sub as follows:
SECTION 3.1 Organization and Qualification; Subsidiaries.
(a) The Company and each of its subsidiaries is a corporation or legal entity
duly organized, validly existing and in good standing under the Laws of the
jurisdiction of its incorporation and has all requisite corporate, partnership
or similar power and authority to own, lease and operate its properties and to
carry on its business as now conducted and proposed by the Company to be
conducted. For purposes of this Section 3.1, the concept of good standing
applies to any of the Foreign Subs only to the extent that such concept is
recognized and exists under the Laws of the jurisdiction of incorporation or
organization of such Foreign Sub.
(b) Section 3.1 of the Company Disclosure Schedule sets
forth a list of all subsidiaries of the Company. Except as listed in Section 3.1
of the Company Disclosure Schedule, the Company does not own, directly or
indirectly, beneficially or of record, any shares of capital stock or other
security of any other entity or any other investment in any other entity.
(c) Each of the Company and its subsidiaries is duly
qualified or licensed and in good standing to do business 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 duly qualified or licensed and in good standing does
not and would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on the Company. None of the Company's
subsidiaries located in Argentina or Mexico (collectively, the "FOREIGN SUBS"),
has any assets valued, individually or in the aggregate, at more than $25,000,
and none of the Foreign Subs has conducted any business to date.
(d) The Company has heretofore made available or delivered
to Parent accurate and complete copies of the certificate of incorporation and
bylaws (or other similar governing instruments), as currently in effect, of the
Company and each of its subsidiaries.
SECTION 3.2 Capitalization of the Company and Its
Subsidiaries. (a) The authorized capital stock of the Company consists of: (i)
50,000,000 shares of Company Common Stock, of which 25,477,625 shares were
issued and outstanding and 117,831 shares of which are held in the Company's
treasury, each as of the close of business on June 30, 2002; (ii) 10,000,000
shares of Class B common stock, par value $0.0001 per share (the "CLASS B
SHARES"), of which no Class B Shares are issued and outstanding; (iii) 15,000
shares of Class A cumulative preferred stock, par value $0.01 per share (the
"CLASS A PREFERRED SHARES"), of which no Class A Preferred Shares are issued and
outstanding; (iv) 15,000,000 shares of Series preferred stock, par value $0.01
per share (the "SERIES PREFERRED SHARES"), of which no Series Preferred Shares
are issued and outstanding; and (v) 1,000,000 shares of Series A junior
participating preferred stock, par value $0.01 per share (the "SERIES A JUNIOR
PREFERRED SHARES"), of which no Series A Junior Preferred Shares are issued and
outstanding. All of the issued and outstanding Shares have been validly issued,
and are duly authorized, fully paid, non-assessable and free of preemptive
rights. As of June 30, 2002, 2,180,040 shares of Company Common Stock were
reserved for issuance and issuable upon or otherwise deliverable in connection
with the exercise of outstanding Company Stock Options issued pursuant to the
6
Company Option Plans. Since March 31, 2002, (a) no shares of the Company's
capital stock have been issued other than pursuant to Company Stock Options
already in existence on such date, (b) no Company Stock Options have been
granted and (c) other than in connection with the cashless exercise of any
Company Stock Options, there has been no declaration or payment of any dividend
or other distribution and no repurchase of shares of capital stock of the
Company. Except as set forth above, as of the date hereof, there are outstanding
(i) no shares of capital stock or other voting securities of the Company; (ii)
no securities of the Company or any of its subsidiaries convertible into or
exchangeable for shares of capital stock or voting securities of the Company;
(iii) except for the Company Rights Agreement, no options or other rights to
acquire from the Company or any of its subsidiaries, and no obligations of the
Company or any of its subsidiaries to issue, any capital stock, voting
securities or securities convertible into or exchangeable for capital stock or
voting securities of the Company; and (iv) no equity equivalents, interests in
the ownership or earnings of the Company or any of its subsidiaries or other
similar rights (including stock appreciation rights) (collectively, "COMPANY
SECURITIES"). Other than in connection with the cashless exercise of any Company
Stock Options, there are no outstanding obligations of the Company or any of its
subsidiaries to repurchase, redeem or otherwise acquire any Company Securities.
There are no stockholder agreements, voting trusts or other agreements or
understandings to which the Company or any of its subsidiaries is a party
relating to the voting of any shares of capital stock of the Company. Section
3.2(a) of the Company Disclosure Schedule sets forth information regarding the
current exercise price, date of grant and number granted of Company Stock
Options for each holder thereof. Following the Effective Time, no holder of
Company Stock Options will have any right to receive shares of common stock of
the Surviving Corporation upon exercise of the Company Stock Options.
(b) Except as set forth in Section 3.2(b) of the Company
Disclosure Schedule, all of the outstanding capital stock of the Company's
subsidiaries is owned by the Company, directly or indirectly, free and clear of
any Lien, other than Permitted Exceptions, or any other limitation or
restriction (including any restriction on the right to vote or sell the same,
except as may be provided as a matter of Law). Except as set forth in Section
3.2(b) of the Company Disclosure Schedule, there are no securities of the
Company or its subsidiaries convertible into or exchangeable for, no options or
other rights to acquire from the Company or its subsidiaries, and no other
contract, understanding, arrangement or obligation (whether or not contingent)
providing for the issuance or sale, directly or indirectly of, any capital stock
or other ownership interests in, or any other securities of, any subsidiary of
the Company. There are no outstanding contractual obligations of the Company or
its subsidiaries to repurchase, redeem or otherwise acquire any outstanding
shares of capital stock or other ownership interests in any subsidiary of the
Company. For purposes of this Agreement, "LIEN" means any mortgage, lien, claim,
pledge, option, charge, right of first refusal, agreement, limitation on the
Company's or any subsidiary of the Company's voting rights, security interest or
other encumbrance of any kind or nature whatsoever. Except as set forth in
Section 3.2(b) of the Company Disclosure Schedule, there are no outstanding
contractual obligations of the Company or any of the Company's subsidiaries to
provide funds to, or make any investment (in the form of a loan, capital
contribution or otherwise) in, any subsidiary of the Company that is not wholly
owned by the Company or to or in any other person.
SECTION 3.3 Authority Relative to This Agreement; Consents
and Approvals. (a) The Company has all necessary corporate power and authority
to execute and deliver this Agreement and to consummate the transactions
7
contemplated hereby. No other corporate proceedings on the part of the Company
are necessary to authorize this Agreement or to consummate the transactions
contemplated hereby (other than, with respect to the Merger and this Agreement,
the Company Requisite Vote). This Agreement has been duly and validly executed
and delivered by the Company and constitutes a valid, legal and binding
agreement of the Company, enforceable against the Company in accordance with its
terms.
(b) The Board of Directors of the Company (the "COMPANY
BOARD") has duly and validly authorized the execution and delivery of this
Agreement and approved the consummation of the transactions contemplated hereby,
and has taken all corporate actions required to be taken by the Company Board
for the consummation of the transactions, including the Merger, contemplated
hereby and has resolved (i) to deem this Agreement and the transactions
contemplated hereby, including the Merger, taken together, advisable and fair
to, and in the best interests of, the Company and its stockholders; and (ii) to
recommend that the stockholders of the Company approve and adopt this Agreement.
The Company Board has directed that this Agreement be submitted to the
stockholders of the Company for their approval. The affirmative approval of the
holders of Shares representing a majority of the votes that may be cast by the
holders of all outstanding Shares (voting as a single class) as of the record
date for the Company (the "COMPANY REQUISITE VOTE") is the only vote of the
holders of any class or series of capital stock of the Company necessary to
adopt this Agreement and approve the transactions contemplated hereby, including
the Merger.
SECTION 3.4 SEC Reports; Financial Statements. The Company
and each of its subsidiaries that files forms, reports and documents with the
Securities and Exchange Commission (the "SEC") have filed all required forms,
statements, reports and documents with the SEC since the later of January 1,
1999 or the date on which any such filing obligation arose (collectively, the
"COMPANY SEC REPORTS"), each of which has complied in all material respects with
all applicable requirements of the Securities Act of 1933, as amended (the
"ACT"), the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), or
both, as the case may be, each as in effect on the dates such Company SEC
Reports were filed. Except as set forth in Section 3.4 of the Company Disclosure
Schedule or as and to the extent amended, modified, restated or revised in any
subsequent Company SEC Report filed prior to the date of this Agreement, none of
the Company SEC Reports, including any financial statements or schedules
included or incorporated by reference therein, contained, when filed, any untrue
statement of a material fact or omitted to state a material fact required to be
stated or incorporated by reference therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The financial statements of the Company and its subsidiaries,
including all related notes and schedules, contained in the Company SEC Reports
complied as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto, have been prepared in accordance with United States generally accepted
accounting principles ("GAAP") applied on a consistent basis during the periods
involved (except as may be indicated in the notes thereto), and fairly present
(on a consolidated basis, if applicable) (i) the financial position of the
Company or its subsidiary providing the financial statements, as applicable, as
of the dates thereof, and (ii) its results of operations, cash flows and changes
in stockholders' equity for the periods then ended (subject, in the case of the
unaudited interim financial statements, to normal year-end adjustments). Since
December 31, 2001 (the "AUDIT DATE"), there has not been any material change, or
8
any application or request for any material change, by the Company or any of its
subsidiaries in accounting principles, methods or policies for financial
accounting or Tax purposes (subject, in the case of the unaudited interim
financial statements, to normal year-end adjustments).
SECTION 3.5 No Undisclosed Liabilities. Except as and to
the extent publicly disclosed by the Company in the Company SEC Reports filed
prior to the date of this Agreement or as set forth in Section 3.5 of the
Company Disclosure Schedule, none of the Company or its subsidiaries has any
liabilities or obligations of any nature, whether or not accrued, contingent or
otherwise, and whether due or to become due or asserted or unasserted, whether
or not required by GAAP to be reflected in, reserved against or otherwise
described in the consolidated balance sheet of the Company or any of its
subsidiaries (in each case including the notes thereto), which have or would
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on the Company. Except as set forth in the Company SEC Reports
filed prior to the date of this Agreement or in Section 3.5 of the Company
Disclosure Schedule, there are no related-party transactions or off-balance
sheet structures or transactions with respect to the Company or any of its
subsidiaries that would be required to be reported or set forth therein pursuant
to the Exchange Act or the rules promulgated by the SEC thereunder.
SECTION 3.6 Absence of Changes. Except as and to the extent
publicly disclosed by the Company in the Company SEC Reports filed prior to the
date of this Agreement or in Section 3.6 of the Company Disclosure Schedule,
since the Audit Date, the business of the Company and each of its three
principal casino operating subsidiaries has been carried on only in the ordinary
and usual course consistent with past practice, and none of the Company or its
subsidiaries has incurred any liabilities of any nature, whether or not accrued,
contingent or otherwise, which do or which would reasonably be expected to have,
and there have been no events, changes or effects with respect to the Company or
its subsidiaries which do or which would reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on the Company.
SECTION 3.7 Consents and Approvals; No Violations. (a)
Except for such filings, permits, authorizations, consents and approvals as may
be required by or under, and other applicable requirements of, the Act, the
Exchange Act, state securities or blue sky Laws, the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR ACT"), the American Stock
Exchange, any Gaming Authority, such filings, permits, authorizations, consents
and approvals relating or applicable to Parent or any of its subsidiaries and
not the Company or any of its subsidiaries, the filing and recordation of the
Certificate of Merger as required by the DGCL or as otherwise set forth in
Sections 3.7(a) or (b) to the Company Disclosure Schedule, no filing with or
notice to, and no permit, authorization, consent or approval of, any court or
tribunal or administrative, governmental or regulatory body, agency or
authority, including any Gaming Authority (a "GOVERNMENTAL ENTITY"), is
necessary for the execution and delivery by the Company of this Agreement or the
consummation by the Company of the transactions contemplated hereby, except
where the failure to obtain such permits, authorizations, consents or approvals
or to make such filings or give such notice would not and would not reasonably
be expected to, individually or in the aggregate, (i) materially impair,
materially delay, or prevent the performance of this Agreement or the Merger, or
(ii) materially impair the ability of the Surviving Corporation and its
9
subsidiaries to conduct their respective businesses in a substantially similar
manner as conducted by the Company and the Company's subsidiaries prior to the
Effective Time.
(b) Except as set forth in Section 3.7(b) to the Company
Disclosure Schedule, neither the execution, delivery and performance of this
Agreement by the Company nor the consummation by the Company of the transactions
contemplated hereby will (i) conflict with or result in any breach of any
provision of the respective certificate or articles of incorporation or bylaws
(or similar governing documents) of the Company or any of its subsidiaries, (ii)
result in a violation or breach of, or constitute (with or without due notice or
lapse of time or both) a default (or give rise to any right of termination,
amendment, cancellation or acceleration or Lien (other than Permitted
Exceptions)) under, any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, lease, license, contract, agreement or other
instrument or obligation (collectively, "CONTRACTS") to which the Company or any
of its subsidiaries is a party or by which any of them or any of their
respective properties or assets may be bound, or (iii) violate any Law
(including any Gaming Law) applicable to the Company or any of its subsidiaries
or any of their respective properties or assets or any Company Permit, except in
the case of (ii) or (iii) for violations, breaches or defaults which do not or
would not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on the Company.
SECTION 3.8 No Default. Neither the Company nor any of its
subsidiaries are in violation of any term of (a) its certificate of
incorporation, bylaws or other organizational documents, (b) any Contract or (c)
any foreign or domestic law, order, writ, injunction, decree, ordinance, award,
stipulation, statute, judicial or administrative doctrine, rule or regulation
entered by a Governmental Entity including any Gaming Law ("LAW") applicable to
the Company or any of its subsidiaries or any of their respective properties or
assets, the consequence of which violation does or would reasonably be expected
to (i) have, individually or in the aggregate, a Material Adverse Effect on the
Company or (ii) prevent or materially delay the performance of this Agreement by
the Company.
SECTION 3.9 Real Property. (a) Section 3.9(a) of the
Company Disclosure Schedule sets forth all of the material real property owned
in fee by the Company and its subsidiaries. Each of the Company and its
subsidiaries has good and marketable title to each parcel of real property owned
by it, free and clear of all Liens, other than Permitted Exceptions.
(b) Section 3.9(b) of the Company Disclosure Schedule sets
forth all material leases, subleases and other agreements (the "REAL PROPERTY
LEASES") under which the Company or any of its subsidiaries uses or occupies or
has the right to use or occupy, now or in the future, any real property. Each
Real Property Lease constitutes the valid and legally binding obligation of the
Company or its subsidiary that is a party thereto, as the case may be,
enforceable in accordance with its terms (except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer and similar Laws of general applicability relating to or
affecting creditors' rights or by general equity principles), and is in full
force and effect. All rents and other sums and charges payable by the Company
and its subsidiaries as tenants under the Real Property Leases are materially
current and no termination event or condition or uncured default of a material
nature on the part of the Company or any such subsidiary or, to the Company's
knowledge, the landlord, exists under any Real Property Lease. Each of the
10
Company and its subsidiaries has a good and valid leasehold interest in each
parcel of real property leased by it, free and clear of all Liens, other than
Permitted Exceptions.
(c) No party to any Real Property Lease has given written
notice to the Company or any of its subsidiaries of or made a claim against the
Company or any of its subsidiaries with respect to, any breach or default
thereunder, in any such case in which such breach or default does or would
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on the Company.
SECTION 3.10 Litigation. Except as disclosed in Section
3.10 of the Company Disclosure Schedule or any of the Company SEC Reports filed
after January 1, 2002 but prior to the date of this Agreement, there is no
claim, action, proceeding or known investigation (collectively, "CLAIM") pending
or, to the Company's knowledge, threatened against the Company or any of its
subsidiaries or any of their respective properties or assets, including by or
before any Governmental Entity, which (a) does or would reasonably be expected
to have, individually or in the aggregate, a Material Adverse Effect on the
Company or (b) as of the date hereof, questions the validity of this Agreement
or any action to be taken by the Company in connection with the consummation of
the transactions contemplated hereby or could otherwise prevent or delay the
consummation of the transactions contemplated by this Agreement. Except as
disclosed in Section 3.10 of the Company Disclosure Schedule or any of the
Company SEC Reports filed after January 1, 2002 but prior to the date of this
Agreement, none of the Company or its subsidiaries is subject to any outstanding
order, writ, injunction or decree which does or would reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect on the
Company.
SECTION 3.11 Compliance with Applicable Law. The Company
and its subsidiaries hold all permits, licenses, variances, exemptions, orders
and approvals of all Governmental Entities necessary for the lawful conduct of
their respective businesses (the "COMPANY PERMITS"), except for failures to hold
such permits, licenses, variances, exemptions, orders and approvals which do not
or would not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on the Company. Except as set forth in Section 3.11 of
the Company Disclosure Schedule, the Company and its subsidiaries and each of
their respective "key persons" (as defined under applicable Gaming Law) are in
compliance with the terms of the Company Permits, except where the failure to so
comply does not or would not reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect on the Company. The businesses of the
Company and its subsidiaries are not being conducted in violation of any Law
applicable to the Company or its subsidiaries, except for violations or possible
violations which do not and would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on the Company.
Except as set forth in Section 3.11 of the Company Disclosure Schedule, to the
Company's knowledge, no investigation or review by any Governmental Entity with
respect to the Company or its subsidiaries is pending or threatened, nor, to the
Company's knowledge, has any Governmental Entity indicated an intention to
conduct the same, other than those which do not or would not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect on
the Company.
SECTION 3.12 Employee Plans. (a) Section 3.12(a) of the
Company Disclosure Schedule sets forth a true and complete list, as of the date
hereof, of all material "employee benefit plans," as defined in Section 3(3) of
11
the Employment Retirement Income Security Act of 1974, as amended ("ERISA"), all
material employment, severance, individual consulting, individual compensation
or similar agreements, and all material bonus, profit sharing or other incentive
compensation, executive compensation, stock option or other stock-related
rights, deferred compensation, stock purchase, vacation pay, salary
continuation, hospitalization, medical or other health benefits, life insurance
or other insurance coverage, workers' compensation, supplemental unemployment
benefits, retirement benefit, retiree welfare benefit coverage, scholarship or
other educational assistance, or similar agreements (in each case, whether
written or unwritten) for which the Company or any ERISA Affiliate has any
obligation or liability (contingent or otherwise) with respect to any current or
former employee of the Company or any of its subsidiaries (each an "EMPLOYEE
BENEFIT PLAN" and collectively, the "EMPLOYEE BENEFIT PLANS"). For purposes of
this Agreement, "ERISA AFFILIATE" means any Person that, together with the
Company, would be treated as a single employer under Section 414 of the Code or
Section 4001 of ERISA and any general partnership of which the Company is or has
been a general partner. Except as set forth on Section 3.12(a) of the Company
Disclosure Schedule, none of the Employee Benefit Plans is a multiemployer plan,
as defined in Section 3(37) of ERISA ("MULTIEMPLOYER PLAN"), or is or has been
subject to Sections 4063 or 4064 of ERISA ("MULTIPLE EMPLOYER PLANS"), and
neither the Company nor any ERISA Affiliate contributes to or has any liability
under any Multiemployer Plan.
(b) True, correct and complete copies of the following
documents, to the extent such documents are applicable with respect to each of
the Employee Benefit Plans (other than a Multiemployer Plan) have been made
available or delivered to Parent by the Company: (i) any plans and related trust
documents, and amendments thereto; (ii) the most recent Forms 5500 and schedules
thereto; (iii) the most recent Internal Revenue Service ("IRS") determination
letter; (iv) the most recent financial statements and actuarial valuations
prepared for such Employee Benefit Plans, if applicable; and (v) the most recent
summary plan descriptions.
(c) To the knowledge of the Company, except as disclosed in
Section 3.12(c) of the Company Disclosure Schedule: (i) all material payments
required to be made by or under any Employee Benefit Plan, any related trusts,
or any collective bargaining agreement or pursuant to Law have been made by the
due date thereof (including any valid extension); (ii) the Company and its ERISA
Affiliates have timely performed in all material respects all obligations
required to be performed by them under any Employee Benefit Plan; (iii) the
Employee Benefit Plans, have been administered in compliance with their terms
and the requirements of ERISA, the Code and other applicable Laws; (iv) there
are no actions, suits, arbitrations or claims (other than routine claims for
benefit) pending or, to the Company's knowledge, threatened with respect to any
Employee Benefit Plan; and (v) the Company and its ERISA Affiliates have no
liability as a result of any "prohibited transaction" (as defined in Section 406
of ERISA and Section 4975 of the Code) for any excise Tax or civil penalty.
(d) Except as set forth in Section 3.12(d) of the Company
Disclosure Statement:
(i) None of the Employee Benefit Plans is subject to Title IV of
ERISA. Neither the Company nor any ERISA Affiliate has any
liability under Title IV of ERISA.
12
(ii) Neither the Company nor any ERISA Affiliate or any
organization to which the Company or any ERISA Affiliate is a
successor or parent corporation, within the meaning of Section
4069(b) of ERISA, has engaged in any transaction within the
last five years which might be alleged to come within the
meaning of Section 4069 of ERISA.
(e) To the knowledge of the Company, each of the Employee
Benefit Plans which is intended to be "qualified" within the meaning of Section
401(a) of the Code has been determined by the IRS to be so "qualified" and the
trusts maintained pursuant thereto are exempt from federal income taxation under
Section 501 of the Code, and the Company knows of no fact which would adversely
affect the qualified status of any such Employee Benefit Plan or the exemption
of such trust in each case, in a manner that would result in a material
liability to the Company or any ERISA Affiliate.
(f) Except as set forth in Section 3.12(f) of the Company
Disclosure Schedule or as required by other applicable Law, none of the Employee
Benefit Plans provide for continuing retiree health, retiree medical or retiree
life insurance coverage for any participant or any beneficiary of a participant.
(g) Except as set forth in Section 3.12(g) of the Company
Disclosure Schedule, no stock or other security issued by the Company forms or
has formed a material part of the assets of any Employee Benefit Plan.
(h) Except as contemplated by this Agreement or disclosed
in Section 3.12(h) of the Company Disclosure Schedule, neither the execution and
delivery of this Agreement nor the consummation of the transactions contemplated
hereby will by itself or in combination with any other event: (i) result in any
bonus, retirement, severance or other payment becoming due, or increase the
amount of compensation due, to any current or former employee of the Company or
any of its subsidiaries; (ii) increase any benefits otherwise payable under any
Employee Benefit Plan; (iii) result in the acceleration of the time of payment
or vesting of any such material benefits or (iv) result in any job security or
similar benefit or increased such benefit.
(i) If the Effective Time occurs after December 31, 2002,
except as provided in the written materials provided to Parent on or about
August 5, 2002, to the Company's knowledge, other than de minimis amounts, there
would be no amounts payable under any contract, plan or arrangement (written or
otherwise) covering any employee or former employee of the Company or any of its
ERISA Affiliates that would not be deductible pursuant to the terms of Sections
162(m) or 280G of the Code.
(j) The Company and its ERISA Affiliates do not maintain,
sponsor or have any liability (contingent or otherwise) with respect to any
Employee Benefit Plan outside the United States.
SECTION 3.13 Labor Matters. (a) Section 3.13(a) of the
Company Disclosure Schedule sets forth a list of all labor or collective
bargaining agreements to which the Company or any subsidiary is party, and
except as set forth therein, there are no other labor or collective bargaining
agreements which pertain to employees of the Company or any of its subsidiaries.
13
The Company has made available or delivered to Parent true and complete copies
of the labor or collective bargaining agreements listed in Section 3.14 of the
Company Disclosure Schedule, together with all amendments, modifications,
supplements and side letters affecting the duties, rights and obligations of any
party thereunder.
(b) Except as set forth in Section 3.13(b) of the Company
Disclosure Schedule, no employees of the Company or any of its subsidiaries are
represented by any labor organization; no labor organization or group of
employees of the Company or any of its subsidiaries has made a pending demand
for recognition or certification; and, to the Company's knowledge, there are no
representation or certification proceedings or petitions seeking a
representation proceeding presently pending or threatened in writing to be
brought or filed with the National Labor Relations Board or any other labor
relations tribunal or authority. Except as set forth in Section 3.13(b) of the
Company Disclosure Schedule, to the Company's knowledge, there are no organizing
activities involving the Company or any of its Subsidiaries pending with any
labor organization or group of employees of the Company or any of its
subsidiaries.
(c) Except as set forth in Section 3.13(a) of the Company
Disclosure Schedule, there are no material unfair labor practice charges
alleging any violation of Section 8 of the National Labor Relations Act, as
amended, 29 U.S.C. Section 158, pending or threatened in writing by or on behalf
of any employee or group of employees of the Company or any of its subsidiaries.
(d) Except as set forth in Section 3.13(d) of the Company
Disclosure Schedule, there are no complaints, charges or claims against the
Company or any of its subsidiaries pending, or threatened in writing to be
brought or filed, with any Governmental Entity or arbitrator based on, arising
out of, in connection with, or otherwise relating to the employment or
termination of employment of any individual by the Company or any of its
subsidiaries other than any such complaints, charges or claims which are not or
would not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on the Company.
(e) The Company and each of its subsidiaries are in
compliance with all Laws relating to the employment of labor, including all such
Laws and orders relating to wages, hours, collective bargaining, discrimination,
civil rights, safety and health workers' compensation and the collection and
payment of withholding and/or Social Security Taxes and similar Taxes other than
any such non-compliance which does not or would not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect on the
Company.
SECTION 3.14 Environmental Matters. (a) For purposes of
this Section 3.14, "ENVIRONMENTAL LAW" means any applicable federal, state,
local or foreign Law (including common Law), statute, code, rule, regulation,
ordinance, or other legal requirement relating to the protection of occupational
health or safety or the environment, including natural resources and the
protection thereof. For purposes of this Section 3.14, "HAZARDOUS MATERIALS"
means any chemicals, materials, substances or wastes in any amount or
concentration which are defined as or included in the definition of "hazardous
substances," "hazardous materials," "hazardous wastes," "extremely hazardous
wastes," "restricted hazardous wastes," "toxic substances," "toxic pollutants,"
"pollutants," "regulated substances" or "contaminants" or words of similar
import, under any Environmental Law, including petroleum, petroleum hydrocarbons
14
or petroleum products, petroleum by-products, radioactive materials, asbestos or
asbestos-containing materials, gasoline, diesel fuel, pesticides, radon, urea
formaldehyde, lead or lead-containing materials, polychlorinated biphenyls. For
purposes of this Section 3.14, "RELEASE" means any spilling, leaking, pumping,
pouring, emitting, emptying, discharging, injecting, escaping, leaching,
dumping, disposing or migration of a Hazardous Material into the environment
(including, without limitation, ambient air, surface water, groundwater, land
surface or subsurface strata).
(b) Except as set forth in Section 3.14(b) of the Company
Disclosure Schedule, (i) the Company and its subsidiaries have obtained and
will, as of the Closing, possess all permits, authorizations, consents and
approvals required by Environmental Laws for the continued operation of their
respective businesses (collectively, "ENVIRONMENTAL PERMITS"), except where the
failure to obtain or possess such Environmental Permits would not reasonably be
expected to have a Material Adverse Effect on the Company; (ii) the operations
of the Company and its subsidiaries have been and are in compliance with all
Environmental Laws and Environmental Permits, except for noncompliance that
would not reasonably be expected to have a Material Adverse Effect on the
Company; (iii) there are no Claims pending or, to the knowledge of the Company,
threatened against the Company or any of its subsidiaries alleging the violation
of or non-compliance with Environmental Laws, except for Claims which if
adversely decided would not reasonably be expected to have a Material Adverse
Effect on the Company; and (iv) to the knowledge of the Company, no Releases of
Hazardous Materials have occurred at, from, in, to, on, or under any property
currently or formerly owned, operated or leased by the Company or any of its
subsidiaries at levels that would reasonably be expected to require
investigation, remediation, monitoring or other similar response or remedial
actions under Environmental Laws; (v) to the knowledge of the Company, there are
no underground storage tanks, active or abandoned or operated or leased by the
Company or any of its subsidiaries; (vi) there are no polychlorinated
biphenyl-containing equipment or fixtures (excluding lighting fixtures) owned by
the Company or any of its subsidiaries, or friable asbestos containing material
at any property currently owned, the presence of which would reasonably be
expected to result in the Company and its subsidiaries incurring material
liabilities under Environmental Laws to address; (vii) neither the Company nor
any of its subsidiaries has transported or arranged for the treatment, storage,
handling, disposal of any Hazardous Material to any off-site location that has
or could result in a Claim under or relating to any Environmental Law against
the Company or any of its subsidiaries, except for Claims which, if adversely
decided, would not reasonably be expected to have a Material Adverse Effect on
the Company; and (viii) no facts, circumstances or conditions exist, including
without limitation the presence of Hazardous Materials at, in, on or migrating
to or from any property currently or formerly owned, operated or leased by the
Company or any of its subsidiaries, that would reasonably be expected to result
in the Company or its subsidiaries incurring liability under Environmental Laws,
which liability would reasonably be expected to have a Material Adverse Effect
on the Company.
(c) The Company has provided or otherwise made available to
Parent copies of all environmental assessments, audits, investigations,
analyses, and other such environmental, health or safety reports relating to the
Company or its subsidiaries or any real property currently or formerly owned,
operated or leased by the Company or its subsidiaries ("ENVIRONMENTAL REPORTS")
that are in the possession, custody or control of the Company or its
subsidiaries or, to the knowledge of the Company, their respective agents or
their representatives.
15
SECTION 3.15 Tax Matters. Except as set forth in Section
3.15 of the Company Disclosure Schedule:
(a) The Company and each of its subsidiaries, and each
affiliated group (within the meaning of Section 1504 of the Code) of which the
Company or any of its subsidiaries is or has been a member, have timely filed
all federal income Tax Returns and all other Tax Returns required to be filed by
them, after giving effect to all extensions permitted by applicable Law. All
such Tax Returns are complete and correct in all material respects. The Company
and each of its subsidiaries have paid (or the Company has paid on its
subsidiaries' behalf) all Taxes due for the periods covered by such Tax Returns.
The most recent consolidated financial statements contained in the Company SEC
Reports reflect an adequate reserve for all Taxes payable by the Company and its
subsidiaries for all taxable periods and portions thereof through the date of
such financial statements, other than for any Taxes the amount or validity of
which are being contested or disputed in good faith or for which the applicable
amount has not been assessed or determined by the appropriate taxing authority.
There are no Liens for Taxes (other than Taxes not yet due and payable and
Permitted Exceptions) upon any of the assets of the Company or any of its
subsidiaries. For purposes of this Agreement, "TAX" or "TAXES" shall mean all
taxes, charges, fees, imposts, levies, gaming or other assessments, including,
without limitation, all net income, gross receipts, capital, sales, gaming, use,
ad valorem, value added, transfer, franchise, profits, inventory, capital stock,
license, withholding, payroll, employment, social security, unemployment,
excise, severance, stamp, occupation, real property and other property and
estimated Taxes, customs duties, fees, assessments and charges of any kind
whatsoever, together with any interest and any penalties, fines, additions to
Tax or additional amounts imposed by any taxing authority (domestic or foreign).
"TAX RETURNS" shall mean any material report, return, document, declaration or
any other information or filing required to be supplied to any taxing authority
or jurisdiction (foreign or domestic) with respect to Taxes, including, without
limitation, information returns, any document with respect to or accompanying
payments or estimated Taxes, or with respect to or accompanying requests for the
extension of time in which to file any such report, return document, declaration
or other information.
(b) No material deficiencies or claims for any Taxes have
been proposed, asserted or assessed against the Company or any of its
subsidiaries that have not been fully paid or adequately provided for in the
appropriate financial statements of the Company and its subsidiaries, no
requests for waivers of the time to assess any Taxes are pending, and no power
of attorney with respect to any Taxes has been executed or filed with any taxing
authority. No material issues relating to Taxes have been raised in writing by
the relevant taxing authority during any pending audit or examination or
otherwise.
(c) None of the Company or any of its subsidiaries is a
party to or is bound by any Tax sharing agreement, Tax indemnity obligation or
similar agreement, arrangement or practice with respect to Taxes (including any
advance pricing agreement, closing agreement or other agreement relating to
Taxes with any taxing authority).
(d) Since January 1, 1999, neither the Company nor any of
its subsidiaries has distributed stock of another person, or has had its stock
distributed by another person, in a transaction that was purported or intended
to be governed in whole or in part by Section 355 or 361 of the Code.
16
SECTION 3.16 Material Contracts.
(a) Section 3.16(a) of the Company Disclosure Schedule sets
forth a list of all Material Contracts. The Company has heretofore made
available to Parent true, correct and complete copies of all written Contracts
(and all amendments, modifications and supplements thereto and all side letters
to which the Company or any of its subsidiaries is a party affecting the
obligations of any party thereunder) to which the Company or any of its
subsidiaries is a party or by which any of its properties or assets are bound
that are either filed (including through incorporation by reference) as an
exhibit to the Annual Report on Form 10-K for the fiscal year ended December 31,
2001 of either the Company or Hollywood Casino Shreveport, a Louisiana general
partnership and Shreveport Capital Corporation, a Louisiana corporation, or
otherwise that are material to the business, properties or assets of the Company
and its subsidiaries taken as a whole, including, without limitation, to the
extent any of the following are, individually or in the aggregate, material to
the business, properties or assets of the Company and its subsidiaries taken as
a whole, all: (i) employment, severance, personal services, consulting,
non-competition or indemnification contracts (including, without limitation, any
contract to which the Company or any of its subsidiaries is a party involving
employees of the Company); (ii) contracts granting a right of first refusal or
first negotiation; (iii) partnership or joint venture agreements; (iv)
agreements for the acquisition, sale or lease of material properties or assets
of the Company or any of its subsidiaries (by merger, purchase or sale of assets
or stock or otherwise) entered into since January 1, 1999; (v) contracts or
agreements with any Governmental Entity; (vi) loan or credit agreements,
mortgages, indentures or other agreements or instruments evidencing indebtedness
for borrowed money by the Company or any of its subsidiaries or any such
agreement pursuant to which indebtedness for borrowed money may be incurred;
(vii) agreements that purport to limit, curtail or restrict the ability of the
Company or any of its subsidiaries to compete in any geographic area or line of
business; (viii) contracts or agreements that would be required to be filed as
an exhibit to a Form 10-K filed by the Company or Shreveport with the SEC on the
date hereof; and (ix) commitments and agreements to enter into any of the
foregoing (collectively, the "MATERIAL CONTRACTS").
(b) Each of the Material Contracts constitutes the valid
and legally binding obligation of the Company or its subsidiaries, enforceable
in accordance with its terms (except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
transfer and similar Laws of general applicability relating to or affecting
creditors' rights or by general equity principles). There is no default under
any Material Contract so listed either by the Company or, to the Company's
knowledge, by any other party thereto, and no event has occurred that with the
lapse of time or the giving of notice or both would constitute a default
thereunder by the Company or, to the Company's knowledge, any other party, in
any such case in which such default or event does or would reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect on
the Company.
(c) No party to any such Material Contract has given
written notice to the Company of or made a Claim against the Company with
respect to any breach or default thereunder, in any such case in which such
breach or default does or would reasonably be expected to have, individually or
in the aggregate, a Material Adverse Effect on the Company.
17
SECTION 3.17 Insurance. Section 3.17 of the Company
Disclosure Schedule sets forth a list of all material insurance policies
(including information on the premiums payable in connection therewith, the
scope and amount of the coverage provided thereunder and, for each of the last
three (3) years, all loss reserves and/or loss runs relating to such policies)
maintained by the Company or any of its subsidiaries, which policies have been
issued by insurers that, to the Company's knowledge, are reputable and
financially sound, and provide coverage for the operations conducted by the
Company and its subsidiaries of a scope and coverage consistent with customary
industry practice.
SECTION 3.18 Intellectual Property.
(a) For purposes of this Agreement, "INTELLECTUAL PROPERTY"
means all (i) trademarks, trademark rights, trade names, trade name rights,
trade dress and other indications of origin, corporate names, brand names,
logos, certification rights, and service marks, including all goodwill
associated with all of the foregoing, and all applications, registrations and
renewals in connection with all of the foregoing, in any jurisdiction; (ii)
inventions, discoveries and ideas (whether patentable or unpatentable and
whether or not reduced to practice), and all patents, patent rights,
applications for patents (including, without limitation, divisions,
continuations, continuations-in-part and renewal applications), and any
renewals, extensions or reissues thereof, in any jurisdiction; (iii) trade
secrets, know-how, confidential information, and other proprietary rights and
information; (iv) copyrights and works of authorship, whether copyrightable or
not, and all applications, registrations and renewals in connection therewith,
in any jurisdiction; (v) mask works and all applications, registrations and
renewals in connection therewith, in any jurisdiction; (vi) Internet domain
names; (vii) databases; and (viii) other similar intellectual property or
proprietary rights. All Intellectual Property owned by the Company or its
subsidiaries, necessary for the conduct of their businesses on the date hereof
and registered with any Governmental Entity, and each material license to use
any Intellectual Property necessary for the conduct of their businesses on the
date hereof, except for computer software licenses that are commercially
available, is listed in Section 3.18(a) of the Company Disclosure Schedule.
(b) The Company and its subsidiaries own or possess
adequate licenses or other valid rights to use (in each case, free and clear of
any Liens (other than Permitted Exceptions)) all material Intellectual Property
used in connection with the business of the Company and its subsidiaries as
currently conducted or as reasonably contemplated to be conducted.
(c) To the Company's knowledge, the use by the Company of
any Intellectual Property owned by the Company and its subsidiaries does not
infringe upon or otherwise violate the rights of any person other than as would
not reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on the Company.
(d) The use by the Company of any Intellectual Property
claimed to be owned by any other person is in accordance with any applicable
license granted by such person (or any person authorized by such person)
pursuant to which the Company or any of its subsidiaries acquired the right to
use such Intellectual Property other than as would not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect on the
Company.
18
(e) To the Company's knowledge, no person is challenging,
infringing upon or otherwise violating any right of the Company or any of its
subsidiaries with respect to any Intellectual Property owned by and/or licensed
to the Company or its subsidiaries other than as would not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect on
the Company.
(f) Neither the Company nor any of its subsidiaries has
received any written notice of any assertion or claim, pending or not, with
respect to any Intellectual Property used by the Company or its subsidiaries
other than as would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on the Company.
(g) To the Company's knowledge, no Intellectual Property
owned by and/or licensed to the Company or its subsidiaries is being used or
enforced in a manner that would result in the abandonment, cancellation or
unenforceability of such Intellectual Property other than as would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on the Company.
(h) Except as set forth in Section 3.18(h) of the Company
Disclosure Schedule, neither the Company nor any of its subsidiaries has made
any material claim of a violation or infringement by others of its Intellectual
Property or, to the Company's knowledge, has a basis to make any such material
claim in the future.
SECTION 3.19 Opinion of Financial Advisor. Goldman, Sachs &
Co. (the "COMPANY FINANCIAL ADVISOR") has delivered to the Company Board its
opinion, dated the date of this Agreement, to the effect that, as of such date,
the Merger Consideration is fair to the holders of Shares from a financial point
of view.
SECTION 3.20 Brokers. No broker, finder or investment
banker (other than the Company Financial Advisor) is entitled to any brokerage,
finder's or other fee or commission or expense reimbursement in connection with
the transactions contemplated by this Agreement based upon arrangements made by
and on behalf of the Company or any of its affiliates. The Company has made
available to Parent true and correct copies of all agreements between the
Company and the Company Financial Advisor under which the Company Financial
Advisor would be entitled to any payment relating to the Merger or any other
transactions contemplated by this Agreement.
SECTION 3.21 Takeover Statutes. The Company has taken all
action required to be taken by it in order to exempt this Agreement, the
Stockholder Agreements and the transactions contemplated hereby and thereby
from, and this Agreement, the Stockholder Agreements and the transactions
contemplated hereby and thereby (the "COVERED TRANSACTIONS") are exempt from,
the requirements of any "moratorium," "control share," "fair price," "affiliate
transaction," "business combination" or other antitakeover Laws and regulations
of any state (collectively, "TAKEOVER STATUTES"), including, without limitation,
Section 203 of the DGCL, or any antitakeover provision in the Company's
certificate of incorporation and bylaws. The provisions of Section 203 of the
DGCL do not apply to the Covered Transactions.
19
SECTION 3.22 Amendment to the Company Rights Agreement. The
Company Board has taken all necessary action (including any amendment thereof)
under the Rights Agreement, dated as of May 7, 1993, between the Company and
Continental Stock Transfer & Trust Company, as Rights Agent (the "COMPANY RIGHTS
AGREEMENT"), so that (a) none of the execution or delivery of this Agreement,
the exchange of the Shares for the Merger Consideration in accordance with
Article II, or any other transaction contemplated hereby, including the Merger,
will cause (i) the rights (the "RIGHTS") issued pursuant to the Company Rights
Agreement to become exercisable under the Company Rights Agreement, (ii) Parent
or Merger Sub to be deemed an "ACQUIRING PERSON" (as defined in the Company
Rights Agreement), or (iii) a "TRIGGERING EVENT," a "STOCK ACQUISITION DATE" or
a "DISTRIBUTION DATE" (each as defined in the Company Rights Agreement) to occur
upon any such event; and (b) the "EXPIRATION DATE" (as defined in the Company
Rights Agreement) of the Rights shall occur immediately prior to the Effective
Time.
SECTION 3.23 Noncompetition Agreements. Except as required
by any Gaming Laws or Gaming Authorities or licenses issued thereunder or
thereby or as set forth in Section 3.23 of the Company Disclosure Schedule,
neither the Company nor any of its subsidiaries is a party to any agreement that
purports to restrict or prohibit in any material respect the Company or any of
its subsidiaries from, directly or indirectly, engaging in any business
currently engaged in by the Company or any of its subsidiaries. To the knowledge
of the Company, none of the Company's officers or key employees is a party to
any agreement that restricts such officer or key employee from acting as an
officer or employee of an entity engaged in any business engaged in by the
Company or any of its subsidiaries, except for those restrictions which do not
or would not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on the Company.
SECTION 3.24 Completeness of Disclosure. Neither this
Agreement nor any certificate, schedule, statement, document or instrument to be
executed by the Company in connection with the negotiation, execution or
performance of this Agreement, contains or will contain any untrue statement of
a material fact or omits or will omit to state a material fact required to be
stated herein or therein or necessary to make any statement herein or therein
not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF PARENT AND MERGER SUB
Except as set forth in the disclosure schedule delivered by
Parent to the Company prior to the execution of this Agreement (the "PARENT
DISCLOSURE SCHEDULE") (each section of which qualifies the correspondingly
numbered representation and warranty or covenant to the extent specified
therein), and except, with respect to Sections 4.3, 4.4, 4.5 and 4.8 hereof, as
to matters which would not or would not reasonably be expected to, materially
impair, materially delay or prevent the Merger or the consummation of the
financing contemplated by the Commitment Letter (as defined herein), Parent and
Merger Sub hereby represent and warrant to the Company as follows:
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SECTION 4.1 Organization. (a) Each of Parent and its
subsidiaries is a corporation or legal entity duly organized, validly existing
and in good standing under the Laws of the jurisdiction of its incorporation or
organization, as the case may be, and has all requisite corporate power and
authority to own, lease and operate its properties and to carry on its business
as now conducted or proposed by Parent to be conducted.
(b) Each of Parent and its subsidiaries is duly qualified
or licensed and in good standing to do business 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 duly qualified or licensed and in good standing does not
and would not reasonably be expected to have, individually or in the aggregate,
a Material Adverse Effect on Parent.
SECTION 4.2 Authority Relative to This Agreement. (a) Each
of Parent and Merger Sub has all necessary corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. No other corporate proceedings on the part of Parent or
Merger Sub are necessary to authorize this Agreement or to consummate the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by each of Parent and Merger Sub and constitutes a valid,
legal and binding agreement of each of Parent and Merger Sub, enforceable
against each of Parent and Merger Sub in accordance with its terms.
(b) The Boards of Directors of Parent (the "PARENT BOARD")
and Merger Sub and Parent as the sole stockholder of Merger Sub have duly and
validly authorized the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby, and have taken all
corporate actions required to be taken by such Boards of Directors and Parent as
the sole stockholder of Merger Sub for the consummation of the transactions
contemplated by this Agreement.
SECTION 4.3 SEC Reports; Financial Statements. Parent has
filed all required forms, statements, reports and documents with the SEC since
the later of January 1, 1999 or the date on which any such filing obligation
arose (collectively, "PARENT SEC Reports"), each of which has complied in all
material respects with all applicable requirements of the Act, the Exchange Act,
or both, as the case may be, each as in effect on the dates such Parent SEC
Reports were filed. Except as and to the extent amended, modified, restated or
revised in any subsequent Parent SEC Report filed prior to the date of this
Agreement, none of the Parent SEC Reports, including any financial statements or
schedules included or incorporated by reference therein, contained, when filed,
any untrue statement of a material fact or omitted to state a material fact
required to be stated or incorporated by reference therein or necessary in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading. The consolidated financial statements, including all
related notes and schedules, contained in the Parent SEC Reports complied as to
form in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto, have been
prepared in accordance with GAAP applied on a consistent basis during the
periods involved (except as may be indicated in the notes thereto), and fairly
present (i) the consolidated financial position of Parent and its consolidated
subsidiaries, as of the dates thereof, and (ii) the consolidated results of
operations, cash flows and changes in stockholders' equity for the periods then
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ended (subject, in the case of the unaudited interim financial statements, to
normal year-end adjustments) for Parent and its consolidated subsidiaries. Since
the Audit Date, there has not been any material change, or any application or
request for any material change, by Parent or any of its consolidated
subsidiaries in accounting principles, methods or policies for financial
accounting or Tax purposes (subject, in the case of the unaudited interim
financial statements, to normal year-end adjustments).
SECTION 4.4 No Undisclosed Liabilities. Except as and to
the extent publicly disclosed by Parent in the Parent SEC Reports filed prior to
the date of this Agreement, none of Parent or its consolidated subsidiaries has
any liabilities or obligations of any nature, whether or not accrued, contingent
or otherwise, and whether due or to become due or asserted or unasserted,
whether or not required by GAAP to be reflected in, reserved against or
otherwise described in the consolidated balance sheet of Parent (including the
notes thereto), which have or would reasonably be expected to have, individually
or in the aggregate, a Material Adverse Effect on Parent.
SECTION 4.5 Absence of Changes. Except as and to the extent
publicly disclosed by Parent in the Parent SEC Reports filed prior to the date
of this Agreement, since the Audit Date, the business of Parent and each of its
subsidiaries has been carried on only in the ordinary and usual course
consistent with past practice, none of Parent or its subsidiaries has incurred
any liabilities of any nature, whether or not accrued, contingent or otherwise,
which do or which would reasonably be expected to have, and there have been no
events, changes or effects with respect to Parent or its subsidiaries which do
or which would reasonably be expected to have, individually or in the aggregate,
a Material Adverse Effect on Parent.
SECTION 4.6 Consents and Approvals; No Violations. Except
for such filings, permits, authorizations, consents and approvals as may be
required under, and other applicable requirements of, the Act, the Exchange Act,
state securities or blue sky Laws, the HSR Act, the Nasdaq Stock Market, Inc.
("NASDAQ"), any Gaming Authority, such filings, permits, authorization, consents
and approvals relating or applicable to the Company or any of its subsidiaries
and not Parent or any of its subsidiaries, the filing and recordation of the
Certificate of Merger as required by the DGCL, and as otherwise set forth in
Section 4.6 to the Parent Disclosure Schedule, no filing with or notice to, and
no permit, authorization, consent or approval of, any Governmental Entity is
necessary for the execution and delivery by Parent or Merger Sub of this
Agreement or the consummation by Parent or Merger Sub of the transactions
contemplated hereby, except where the failure to obtain such permits,
authorizations, consents or approvals or to make such filings or give such
notice would not and would not reasonably be expected to, individually or in the
aggregate, materially impair, materially delay, or prevent the performance of
this Agreement or the Merger. Neither the execution, delivery and performance of
this Agreement by Parent or Merger Sub nor the consummation by Parent or Merger
Sub of the transactions contemplated hereby will (i) conflict with or result in
any breach of any provision of the respective articles of incorporation or
bylaws (or similar governing documents) of Parent or Merger Sub or any of
Parent's subsidiaries, (ii) result in a violation or breach of, or constitute
(with or without due notice or lapse of time or both) a default (or give rise to
any right of termination, amendment, cancellation or acceleration or Lien (other
than Permitted Exceptions)) under, any of the terms, conditions or provisions of
any Contract to which Parent or Merger Sub or any of Parent's subsidiaries is a
22
party or by which any of them or any of their respective properties or assets
may be bound, or (iii) violate any Law applicable to Parent or Merger Sub or any
of Parent's subsidiaries or any of their respective properties or assets, except
in the case of (ii) or (iii), for violations, breaches or defaults which do not
or would not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on Parent.
SECTION 4.7 Litigation. Except as and to the extent
publicly disclosed by Parent in the Parent SEC Reports filed after January 1,
2002 but prior to the date of this Agreement, there is no Claim pending or, to
Parent's knowledge, threatened against Parent or any of its subsidiaries or any
of their respective properties or assets, including by or before any
Governmental Entity, which (a) does or would reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on Parent or (b) as
of the date hereof, questions the validity of this Agreement or any action to be
taken by Parent in connection with the consummation of the transactions
contemplated hereby, or could otherwise prevent or delay the consummation of the
transactions contemplated by this Agreement. Except as and to the extent
publicly disclosed by Parent in the Parent SEC Reports filed after January 1,
2002 but prior to the date of this Agreement, none of Parent or its subsidiaries
is subject to any outstanding order, writ, injunction or decree which does or
would reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on Parent.
SECTION 4.8 Compliance with Applicable Law. Parent and its
subsidiaries hold all permits, licenses, variances, exemptions, orders and
approvals of all Governmental Entities necessary for the lawful conduct of their
respective businesses (the "PARENT PERMITS"), except for failures to hold such
permits, licenses, variances, exemptions, orders and approvals which do not or
would not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on Parent. Except as set forth in Section 4.8 of the
Parent Disclosure Schedule, Parent and its subsidiaries and each of their
respective "key persons" (as defined under applicable Gaming Law) are in
compliance with the terms of the Parent Permits, except where the failure to so
comply does not or would not reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect on Parent. The businesses of Parent and
its subsidiaries are not being conducted in violation of any Law applicable to
Parent or its subsidiaries, except for violations or possible violations which
do not and would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on Parent. To Parent's knowledge, no
investigation or review by any Governmental Entity with respect to Parent or its
subsidiaries is pending or threatened, nor, to Parent's knowledge, has any
Governmental Entity indicated an intention to conduct the same, other than, in
each case, those which Parent reasonably believes do not or would not reasonably
be expected to have, individually or in the aggregate, a Material Adverse Effect
on Parent.
SECTION 4.9 No Prior Activities. Except for obligations
incurred in connection with its incorporation or organization or the negotiation
and consummation of this Agreement and the transactions contemplated hereby,
Merger Sub has neither incurred any obligation or liability to nor engaged in
any business or activity of any type or kind whatsoever or entered into any
agreement or arrangement with any person.
SECTION 4.10 Brokers. Except as set forth in Section 4.10
of the Parent Disclosure Schedule, no broker, finder or investment banker (other
than Lehman Brothers, Inc.) is entitled to any brokerage, finder's or other
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advisory fee or commission in connection with the transactions contemplated by
this Agreement based upon arrangements made by and on behalf of Parent or Merger
Sub or any of their affiliates.
SECTION 4.11 Financing. Parent has obtained a written
commitment (the "COMMITMENT LETTER") from Bear Stearns & Co. Inc., Bear Stearns
Corporate Lending Inc. (collectively, "BEAR") and Merrill Lynch Capital
Corporation ("MERRILL") to provide financing in connection with the Merger and
the other transactions contemplated by this Agreement, a true and correct copy
of which has been provided by Parent to the Company. The Commitment Letter has
not been amended and is in full force and effect. Parent does not know of any
facts that would reasonably be expected to, individually or in the aggregate,
materially impair, materially delay or prevent the consummation of the financing
contemplated by the Commitment Letter or that would cause the funds to be
provided by Bear and Merrill under the Commitment Letter to be insufficient to
fund Parent's and Merger Sub's obligations under this Agreement or as otherwise
required or contemplated by or under the Commitment Letter.
SECTION 4.12 No Ownership of Securities. None of Parent,
Merger Sub or any of their respective subsidiaries own, beneficially, or of
record, any Shares or other debt or equity securities of the Company, except for
not more than 100 shares of the Company Common Stock owned by Parent or its
subsidiaries.
SECTION 4.13 Completeness of Disclosure. Neither this
Agreement nor any certificate, schedule, statement, document or instrument to be
executed by Parent or Merger Sub in connection with the negotiation, execution
or performance of this Agreement, contains or will contain any untrue statement
of a material fact or omits or will omit to state a material fact required to be
stated herein or therein or necessary to make any statement herein or therein
not misleading.
ARTICLE V
COVENANTS RELATED TO CONDUCT OF BUSINESS
SECTION 5.1 Conduct of Business of the Company. Except as
contemplated by this Agreement, or to the extent prohibited or required by any
Gaming Authority or to the extent a prior approval of a Gaming Authority is
required to agree to the undertaking, during the period from the date hereof to
the Effective Time, the Company will use reasonable best efforts and will cause
each of its subsidiaries to use reasonable best efforts to conduct its
operations in the ordinary and usual course of business consistent with past
practice (including with respect to its capital maintenance programs) and, to
the extent consistent therewith, with no less diligence and effort than would be
applied in the absence of this Agreement, seek to preserve intact the current
business organizations of the Company and each of its subsidiaries, keep
available the service of the current officers and employees of the Company and
each of its subsidiaries and preserve the Company's and its subsidiaries'
relationships with customers, suppliers and all others having business dealings
with the Company or any of its subsidiaries to the end that goodwill and ongoing
businesses shall be materially unimpaired at the Effective Time. Without
limiting the generality of the foregoing, and except as otherwise expressly
provided in this Agreement or in Section 5.1(g) or (m) of the Company Disclosure
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Schedule, prior to the Effective Time, neither the Company nor any of its
subsidiaries will, and the Company will not permit any of its subsidiaries to,
without the prior written consent of Parent which consent shall not be
unreasonably withheld or delayed:
(a) adopt any amendment to the certificate of incorporation
or bylaws (or other similar governing instruments) of the Company or any of its
subsidiaries;
(b) authorize for issuance, issue, sell, deliver or agree
or commit to issue, sell or deliver (whether through the issuance or granting of
options, warrants, commitments, subscriptions, rights to purchase or otherwise)
any stock of any class or any other securities convertible into or exchangeable
for any stock or any equity equivalents (including, without limitation, any
stock options or stock appreciation rights), except for (i) the issuance or sale
of Shares pursuant to outstanding Company Stock Options or (ii) the granting of
Company Stock Options to directors of the Company pursuant to its 1996
Non-Employee Director Stock Plan;
(c) (i) split, combine or reclassify any shares of its
capital stock; (ii) declare, set aside or pay any dividend or other distribution
(whether in cash, stock or property or any combination thereof) in respect of
its capital stock; (iii) make any other actual, constructive or deemed
distribution in respect of any shares of its capital stock or otherwise make any
payments to stockholders in their capacity as such; or (iv) redeem, repurchase
or otherwise acquire any of its securities or any securities of any of its
subsidiaries (including redeeming any Rights);
(d) adopt a plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization or other
reorganization of the Company or any of its subsidiaries (other than the
Merger);
(e) alter through merger, liquidation, reorganization,
restructuring or in any other fashion the corporate structure or ownership of
the Company or any of its subsidiaries (other than through the Merger);
(f) (i) incur, assume or prepay any long-term or short-term
debt or issue any debt securities, except for borrowings under existing lines of
credit in the ordinary and usual course of business consistent with past
practice, and except for the incurrence or increase in obligations among the
Company and its direct or indirect wholly owned subsidiaries (other than
HWCC-Louisiana, Inc. and its direct and indirect subsidiaries, collectively,
"SHREVEPORT"); (ii) assume, guarantee, endorse or otherwise become liable or
responsible (whether directly, contingently or otherwise) for the obligations of
any other person, except in the ordinary and usual course of business consistent
with past practice, and except for the incurrence or increase in obligations
among the Company and its direct or indirect wholly owned subsidiaries (other
than Shreveport); (iii) make any loans, advances or capital contributions to, or
investments in, any other person (other than to the wholly owned subsidiaries of
the Company, other than Shreveport, or customary loans or advances to employees
in the ordinary and usual course of business consistent with past practice);
(iv) pledge or otherwise encumber shares of capital stock of the Company or its
subsidiaries; or (v) mortgage or pledge any of its or any of its subsidiaries'
material assets, tangible or intangible, or create or suffer to exist any
material Lien thereupon, other than Permitted Exceptions, and except for the
incurrence or increase in obligations among the Company and its direct or
indirect wholly owned subsidiaries (other than Shreveport);
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(g) except as (i) set forth in Section 5.1(g) of the
Company Disclosure Schedule, (ii) may be required by Law or (iii) contemplated
by this Agreement, enter into, adopt or amend or terminate any Employee Benefit
Plan or any other bonus, profit sharing, compensation, severance, termination,
stock option, stock appreciation right, restricted stock, performance unit,
stock equivalent, stock purchase, pension, retirement, deferred compensation,
employment or other employee benefit agreement, trust, plan, fund, award or
other arrangement for the benefit or welfare of any director, officer or
employee in any manner, or (except as set forth in Section 5.1(g) of the Company
Disclosure Schedule and except for increases or changes in the ordinary and
usual course of business consistent with past practice that, in the aggregate,
do not result in a material increase in benefits or compensation expense to the
Company, and as required under existing agreements) increase in any manner the
compensation or fringe benefits of any director, officer or employee or pay any
benefit not required by any plan and arrangement as in effect as of the date
hereof;
(h) acquire, sell, lease, license, transfer, pledge,
encumber, grant or dispose of (whether by merger, consolidation, purchase, sale
or otherwise) any assets, including capital stock of the Company's subsidiaries,
outside the ordinary and usual course of business consistent with past practice
or any assets, including capital stock of the Company's subsidiaries, which in
the aggregate are material to the Company and its subsidiaries taken as a whole
or enter into any commitment or transaction outside the ordinary and usual
course of business consistent with past practice;
(i) except as may be required as a result of a change in
Law or in GAAP, change in any material adverse respect any accounting
principles, policies, or practices of the Company or any of its subsidiaries;
(j) revalue in any material respect any of its assets,
including, without limitation, writing down the value of inventory or
writing-off notes or accounts receivable other than in the ordinary and usual
course of business consistent with past practice or as required by GAAP;
(k) acquire (by merger, consolidation, or acquisition of
stock or assets) any corporation, partnership or other business organization or
division thereof or any equity interest therein;
(l) make or revoke or otherwise modify any Tax election
(including any election pertaining to net operating losses) or settle or
compromise any Tax liability, in each case material to the Company and its
subsidiaries taken as a whole or change or make a request to any taxing
authority to change in any adverse manner any material aspect of its method of
accounting for Tax purposes;
(m) except as set forth in Section 5.1(m) of the Company
Disclosure Schedule, pay, discharge or satisfy any material claims, liabilities
or obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction in the ordinary
and usual course of business consistent with past practice of liabilities
reflected or reserved against in the consolidated financial statements of the
Company and its subsidiaries or incurred in the ordinary and usual course of
business consistent with past practice;
26
(n) terminate, cancel or request any material change in, or
agree to any material change in, any Material Contract, or enter into any
Contract that would be a Material Contract if entered into as of the date
hereof, in either case other than in the ordinary course of business consistent
with past practice; or make or agree to make any capital expenditure, other than
capital expenditures that are made in the ordinary course of business consistent
with past practice and that are made substantially in accordance with the levels
(in dollars), categories and timing for capital expenditures contained in the
2002 capital expenditure budgets provided to Parent and, with respect to capital
expenditures made in 2003, such capital expenditures will not exceed the amounts
included in the Company's financial projections heretofore provided to Parent
and the timing and category of such capital expenditures will be consistent with
the Company's past practices and operating strategy;
(o) waive, release, assign, settle or compromise any
pending or threatened suit, action or claim relating to the transactions
contemplated hereby or any other rights, claims or litigation material to the
Company or any of its three principal casino operating subsidiaries or regarding
an amount in excess of $50,000 for any of the Company's other subsidiaries;
(p) except as otherwise required by Law, enter into any or
modify in any material respect any collective bargaining agreement; or
(q) take, propose to take, agree in writing or otherwise to
take or authorize to take, any of the actions described in Sections 5.1(a)
through 5.1(p).
SECTION 5.2 Other Actions. Except as required by Law, the
Company and Parent shall not, and shall not permit any of their respective
subsidiaries to, voluntarily take any action that would, or that would
reasonably be expected to, (i) result in any of the representations and
warranties of such party set forth in this Agreement that are qualified as to
materiality becoming untrue, (ii) result in any of such representations and
warranties that are not so qualified becoming untrue in any material respect,
(iii) result in any of the conditions to the consummation of the Merger, the
financing under the Commitment Letter or the other transactions contemplated
hereby not being satisfied, or (iv) materially impair, materially delay or
prevent the consummation of the Merger and the other transactions contemplated
hereby.
SECTION 5.3 Access to Information. (a) Between the date
hereof and the Effective Time, the Company (i) will give Parent and Merger Sub
and their authorized representatives (including counsel, financial advisors and
auditors) reasonable access during normal business hours or other mutually
agreeable times to all employees, casinos, offices, warehouses and other
facilities and to all books and records of the Company and its subsidiaries,
(ii) will permit Parent and Merger Sub to make such inspections as Parent and
Merger Sub may reasonably require and (iii) will cause the Company's officers
and those of its subsidiaries to furnish Parent and Merger Sub promptly with
such financial and operating data and other information with respect to the
business, properties, personnel (including with respect to labor relations and
union organizing activities) or other aspects of the Company and its
subsidiaries as Parent or Merger Sub may from time to time reasonably request,
including in the case of (i), (ii) and (iii), promptly providing such access,
inspections and financial operating data and other information (including
projections) reasonably requested by Parent in connection with its efforts to
consummate the financing contemplated by the Commitment Letter, provided that no
27
investigation pursuant to this Section 5.3(a) shall affect or be deemed to
modify any of the representations or warranties made in this Agreement.
(b) Between the date hereof and the Effective Time, the
Company shall furnish to Parent and Merger Sub (i) within the earlier to occur
of ten (10) business days after the delivery thereof to management or
twenty-nine (29) days after the end of the month for which such internal monthly
financial statements and data pertain, such internal monthly financial
statements and data as are regularly prepared by the Company for distribution to
the Company's executive management, and (ii) at the earliest time they are
available, such quarterly and annual financial statements as are prepared for
the Company's SEC filings, which (in the case of this clause (ii)) shall be in
accordance with the books and records of the Company.
(c) The parties shall comply with, and shall cause their
respective representatives to comply with, all of their respective obligations
under that certain Mutual Confidentiality and Standstill Agreement entered into
between the Company and Parent dated January 18, 2002 (the "CONFIDENTIALITY
AGREEMENT") in connection with the information furnished pursuant to this
Agreement.
(d) Furthermore, the Company hereby agrees to enforce, at
the reasonable request and expense of Parent, all material rights that the
Company or any of its subsidiaries may have under any "standstill,"
confidentiality or other similar agreements entered into in connection with any
acquisition transaction involving the Company or any of its subsidiaries.
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.1 Stockholder Meeting. The Company shall take all
lawful action to (a) cause its annual meeting of stockholders or a special
meeting of its stockholders (the "COMPANY STOCKHOLDER MEETING") to be duly
called and held as soon as practicable after the date of this Agreement for the
purpose of voting on the approval and adoption of this Agreement and (b) solicit
proxies from its stockholders to obtain the Company Requisite Vote for the
approval and adoption of this Agreement. The Company Board shall recommend
approval and adoption by the Company's stockholders of this Agreement and the
Merger and, except as permitted by Section 6.6, the Company Board shall not
withdraw, amend or modify in a manner adverse to Parent such recommendation (or
announce publicly its intention to do so).
SECTION 6.2 Preparation of the Proxy Statement. The Company
will, as promptly as practicable after the execution of this Agreement (and in
any event, within forty-five (45) days after the date hereof), prepare and file
with the SEC the proxy statement and any amendments or supplements thereto
relating to the Company Stockholder Meeting to be held in connection with the
Merger (the "PROXY STATEMENT"). Parent and Merger Sub shall cooperate with the
Company in the preparation and filing of the Proxy Statement. The Company will
provide Parent with a reasonable opportunity to review and comment on the Proxy
Statement prior to filing. The Company shall use all reasonable efforts to have
the Proxy Statement cleared by the SEC as promptly thereafter as practicable.
The Company shall, as promptly as practicable after the receipt thereof, provide
to Parent copies of any written comments and advise Parent of any oral comments
28
with respect to the Proxy Statement received from the staff of the SEC. The
Company will provide Parent with a reasonable opportunity to review and comment
on any amendment or supplement to the Proxy Statement prior to filing with the
SEC and will provide Parent with a copy of all such filings with the SEC. The
Company will use its reasonable best efforts to cause the Proxy Statement to be
mailed to its stockholders at the earliest practicable date.
SECTION 6.3 Company Information Supplied. The Company
covenants that the Proxy Statement will not, at the date mailed to stockholders
of the Company and at the time of the Company Stockholder Meeting to be held in
connection with the Merger, 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. If at any time prior to the Effective Time any
event with respect to the Company, its officers or directors or any of its
subsidiaries should occur which is required to be described in an amendment of,
or a supplement to, the Proxy Statement, the Company shall promptly so advise
Parent and such event shall be so described, and such amendment or supplement
(which Parent shall have a reasonable opportunity to review) shall be promptly
filed with the SEC and, as required by Law, disseminated to the stockholders of
the Company. The Proxy Statement, insofar as it relates to the Company
Stockholder Meeting, will comply as to form in all material respects with the
provisions of the Exchange Act and the rules and regulations promulgated
thereunder.
SECTION 6.4 Parent and Merger Sub Information Supplied.
Each of Parent and Merger Sub covenant that none of the information supplied or
to be supplied by Parent or Merger Sub for inclusion in the Proxy Statement
will, at the date mailed to stockholders and at the time of the Company
Stockholder Meeting, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they are
made, not misleading. If at any time prior to the Effective Time any event with
respect to Parent, its officers or directors or any of its subsidiaries should
occur which is required to be described in an amendment of, or a supplement to,
the Proxy Statement, Parent shall promptly so advise the Company of such event
in sufficient detail to allow the Company to prepare and file any such amendment
or supplement.
SECTION 6.5 Efforts; Cooperation. (a) Subject to the terms
and conditions of this Agreement, each party will use its reasonable best
efforts to take, or cause to be taken, all appropriate action, and do, or cause
to be done, all things necessary, proper or advisable under applicable Law or
otherwise to consummate and make effective the Merger and the other transactions
contemplated hereby, including, without limitation, to (i) obtain from
Governmental Entities any consents, licenses, permits, waivers, approvals,
authorizations or orders required to be obtained or made by Parent or the
Company or any of their subsidiaries in connection with the authorization,
execution and delivery of this Agreement and the consummation of the Merger and
the other transactions contemplated hereby, and (ii) make all necessary filings,
and thereafter make any other submissions either required or deemed appropriate
by each of the parties, with respect to this Agreement and the Merger and the
other transactions contemplated hereby required under (A) the Act, the Exchange
Act, any other applicable federal or state securities or blue sky Laws, (B) the
HSR Act, (C) the DGCL, (D) any other applicable Law, (E) any Gaming Laws
applicable to such party and (F) the rules and regulations of the American Stock
29
Exchange. The parties hereto shall cooperate and consult with each other in
connection with the making of all such filings, including by providing copies of
all such documents to the nonfiling party and its advisors prior to filing, and,
except as required by Law, none of the parties will file any such document if
any of the other parties shall have reasonably objected to the filing of such
document. No party to this Agreement shall consent to any voluntary extension of
any statutory deadline or waiting period or to any voluntary delay of the
consummation of the Merger and the other transactions contemplated hereby at the
behest of any Governmental Entity without the consent and agreement of the other
parties to this Agreement, which consent shall not be unreasonably withheld or
delayed. In furtherance and not in limitation of the foregoing, each party
hereto agrees to make an appropriate filing of a Notification and Report Form
pursuant to the HSR Act with respect to the transactions contemplated hereby as
promptly as practicable and in any event within twenty (20) business days of the
date hereof and to supply as promptly as practicable any additional information
and documentary material that may be requested pursuant to the HSR Act and use
its reasonable best efforts to take, or cause to be taken, as promptly as
practicable all other actions consistent with this Section 6.5 necessary to
cause the expiration or termination of the applicable waiting periods under the
HSR Act as soon as practicable.
(b) Without limiting the generality of Section 6.5(a), each
of Parent and the Company shall (i) cooperate in all material respects with each
other in connection with any filing or submission and in connection with any
investigation or other inquiry, including any proceeding initiated by a private
party; and (ii) keep the other party promptly informed in all material respects
of any material communication received by such party from, or given by such
party to, the Federal Trade Commission, the Antitrust Division of the Department
of Justice or any other Governmental Entity and of any material communication
received or given in connection with any proceeding by a private party, in each
case regarding any of the transactions contemplated hereby. For purposes of this
Agreement, "ANTITRUST LAW" means the Sherman Act, as amended, the Clayton Act,
as amended, the HSR Act, the Federal Trade Commission Act, as amended, and all
other Laws that are designed or intended to prohibit, restrict or regulate
actions having the purpose or effect of monopolization or restraint of trade or
lessening of competition through merger or acquisition.
(c) Without limiting the generality of Section 6.5(a), each
of Parent and the Company shall use its reasonable best efforts to, as promptly
and expeditiously as practicable, (i) file all required applications for Parent
and all "key persons" (as defined under applicable Gaming Laws) to obtain the
necessary approvals from all applicable Gaming Authorities in order to
consummate the transactions contemplated hereby; and (ii) request an accelerated
review from such Gaming Authorities in connection with such filings.
(d) In furtherance and not in limitation of the covenants
of the parties contained in Sections 6.5(a), (b) and (c), each of Parent and the
Company shall use its reasonable best efforts to resolve such objections, if
any, as may be asserted by a Governmental Entity or other person with respect to
the transactions contemplated hereby under any Antitrust Law or Gaming Law or by
any Gaming Authority. In connection with the foregoing, if any administrative or
judicial action or proceeding, including any proceeding by a private party, is
instituted (or threatened to be instituted) challenging any transaction
contemplated by this Agreement as violative of any Antitrust Law, Gaming Law or
the rules and regulations of any Gaming Authority, each of Parent and the
Company shall cooperate in all respects with each other and use its respective
30
reasonable best efforts to, as promptly as practicable, contest and resist any
such action or proceeding and to have vacated, lifted, reversed or overturned
any decree, judgment, injunction or other order, whether temporary, preliminary
or permanent, that is in effect and that prohibits, prevents or restricts the
consummation of the transactions contemplated by this Agreement. Notwithstanding
the foregoing or any other provision of this Agreement, nothing in this Section
6.5 shall (i) limit a party's right to terminate this Agreement pursuant to
Article VIII so long as such party has up to then complied in all material
respects with its obligations under this Section 6.5, or (ii) require Parent to
(A) dispose of or hold separate any part of its or the Company's businesses or
operations (or a combination of Parent's and the Company's businesses or
operations), (B) agree not to compete in any geographic area or line of business
or (C) remove or replace any "key person" (as defined under applicable Gaming
Laws), except, in each case, as would not have a Material Adverse Effect on
Parent.
(e) Without limiting the generality of Section 6.5(a), the
Company shall use its reasonable best efforts to cooperate with Parent in its
efforts to secure the financing contemplated by the Commitment Letter.
(f) Without limiting the generality of the foregoing, the
Company shall prevent the Foreign Subs from conducting any business.
SECTION 6.6 Acquisition Proposals. (a) From the date hereof
until the termination hereof and except as expressly permitted by the following
provisions of this Section 6.6, the Company will not, nor will it permit any of
its subsidiaries to, nor will it authorize or permit any officer, director,
employee or agent of, or any investment banker, attorney, accountant or other
advisor or representative of, the Company or any of its subsidiaries to,
directly or indirectly, (i) initiate, solicit or encourage any inquiries, offers
or proposals that constitute, or may reasonably be expected to lead to, a
proposal or offer for (x) any merger, consolidation, share exchange,
recapitalization, business combination or similar transaction, (y) any sale,
lease, exchange, mortgage, transfer or other disposition, in a single
transaction or series of related transactions, of assets representing twenty
percent (20%) or more of the assets of the Company and its subsidiaries, taken
as a whole, or (z) sale of shares of capital stock representing, individually or
in the aggregate, twenty percent (20%) or more of the voting power of the
Company other than to the Company or any subsidiary of the Company, including,
without limitation, by way of a tender offer or exchange offer by any person
(other than the Company or a subsidiary of the Company) for shares of capital
stock representing twenty percent (20%) or more of the voting power of the
Company (any of the foregoing inquiries, offers or proposals being referred to
in this Agreement as an "ACQUISITION PROPOSAL"), (ii) participate in any
discussions or negotiations concerning, or provide to any person or entity any
information or data relating to the Company or any subsidiary of the Company for
the purposes of making, or take any other action to facilitate, any Acquisition
Proposal or any inquiries or the making of any proposal that constitutes or may
reasonably be expected to lead to any Acquisition Proposal, (iii) agree to,
approve or recommend any Acquisition Proposal or (iv) take any other action
materially inconsistent with the obligations and commitments assumed by the
Company pursuant to this Section 6.6; provided, however, that, subject to the
Company's compliance with this Section 6.6, nothing contained in this Section
6.6 or elsewhere in this Agreement shall prevent the Company or the Company
Board from, either prior to receipt of the Company Requisite Vote or at any time
after February 28, 2003, (A) entering into a definitive agreement providing for
31
the implementation of a Superior Proposal if the Company or the Company Board is
concurrently terminating this Agreement pursuant to Section 8.3(a), (B)
furnishing non-public information to, entering into customary confidentiality
agreements with, or entering into discussions or negotiations with, any person
or entity in connection with an unsolicited bona fide written Acquisition
Proposal to the Company or its stockholders, if the Company Board determines in
its good faith reasonable judgment after consultation with the Company Financial
Advisor or other nationally-recognized independent financial advisors that such
Acquisition Proposal, if accepted, constitutes, or is reasonably likely to lead
to or result in, a Superior Proposal or (C) taking and disclosing to its
stockholders a position with respect to such Acquisition Proposal contemplated
by Rule 14e-2(a) promulgated under the Exchange Act or making any other public
disclosure that the Company Board determines in its good faith reasonable
judgment, after consultation with independent legal counsel, is required under
applicable Law. The Company will immediately cease and cause to be terminated
any existing activities, discussions or negotiations with any parties conducted
heretofore with respect to any of the foregoing, and will promptly inform the
individuals or entities referred to in the first sentence of this Section 6.6(a)
of the obligations undertaken in this Section 6.6.
(b) The Company shall (i) promptly (and in any event no
later than twenty-four (24) hours after receipt by the Company Board or a senior
executive officer of the Company) notify Parent orally and in writing after
receipt by the Company (or its advisors) of any Acquisition Proposal or any
inquiries indicating that any person is considering making or wishes to make, or
which may reasonably be expected to lead to, an Acquisition Proposal, including
the material terms and conditions thereof and the identity of the person making
it, (ii) promptly (and in any event no later than twenty-four (24) hours after
receipt by the Company Board or a senior executive officer of the Company)
notify Parent orally and in writing after receipt of any request for non-public
information relating to it or any of its subsidiaries or for access to its or
any of its subsidiaries' properties, books or records by any person that, to the
Company's knowledge, may be considering making, or has made, an Acquisition
Proposal, and (iii) receive from any person that may make or has made an
Acquisition Proposal and that requests non-public information relating to the
Company and/or any of its subsidiaries, an executed confidentiality letter in
reasonably customary form and containing terms that are as stringent in all
material respects as those contained in the Confidentiality Agreement prior to
delivery of any such non-public information. Oral notice shall be deemed given
by making a telephone call to Robert Krauss at 215.864.8202 and speaking with
him directly or leaving a voice mail message or to such other person and
telephone number as may be directed in writing by Parent. Written notice shall
be deemed given to Parent upon notice to Parent in accordance with Section 9.3.
(c) The Company Board will not withdraw or modify, or
propose to withdraw or modify, in any manner adverse to Parent, its approval or
recommendation of this Agreement or the Merger except in connection with a
Superior Proposal and then only upon or after the termination of this Agreement
pursuant to Section 8.3(a).
SECTION 6.7 Public Announcements. Each of Parent, Merger
Sub and the Company will consult with one another before issuing any press
release or otherwise making any public statements with respect to the
transactions contemplated by this Agreement, including, without limitation, the
Merger, and shall not issue any such press release or make any such public
statement prior to such consultation, except as may be required by any
32
applicable Gaming Authority, Governmental Entity or Law or by obligations
pursuant to any listing agreement with the American Stock Exchange or Nasdaq, as
determined by the Company, Parent or Merger Sub, as the case may be, in which
case the issuing party shall use its reasonable best efforts to consult with the
other parties before issuing any such release or making any such public
statement. Without limiting the foregoing, the Company will not publicly
disclose any guidance concerning the expected earnings or other performance of
the Company or any of its subsidiaries; provided, however, that the Company
shall publicly disclose that it is no longer providing such guidance as a result
of the requirements of this Section 6.7 and shall be permitted to provide
guidance if, based on the advice of outside legal counsel, the provision of such
guidance is required or advisable under applicable Law.
SECTION 6.8 Indemnification; Directors' and Officers'
Insurance.
(a) From and after the Effective Time, Parent shall, to the
fullest extent permitted by applicable Law, indemnify, defend and hold harmless
each person who is now, or has been at any time prior to the date hereof, or who
becomes prior to the Effective Time, a director or officer of the parties hereto
(each, an "INDEMNIFIED PARTY" and, collectively, the "INDEMNIFIED PARTIES")
against all losses, expenses (including reasonable attorneys' fees and
expenses), Claims, damages or liabilities or, subject to the proviso of the next
succeeding sentence, amounts paid in, settlement, arising out of actions or
omissions occurring at or prior to the Effective Time and whether asserted or
claimed prior to, at or after the Effective Time that are in whole or in part
(i) based on, or arising out of the fact that such person is or was a director
or officer of such party or (ii) based on, arising out of or pertaining to the
transactions contemplated by this Agreement. In the event of any such loss,
expense, Claim, damage or liability (whether or not arising before the Effective
Time), (i) Parent shall pay the reasonable fees and expenses of counsel selected
by such Indemnified Party, which counsel shall be reasonably satisfactory to
Parent, promptly after statements therefor are received and otherwise advance to
such Indemnified Party upon request reimbursement of documented expenses
reasonably incurred, in either case to the extent not prohibited by applicable
Law and upon receipt of any affirmation and undertaking required by applicable
Law, (ii) Parent will cooperate in the defense of any such matter and (iii) any
determination required to be made with respect to whether an Indemnified Party's
conduct complies with the standards set forth under applicable Law and Parent's
articles of incorporation or bylaws shall be made by independent counsel
mutually acceptable to Parent and the Indemnified Party; provided, however, that
Parent shall not be liable for any settlement effected without its written
consent (which consent shall not be unreasonably withheld).
(b) After the Effective Time, Parent shall cause to be
maintained in effect a policy of directors' and officers' liability insurance
providing tail coverage for the benefit of those persons who are covered by a
directors' and officers' liability insurance policy maintained by the Company at
the Effective Time for the maximum term and coverage (not to exceed the coverage
amount provided by the Company's policy that was effective on November 1, 2001)
that can be obtained for the payment of an aggregate premium cost to Parent not
greater than six hundred percent (600%) of the annual premium payable by the
Company for its directors' and officers' liability insurance that was effective
as of November 1, 2001, the amount of coverage and term of such policy to be
advised by the Company to Parent.
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(c) In the event Parent or any of its successors or assigns
(i) consolidates with or merges into any other person and shall not be the
continuing or surviving corporation or entity of such consolidation or merger or
(ii) transfers all or substantially all of its properties and assets to any
person, then and in either such case, proper provision shall be made so that the
successors and assigns of Parent shall assume the obligations set forth in this
Section 6.8.
(d) To the fullest extent permitted by Law, from and after
the Effective Time, all rights to indemnification and advancement of expenses
now existing in favor of the employees, agents, directors or officers of the
Company and its subsidiaries with respect to their activities as such prior to
the Effective Time, as provided in the Company's certificate of incorporation or
bylaws, in effect on the date thereof or otherwise in effect on the date hereof,
all of which the Company represents are listed on Schedule 6.6, shall survive
the Merger and shall continue in full force and effect for a period of not less
than six years from the Effective Time.
(e) The provisions of this Section 6.8 are intended to be
for the benefit of, and shall be enforceable by, each Indemnified Party, his or
her heirs and his or her representatives.
SECTION 6.9 Notification of Certain Matters. The Company
shall give prompt notice to Parent and Merger Sub, and Parent and Merger Sub
shall give prompt notice to the Company, of (a) the occurrence or nonoccurrence
of any event the occurrence or nonoccurrence of which would be likely to cause
any representation or warranty contained in this Agreement which is qualified as
to materiality to be untrue or inaccurate, or any representation or warranty not
so qualified to be untrue or inaccurate in any material respect, at or prior to
the Effective Time, (b) any material failure of the Company, Parent or Merger
Sub, as the case may be, to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by it hereunder or under the
Commitment Letter, (c) any notice of, or other communication relating to, a
default or event which, with notice or lapse of time or both, would become a
default, received by it or any of its subsidiaries subsequent to the date of
this Agreement and prior to the Effective Time, under any contract or agreement
material to the financial condition, properties, businesses, results of
operations or prospects of it and its subsidiaries taken as a whole to which it
or any of its subsidiaries is a party or is subject, (d) any notice or other
communication from any third party alleging that the consent of such third party
is or may be required in connection with the transactions contemplated by this
Agreement, or (e) in the case of the Company, any Material Adverse Effect on the
Company, and in the case of Parent, any Material Adverse Effect on Parent;
provided, however, that the delivery of any notice pursuant to this Section 6.9
shall not cure such breach or non-compliance or limit or otherwise affect the
remedies available hereunder to the party receiving such notice or otherwise
affect the representations or warranties of any party or the conditions to the
obligations of any party hereunder.
SECTION 6.10 Employee Matters. (a) Parent will cause the
Surviving Corporation to honor the obligations of the Company or any of its
subsidiaries as of the Effective Time under the provisions of all employment,
bonus, consulting, termination, severance, change in control and indemnification
agreements between and among the Company or any of its subsidiaries and any
current or former officer, director, consultant or employee of the Company or
any of its subsidiaries; provided, however, that this Section 6.10 shall not be
34
construed to limit Parent or the Surviving Corporation's ability to amend or
terminate any such agreement to the extent permitted by Law and the terms of
each such agreement.
(b) Following the Effective Time and for a period of 6
months thereafter, Parent shall provide or shall cause the Surviving Corporation
to provide, to all individuals who are employees of the Company at the Effective
Time and whose employment will continue following the Effective Time (the
"ASSUMED EMPLOYEES") with: (i) compensation, employee benefits, and terms and
conditions of employment that are substantially similar, in the aggregate, as
Parent provides to similarly-situated employees of Parent; (ii) compensation,
employee benefits, and terms and conditions of employment that are substantially
similar, in the aggregate, to those of the Company as in effect immediately
prior to the Effective Time; or (iii) a combination of clauses (i) and (ii);
provided that such compensation, employee benefits, and terms and conditions of
employment are substantially similar, in the aggregate, to those in effect for
the Assumed Employees immediately prior to the Effective Time. Following the
Effective Time, to the extent permitted by Law and applicable tax qualification
requirements, and subject to any generally applicable break in service or
similar rule, and the approval of any insurance carrier, third party provider or
the like with reasonable best efforts of Parent, each Assumed Employee shall
receive service credit for purposes of eligibility to participate and vesting
(but not for benefit accrual purposes) for employment, compensation, and
employee benefit plan purposes with the Company prior to the Effective Time.
Notwithstanding any of the foregoing to the contrary, none of the provisions
contained herein shall operate to duplicate any benefit provided to any Assumed
Employee or the funding of any such benefit. Parent and the Surviving
Corporation will also cause all (A) pre-existing conditions and proof of
insurability provisions, for all conditions that all Assumed Employees and their
covered dependents have as of the Closing, and (B) waiting periods under each
plan that would otherwise be applicable to newly hired employees to be waived in
the case of clause (A) or clause (B) with respect to Assumed Employees to the
same extent waived or satisfied under the Employee Benefit Plans; provided that
nothing in this sentence shall limit the ability of Parent or the Surviving
Corporation from amending or entering into new or different employee benefit
plans or arrangements provided such plans or arrangements treat the Assumed
Employees in a substantially similar manner as employees of Parent or the
Surviving Corporation, as applicable, are treated.
(c) Parent and the Surviving Corporation will give each
Assumed Employee credit, for purposes of Parent's and the Surviving
Corporation's vacation and/or other paid leave benefit programs, for such
employees accrued and unpaid vacation and/or paid leave balance as of the
Effective Time.
(d) Nothing contained in this Agreement is intended to (i)
confer upon any Assumed Employee any right to continued employment after the
Effective Time or (ii) prevent Parent or the Surviving Corporation from
reserving the right to amend, modify or terminate any of their respective
benefit plans.
SECTION 6.11 SEC Filings. Each of Parent and the Company
shall promptly provide the other party (or its counsel) with copies of all
filings made by the other party or any of its subsidiaries with the SEC or any
other state or federal Governmental Entity in connection with this Agreement and
the transactions contemplated hereby.
35
SECTION 6.12 Fees and Expenses. Except as otherwise
contemplated in Section 8.6, whether or not the Merger is consummated, all
Expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such Expenses, except
for Expenses incurred, other than attorneys' fees, in connection with the filing
of the premerger Notification and Report Forms relating to the Merger under the
HSR Act and except for filing, printing and mailing fees incurred in connection
with the filing, printing and mailing of the Proxy Statement, which shall be
shared equally by the Company and Parent. As used in this Agreement, "EXPENSES"
includes all expenses (including, without limitation, all fees and expenses of
counsel, accountants, investment bankers, experts and consultants to a party
hereto and its affiliates) incurred by a party or on its behalf in connection
with, or related to, the authorization, preparation, negotiation, execution and
performance of this Agreement, and the transactions contemplated hereby,
including the preparation, filing, printing and mailing of the Proxy Statement
and the solicitation of stockholder approvals and all other matters related to
the transactions contemplated hereby.
SECTION 6.13 Obligations of Merger Sub. Parent will take
all action necessary to cause Merger Sub (i) to perform its obligations under
this Agreement and to consummate the Merger on the terms and conditions set
forth in this Agreement and (ii) not to conduct any business prior to the
Effective Time other than in connection with the Merger and the transactions
contemplated by this Agreement.
SECTION 6.14 Stock Delisting. The parties shall use their
reasonable best efforts to cause the Surviving Corporation to cause the Company
Common Stock to be delisted from the American Stock Exchange and deregistered
under the Exchange Act as soon as practicable following the Effective Time.
SECTION 6.15 Antitakeover Statutes. If any Takeover Statute
is or may become applicable to the Merger or the other transactions contemplated
hereby, each of Parent and the Company and their respective boards of directors
shall, subject to their fiduciary duties under applicable Law, grant such
approvals and take such actions as are necessary so that the Merger and such
transactions may be consummated as promptly as practicable on the terms
contemplated hereby and otherwise act to eliminate or minimize the effects of
any Takeover Statute on the Merger and such transactions.
SECTION 6.16 Control of the Company's Operations. Nothing
contained in this Agreement shall give Parent, directly or indirectly, rights to
control or direct the Company's operations prior to the Effective Time.
SECTION 6.17 Financing. Parent shall use its reasonable
best efforts to obtain and effectuate the financing contemplated by the
Commitment Letter including, without limitation, the consummation of the tender
offer and consent solicitation for, or discharge or defeasance of, the Company's
indebtedness as contemplated in the Commitment Letter on the terms set forth
therein and shall keep the Company apprised of all developments that would
materially affect or delay such financing, including, without limitation,
matters referred to in Section 6.9(b). Parent shall not, or permit any of its
subsidiaries to, without the prior written consent of the Company, take any
action or enter into any transaction, including, without limitation, any merger,
acquisition, joint venture, disposition, lease, contract or debt or equity
36
financing that would reasonably be expected to materially impair, materially
delay or prevent the financing contemplated by the Commitment Letter. Parent
shall not amend or alter, or agree to amend or alter the Commitment Letter in
any manner that would materially impair, materially delay or prevent the Merger
or the financing contemplated by the Commitment Letter without the prior written
consent of the Company. In the event that the Commitment Letter shall expire or
be terminated for any reason, Parent shall promptly notify the Company of such
event and the reasons therefor.
ARTICLE VII
CONDITIONS TO CONSUMMATION OF THE MERGER
SECTION 7.1 Conditions to Each Party's Obligations to
Effect the Merger. The respective obligations of each party to consummate the
transactions contemplated by this Agreement are subject to the fulfillment at or
prior to the Effective Time of each of the following conditions, any or all of
which may be waived in whole or in part by the party being benefited thereby, to
the extent permitted by applicable Law:
(a) This Agreement shall have been approved and adopted by
the Company Requisite Vote.
(b) Any waiting period applicable to the Merger under the
HSR Act shall have expired or early termination thereof shall have been granted
without limitation, restriction or condition that has had or would reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect on
the Company (or an effect on Parent and its subsidiaries that, were such effect
applied to the Company and its subsidiaries, would have or would reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect on
the Company).
(c) There shall not be in effect any Law (including,
without limitation, any Gaming Law) of any Governmental Entity (including,
without limitation, any Gaming Authority) of competent jurisdiction,
restraining, enjoining or otherwise preventing consummation of the transactions
contemplated by this Agreement or permitting such consummation only subject to
any condition or restriction that has or would reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on the Company and
Parent, taken as a whole, as if the Merger had been consummated, and no
Governmental Entity shall have instituted any proceeding which continues to be
pending seeking any such Law.
(d) Parent, Merger Sub and the Company shall have obtained
the consent, approval or waiver of each Governmental Entity or other person set
forth on Schedule 7.1(d) without any limitation, restriction or condition that
has, or would reasonably be expected to have, a Material Adverse Effect on the
Surviving Corporation or Parent after giving effect to the Merger.
SECTION 7.2 Conditions to the Obligations of Parent and
Merger Sub. The respective obligations of Parent and Merger Sub to consummate
the transactions contemplated by this Agreement are subject to the fulfillment
at or prior to the Effective Time of each of the following additional
37
conditions, any or all of which may be waived in whole or part by Parent and
Merger Sub, as the case may be, to the extent permitted by applicable Law:
(a) The representations and warranties of the Company
contained herein or otherwise required to be made after the date hereof in a
writing expressly referred to herein by or on behalf of the Company pursuant to
this Agreement, to the extent qualified by materiality or Material Adverse
Effect, shall have been true and, to the extent not qualified by materiality or
Material Adverse Effect, shall have been true in all material respects, in each
case when made and on and as of the Closing Date as though made on and as of the
Closing Date (except for representations and warranties made as of a specified
date, which need be true, or true in all material respects, as the case may be,
only as of the specified date).
(b) The Company shall have performed or complied in all
material respects with all agreements and conditions contained herein required
to be performed or complied with by it prior to or at the time of the Closing.
(c) Since the date of this Agreement, there shall have been
no event which, individually or in the aggregate, results in or would reasonably
be expected to result in a Material Adverse Effect on the Company.
(d) The Company shall have delivered to Parent a
certificate, dated the date of the Closing, signed by the President or any Vice
President of the Company (but without personal liability thereto), certifying as
to the fulfillment of the conditions specified in Sections 7.2(a) and 7.2(b).
(e) Bear, Merrill and any other lenders under the financing
contemplated by the Commitment Letter are ready and willing to fund the amounts
contemplated by the Commitment Letter on the terms set forth therein.
(f) All loans and other advances made to stockholders,
employees, officers or directors of the Company or any of the Company's
subsidiaries in excess of $5,000, individually or in the aggregate (excluding
(x) loans between the Company and any of the Company's subsidiaries or between
any two of the Company's subsidiaries and (y) loans and advances to employees
for reasonable, travel, business and moving expenses in the ordinary course of
business), shall have been repaid, and Parent shall have received evidence of
such repayment satisfactory in form and substance to Parent in its sole
discretion.
(f) Holders of not more than ten percent (10%) of the
outstanding shares of Company Common Stock shall have properly demanded
appraisal rights for their shares under the DGCL.
SECTION 7.3 Conditions to the Obligations of the Company.
The obligations of the Company to consummate the transactions contemplated by
this Agreement are subject to the fulfillment at or prior to the Effective Time
of each of the following conditions, any or all of which may be waived in whole
or in part by the Company to the extent permitted by applicable Law:
38
(a) The representations and warranties of Parent and Merger
Sub contained herein or otherwise required to be made after the date hereof in a
writing expressly referred to herein by or on behalf of Parent and Merger Sub
pursuant to this Agreement, to the extent qualified by materiality or Material
Adverse Effect, shall have been true and, to the extent not qualified by
materiality or Material Adverse Effect, shall have been true in all material
respects, in each case when made and on and as of the Closing Date as though
made on and as of the Closing Date (except for representations and warranties
made as of a specified date, which need be true, or true in all material
respects, as the case may be, only as of the specified date).
(b) Parent shall have performed or complied in all material
respects with all agreements and conditions contained herein required to be
performed or complied with by it prior to or at the time of the Closing.
(c) Parent shall have delivered to the Company a
certificate, dated the date of the Closing, signed by the President or any Vice
President of Parent (but without personal liability thereto), certifying as to
the fulfillment of the conditions specified in Section 7.3(a) and 7.3(b).
ARTICLE VIII
TERMINATION; AMENDMENT; WAIVER
SECTION 8.1 Termination by Mutual Agreement. This Agreement
may be terminated and the Merger may be abandoned at any time prior to the
Effective Time, whether before or after the approval of the Merger by the
Company Requisite Vote referred to in Section 7.1(a), by mutual written consent
of the Company and Parent by action of their respective Boards of Directors.
SECTION 8.2 Termination by Either Parent or the Company.
This Agreement may be terminated and the Merger may be abandoned at any time
prior to the Effective Time by action of the Board of Directors of either Parent
or the Company if:
(a) the Merger shall not have been consummated on or before
two hundred seventy (270) days from the date of this Agreement, whether such
date is before or after the date of approval of the Merger by the Company
Requisite Vote (as may be extended as hereinafter provided, the "TERMINATION
DATE"); provided, however, that if either Parent or the Company determines that
additional time is necessary in connection with obtaining any consent,
registration, approval, permit or authorization required to be obtained from any
Gaming Authority, the Termination Date may be extended by Parent or the Company
from time to time by written notice to the other party to a date not beyond
three hundred sixty-five (365) days from the date of this Agreement.
(b) the Company Requisite Vote shall not have been obtained
at the Company Stockholder Meeting or at any adjournment or postponement
thereof;
(c) any Law permanently restraining, enjoining or otherwise
prohibiting consummation of the Merger shall become final and non-appealable
(whether before or after the approval of the Merger by the Company Requisite
Vote); or
39
(d) any Governmental Entity shall have failed to issue an
order, decree or ruling or to take any other action which is necessary to
fulfill the conditions set forth in Section 7.1(b) or 7.1(d), as applicable, and
(i) such denial of a request to issue such order, decree, ruling or take such
other action shall have been final and nonappealable or (ii) such order, decree,
ruling or other action is not reasonably likely to be issued or taken within one
year after the date hereof;
provided, that the right to terminate this Agreement pursuant to this Section
8.2 shall not be available to any party that has breached in any material
respect its obligations under this Agreement in any manner that shall have
proximately contributed to the occurrence of the failure of the Merger to be
consummated.
SECTION 8.3 Termination by the Company. This Agreement may
be terminated and the Merger may be abandoned at any time prior to the Effective
Time by action of the Company Board:
(a) prior to the Company Requisite Vote or at any time
after February 28, 2003, if the Company Board shall have approved, and the
Company shall have concurrently entered into, a definitive agreement providing
for the implementation of a Superior Proposal, so long as such action is not
prohibited by Section 6.6;
(b) if there is a breach by Parent or Merger Sub of any
representation, warranty, covenant or agreement contained in this Agreement that
cannot be cured and would cause a condition set forth in Section 7.3(a) or
7.3(b) to be incapable of being satisfied as of the Termination Date; or
(c) upon written notice to Parent if (i) the Commitment
Letter shall have expired or have been terminated or (ii) prior to the end of
any calendar quarter ending after the date hereof or any calendar month ending
after January 31, 2002, the Company requests Parent to deliver to the Company a
certificate pursuant to this Section 8.3(c) and Parent does not within
forty-five (45) days of the end of such quarter or within thirty (30) days of
the end of such month, as applicable, deliver such certificate of Parent signed
by a responsible officer stating that the Commitment Letter is in full force and
effect and that, after inquiry of Bear and Merrill, Parent does not know of any
facts that would reasonably be expected to materially impair, materially delay
or prevent the consummation of the financing contemplated by the Commitment
Letter; provided, however, that the right to terminate this Agreement under this
Section 8.3(c) shall not be available to the Company unless within ten (10) days
of receiving written notice by the Company of its intention to terminate this
Agreement under this Section 8.3(c), Parent does not (A) secure an extension of
the Commitment Letter (if expired or terminated), (B) secure an amendment of the
Commitment Letter that allows it to deliver the certificate referenced in this
Section 8.3(c), or (C) secure a commitment letter for alternate or additional
financing upon terms reasonably acceptable to the Company. Notwithstanding the
foregoing, the right to terminate this Agreement pursuant to this Section 8.3(c)
shall not be available to the Company if it has breached in any material respect
its obligations under this Agreement in any manner that contributed to Parent's
inability to deliver the certificate referenced in this Section 8.3(c).
40
SECTION 8.4 Termination by Parent. This Agreement may be
terminated and the Merger may be abandoned at any time prior to the Effective
Time, by action of the Parent Board:
(a) if the Company enters into a binding agreement for a
Superior Proposal;
(b) if there is a breach by the Company of any
representation, warranty, covenant or agreement contained in this Agreement that
cannot be cured and would cause a condition set forth in Sections 7.2(a) or
7.2(b) to be incapable of being satisfied as of the Termination Date; or
(c) after the occurrence of a Material Adverse Effect on
the Company.
SECTION 8.5 Effect of Termination and Abandonment. In the
event of termination of this Agreement and the abandonment of the Merger
pursuant to this Article VIII, this Agreement (other than this Section 8.5 and
Sections 5.3(c), 6.12, 8.6 and Article IX) shall become void and of no effect
with no liability on the part of any party hereto (or of any of its directors,
officers, employees, agents, legal and financial advisors or other
representatives); provided, however, that no such termination shall relieve any
party hereto of any liability or damages resulting from any willful breach of
any of its representations or warranties or the breach of any of its covenants
or agreements set forth in this Agreement.
SECTION 8.6 Termination Amount and Expenses.
(a) Except as set forth in this Section 8.6, all Expenses
incurred in connection with this Agreement and the transactions contemplated
hereby shall be paid in accordance with the provisions of Section 6.12.
(b) The Company agrees that, if the Company shall terminate
this Agreement pursuant to Section 8.3(a) or Parent shall terminate this
Agreement pursuant to Section 8.4(a) then the Company shall pay to Parent on or
before the Termination Payment Date, a termination fee in an amount equal to
$15,000,000 plus an additional amount determined in accordance with the
provisions of Schedule 8.6, for a total amount not to exceed $27,500,000 (the
"TERMINATION AMOUNT"). As used in this Agreement, "TERMINATION PAYMENT DATE"
shall mean the earlier to occur of: (i) the date that is one (1) year after the
Termination Date, or (ii) the date on which a Superior Proposal is consummated
by the Company, and if the Superior Proposal terminates without being
consummated, the Company shall pay with the Termination Amount interest thereon
at the rate of nine percent (9%) per annum from the date of termination of the
Superior Proposal to the date of payment. For purposes of this Agreement the
"value" of consideration other than cash payable in a Superior Proposal shall be
the fair market value as determined in good faith by the Company Board for
purposes of valuing the Superior Proposal, except that any publicly-traded
security shall be valued as follows: (i) if the security is then traded on a
national securities exchange or Nasdaq (or a similar national quotation system),
then the value of the security shall be deemed to be the average of the closing
prices of the security on such exchange or system over the ten (10) trading day
period ending on the date this Agreement is terminated pursuant to Section
8.3(a) or 8.4(a) or (ii) if the security is actively traded over-the-counter,
then the value of the security shall be deemed to be the average of the
midpoints between the closing bid and asked prices of the security over the ten
41
(10) trading day period ending on the date this Agreement is terminated pursuant
to Section 8.3(a) or 8.4(a).
(c) The Company agrees that, if Parent shall terminate this
Agreement pursuant to Section 8.4(b), the Company shall pay to Parent, within
five (5) business days of receipt by Company of a written notice from Parent
evidencing Parent's documented Expenses, an amount equal to Parent's documented
Expenses not to exceed $3,500,000 in the aggregate.
(d) Parent agrees that, if the Company shall terminate this
Agreement pursuant to Section 8.3(b), Parent shall pay to the Company, within
five (5) business days of receipt by Parent of a written notice from the Company
evidencing the Company's documented Expenses, an amount equal to the Company's
documented Expenses not to exceed $3,500,000 in the aggregate.
(e) Each of Parent and the Company agrees that the payments
provided for in this Section 8.6 shall be the sole and exclusive remedy of the
parties upon a termination of this Agreement pursuant to Article VIII, and such
remedy shall be limited to the payments stipulated in this Section 8.6;
provided, however, that nothing in this Agreement shall relieve any party hereto
of any liability or damages resulting from any willful breach of any of its
representations and warranties or the breach of any of its covenants or
agreements set forth in this Agreement. Notwithstanding the foregoing, any
recovery by Parent under Section 8.6(b) or Section 8.6(c) is intended to be
mutually exclusive and in no event shall Parent be entitled to payment under
both such Sections.
(f) Each Party acknowledges that the agreements contained
in this Section 8.6 are an integral part of the transactions contemplated by
this Agreement, and that, without these agreements, such party would not enter
into this Agreement; accordingly, if a party fails to pay promptly amounts due
hereunder, and, in order to obtain such payment, the other party commences a
suit which results in a judgment against the Company for such amounts, the
non-prevailing party shall pay the prevailing party's expenses (including
attorneys' fees) incurred in connection with such suit.
(g) Any payment required to be made pursuant to this
Section 8.6 shall be made on the requisite payment date by wire transfer of
immediately available funds to an account designated by Parent or the Company,
as applicable.
SECTION 8.7 Amendment. This Agreement may be amended by
action taken by the Company, Parent and Merger Sub at any time before or after
approval of the Merger by the Company Requisite Vote but, after any such
approval, no amendment shall be made which requires the approval of such
stockholders under applicable Law without such approval. This Agreement may not
be amended except by an instrument in writing signed on behalf of the parties
hereto.
SECTION 8.8 Extension; Waiver. At any time prior to the
Effective Time, each party hereto (for these purposes, Parent and Merger Sub
shall together be deemed one party and the Company shall be deemed the other
party) may (a) extend the time for the performance of any of the obligations or
other acts of the other party, (b) waive any inaccuracies in the representations
42
and warranties of the other party contained herein or in any document,
certificate or writing delivered pursuant hereto, or (c) waive compliance by the
other party with any of the agreements or conditions contained herein. Any
agreement on the part of either party hereto to any such extension or waiver
shall be valid only if set forth in an instrument in writing signed on behalf of
such party. The failure of either party hereto to assert any of its rights
hereunder shall not constitute a waiver of such rights.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1 Nonsurvival of Representations and Warranties.
None of the representations, warranties, covenants and agreements in this
Agreement or in any exhibit, schedule or instrument delivered pursuant to this
Agreement shall survive beyond the Effective Time, except for those covenants
and agreements contained herein and therein that by their terms apply or are to
be performed in whole or in part after the Effective Time and this Article IX.
This Section 9.1 shall not limit any covenant or agreement of the parties which
by its terms contemplates performance after the Effective Time.
SECTION 9.2 Entire Agreement; Assignment. (a) This
Agreement (including any exhibits, schedules and annexes to this Agreement), the
Company Disclosure Schedule and the Parent Disclosure Schedule constitute the
entire agreement between the parties hereto with respect to the subject matter
hereof and supersede all other prior agreements and understandings, both written
and oral, between the parties with respect to the subject matter hereof other
than the Confidentiality Agreement.
(b) Neither this Agreement nor any of the rights, interests
or obligations hereunder shall be assigned by operation of Law (including, but
not limited to, by merger or consolidation) or otherwise. Any assignment in
violation of the preceding sentence shall be void. 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 9.3 Notices. All notices, requests, instructions or
other documents to be given under this Agreement shall be in writing and shall
be deemed given (a) five (5) business days following sending by registered or
certified mail, postage prepaid, (b) when sent if sent by facsimile; provided,
that the fax is promptly confirmed by telephone confirmation thereof, (c) when
delivered, if delivered personally to the intended recipient, or (d) one (1)
business day following sending by overnight delivery via a national courier
service, and in each case, addressed to a party at the following address for
such party:
if to Parent or to Merger
Sub, to: Penn National Gaming, Inc.
825 Berkshire Boulevard, Suite 200
Wyomissing, Pennsylvania 19610
Attention: Peter M. Carlino
Chief Executive Officer
Facsimile: (610) 373-4966
43
with a copy to: Morgan, Lewis & Bockius LLP
1701 Market Street
Philadelphia, Pennsylvania 19103-2921
Attention: Peter S. Sartorius, Esquire
Facsimile: (215) 963-5299
if to the Company, to: Hollywood Casino Corporation
Two Galleria Tower
13455 Noel Road, Suite 2200
Dallas, Texas 75240
Attention: Edward T. Pratt III
Chief Executive Officer
Facsimile: (972) 716-3903
with copies to: Hollywood Casino Corporation
Two Galleria Tower
13455 Noel Road, Suite 2200
Dallas, Texas 75240
Attention: Walter E. Evans
General Counsel
Facsimile: (972) 716-3903
and Weil, Gotshal & Manges LLP
100 Crescent Court, Suite 1300
Dallas, Texas 75201
Attention: Michael A. Saslaw
Facsimile: (214) 746-7777
or to such other address as the person to whom notice is to be given may have
previously furnished to the other in writing in the manner set forth above.
SECTION 9.4 Governing Law; Consent to Jurisdiction. This
Agreement and the legal relations among the parties hereto shall be governed by,
and construed and enforced in accordance with, the Laws of the State of
Delaware, without regard to its conflict of laws rules. Each party to this
Agreement hereby irrevocably and unconditionally (a) agrees that any action or
proceeding arising out of or in connection with this Agreement shall be brought
only in the Chancery Court of the State of Delaware (the "DELAWARE Court"), and
not in any other state or federal court in the United States of America or any
court in any other country, (b) consents to submit to the exclusive jurisdiction
of the Delaware Court for purposes of any action or proceeding arising out of or
in connection with this Agreement, (c) appoints, to the extent such party is not
otherwise subject to service of process in the State of Delaware, irrevocably
RL&F Service Corp., One Rodney Square, 10th Floor, 10th and King Streets,
Wilmington, Delaware 19801 as its agent in the State of Delaware as such party's
agent for acceptance of legal process in connection with any such action or
proceeding against such party with the same legal force and validity as if
served upon such party personally within the State of Delaware, (d) waives any
objection to the laying of venue of any such action or proceeding in the
Delaware Court, and (e) waives, and agrees not to plead or to make, any claim
44
that any such action or proceeding brought in the Delaware Court has been
brought in an improper or inconvenient forum or is subject to a jury trial.
SECTION 9.5 Descriptive Headings. The descriptive headings
herein are inserted for convenience of reference only and are not intended to be
part of or to affect the meaning or interpretation of this Agreement.
SECTION 9.6 Parties in Interest. Subject to Section 9.2(b),
this Agreement shall be binding upon and inure solely to the benefit of each
party hereto and its successors and permitted assigns, and, except as provided
in Section 6.8, nothing in this Agreement, express or implied, is intended to or
shall confer upon any other person any rights, benefits or remedies of any
nature whatsoever under or by reason of this Agreement.
SECTION 9.7 Severability. The provisions of this Agreement
shall be deemed severable and the invalidity or unenforceability of any
provision shall not affect the validity or enforceability of the other
provisions hereof. If any provision of this Agreement, or the application
thereof to any person or any circumstance, is invalid or unenforceable, (a) a
suitable and equitable provision shall be substituted therefor in order to carry
out, so far as may be valid and enforceable, the intent and purpose of such
invalid or unenforceable provision and (b) the remainder of this Agreement and
the application of such provision to other persons or circumstances shall not be
affected by such invalidity or unenforceability, nor shall such invalidity or
unenforceability affect the validity or enforceability of such provision, or the
application thereof, in any other jurisdiction.
SECTION 9.8 Specific Performance. The parties agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions of this Agreement, in addition to
any other remedy to which they are entitled at Law or in equity.
SECTION 9.9 Counterparts. This Agreement may be executed in
one or more counterparts, all of which shall be considered one and the same
agreement and shall become effective when one or more counterparts have been
signed by each of the parties and delivered to the other parties.
SECTION 9.10 Interpretation. (a) The words "hereof,"
"herein," "hereby" and "herewith" and words of similar import shall, unless
otherwise stated, be construed to refer to this Agreement as a whole and not to
any particular provision of this Agreement, and article, section, paragraph,
exhibit and schedule references are to the articles, sections, paragraphs,
exhibits and schedules of this Agreement unless otherwise specified. Whenever
the words "include," "includes" or "including" are used in this Agreement, they
shall be deemed to be followed by the words "without limitation." All terms
defined in this Agreement shall have the defined meanings contained herein when
used in any certificate or other document made or delivered pursuant hereto
unless otherwise defined therein. The definitions contained in this Agreement
are applicable to the singular as well as the plural forms of such terms and to
the masculine as well as to the feminine and neuter genders of such terms. Any
45
agreement, instrument or statute defined or referred to herein or in any
agreement or instrument that is referred to herein means such agreement,
instrument or statute as from time to time, amended, qualified or supplemented,
including (in the case of agreements and instruments) by waiver or consent and
(in the case of statutes) by succession of comparable successor statutes and all
attachments thereto and instruments incorporated therein. References to a person
are also to its permitted successors and assigns.
(b) 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 [date]. The phrase "made available" in this
agreement shall mean that the information referred to has been actually
delivered to the party to whom such information is to be made available.
(c) The parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties and no presumption or burden of proof shall
arise favoring or disfavoring any party by virtue of the authorship of any
provisions of this Agreement.
SECTION 9.11 Definitions.
(a) "CODE" means the Internal Revenue Code of 1986, as
amended.
(b) "GAMING AUTHORITY" means any Governmental Entity with
regulatory control or jurisdiction over the conduct of lawful gaming or
gambling, including, without limitation, the Alcohol and Gaming Commission of
Ontario, the Colorado Division of Gaming, the Colorado Limited Gaming Control
Commission, the Illinois Governing Board, the Louisiana Gaming Control Board,
the Mississippi Gaming Commission, the Mississippi State Tax Commission, the New
Jersey Racing Commission, the New Jersey Casino Control Commission, the
Pennsylvania State Horse Racing Commission, the Pennsylvania State Harness
Racing Commission, the West Virginia Racing Commission and the West Virginia
Lottery Commission.
(c) "GAMING LAWS" means any federal, state, local or
foreign statute, ordinance, rule, regulation, permit, consent, approval,
registration, finding of suitability, license, judgment, order, decree,
injunction or other authorization governing or relating to the current (or, in
the case of the Company and its subsidiaries, contemplated) manufacturing,
distribution, casino gambling and gaming activities and operations of the
Company and Parent and their respective subsidiaries, including, without
limitation, the Ontario Gaming Control Act and the rules and regulations
promulgated thereunder, the Illinois Riverboat Act and the rules and regulations
promulgated thereunder, the Colorado Limited Gaming Act and the rules and
regulations promulgated thereunder, the Louisiana Riverboat Economic Development
and Gaming Control Act and the rules and regulations promulgated thereunder, the
Mississippi Gaming Control Act and the rules and regulations promulgated
thereunder, the New Jersey Racing Act of 1940 and the rules and regulations
promulgated thereunder, the New Jersey Casino Control Act and Casino
Simulcasting Act and the rules and regulations promulgated thereunder, the
Pennsylvania Racing Act and the rules and regulations promulgated thereunder,
46
the West Virginia Horse and Dog Racing Act and the rules and regulations
promulgated thereunder and the West Virginia Racetrack Video Lottery Act and the
rules and regulations promulgated thereunder and all applicable local rules and
ordinances.
(d) "KNOW" or "KNOWLEDGE" means, with respect to any party,
the actual knowledge of any executive officer or director of such party.
(e) "LEASE" means any lease of property, whether real,
personal or mixed, and all amendments thereto, and shall include without
limitation all use of occupancy agreements.
(f) "MATERIAL ADVERSE EFFECT" means with respect to any
party, any change, circumstance or effect that, individually or in the aggregate
with all other changes, circumstances and effects, is or is reasonably likely to
have a material adverse effect on (i) the business, assets, results of
operations or financial condition of such party and its subsidiaries taken as a
whole or (ii) the ability of such party to perform its obligations under this
Agreement or consummate the Merger and the other transactions contemplated
hereby; provided, however, that no changes, circumstances or effects resulting
from general economic conditions or general gaming industry developments
applicable in the United States generally that are not directed specifically at
any jurisdiction in which such party or its subsidiaries conduct business shall
be deemed to constitute, create or cause a Material Adverse Effect.
(g) "PERMITTED EXCEPTIONS" means (i) Liens for current
Taxes or other governmental charges not yet due and payable or delinquent, the
amount or validity of which is being contested in good faith by appropriate
proceedings or which may thereafter be paid without penalty (ii) such
imperfections of title, easements, encumbrances and mortgages or other Liens, if
any, as are not, individually or in the aggregate, material in character, amount
or extent and do not materially detract from the value, or materially interfere
with the present use, of any property subject thereto or affected thereby, (iii)
Liens securing debt for borrowed money of the underlying fee owner where the
Company or a subsidiary of the Company or Parent or a subsidiary of Parent, as
the case may be, is a lessee, (iv) levies not at the time due or which are being
contested in good faith by appropriate proceedings, (v) mechanics',
materialmen's, repairmen's or other like Liens arising in the ordinary course of
business that are not overdue for a period of more than sixty (60) days (vi)
zoning, entitlement and other land use and environmental regulations by any
Governmental Entity (vii) purchase money security interests for gaming
equipment, (viii) Liens arising under any existing agreement of the Company or
any of its subsidiaries for borrowed money or any indenture to which the Company
or any of its subsidiaries is a party and which is a Material Contract and (ix)
such other imperfections in title, charges, easements, restrictions and
encumbrances which do not materially detract from the value of or materially
interfere with the present use of any property subject thereto or affected
thereby.
(h) "PERSON" means an individual, corporation, limited
liability company, partnership, joint venture, association, trust,
unincorporated organization, other entity or group (as defined in the Exchange
Act).
(i) "REAL PROPERTY" means all of the fee estates and
buildings and other fixtures and improvements thereon, leasehold interests,
easements, licenses, rights to access, rights-of-way, and other real property
interests which are owned or used by the Company or any of its subsidiaries, as
47
of the date hereof, in the operations of the business of the Company or any of
the Company's subsidiaries, plus such additions thereto and deletions therefrom
arising in the ordinary course of business between the date hereof and the
Closing Date.
(j) "SUBSIDIARY" means, when used with reference to any
person, any corporation or other organization or entity, whether incorporated or
unincorporated, (i) of which such party or any other subsidiary of such person
is a general or managing partner or (ii) the outstanding voting securities or
interests of, which 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 or entity, or which otherwise
constitutes 50% or more of the voting or economic interest in such corporation,
organization or entity, is directly or indirectly owned or controlled by such
person or by any one or more of its subsidiaries.
(k) "SUPERIOR PROPOSAL" means a bona fide, unsolicited,
written Acquisition Proposal (other than from Parent or its subsidiaries) for
the acquisition of all the equity interest in, or all or substantially all of
the assets of the Company and the Company's subsidiaries on terms which a
majority of the members of the Company Board determine in their good faith
judgment (after consultation with the Company Financial Advisor or other
nationally-recognized independent financial advisors) and after taking into
account all legal, financial, regulatory and other material aspects of the
Acquisition Proposal, and the person making the proposal, (i) will result in
terms that are more favorable from a financial point of view to the Company's
stockholders than the Merger, and (ii) is reasonably likely to be consummated.
[signature page follows]
48
IN WITNESS WHEREOF, each of the parties has caused this
Agreement to be duly executed on its behalf as of the day and year first above
written.
PENN NATIONAL GAMING, INC.
By: /s/ Peter M. Carlino
-----------------------------------------
Name: Peter M. Carlino
Title: Chief Executive Officer
P ACQUISITION CORP.
By: /s/ Robert S. Ippolito
-----------------------------------------
Name: Robert S. Ippolito
Title: Chief Executive Officer
HOLLYWOOD CASINO CORPORATION
By: /s/ Edward T. Pratt III
-----------------------------------------
Name: Edward T. Pratt III
Title: Chief Executive Officer
49
SCHEDULE 8.6
TERMINATION FEE (IN THOUSANDS)
--------------------------------------------------------------------------------------
PRICE TO BE PAID PER SHARE
PURSUANT TO SUPERIOR PROPOSAL BASE AMOUNT ADDITIONAL AMOUNT TOTAL AMOUNT
----------------------------- ----------- ----------------- ------------
$12.75 $15,000 $0 $15,000
$12.85 $15,000 $225 $15,225
$12.95 $15,000 $450 $15,450
$13.05 $15,000 $675 $15,675
$13.15 $15,000 $900 $15,900
$13.25 $15,000 $1,125 $16,125
$13.35 $15,000 $1,350 $16,350
$13.45 $15,000 $1,575 $16,575
$13.55 $15,000 $1,800 $16,800
$13.65 $15,000 $2,025 $17,025
$13.75 $15,000 $2,250 $17,250
$13.85 $15,000 $2,475 $17,475
$13.95 $15,000 $2,700 $17,700
$14.05 $15,000 $2,925 $17,925
$14.15 $15,000 $3,150 $18,150
$14.25 $15,000 $3,375 $18,375
$14.35 $15,000 $3,600 $18,600
$14.45 $15,000 $3,825 $18,825
$14.55 $15,000 $4,050 $19,050
$14.65 $15,000 $4,275 $19,275
$14.75 $15,000 $4,500 $19,500
$14.85 $15,000 $4,725 $19,725
$14.95 $15,000 $4,950 $19,950
$15.05 $15,000 $5,175 $20,175
$15.15 $15,000 $5,400 $20,400
$15.25 $15,000 $5,625 $20,625
$15.35 $15,000 $5,850 $20,850
$15.45 $15,000 $6,075 $21,075
$15.55 $15,000 $6,213 $21,213
$15.65 $15,000 $6,352 $21,352
$15.75 $15,000 $6,490 $21,490
$15.85 $15,000 $6,628 $21,628
$15.95 $15,000 $6,766 $21,766
$16.05 $15,000 $6,905 $21,905
$16.15 $15,000 $7,043 $22,043
$16.25 $15,000 $7,181 $22,181
$16.35 $15,000 $7,320 $22,320
$16.45 $15,000 $7,458 $22,458
$16.55 $15,000 $7,596 $22,596
$16.65 $15,000 $7,734 $22,734
TERMINATION FEE (IN THOUSANDS)
--------------------------------------------------------------------------------------
PRICE TO BE PAID PER SHARE
PURSUANT TO SUPERIOR PROPOSAL BASE AMOUNT ADDITIONAL AMOUNT TOTAL AMOUNT
----------------------------- ----------- ----------------- ------------
$16.75 $15,000 $7,873 $22,873
$16.85 $15,000 $8,011 $23,011
$16.95 $15,000 $8,149 $23,149
$17.05 $15,000 $8,287 $23,287
$17.15 $15,000 $8,426 $23,426
$17.25 $15,000 $8,564 $23,564
$17.35 $15,000 $8,702 $23,702
$17.45 $15,000 $8,841 $23,841
$17.55 $15,000 $8,979 $23,979
$17.65 $15,000 $9,117 $24,117
$17.75 $15,000 $9,255 $24,255
$17.85 $15,000 $9,394 $24,394
$17.95 $15,000 $9,532 $24,532
$18.05 $15,000 $9,670 $24,670
$18.15 $15,000 $9,809 $24,809
$18.25 $15,000 $9,947 $24,947
$18.35 $15,000 $10,085 $25,085
$18.45 $15,000 $10,223 $25,223
$18.55 $15,000 $10,362 $25,362
$18.65 $15,000 $10,500 $25,500
$18.75 $15,000 $10,638 $25,638
$18.85 $15,000 $10,776 $25,776
$18.95 $15,000 $10,915 $25,915
$19.05 $15,000 $11,053 $26,053
$19.15 $15,000 $11,191 $26,191
$19.25 $15,000 $11,330 $26,330
$19.35 $15,000 $11,468 $26,468
$19.45 $15,000 $11,606 $26,606
$19.55 $15,000 $11,744 $26,744
$19.65 $15,000 $11,883 $26,883
$19.75 $15,000 $12,021 $27,021
$19.85 $15,000 $12,159 $27,159
$19.95 $15,000 $12,298 $27,298
$20.05 $15,000 $12,436 $27,436
$20.15 $15,000 $12,500 $27,500
For a price per Share between any two listed prices per Share above, the
"Additional Amount" and "Total Amount" shall be determined by interpolation on a
straight line basis between the amounts shown opposite the two applicable prices
per Share.
EXHIBIT 1.2
STOCKHOLDER AGREEMENT
THIS STOCKHOLDER AGREEMENT (this "Agreement") is made and
entered into as of the 7th day of August, 2002, by and between Penn National
Gaming, Inc., a Pennsylvania corporation ("Parent"), Hollywood Casino
Corporation, a Delaware corporation ("Company"), and Edward T. Pratt, Jr.
("Stockholder"). Parent, Company and Stockholder are sometimes referred to in
this Agreement individually as a "Party" or collectively as the "Parties."
RECITALS
This Agreement is entered into with reference to the following
facts, objectives and definitions:
A. Contemporaneously with the execution and delivery of this
Agreement, Parent, P Acquisition Corp., a Delaware corporation and a
wholly-owned subsidiary of Parent ("Merger Sub"), and Company, are entering into
an Agreement and Plan of Merger, dated as of the date of this Agreement (the
"Merger Agreement"), pursuant to which it is contemplated that Company will
merge (the "Merger") with Merger Sub, upon the terms and conditions set forth in
the Merger Agreement; and
B. The Board of Directors of Company (the "Company Board") has
previously approved the Merger Agreement and the execution and delivery by
Company of this Agreement; and
C. On the date hereof each of the other stockholders of
Company set forth on Schedule A attached hereto (collectively, the "Other
Stockholders") is entering into a Stockholder Agreement in a form substantially
similar to this Agreement (collectively, the "Other Stockholder Agreements");
and
D. Stockholder owns, or has rights with respect to, certain of
the outstanding shares of Class A Common Stock, par value $0.0001 per share
("Class A Common Stock"), of Company, and may acquire rights with respect to
additional shares of Class A Common Stock after the date of this Agreement, and
desires to facilitate the consummation of the Merger, and for such purpose and
in order to induce Parent to enter into the Merger Agreement, Stockholder has
agreed, among other matters set forth herein, (i) to vote these shares and (ii)
to grant Parent or its designee an irrevocable proxy to exercise the voting
power of Stockholder with respect to these shares, all as provided in this
Agreement.
NOW, THEREFORE, in consideration of the covenants and
conditions contained in this Agreement, the Parties represent, warrant, and
agree as follows:
AGREEMENT
1. Representations and Warranties of Stockholder. Stockholder
represents and warrants that: (i) Stockholder is the holder of record (free and
clear of any liens, encumbrances, pledges or restrictions except as described
under the heading "Record Share Encumbrances" on Schedule B attached hereto (the
"Record Share Encumbrances")), of the number of outstanding shares of Class A
Common Stock, if any, set forth under the heading "Shares Held of Record" on
Schedule B attached hereto (the "Record Shares"), and, except as may be
described on Schedule B attached hereto, Stockholder possesses the sole right to
vote and dispose of the Record Shares; (ii) Stockholder holds (free and clear of
any liens, encumbrances, pledges or restrictions) the options to acquire shares
of Class A Common Stock, if any, set forth under the heading "Options" on
Schedule B attached hereto (the "Options"); (iii) except as may be described
under the heading "Additional Voting Shares" on Schedule B attached hereto
Stockholder maintains the right to vote or direct the vote of, but does not
solely own and cannot dispose of, the additional shares of Class A Common Stock,
if any, set forth under the heading "Additional Voting Shares" on Schedule B
attached hereto (the "Additional Voting Shares" and, collectively with the
Record Shares as to which Stockholder holds the right to vote, the "Voting
Shares"); (iv) Stockholder holds the right to sell or otherwise dispose of, but
cannot vote or direct the vote of, the additional shares of Class A Common
Stock, if any, set forth under the heading "Additional Disposition Shares" on
Schedule B attached hereto (the "Additional Disposition Shares" and, together
with the Record Shares as to which Stockholder holds the right of disposition,
the "Disposition Shares"; the Record Shares, the Additional Voting Shares, the
Additional Disposition Shares and the New Shares, as hereinafter defined, are
referred to in this Agreement as the "Shares"); (v) Stockholder does not
directly or indirectly hold or beneficially own any shares of capital stock or
other securities of Company, or any option, warrant or other right to acquire
capital stock or other securities of Company, or any option, warrant or other
right to acquire (by purchase, conversion or otherwise) any shares of capital
stock or other securities of Company, other than as described on Schedule B
hereto; (vi) Stockholder has full power and authority to make, enter into, and
carry out the terms of this Agreement; (vii) the execution, delivery, and
performance of this Agreement by Stockholder will not violate any agreement to
which Stockholder is a party, including, without limitation, any voting
agreement, stockholder agreement, or voting trust; and (viii) this Agreement
constitutes the legal, valid and binding obligation of Stockholder, enforceable
against Stockholder in accordance with its terms.
2. Agreement to Vote the Shares. During the term of this Agreement,
Stockholder shall vote all of the Voting Shares over which Stockholder has sole
voting power and will cause all of the Voting Shares over which he has shared
voting power as described on Schedule B to be voted (other than any Shares that
may have been sold in accordance with the terms of this Agreement) (i) in favor
of the Merger Agreement, and the Merger or any transaction contemplated by the
Merger Agreement, (ii) as otherwise necessary or appropriate to enable Parent,
Company and Merger Sub to consummate the transactions contemplated by the Merger
Agreement, (iii) against any action or agreement that would result in a breach
in any material aspect of any covenant, representation, or warranty or any other
obligation or agreement of Company under the Merger Agreement, (iv) against any
action or agreement that would terminate, impede, interfere with, delay,
postpone, or attempt to discourage the Merger, including, but not limited to:
(A) a sale or transfer of a material amount of the assets of Company or any of
its subsidiaries or a reorganization, recapitalization, or liquidation of
Company or any of its subsidiaries, (B) any change in the Company Board, except
as provided for in the last sentence of this Section or Section 10 or as
otherwise agreed to in writing by the Parties, (C) any change in the present
capitalization or dividend policy of Company, or (D) any other change in
Company's corporate structure; and (v) against any other proposal which would
result in any of the conditions to Parent's obligations under the Merger
Agreement not being fulfilled. Notwithstanding the foregoing, nothing herein
shall prevent Stockholder from taking any actions as an officer and/or a
director of Company so long as such actions are not prohibited by the Merger
Agreement or any other provision of this Agreement, including without
2
limitation, the nomination for and filling of any vacancy in the Company Board
arising due to the death, resignation or removal of any current director of
Company.
3. Grant of Irrevocable Proxy. In the event that Stockholder does not
vote all of the Voting Shares in accordance with Section 2 hereof, subject to
the approval of all applicable Gaming Authorities (as defined in the Merger
Agreement), Stockholder hereby irrevocably appoints Parent or any designee of
Parent the lawful agent, attorney, and proxy of Stockholder, during the term of
this Agreement, to vote all of the Voting Shares in accordance with Section 2
hereof. Stockholder intends this proxy to be irrevocable, during the term of
this Agreement, and coupled with an interest and will take such further action
or execute such other instruments as may be necessary to effectuate the intent
of this proxy and hereby revokes any proxy previously granted by Stockholder
with respect to the Voting Shares. Stockholder shall not hereafter, unless and
until the Termination Time, purport to vote (or execute a consent with respect
to) any of the Voting Shares (other than through this irrevocable proxy or in
accordance with Section 2 hereof) or grant any other proxy or power of attorney
with respect to any of the Voting Shares, deposit any of the Voting Shares into
a voting trust or enter into any agreement (other than this Agreement),
arrangement, or understanding with any person, directly or indirectly, to vote,
grant any proxy, or give instructions with respect to the voting of any of the
Voting Shares. Stockholder shall retain at all times the right to vote the
Voting Shares in Stockholder's sole discretion on all matters other than those
set forth in Section 2 hereof that are presented for a vote to the stockholders
of Company generally.
4. Manner of Voting. The Voting Shares may be voted pursuant to this
Agreement in person, by proxy, by written consent, or in any other manner
permitted by applicable law.
5. No Solicitation. From the date of this Agreement until the Effective
Time (as such date is defined in the Merger Agreement) or the Termination Time
(as hereinafter defined), Stockholder will not, nor will Stockholder permit any
investment banker, attorney, accountant or other advisor or representative of
Stockholder to, directly or indirectly, (i) initiate, solicit or encourage any
inquiries, offers or proposals that constitute, or may reasonably be expected to
lead to an Acquisition Proposal (as such term is defined in the Merger
Agreement), (ii) participate in any discussions or negotiations concerning, or
provide to any person any information or data relating to Company or any
subsidiary of Company for the purpose of making, or take any other action to
facilitate, any Acquisition Proposal or any inquiries or the making of any
proposal that constitutes, or may reasonably be expected to lead to, any
Acquisition Proposal, (iii) agree to, approve or recommend any Acquisition
Proposal or (iv) take any other action materially inconsistent with Company's
obligations and commitments assumed pursuant to Section 6.6 of the Merger
Agreement. For avoidance of doubt, if Stockholder is a director or officer of
Company, this Section 5 shall not limit Stockholder's participation as a
director or officer in actions permitted to be taken by the Company Board or
officers of Company, as applicable, under the Merger Agreement.
6. No Transfer. From the date of this Agreement until the earlier of
(a) the Effective Time (as defined in the Merger Agreement) and (b) the
Termination Time (as hereinafter defined), Stockholder shall not sell, pledge,
or otherwise transfer, dispose of or encumber any of the Record Shares,
Additional Disposition Shares or New Shares (as hereinafter defined), or any
rights in respect thereof and shall not consent to any sale, pledge or other
3
transfer, disposition of, or encumbrance of, any Additional Voting Shares, or
any rights in respect thereof; provided, however, that this Section 6 shall not
prohibit (i) the Record Share Encumbrances, (ii) the surrender of any Shares to
Company by Stockholder as consideration for the exercise of any Options, or
(iii) the pledge of any Shares as collateral for any funds used by Stockholder
to exercise any Options or to pay withholding taxes on any such Options,
provided such pledge is subject to the terms and conditions hereof and such
pledgee agrees to be bound by the terms and conditions hereof if such pledgee
acquires voting power or dispositive power with respect to, and/or becomes the
record owner of, such Shares. Notwithstanding anything in this Agreement to the
contrary, Stockholder may (i) sell, in any manner chosen in the sole discretion
of Stockholder, Shares held of record by Stockholder or trusts for the benefit
of his children or grandchildren, (ii) margin, in any manner chosen in the sole
discretion of Stockholder, Shares held of record by Stockholder or trusts for
the benefit of his children or grandchildren or (iii) gift Shares to a
charitable organization or a relative of the Stockholder or a trust for the
benefit of any relative of the Stockholder; provided that in the case of clauses
(i), (ii) and (iii), the aggregate number of shares sold, margin, gifted or
otherwise transferred pursuant thereto, during the term of this Agreement, shall
not exceed 25,000 Shares.
7. Additional Purchases; Option Exercise. If, during the period
commencing on the date of this Agreement and ending on the earlier of (i) the
Effective Time and (ii) the Termination Time, Stockholder purchases or otherwise
acquires any additional shares of Class A Common Stock or any rights in respect
thereof, including, without limitation, pursuant to the exercise of
Stockholder's Options, such shares (the "New Shares") shall be subject to the
terms of this Agreement and for all purposes shall be and constitute a portion
of the Shares. As to all Options listed on Schedule B (other than Options for
which shares are issued by the Company as a result of Stockholder's exercise of
such Options), if the Merger is consummated, Stockholder shall receive, in
accordance with Section 2.2 of the Merger Agreement, cash for each such Option
in the amount of the difference between the Merger Consideration and the
exercise price of such Option plus applicable withholding tax.
8. Adjustments to Prevent Dilution. In the event of any change in the
Class A Common Stock by reason of any stock dividend, split-up,
recapitalization, combination, or the exchange of shares, the term "Shares"
shall be deemed to refer to and include the Shares as well as all such stock
dividends and distributions and any shares into which or for which any or all of
the Shares may be changed or exchanged.
9. Waiver of Appraisal Rights. Stockholder hereby irrevocably and
unconditionally waives any right of appraisal relating to the Merger that
Stockholder may have by virtue of ownership of the Shares.
10. Director Qualifications; Resignation of Stockholder. Stockholder
shall comply with all orders, decrees, rulings or other requirements of all
Gaming Authorities (as defined in the Merger Agreement) and all Gaming Laws (as
defined in the Merger Agreement) having jurisdiction over or applicability to
Company or any of its subsidiaries at all times during which Stockholder is
serving in any position with the Company or any of its subsidiaries, whether as
a director, officer or otherwise, subject to Stockholder's right to appeal any
such orders in the manner provided for by, and in accordance with, applicable
law. Stockholder hereby resigns from all positions with the Company and any of
its subsidiaries, whether as a director, officer or otherwise, effective only at
the Effective Time (as defined in the Merger Agreement). Stockholder also agrees
to resign from all positions with Company and any of its subsidiaries, whether
4
as a director, officer or otherwise, at any time that a Gaming Authority
determines that Stockholder is not qualified or suitable to serve in any of such
positions, or otherwise denies or revokes approval of such individual for
service in any of such positions, subject to Stockholder's right to retain any
of such positions during any appeal of such determination to the extent such
retention is permitted under applicable law.
11. Litigation Standstill.
(a) Stay of Litigation. Stockholder and Company agree to stay
all activities in the Lawsuits until the Termination Time, including,
without limitation, refraining from seeking any discovery, filing any
motions or amendments to pleadings or previous motions, and to further
postpone any deadlines, discovery cut-offs, response dates, or similar
matters which have not expired prior to the date of this Agreement.
Stockholder and Company shall cooperate in taking all reasonable steps
to ensure a stay of all activities in the Lawsuits and to ensure that
the Lawsuits, to the extent within the control of Stockholder and
Company, remain inactive in all respects involving Stockholder and
Company. If not previously dismissed prior to the Effective Time, all
Lawsuits will be dismissed with prejudice promptly following the
Effective Time.
(b) Tolling. All limitations periods applicable to the
Lawsuits will be tolled until 15 days after the Termination Time.
(c) Definitions. For purposes of this Agreement, "Lawsuits"
means each of the lawsuits styled as follows: (a) Hollywood Casino
Corporation v. Jack E. Pratt v. Edward T. Pratt III, Walter E. Evans
and Paul C. Yates, Cause No. 02-01516, in the District Court of Dallas
County, Texas, 116th Judicial District; (b) Hollywood Casino
Corporation v. Harold C. Simmons, et al., Civil Action No.
3:02CV0325-M, in the United Stated District Court for the Northern
District of Texas, Dallas Division; and (c) Jack E. Pratt v. Hollywood
Casino Corporation, a Delaware corporation, C.A. No. 19504, in the
Court of Chancery of the State of Delaware in and for New Castle
County.
(d) Standstill on other Actions. From the date of this
Agreement through the earlier to occur of the Termination Time or the
Effective Time, the Parties agree as follows:
(i) The Stockholder Parties (as hereinafter defined)
and the Company Controlled Parties (as hereinafter defined)
shall not bring any actions against any Company Parties (as
hereinafter defined) or Stockholder Parties, respectively,
other than with respect to an activity that is unrelated to
the Company; provided, however, that such Parties may still
report or make public disclosure of any violations of Law (as
defined in the Merger Agreement).
(ii) Company shall not increase the size of its Board
of Directors.
(iii) Company will continue to pay or make available
to Stockholder the current salary and benefits of Stockholder
through December 31, 2002 and consulting compensation pursuant
to the terms of Stockholder's employment agreement with
Company from and after January 1, 2003.
5
12. General Release and Covenant Not to Sue.
(a) Release by Stockholder Parties. EFFECTIVE AS OF THE
EFFECTIVE TIME, STOCKHOLDER, ON BEHALF OF STOCKHOLDER, STOCKHOLDER'S
ATTORNEYS, HEIRS, EXECUTORS, ADMINISTRATORS, ASSIGNS, AND TRUSTS,
PARTNERSHIPS AND OTHER ENTITIES UNDER STOCKHOLDER'S CONTROL (TOGETHER
THE "STOCKHOLDER PARTIES"), HEREBY GENERALLY RELEASES AND FOREVER
DISCHARGES COMPANY AND ITS PREDECESSORS, SUCCESSORS, ASSIGNS,
SUBSIDIARIES AND AFFILIATES AND FAMILY MEMBERS (AS DEFINED BELOW),
OFFICERS (OTHER THAN PAUL YATES AND WALTER EVANS), EMPLOYEES, AGENTS,
REPRESENTATIVES, PRINCIPALS AND ATTORNEYS, AND, SUBJECT TO SECTION 14
HEREOF, DIRECTORS, PAUL YATES AND WALTER EVANS (TOGETHER THE "COMPANY
PARTIES") FROM ANY AND ALL CLAIMS, DEMANDS, LIABILITIES, SUITS,
DAMAGES, LOSSES, EXPENSES, ATTORNEYS' FEES, OBLIGATIONS OR CAUSES OF
ACTION, KNOWN OR UNKNOWN OF ANY KIND AND EVERY NATURE WHATSOEVER, AND
WHETHER OR NOT ACCRUED OR MATURED (COLLECTIVELY, "CLAIMS"), WHICH ANY
OF THEM MAY HAVE ARISING OUT OF OR RELATING TO ANY OMISSION, ACTS OR
FACTS THAT HAVE OCCURRED UP AND UNTIL AND INCLUDING THE EFFECTIVE TIME,
INCLUDING WITHOUT LIMITATION:
i. any and all Claims relating to, arising from, or
in connection with the Lawsuits;
ii. any and all Claims relating to, arising from, or
in connection with, the employment of Stockholder by the
Company or the termination of such employment;
iii. any and all Claims relating to, or arising from,
Stockholder's right to purchase, or actual purchase of shares
of stock of Company, including, without limitation, any Claims
for fraud, misrepresentation, breach of fiduciary duty, breach
of duty under applicable state corporate law, and securities
fraud under any state or federal law;
iv. any and all Claims for wrongful discharge of
employment; fraud; misrepresentation; termination in violation
of public policy; discrimination; breach of contract, both
express and implied; breach of a covenant of good faith and
fair dealing, both express and implied; promissory estoppel;
negligent or intentional infliction of emotional distress;
negligent or intentional misrepresentation; negligent or
intentional interference with contract or prospective economic
advantage; breach of fiduciary duty; unfair business
practices; breach of confidentiality provision, defamation;
libel; slander; negligence; personal injury; assault; battery;
invasion of privacy; false imprisonment; tortious
interference, theft, embezzlement, and conversion;
v. any and all Claims for violation of any federal,
state or municipal statute, including, but not limited to,
Title VII of the Civil Rights Act of 1964, the Civil Rights
6
Act of 1991, the Family Medical Leave Act, the Americans with
Disabilities Act of 1990, the Fair Labor Standards Act, the
Employee Retirement Income Security Act of 1974, The Worker
Adjustment and Retraining Notification Act, Older Workers
Benefit Protection Act and the Texas Commission on Human
Rights Act;
vi. any and all Claims for violation of the federal,
or any state, constitution;
vii. any and all Claims arising out of any other laws
and regulations relating to employment or employment
discrimination; and
viii. any and all Claims for attorneys' fees,
expenses, and costs other than fees, costs or expenses which
are otherwise indemnifiable under Section 6.8 of the Merger
Agreement.
"FAMILY MEMBERS" SHALL MEAN, WITH RESPECT TO ANY PARTY THAT IS AN INDIVIDUAL,
THE SPOUSE OF A PARTY, ANY PARENT OF SUCH PARTY, OR ANY LINEAL DESCENDENT OF A
PARENT OF SUCH PARTY (WHETHER NATURAL BORN OR ADOPTED).
NOTWITHSTANDING THE FOREGOING, THIS RELEASE DOES NOT IN ANY WAY RELEASE, IMPAIR,
OR LIMIT ANY OBLIGATIONS INCURRED BY OR OWING FROM THE COMPANY PARTIES (1) UNDER
THIS AGREEMENT, (2) UNDER THE MERGER AGREEMENT, INCLUDING, WITHOUT LIMITATION,
SECTION 6.8 THEREOF AND (3) WITH RESPECT TO CLAIMS UNDER THE AGE DISCRIMINATION
IN EMPLOYMENT ACT OF 1967 ("ADEA CLAIMS"). FURTHER, THIS RELEASE DOES NOT IN ANY
WAY RELEASE ANY OF COMPANY'S INSURERS FROM COVERING STOCKHOLDER FOR ANY CONDUCT,
ACTS, INJURIES, OR ACTIONS ARISING FROM, IN CONNECTION WITH, OR RELATED TO THE
TIME PERIOD SUCH PERSON WAS EMPLOYED BY OR SERVING AS AN OFFICER OR DIRECTOR OF
COMPANY.
(b) Prosecution by Stockholder and Stockholder Parties.
EFFECTIVE AS OF THE EFFECTIVE TIME, STOCKHOLDER, ON BEHALF OF
STOCKHOLDER AND THE STOCKHOLDER PARTIES, HEREBY COVENANTS FOREVER NOT
TO ASSERT, FILE, PROSECUTE, MAINTAIN, COMMENCE, INSTITUTE (OR SPONSOR
OR PURPOSELY FACILITATE ANY PERSON IN CONNECTION WITH THE FOREGOING),
ANY COMPLAINT OR LAWSUIT OR ANY LEGAL, EQUITABLE OR ADMINISTRATIVE
PROCEEDING OF ANY NATURE, AGAINST ANY OF THE COMPANY PARTIES IN
CONNECTION WITH ANY MATTER RELEASED IN SECTION 12(a), INCLUDING,
WITHOUT LIMITATION, THE LAWSUITS, AND REPRESENTS AND WARRANTS THAT TO
THE EXTENT WITHIN STOCKHOLDER'S CONTROL, NO OTHER PERSON OR ENTITY HAS
OR WILL INITIATE ANY SUCH PROCEEDING ON BEHALF OF STOCKHOLDER OR ANY
STOCKHOLDER PARTY.
7
NOTWITHSTANDING THE FOREGOING, THIS COVENANT DOES NOT IN ANY WAY PROHIBIT
STOCKHOLDER OR ANY OF THE STOCKHOLDER PARTIES FROM REPORTING OR MAKING PUBLIC
DISCLOSURE OF ANY VIOLATIONS OF LAW.
(c) Release by Company. EFFECTIVE AS OF THE EFFECTIVE TIME,
COMPANY, ON BEHALF OF ITSELF AND THE COMPANY PARTIES UNDER ITS CONTROL
(THE "COMPANY CONTROLLED PARTIES"), HEREBY GENERALLY RELEASES AND
FOREVER DISCHARGES STOCKHOLDER, THE STOCKHOLDER PARTIES AND THEIR
FAMILY MEMBERS FROM ANY AND ALL CLAIMS, WHICH ANY OF THEM MAY HAVE,
ARISING OUT OF OR RELATING TO ANY OMISSION, ACTS OR FACTS THAT HAVE
OCCURRED UP AND UNTIL AND INCLUDING THE EFFECTIVE TIME, INCLUDING
WITHOUT LIMITATION, THE LAWSUITS.
NOTWITHSTANDING THE FOREGOING, THIS RELEASE DOES NOT IN ANY WAY RELEASE, IMPAIR,
OR LIMIT (i) ANY OBLIGATIONS INCURRED BY OR OWING FROM STOCKHOLDER OR ANY OF THE
STOCKHOLDER PARTIES (1) UNDER THIS AGREEMENT, AND (2) WITH RESPECT TO ADEA
CLAIMS OR (ii) THE RIGHTS OF COMPANY OR ANY OF ITS PREDECESSORS, SUCCESSORS,
ASSIGNS OR SUBSIDIARIES AGAINST STOCKHOLDER OR STOCKHOLDER PARTIES WITH RESPECT
TO ANY CRIMINAL OR FRAUDULENT ACTIVITY OTHER THAN ACTIVITIES THAT ARE THE
SUBJECT OF THE LAWSUITS.
(d) Prosecutions by Company and Company Controlled Parties.
EFFECTIVE AS OF THE EFFECTIVE TIME, COMPANY, ON BEHALF OF ITSELF AND
THE COMPANY CONTROLLED PARTIES, HEREBY COVENANTS FOREVER NOT TO ASSERT,
FILE, PROSECUTE, MAINTAIN, COMMENCE, INSTITUTE (OR SPONSOR OR PURPOSELY
FACILITATE ANY PERSON IN CONNECTION WITH THE FOREGOING), ANY COMPLAINT
OR LAWSUIT OR ANY LEGAL, EQUITABLE OR ADMINISTRATIVE PROCEEDING OF ANY
NATURE, AGAINST ANY OF THE STOCKHOLDER PARTIES IN CONNECTION WITH ANY
MATTER RELEASED IN SECTION 12(c), INCLUDING, WITHOUT LIMITATION, THE
LAWSUITS, AND REPRESENTS AND WARRANTS THAT, TO THE EXTENT WITHIN ITS
CONTROL, NO OTHER PERSON OR ENTITY HAS INITIATED OR WILL INITIATE ANY
SUCH PROCEEDING ON ITS OR THEIR BEHALF.
NOTWITHSTANDING THE FOREGOING, THIS COVENANT DOES NOT IN ANY WAY PROHIBIT THE
COMPANY OR ANY OF THE COMPANY PARTIES FROM REPORTING OR MAKING PUBLIC DISCLOSURE
OF ANY VIOLATIONS OF LAW.
13. Employment, Severance and Pension Matters. In consideration for the
foregoing, promptly after the Effective Time, Parent agrees to cause Company to
pay to Stockholder $1,828,374 plus any accrued bonus less any salary and
consulting payments paid after June 30, 2002, less applicable withholding and
8
other taxes, as compensation for and in full settlement of all employment,
consulting, severance, pension, death benefit or other matters.
14. Third-Party Beneficiary Rights. Subject to the following sentence,
no provision of this Agreement is intended to nor shall it be interpreted to
provide or create any third-party beneficiary rights or any other rights of any
kind in any other person or entity who is not a Party. The provisions of
Sections 11 and 12 are intended to and shall be interpreted to provide and
create third party beneficiary rights for each director, officer, employee, and
agent of the Company, provided that in the case of each director, Paul Yates and
Walter Evans, such person must, deliver to Stockholder a fully executed
agreement within five business days of the date of this Agreement containing
provisions, where reasonably applicable, identical to the provisions of Section
11 (with respect to the stay of the Lawsuits) and Section 12 (with respect to
the release of the Stockholder Parties).
15. Further Assurances. Each Party shall do and perform or cause to be
done and performed all such further acts and things and shall execute and
deliver all such other agreements, certificates, instruments, or documents as
any other Party shall reasonably request from time to time in order to carry out
the intent and purposes of this Agreement. No Party shall voluntarily undertake
any course of action inconsistent with satisfaction of the requirements
applicable to such Party as set forth in this Agreement, and each Party shall
promptly do all acts and take all measures as may be appropriate or necessary to
enable such Party to perform, as early as practicable, the obligations required
to be performed by such Party under this Agreement. Without limiting the
foregoing, if requested by Company or Parent, Stockholder will obtain a written
acknowledgement from any entity or person that Stockholder purports to act on
behalf of acknowledging that such Stockholder has the authority to execute this
Agreement on such person or entity's behalf and to so bind such person or
entity.
16. Injunctive Relief. The Parties acknowledge that it is impossible to
measure in money the damages that will accrue to one or more of them by reason
of the failure of either of them to abide by the provisions of this Agreement,
that every such provision is material, and that in the event of any such
failure, the other Party will not have an adequate remedy at law or damages.
Therefore, if any Party shall institute any action or proceeding to enforce the
provisions of this Agreement, in addition to any other relief, the court in such
action or proceeding may grant injunctive relief against any Party found to be
in breach or violation of this Agreement, as well as or in addition to any
remedies at law or damages, and such Party waives the claim or defense in any
such action or proceeding that the Party bringing such action has an adequate
remedy at law, and such Party shall not argue or assert in any such action or
proceeding the claim or defense that such remedy at law exists. No Party shall
seek and each Party shall waive any requirement for, the securing or posting of
a bond in connection with the other Party seeking or obtaining such equitable
relief.
17. Court Modification. Should any portion of this Agreement be
declared by a court of competent jurisdiction to be unreasonable, unenforceable,
or void for any reason or reasons, the involved court shall modify the
applicable provision(s) of this Agreement so as to be reasonable or as is
otherwise necessary to make this Agreement enforceable and valid and to protect
the interests of the Parties intended to be protected by this Agreement to the
maximum extent possible.
9
18. Facsimile Transmission and Counterparts. This Agreement may be
executed by facsimile transmission and in one or more counterparts, each of
which shall be deemed to be an original, but all of which taken together shall
constitute one and the same Agreement.
19. Notices. All notices, requests, demands, and other communications
under this Agreement ("Notices") shall be in writing and shall be delivered (i)
personally, (ii) by certified mail, return receipt requested, postage prepaid,
(iii) by overnight courier or (iv) by facsimile transmission properly addressed
as follows:
If to Parent to:
Penn National Gaming, Inc.
825 Berkshire Blvd., Suite 200
Wyomissing, PA 19610
Facsimile: (610) 373-4966
Attention: Peter M. Carlino, Chief Executive Officer
with a copy to:
Morgan, Lewis & Bockius LLP
1701 Market Street
Philadelphia, PA 19103
Facsimile: (215) 963-5299
Attention: Peter S. Sartorius, Esq.
If to Company to:
Hollywood Casino Corporation
Two Galleria Tower
13455 Noel Road, Suite 2200
Dallas, TX 75240
Facsimile: (972) 716-3903
Attention: Walter E. Evans, General Counsel
with a copy to:
Weil, Gotshal & Manges LLP
100 Crescent Court, Suite 1300
Dallas, TX 75201
Facsimile: (214) 746-7777
Attention: Michael A. Saslaw
and if to Stockholder, at the address specified in on the signature page to this
Agreement or, in either case, to such other address or addresses as a Party to
this Agreement may indicate to the other Party in the manner provided for in
this Paragraph 19. Notices given by mail, by overnight courier and by personal
10
delivery shall be deemed effective and complete upon delivery and notices by
facsimile transmission shall be deemed effective upon receipt.
20. Effective Date; Term. This Agreement shall become effective upon
(i) its execution and delivery by all Parties and (ii) the execution and
delivery of each of the Other Stockholder Agreements by the parties thereto;
provided, however, that Section 12 of this Agreement shall not become effective
until the Effective Time. This Agreement shall continue in full force and effect
until the first to occur of (A) the written agreement of all the Parties to
terminate this Agreement and (B) the termination of the Merger Agreement in
accordance with its terms (the first to occur of (A) and (B) the "Termination
Time").
21. Non-Solicitation of Employees. Stockholder hereby agrees for a
period of eighteen (18) months after the Effective Date that Stockholder will
not, without the prior written consent of Parent, such consent not to be
unreasonably withheld or delayed, directly or indirectly, (i) solicit, recruit
or hire any person who is now or in the future becomes an executive or
management employee of Company or any subsidiary of Company (a "Key Employee")
to work for any person or entity other than Company or any such subsidiary or
(ii) engage in any activity that would cause any employee to violate any
agreement with Company or any of its subsidiaries; provided, however, that the
above provisions shall not apply with respect to any Key Employee who is not
employed by Parent, Surviving Corporation (as defined in the Merger Agreement)
or any of their respective subsidiaries following the Effective Time for at
least one-hundred twenty (120) days unless such unemployment occurred in
connection with a violation by Stockholder of this Section 21.
22. Gaming Approvals; Cooperation. Company shall (i) promptly file all
required applications to obtain the approvals from all applicable Gaming
Authorities necessary for Stockholder to grant the proxy set forth in Section 3,
(ii) shall request an accelerated review from such Gaming Authorities in
connection with such filings, and (iii) shall otherwise use its reasonable best
efforts to obtain such approvals. Each of the Parties shall use such Party's
reasonable best efforts to cooperate with Company and all applicable Gaming
Authorities in making such filings and obtaining such approvals.
23. Other Agreements.
(a) This Agreement supersedes all prior agreements or
understandings of the Parties on the subject matter of this Agreement.
There are no representations, warranties, or agreements, whether
express or implied, or oral or written, with respect to the subject
matter of this Agreement, except as set forth in this Agreement. This
Agreement (i) shall not be modified by any oral agreement, either
express or implied, and all amendments or modifications of this
Agreement shall be in writing and be signed by all of the Parties, and
(ii) shall be binding on and shall inure to the benefit of the Parties
and their respective heirs, legal representatives, successors and
assigns.
(b) The paragraph headings in this Agreement are for the
purpose of convenience only and shall not limit or otherwise affect any
of the terms of this Agreement.
11
(c) Should any Party be in default under or breach of any of
the covenants or agreements contained in this Agreement, or in the
event a dispute shall arise as to the meaning of any term of this
Agreement, the defaulting or nonprevailing Party shall pay all costs
and expenses, including reasonable attorneys' fees, of the other Party
that may arise or accrue from enforcing this Agreement, securing an
interpretation of any provision of this Agreement, or in pursuing any
remedy provided by law whether such remedy is pursued or interpretation
is sought by the filing of a lawsuit, an appeal, or otherwise.
(d) This Agreement shall be governed by and construed in
accordance with the internal laws of the State of Delaware, which
internal laws exclude any provision or interpretation of such laws that
would call for, or permit, the application of the laws of any other
state or jurisdiction, and any dispute arising therefrom and the
remedies available shall be determined solely in accordance with such
internal laws.
(e) Where the context requires, the singular shall include the
plural, the plural shall include the singular, and any gender shall
include all other genders.
(f) Stockholder certifies that Stockholder has read the terms
of this Agreement, that Stockholder has been informed by this document
that Stockholder should discuss this Agreement with the attorney of
Stockholder's own choice, that Stockholder has had an opportunity to do
so and that Stockholder understands this Agreement's terms and effects.
(g) The Parties have jointly participated jointly in the
negotiation and drafting of this Agreement. In the event any ambiguity
or question of intent or interpretation arises, this Agreement shall be
construed as if drafted jointly by the Parties and no presumption or
burden of proof shall arise favoring or disfavoring any Party by virtue
of the authorship of any provisions of this Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
12
IN WITNESS WHEREOF, each of the Parties has executed this Agreement on
or as of the date of this Agreement.
PARENT:
PENN NATIONAL GAMING, INC.
By: /s/ Robert S. Ippolito
---------------------------------------
Name: Robert S. Ippolito
Title: Vice President, Secretary
and Treasurer
COMPANY:
HOLLYWOOD CASINO CORPORATION
By: /s/ Edward T. Pratt III
---------------------------------------
Name: Edward T. Pratt III
Title: Chief Executive Officer
STOCKHOLDER:
/s/ Edward T. Pratt, Jr.
- -------------------------------------
Edward T. Pratt, Jr.
Address:
- ----------------------------------------------------------
- ----------------------------------------------------------
- ----------------------------------------------------------
Telephone:
--------------------------------------
Facsimile:
--------------------------------------
SCHEDULE A
OTHER STOCKHOLDERS EXECUTING STOCKHOLDER AGREEMENTS
Maria A. Pratt
Sharon Pratt Naftel
Diana Pratt Wyatt
Carolyn Pratt Hickey
Michael Shannan Pratt
Jill Pratt LaFerney
John R. Pratt
Jack E. Pratt, Sr.
William D. Pratt
Edward T. Pratt III
William D. Pratt, Jr.
SCHEDULE B
SHARES HELD OF RECORD:
Stockholder holds of record 1,102,544 shares of Class A Common Stock.
OPTIONS:
None
ADDITIONAL VOTING SHARES:
None
ADDITIONAL DISPOSITION SHARES:
None
RECORD SHARE ENCUMBRANCES:
None
EXHIBIT 1.3
STOCKHOLDER AGREEMENT
THIS STOCKHOLDER AGREEMENT (this "Agreement") is made and
entered into as of the 7th day of August, 2002, by and between Penn National
Gaming, Inc., a Pennsylvania corporation ("Parent"), Hollywood Casino
Corporation, a Delaware corporation ("Company"), and Edward T. Pratt III
("Stockholder"). Parent, Company and Stockholder are sometimes referred to in
this Agreement individually as a "Party" or collectively as the "Parties."
RECITALS
This Agreement is entered into with reference to the following
facts, objectives and definitions:
A. Contemporaneously with the execution and delivery of this
Agreement, Parent, P Acquisition Corp., a Delaware corporation and a
wholly-owned subsidiary of Parent ("Merger Sub"), and Company, are entering into
an Agreement and Plan of Merger, dated as of the date of this Agreement (the
"Merger Agreement"), pursuant to which it is contemplated that Company will
merge (the "Merger") with Merger Sub, upon the terms and conditions set forth in
the Merger Agreement; and
B. The Board of Directors of Company (the "Company Board") has
previously approved the Merger Agreement and the execution and delivery by
Company of this Agreement; and
C. On the date hereof each of the other stockholders of
Company set forth on Schedule A attached hereto (collectively, the "Other
Stockholders") is entering into a Stockholder Agreement in a form substantially
similar to this Agreement (collectively, the "Other Stockholder Agreements");
and
D. Stockholder owns, or has rights with respect to, certain of
the outstanding shares of Class A Common Stock, par value $0.0001 per share
("Class A Common Stock"), of Company, and may acquire rights with respect to
additional shares of Class A Common Stock after the date of this Agreement, and
desires to facilitate the consummation of the Merger, and for such purpose and
in order to induce Parent to enter into the Merger Agreement, Stockholder has
agreed, among other matters set forth herein, (i) to vote these shares and (ii)
to grant Parent or its designee an irrevocable proxy to exercise the voting
power of Stockholder with respect to these shares, all as provided in this
Agreement.
NOW, THEREFORE, in consideration of the covenants and
conditions contained in this Agreement, the Parties represent, warrant, and
agree as follows:
AGREEMENT
1. Representations and Warranties of Stockholder. Stockholder
represents and warrants that: (i) Stockholder is the holder of record (free and
clear of any liens, encumbrances, pledges or restrictions except as described
under the heading "Record Share Encumbrances" on Schedule B attached hereto (the
"Record Share Encumbrances")), of the number of outstanding shares of Class A
Common Stock, if any, set forth under the heading "Shares Held of Record" on
Schedule B attached hereto (the "Record Shares"), and, except as may be
described on Schedule B attached hereto, Stockholder possesses the sole right to
vote and dispose of the Record Shares; (ii) Stockholder holds (free and clear of
any liens, encumbrances, pledges or restrictions) the options to acquire shares
of Class A Common Stock, if any, set forth under the heading "Options" on
Schedule B attached hereto (the "Options"); (iii) except as may be described
under the heading "Additional Voting Shares" on Schedule B attached hereto
Stockholder maintains the right to vote or direct the vote of, but does not
solely own and cannot dispose of, the additional shares of Class A Common Stock,
if any, set forth under the heading "Additional Voting Shares" on Schedule B
attached hereto (the "Additional Voting Shares" and, collectively with the
Record Shares as to which Stockholder holds the right to vote, the "Voting
Shares"); (iv) Stockholder holds the right to sell or otherwise dispose of, but
cannot vote or direct the vote of, the additional shares of Class A Common
Stock, if any, set forth under the heading "Additional Disposition Shares" on
Schedule B attached hereto (the "Additional Disposition Shares" and, together
with the Record Shares as to which Stockholder holds the right of disposition,
the "Disposition Shares"; the Record Shares, the Additional Voting Shares, the
Additional Disposition Shares and the New Shares, as hereinafter defined, are
referred to in this Agreement as the "Shares"); (v) Stockholder does not
directly or indirectly hold or beneficially own any shares of capital stock or
other securities of Company, or any option, warrant or other right to acquire
capital stock or other securities of Company, or any option, warrant or other
right to acquire (by purchase, conversion or otherwise) any shares of capital
stock or other securities of Company, other than as described on Schedule B
hereto; (vi) Stockholder has full power and authority to make, enter into, and
carry out the terms of this Agreement; (vii) the execution, delivery, and
performance of this Agreement by Stockholder will not violate any agreement to
which Stockholder is a party, including, without limitation, any voting
agreement, stockholder agreement, or voting trust; and (viii) this Agreement
constitutes the legal, valid and binding obligation of Stockholder, enforceable
against Stockholder in accordance with its terms.
2. Agreement to Vote the Shares. During the term of this Agreement,
Stockholder shall vote all of the Voting Shares over which Stockholder has sole
voting power and will cause all of the Voting Shares over which he has shared
voting power as described on Schedule B to be voted (other than any Shares that
may have been sold in accordance with the terms of this Agreement) (i) in favor
of the Merger Agreement, and the Merger or any transaction contemplated by the
Merger Agreement, (ii) as otherwise necessary or appropriate to enable Parent,
Company and Merger Sub to consummate the transactions contemplated by the Merger
Agreement, (iii) against any action or agreement that would result in a breach
in any material aspect of any covenant, representation, or warranty or any other
obligation or agreement of Company under the Merger Agreement, (iv) against any
action or agreement that would terminate, impede, interfere with, delay,
postpone, or attempt to discourage the Merger, including, but not limited to:
(A) a sale or transfer of a material amount of the assets of Company or any of
its subsidiaries or a reorganization, recapitalization, or liquidation of
Company or any of its subsidiaries, (B) any change in the Company Board, except
as provided for in the last sentence of this Section or Section 10 or as
otherwise agreed to in writing by the Parties, (C) any change in the present
capitalization or dividend policy of Company, or (D) any other change in
Company's corporate structure; and (v) against any other proposal which would
result in any of the conditions to Parent's obligations under the Merger
Agreement not being fulfilled. Notwithstanding the foregoing, nothing herein
shall prevent Stockholder from taking any actions as an officer and/or a
director of Company so long as such actions are not prohibited by the Merger
Agreement or any other provision of this Agreement, including without
limitation, the nomination for and filling of any vacancy in the Company Board
2
arising due to the death, resignation or removal of any current director of
Company.
3. Grant of Irrevocable Proxy. In the event that Stockholder does not
vote all of the Voting Shares in accordance with Section 2 hereof, subject to
the approval of all applicable Gaming Authorities (as defined in the Merger
Agreement), Stockholder hereby irrevocably appoints Parent or any designee of
Parent the lawful agent, attorney, and proxy of Stockholder, during the term of
this Agreement, to vote all of the Voting Shares in accordance with Section 2
hereof. Stockholder intends this proxy to be irrevocable, during the term of
this Agreement, and coupled with an interest and will take such further action
or execute such other instruments as may be necessary to effectuate the intent
of this proxy and hereby revokes any proxy previously granted by Stockholder
with respect to the Voting Shares. Stockholder shall not hereafter, unless and
until the Termination Time, purport to vote (or execute a consent with respect
to) any of the Voting Shares (other than through this irrevocable proxy or in
accordance with Section 2 hereof) or grant any other proxy or power of attorney
with respect to any of the Voting Shares, deposit any of the Voting Shares into
a voting trust or enter into any agreement (other than this Agreement),
arrangement, or understanding with any person, directly or indirectly, to vote,
grant any proxy, or give instructions with respect to the voting of any of the
Voting Shares. Stockholder shall retain at all times the right to vote the
Voting Shares in Stockholder's sole discretion on all matters other than those
set forth in Section 2 hereof that are presented for a vote to the stockholders
of Company generally.
4. Manner of Voting. The Voting Shares may be voted pursuant to this
Agreement in person, by proxy, by written consent, or in any other manner
permitted by applicable law.
5. No Solicitation. From the date of this Agreement until the Effective
Time (as such date is defined in the Merger Agreement) or the Termination Time
(as hereinafter defined), Stockholder will not, nor will Stockholder permit any
investment banker, attorney, accountant or other advisor or representative of
Stockholder to, directly or indirectly, (i) initiate, solicit or encourage any
inquiries, offers or proposals that constitute, or may reasonably be expected to
lead to an Acquisition Proposal (as such term is defined in the Merger
Agreement), (ii) participate in any discussions or negotiations concerning, or
provide to any person any information or data relating to Company or any
subsidiary of Company for the purpose of making, or take any other action to
facilitate, any Acquisition Proposal or any inquiries or the making of any
proposal that constitutes, or may reasonably be expected to lead to, any
Acquisition Proposal, (iii) agree to, approve or recommend any Acquisition
Proposal or (iv) take any other action materially inconsistent with Company's
obligations and commitments assumed pursuant to Section 6.6 of the Merger
Agreement. For avoidance of doubt, if Stockholder is a director or officer of
Company, this Section 5 shall not limit Stockholder's participation as a
director or officer in actions permitted to be taken by the Company Board or
officers of Company, as applicable, under the Merger Agreement.
6. No Transfer. From the date of this Agreement until the earlier of
(a) the Effective Time (as defined in the Merger Agreement) and (b) the
Termination Time (as hereinafter defined), Stockholder shall not sell, pledge,
or otherwise transfer, dispose of or encumber any of the Record Shares,
Additional Disposition Shares or New Shares (as hereinafter defined), or any
rights in respect thereof and shall not consent to any sale, pledge or other
3
transfer, disposition of, or encumbrance of, any Additional Voting Shares, or
any rights in respect thereof; provided, however, that this Section 6 shall not
prohibit (i) the Record Share Encumbrances, (ii) the surrender of any Shares to
Company by Stockholder as consideration for the exercise of any Options, or
(iii) the pledge of any Shares as collateral for any funds used by Stockholder
to exercise any Options or to pay withholding taxes on any such Options,
provided such pledge is subject to the terms and conditions hereof and such
pledgee agrees to be bound by the terms and conditions hereof if such pledgee
acquires voting power or dispositive power with respect to, and/or becomes the
record owner of, such Shares. Notwithstanding anything in this Agreement to the
contrary, Stockholder may (i) sell, in any manner chosen in the sole discretion
of Stockholder, Shares held of record by Stockholder or trusts for the benefit
of his children or grandchildren, (ii) margin, in any manner chosen in the sole
discretion of Stockholder, Shares held of record by Stockholder or trusts for
the benefit of his children or grandchildren or (iii) gift Shares to a
charitable organization or a relative of the Stockholder or a trust for the
benefit of any relative of the Stockholder; provided that in the case of clauses
(i), (ii) and (iii), the aggregate number of shares sold, margin, gifted or
otherwise transferred pursuant thereto, during the term of this Agreement, shall
not exceed 50,000 Shares.
7. Additional Purchases; Option Exercise. If, during the period
commencing on the date of this Agreement and ending on the earlier of (i) the
Effective Time and (ii) the Termination Time, Stockholder purchases or otherwise
acquires any additional shares of Class A Common Stock or any rights in respect
thereof, including, without limitation, pursuant to the exercise of
Stockholder's Options, such shares (the "New Shares") shall be subject to the
terms of this Agreement and for all purposes shall be and constitute a portion
of the Shares. As to all Options listed on Schedule B (other than Options for
which shares are issued by the Company as a result of Stockholder's exercise of
such Options), if the Merger is consummated, Stockholder shall receive, in
accordance with Section 2.2 of the Merger Agreement, cash for each such Option
in the amount of the difference between the Merger Consideration and the
exercise price of such Option plus applicable withholding tax.
8. Adjustments to Prevent Dilution. In the event of any change in the
Class A Common Stock by reason of any stock dividend, split-up,
recapitalization, combination, or the exchange of shares, the term "Shares"
shall be deemed to refer to and include the Shares as well as all such stock
dividends and distributions and any shares into which or for which any or all of
the Shares may be changed or exchanged.
9. Waiver of Appraisal Rights. Stockholder hereby irrevocably and
unconditionally waives any right of appraisal relating to the Merger that
Stockholder may have by virtue of ownership of the Shares.
10. Director Qualifications; Resignation of Stockholder. Stockholder
shall comply with all orders, decrees, rulings or other requirements of all
Gaming Authorities (as defined in the Merger Agreement) and all Gaming Laws (as
defined in the Merger Agreement) having jurisdiction over or applicability to
Company or any of its subsidiaries at all times during which Stockholder is
serving in any position with the Company or any of its subsidiaries, whether as
a director, officer or otherwise, subject to Stockholder's right to appeal any
such orders in the manner provided for by, and in accordance with, applicable
law. Stockholder also agrees to resign from all positions with Company and any
of its subsidiaries, whether as a director, officer or otherwise, at any time
that a Gaming Authority determines that Stockholder is not qualified or suitable
to serve in any of such positions, or otherwise denies or revokes approval of
4
such individual for service in any of such positions, subject to Stockholder's
right to retain any of such positions during any appeal of such determination to
the extent such retention is permitted under applicable law.
11. Litigation Standstill.
(a) Stay of Litigation. Stockholder and Company agree to stay
all activities in the Lawsuits until the Termination Time, including,
without limitation, refraining from seeking any discovery, filing any
motions or amendments to pleadings or previous motions, and to further
postpone any deadlines, discovery cut-offs, response dates, or similar
matters which have not expired prior to the date of this Agreement.
Stockholder and Company shall cooperate in taking all reasonable steps
to ensure a stay of all activities in the Lawsuits and to ensure that
the Lawsuits, to the extent within the control of Stockholder and
Company, remain inactive in all respects involving Stockholder and
Company. If not previously dismissed prior to the Effective Time, all
Lawsuits will be dismissed with prejudice promptly following the
Effective Time.
(b) Tolling. All limitations periods applicable to the
Lawsuits will be tolled until 15 days after the Termination Time.
(c) Definitions. For purposes of this Agreement, "Lawsuits"
means each of the lawsuits styled as follows: (a) Hollywood Casino
Corporation v. Jack E. Pratt v. Edward T. Pratt III, Walter E. Evans
and Paul C. Yates, Cause No. 02-01516, in the District Court of Dallas
County, Texas, 116th Judicial District; (b) Hollywood Casino
Corporation v. Harold C. Simmons, et al., Civil Action No.
3:02CV0325-M, in the United Stated District Court for the Northern
District of Texas, Dallas Division; and (c) Jack E. Pratt v. Hollywood
Casino Corporation, a Delaware corporation, C.A. No. 19504, in the
Court of Chancery of the State of Delaware in and for New Castle
County.
(d) Standstill on other Actions. From the date of this
Agreement through the earlier to occur of the Termination Time or the
Effective Time, the Parties agree as follows:
(i) The Stockholder Parties (as hereinafter defined)
and the Company Controlled Parties (as hereinafter defined)
shall not bring any actions against any Company Parties (as
hereinafter defined) or Stockholder Parties, respectively,
other than with respect to an activity that is unrelated to
the Company; provided, however, that such Parties may still
report or make public disclosure of any violations of Law (as
defined in the Merger Agreement).
(ii) Company shall not increase the size of its Board
of Directors.
(iii) Company will continue to pay or make available
to Stockholder the current salary and benefits of Stockholder.
12. General Release and Covenant Not to Sue.
(a) Release by Stockholder Parties. EFFECTIVE AS OF THE
EFFECTIVE TIME, STOCKHOLDER, ON BEHALF OF STOCKHOLDER, STOCKHOLDER'S
5
ATTORNEYS, HEIRS, EXECUTORS, ADMINISTRATORS, ASSIGNS, AND TRUSTS,
PARTNERSHIPS AND OTHER ENTITIES UNDER STOCKHOLDER'S CONTROL (TOGETHER
THE "STOCKHOLDER PARTIES"), HEREBY GENERALLY RELEASES AND FOREVER
DISCHARGES COMPANY AND ITS PREDECESSORS, SUCCESSORS, ASSIGNS,
SUBSIDIARIES AND AFFILIATES AND FAMILY MEMBERS (AS DEFINED BELOW),
OFFICERS (OTHER THAN PAUL YATES AND WALTER EVANS), EMPLOYEES, AGENTS,
REPRESENTATIVES, PRINCIPALS AND ATTORNEYS, AND, SUBJECT TO SECTION 14
HEREOF, DIRECTORS, PAUL YATES AND WALTER EVANS (TOGETHER THE "COMPANY
PARTIES") FROM ANY AND ALL CLAIMS, DEMANDS, LIABILITIES, SUITS,
DAMAGES, LOSSES, EXPENSES, ATTORNEYS' FEES, OBLIGATIONS OR CAUSES OF
ACTION, KNOWN OR UNKNOWN OF ANY KIND AND EVERY NATURE WHATSOEVER, AND
WHETHER OR NOT ACCRUED OR MATURED (COLLECTIVELY, "CLAIMS"), WHICH ANY
OF THEM MAY HAVE ARISING OUT OF OR RELATING TO ANY OMISSION, ACTS OR
FACTS THAT HAVE OCCURRED UP AND UNTIL AND INCLUDING THE EFFECTIVE TIME,
INCLUDING WITHOUT LIMITATION:
i. any and all Claims relating to, arising from, or
in connection with the Lawsuits;
ii. any and all Claims relating to, arising from, or
in connection with, the employment of Stockholder by the
Company or the termination of such employment;
iii. any and all Claims relating to, or arising from,
Stockholder's right to purchase, or actual purchase of shares
of stock of Company, including, without limitation, any Claims
for fraud, misrepresentation, breach of fiduciary duty, breach
of duty under applicable state corporate law, and securities
fraud under any state or federal law;
iv. any and all Claims for wrongful discharge of
employment; fraud; misrepresentation; termination in violation
of public policy; discrimination; breach of contract, both
express and implied; breach of a covenant of good faith and
fair dealing, both express and implied; promissory estoppel;
negligent or intentional infliction of emotional distress;
negligent or intentional misrepresentation; negligent or
intentional interference with contract or prospective economic
advantage; breach of fiduciary duty; unfair business
practices; breach of confidentiality provision, defamation;
libel; slander; negligence; personal injury; assault; battery;
invasion of privacy; false imprisonment; tortious
interference, theft, embezzlement, and conversion;
v. any and all Claims for violation of any federal,
state or municipal statute, including, but not limited to,
Title VII of the Civil Rights Act of 1964, the Civil Rights
Act of 1991, the Family Medical Leave Act, the Americans with
Disabilities Act of 1990, the Fair Labor Standards Act, the
Employee Retirement Income Security Act of 1974, The Worker
Adjustment and Retraining Notification Act, Older Workers
6
Benefit Protection Act and the Texas Commission on Human
Rights Act;
vi. any and all Claims for violation of the federal,
or any state, constitution;
vii. any and all Claims arising out of any other laws
and regulations relating to employment or employment
discrimination; and
viii. any and all Claims for attorneys' fees,
expenses, and costs other than fees, costs or expenses which
are otherwise indemnifiable under Section 6.8 of the Merger
Agreement.
"FAMILY MEMBERS" SHALL MEAN, WITH RESPECT TO ANY PARTY THAT IS AN INDIVIDUAL,
THE SPOUSE OF A PARTY, ANY PARENT OF SUCH PARTY, OR ANY LINEAL DESCENDENT OF A
PARENT OF SUCH PARTY (WHETHER NATURAL BORN OR ADOPTED).
NOTWITHSTANDING THE FOREGOING, THIS RELEASE DOES NOT IN ANY WAY RELEASE, IMPAIR,
OR LIMIT ANY OBLIGATIONS INCURRED BY OR OWING FROM THE COMPANY PARTIES (1) UNDER
THIS AGREEMENT, (2) UNDER THE MERGER AGREEMENT, INCLUDING, WITHOUT LIMITATION,
SECTION 6.8 THEREOF, (3) WITH RESPECT TO CLAIMS UNDER THE AGE DISCRIMINATION IN
EMPLOYMENT ACT OF 1967 ("ADEA CLAIMS") AND (4) WITH RESPECT TO THE CLAIMS OF
STOCKHOLDER UNDER THAT CERTAIN EMPLOYMENT AGREEMENT, DATED AS OF FEBRUARY 5,
2002, BY AND BETWEEN THE COMPANY AND STOCKHOLDER. FURTHER, THIS RELEASE DOES NOT
IN ANY WAY RELEASE ANY OF COMPANY'S INSURERS FROM COVERING STOCKHOLDER FOR ANY
CONDUCT, ACTS, INJURIES, OR ACTIONS ARISING FROM, IN CONNECTION WITH, OR RELATED
TO THE TIME PERIOD SUCH PERSON WAS EMPLOYED BY OR SERVING AS AN OFFICER OR
DIRECTOR OF COMPANY.
(b) Prosecution by Stockholder and Stockholder Parties.
EFFECTIVE AS OF THE EFFECTIVE TIME, STOCKHOLDER, ON BEHALF OF
STOCKHOLDER AND THE STOCKHOLDER PARTIES, HEREBY COVENANTS FOREVER NOT
TO ASSERT, FILE, PROSECUTE, MAINTAIN, COMMENCE, INSTITUTE (OR SPONSOR
OR PURPOSELY FACILITATE ANY PERSON IN CONNECTION WITH THE FOREGOING),
ANY COMPLAINT OR LAWSUIT OR ANY LEGAL, EQUITABLE OR ADMINISTRATIVE
PROCEEDING OF ANY NATURE, AGAINST ANY OF THE COMPANY PARTIES IN
CONNECTION WITH ANY MATTER RELEASED IN SECTION 12(a), INCLUDING,
WITHOUT LIMITATION, THE LAWSUITS, AND REPRESENTS AND WARRANTS THAT TO
THE EXTENT WITHIN STOCKHOLDER'S CONTROL, NO OTHER PERSON OR ENTITY HAS
OR WILL INITIATE ANY SUCH PROCEEDING ON BEHALF OF STOCKHOLDER OR ANY
STOCKHOLDER PARTY.
7
NOTWITHSTANDING THE FOREGOING, THIS COVENANT DOES NOT IN ANY WAY PROHIBIT
STOCKHOLDER OR ANY OF THE STOCKHOLDER PARTIES FROM REPORTING OR MAKING PUBLIC
DISCLOSURE OF ANY VIOLATIONS OF LAW.
(c) Release by Company. EFFECTIVE AS OF THE EFFECTIVE TIME,
COMPANY, ON BEHALF OF ITSELF AND THE COMPANY PARTIES UNDER ITS CONTROL
(THE "COMPANY CONTROLLED PARTIES"), HEREBY GENERALLY RELEASES AND
FOREVER DISCHARGES STOCKHOLDER, THE STOCKHOLDER PARTIES AND THEIR
FAMILY MEMBERS FROM ANY AND ALL CLAIMS, WHICH ANY OF THEM MAY HAVE,
ARISING OUT OF OR RELATING TO ANY OMISSION, ACTS OR FACTS THAT HAVE
OCCURRED UP AND UNTIL AND INCLUDING THE EFFECTIVE TIME, INCLUDING
WITHOUT LIMITATION, THE LAWSUITS.
NOTWITHSTANDING THE FOREGOING, THIS RELEASE DOES NOT IN ANY WAY RELEASE, IMPAIR,
OR LIMIT (i) ANY OBLIGATIONS INCURRED BY OR OWING FROM STOCKHOLDER OR ANY OF THE
STOCKHOLDER PARTIES (1) UNDER THIS AGREEMENT, (2) WITH RESPECT TO ADEA CLAIMS
AND (3) UNDER THAT CERTAIN EMPLOYMENT AGREEMENT, DATED AS OF FEBRUARY 5, 2002,
BY AND BETWEEN THE COMPANY AND STOCKHOLDER OR (ii) THE RIGHTS OF COMPANY OR ANY
OF ITS PREDECESSORS, SUCCESSORS, ASSIGNS OR SUBSIDIARIES AGAINST STOCKHOLDER OR
STOCKHOLDER PARTIES WITH RESPECT TO ANY CRIMINAL OR FRAUDULENT ACTIVITY OTHER
THAN ACTIVITIES THAT ARE THE SUBJECT OF THE LAWSUITS.
(d) Prosecutions by Company and Company Controlled Parties.
EFFECTIVE AS OF THE EFFECTIVE TIME, COMPANY, ON BEHALF OF ITSELF AND
THE COMPANY CONTROLLED PARTIES, HEREBY COVENANTS FOREVER NOT TO ASSERT,
FILE, PROSECUTE, MAINTAIN, COMMENCE, INSTITUTE (OR SPONSOR OR PURPOSELY
FACILITATE ANY PERSON IN CONNECTION WITH THE FOREGOING), ANY COMPLAINT
OR LAWSUIT OR ANY LEGAL, EQUITABLE OR ADMINISTRATIVE PROCEEDING OF ANY
NATURE, AGAINST ANY OF THE STOCKHOLDER PARTIES IN CONNECTION WITH ANY
MATTER RELEASED IN SECTION 12(c), INCLUDING, WITHOUT LIMITATION, THE
LAWSUITS, AND REPRESENTS AND WARRANTS THAT, TO THE EXTENT WITHIN ITS
CONTROL, NO OTHER PERSON OR ENTITY HAS INITIATED OR WILL INITIATE ANY
SUCH PROCEEDING ON ITS OR THEIR BEHALF.
NOTWITHSTANDING THE FOREGOING, THIS COVENANT DOES NOT IN ANY WAY PROHIBIT THE
COMPANY OR ANY OF THE COMPANY PARTIES FROM REPORTING OR MAKING PUBLIC DISCLOSURE
OF ANY VIOLATIONS OF LAW.
13. Employment Matters. In consideration for the foregoing, Parent
agrees to honor and comply with (or cause the Surviving Corporation (as defined
in the Merger Agreement) to honor or comply with) all the terms and conditions
of that certain Employment Agreement, dated as of February 5, 2002, by and
8
between Company and Stockholder (including, without limitation, the obligation
of Company to make severance payments to Stockholder thereunder).
14. Third-Party Beneficiary Rights. Subject to the following sentence,
no provision of this Agreement is intended to nor shall it be interpreted to
provide or create any third-party beneficiary rights or any other rights of any
kind in any other person or entity who is not a Party. The provisions of
Sections 11 and 12 are intended to and shall be interpreted to provide and
create third party beneficiary rights for each director, officer, employee, and
agent of the Company, provided that in the case of each director, Paul Yates and
Walter Evans, such person must, deliver to Stockholder a fully executed
agreement within five business days of the date of this Agreement containing
provisions, where reasonably applicable, identical to the provisions of Section
11 (with respect to the stay of the Lawsuits) and Section 12 (with respect to
the release of the Stockholder Parties).
15. Further Assurances. Each Party shall do and perform or cause to be
done and performed all such further acts and things and shall execute and
deliver all such other agreements, certificates, instruments, or documents as
any other Party shall reasonably request from time to time in order to carry out
the intent and purposes of this Agreement. No Party shall voluntarily undertake
any course of action inconsistent with satisfaction of the requirements
applicable to such Party as set forth in this Agreement, and each Party shall
promptly do all acts and take all measures as may be appropriate or necessary to
enable such Party to perform, as early as practicable, the obligations required
to be performed by such Party under this Agreement. Without limiting the
foregoing, if requested by Company or Parent, Stockholder will obtain a written
acknowledgement from any entity or person that Stockholder purports to act on
behalf of acknowledging that such Stockholder has the authority to execute this
Agreement on such person or entity's behalf and to so bind such person or
entity.
16. Injunctive Relief. The Parties acknowledge that it is impossible to
measure in money the damages that will accrue to one or more of them by reason
of the failure of either of them to abide by the provisions of this Agreement,
that every such provision is material, and that in the event of any such
failure, the other Party will not have an adequate remedy at law or damages.
Therefore, if any Party shall institute any action or proceeding to enforce the
provisions of this Agreement, in addition to any other relief, the court in such
action or proceeding may grant injunctive relief against any Party found to be
in breach or violation of this Agreement, as well as or in addition to any
remedies at law or damages, and such Party waives the claim or defense in any
such action or proceeding that the Party bringing such action has an adequate
remedy at law, and such Party shall not argue or assert in any such action or
proceeding the claim or defense that such remedy at law exists. No Party shall
seek and each Party shall waive any requirement for, the securing or posting of
a bond in connection with the other Party seeking or obtaining such equitable
relief.
17. Court Modification. Should any portion of this Agreement be
declared by a court of competent jurisdiction to be unreasonable, unenforceable,
or void for any reason or reasons, the involved court shall modify the
applicable provision(s) of this Agreement so as to be reasonable or as is
otherwise necessary to make this Agreement enforceable and valid and to protect
the interests of the Parties intended to be protected by this Agreement to the
maximum extent possible.
9
18. Facsimile Transmission and Counterparts. This Agreement may be
executed by facsimile transmission and in one or more counterparts, each of
which shall be deemed to be an original, but all of which taken together shall
constitute one and the same Agreement.
19. Notices. All notices, requests, demands, and other communications
under this Agreement ("Notices") shall be in writing and shall be delivered (i)
personally, (ii) by certified mail, return receipt requested, postage prepaid,
(iii) by overnight courier or (iv) by facsimile transmission properly addressed
as follows:
If to Parent to:
Penn National Gaming, Inc.
825 Berkshire Blvd., Suite 200
Wyomissing, PA 19610
Facsimile: (610) 373-4966
Attention: Peter M. Carlino, Chief Executive Officer
with a copy to:
Morgan, Lewis & Bockius LLP
1701 Market Street
Philadelphia, PA 19103
Facsimile: (215) 963-5299
Attention: Peter S. Sartorius, Esq.
If to Company to:
Hollywood Casino Corporation
Two Galleria Tower
13455 Noel Road, Suite 2200
Dallas, TX 75240
Facsimile: (972) 716-3903
Attention: Walter E. Evans, General Counsel
with a copy to:
Weil, Gotshal & Manges LLP
100 Crescent Court, Suite 1300
Dallas, TX 75201
Facsimile: (214) 746-7777
Attention: Michael A. Saslaw
and if to Stockholder, at the address specified in on the signature page to this
Agreement or, in either case, to such other address or addresses as a Party to
this Agreement may indicate to the other Party in the manner provided for in
this Paragraph 19. Notices given by mail, by overnight courier and by personal
10
delivery shall be deemed effective and complete upon delivery and notices by
facsimile transmission shall be deemed effective upon receipt.
20. Effective Date; Term. This Agreement shall become effective upon
(i) its execution and delivery by all Parties and (ii) the execution and
delivery of each of the Other Stockholder Agreements by the parties thereto;
provided, however, that Section 12 of this Agreement shall not become effective
until the Effective Time. This Agreement shall continue in full force and effect
until the first to occur of (A) the written agreement of all the Parties to
terminate this Agreement and (B) the termination of the Merger Agreement in
accordance with its terms (the first to occur of (A) and (B) the "Termination
Time").
21. Non-Solicitation of Employees. Stockholder hereby agrees for a
period of eighteen (18) months after the Effective Date that Stockholder will
not, without the prior written consent of Parent, such consent not to be
unreasonably withheld or delayed, directly or indirectly, (i) solicit, recruit
or hire any person who is now or in the future becomes an executive or
management employee of Company or any subsidiary of Company (a "Key Employee")
to work for any person or entity other than Company or any such subsidiary or
(ii) engage in any activity that would cause any employee to violate any
agreement with Company or any of its subsidiaries; provided, however, that the
above provisions shall not apply with respect to any Key Employee who is not
employed by Parent, Surviving Corporation (as defined in the Merger Agreement)
or any of their respective subsidiaries following the Effective Time for at
least one-hundred twenty (120) days unless such unemployment occurred in
connection with a violation by Stockholder of this Section 21.
22. Gaming Approvals; Cooperation. Company shall (i) promptly file all
required applications to obtain the approvals from all applicable Gaming
Authorities necessary for Stockholder to grant the proxy set forth in Section 3,
(ii) shall request an accelerated review from such Gaming Authorities in
connection with such filings, and (iii) shall otherwise use its reasonable best
efforts to obtain such approvals. Each of the Parties shall use such Party's
reasonable best efforts to cooperate with Company and all applicable Gaming
Authorities in making such filings and obtaining such approvals.
23. Other Agreements.
(a) This Agreement supersedes all prior agreements or
understandings of the Parties on the subject matter of this Agreement.
There are no representations, warranties, or agreements, whether
express or implied, or oral or written, with respect to the subject
matter of this Agreement, except as set forth in this Agreement. This
Agreement (i) shall not be modified by any oral agreement, either
express or implied, and all amendments or modifications of this
Agreement shall be in writing and be signed by all of the Parties, and
(ii) shall be binding on and shall inure to the benefit of the Parties
and their respective heirs, legal representatives, successors and
assigns.
(b) The paragraph headings in this Agreement are for the
purpose of convenience only and shall not limit or otherwise affect any
of the terms of this Agreement.
(c) Should any Party be in default under or breach of any of
the covenants or agreements contained in this Agreement, or in the
event a dispute shall arise as to the meaning of any term of this
11
Agreement, the defaulting or nonprevailing Party shall pay all costs
and expenses, including reasonable attorneys' fees, of the other Party
that may arise or accrue from enforcing this Agreement, securing an
interpretation of any provision of this Agreement, or in pursuing any
remedy provided by law whether such remedy is pursued or interpretation
is sought by the filing of a lawsuit, an appeal, or otherwise.
(d) This Agreement shall be governed by and construed in
accordance with the internal laws of the State of Delaware, which
internal laws exclude any provision or interpretation of such laws that
would call for, or permit, the application of the laws of any other
state or jurisdiction, and any dispute arising therefrom and the
remedies available shall be determined solely in accordance with such
internal laws.
(e) Where the context requires, the singular shall include the
plural, the plural shall include the singular, and any gender shall
include all other genders.
(f) Stockholder certifies that Stockholder has read the terms
of this Agreement, that Stockholder has been informed by this document
that Stockholder should discuss this Agreement with the attorney of
Stockholder's own choice, that Stockholder has had an opportunity to do
so and that Stockholder understands this Agreement's terms and effects.
(g) The Parties have jointly participated jointly in the
negotiation and drafting of this Agreement. In the event any ambiguity
or question of intent or interpretation arises, this Agreement shall be
construed as if drafted jointly by the Parties and no presumption or
burden of proof shall arise favoring or disfavoring any Party by virtue
of the authorship of any provisions of this Agreement.
24. Spousal Joinder. The spouse of Stockholder joins in the execution
of this Agreement for the purpose of evidencing her knowledge of its existence,
her acknowledgment that she agrees to the provisions of this Agreement and her
agreement to bind her community interest, if any, in any of the Shares to the
performance of this Agreement, and she further agrees that the covenants in this
Agreement shall be, and hereby are, accepted as binding on her individually and
upon all persons ever to claim under her as though such Shares were held of
record by her; provided, however, nothing contained in this Section 24 is
intended to, nor shall be deemed to, confer or create any community property
interest in the Shares upon her.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
12
IN WITNESS WHEREOF, each of the Parties has executed this Agreement on
or as of the date of this Agreement.
PARENT:
PENN NATIONAL GAMING, INC.
By: /s/ Robert S. Ippolito
---------------------------------------
Name: Robert S. Ippolito
Title: Vice President, Secretary
and Treasurer
COMPANY:
HOLLYWOOD CASINO CORPORATION
By: /s/ Edward T. Pratt III
---------------------------------------
Name: Edward T. Pratt III
Title: Chief Executive Officer
STOCKHOLDER: SPOUSE:
/s/ Edward T. Pratt III /s/ Lisa Pratt
- ----------------------- --------------
Edward T. Pratt III Lisa Pratt
Address:
- ----------------------------------------------------
- ----------------------------------------------------
- ----------------------------------------------------
Telephone:
------------------------------------
Facsimile:
------------------------------------
SCHEDULE A
OTHER STOCKHOLDERS EXECUTING STOCKHOLDER AGREEMENTS
Maria A. Pratt
Sharon Pratt Naftel
Diana Pratt Wyatt
Carolyn Pratt Hickey
Michael Shannan Pratt
Jill Pratt LaFerney
John R. Pratt
Edward T. Pratt, Jr.
William D. Pratt
Jack E. Pratt, Sr.
William D. Pratt, Jr.
SCHEDULE B
SHARES HELD OF RECORD:
Stockholder holds of record 1,083,713 shares of Class A Common Stock.
OPTIONS:
Total of 850,000 options, of which options to acquire 790,000 shares of Class A
Common Stock are vested, and 60,000 additional shares vest in 20,000 share
increments on May 5 of 2003, 2004 and 2005. The right to acquire 150,000 of
these shares will expire on September 11, 2002; the right to acquire 150,000 of
these shares will expire on June 19, 2003; the right to acquire 450,000 of these
shares will expire on April 5, 2004; and the right to acquire 100,000 of these
shares will expire on May 5, 2010. All of such options, which have not been
previously exercised, will vest at the Effective Time of the Merger.
ADDITIONAL VOTING SHARES:
Stockholder has sole power to vote the following shares of Class A Common Stock
subject to proxies granting Stockholder the right to vote but not to dispose of
such shares: 479,604 shares owned of record by Sharon Pratt Naftel, 479,604
shares owned of record by Diana Pratt Wyatt, and 479,604 shares owned of record
by Carolyn Pratt Hickey.
ADDITIONAL DISPOSITION SHARES:
None
RECORD SHARE ENCUMBRANCES:
Stockholder has granted a security interest in 1,083,713 shares of Class A
Common Stock to Texas Community Bank and Trust, N.A. with respect to a loan in
the amount of $894,000.00.
EXHIBIT 1.4
STOCKHOLDER AGREEMENT
THIS STOCKHOLDER AGREEMENT (this "Agreement") is made and
entered into as of the 7th day of August, 2002, by and between Penn National
Gaming, Inc., a Pennsylvania corporation ("Parent"), Hollywood Casino
Corporation, a Delaware corporation ("Company"), and Jack E. Pratt, Sr.
("Stockholder"). Parent, Company and Stockholder are sometimes referred to in
this Agreement individually as a "Party" or collectively as the "Parties."
RECITALS
This Agreement is entered into with reference to the following
facts, objectives and definitions:
A. Contemporaneously with the execution and delivery of this
Agreement, Parent, P Acquisition Corp., a Delaware corporation and a
wholly-owned subsidiary of Parent ("Merger Sub"), and Company, are entering into
an Agreement and Plan of Merger, dated as of the date of this Agreement (the
"Merger Agreement"), pursuant to which it is contemplated that Company will
merge (the "Merger") with Merger Sub, upon the terms and conditions set forth in
the Merger Agreement; and
B. The Board of Directors of Company (the "Company Board") has
previously approved the Merger Agreement and the execution and delivery by
Company of this Agreement; and
C. On the date hereof each of the other stockholders of
Company set forth on Schedule A attached hereto (collectively, the "Other
Stockholders") is entering into a Stockholder Agreement in a form substantially
similar to this Agreement (collectively, the "Other Stockholder Agreements");
and
D. Stockholder owns, or has rights with respect to, certain of
the outstanding shares of Class A Common Stock, par value $0.0001 per share
("Class A Common Stock"), of Company, and may acquire rights with respect to
additional shares of Class A Common Stock after the date of this Agreement, and
desires to facilitate the consummation of the Merger, and for such purpose and
in order to induce Parent to enter into the Merger Agreement, Stockholder has
agreed, among other matters set forth herein, (i) to vote these shares and (ii)
to grant Parent or its designee an irrevocable proxy to exercise the voting
power of Stockholder with respect to these shares, all as provided in this
Agreement.
NOW, THEREFORE, in consideration of the covenants and
conditions contained in this Agreement, the Parties represent, warrant, and
agree as follows:
AGREEMENT
1. Representations and Warranties of Stockholder. Stockholder
represents and warrants that: (i) Stockholder is the holder of record (free and
clear of any liens, encumbrances, pledges or restrictions except as described
under the heading "Record Share Encumbrances" on Schedule B attached hereto (the
"Record Share Encumbrances")), of the number of outstanding shares of Class A
Common Stock, if any, set forth under the heading "Shares Held of Record" on
Schedule B attached hereto (the "Record Shares"), and, except as may be
described on Schedule B attached hereto, Stockholder possesses the sole right to
vote and dispose of the Record Shares; (ii) Stockholder holds (free and clear of
any liens, encumbrances, pledges or restrictions) the options to acquire shares
of Class A Common Stock, if any, set forth under the heading "Options" on
Schedule B attached hereto (the "Options"); (iii) except as may be described
under the heading "Additional Voting Shares" on Schedule B attached hereto
Stockholder maintains the right to vote or direct the vote of, but does not
solely own and cannot dispose of, the additional shares of Class A Common Stock,
if any, set forth under the heading "Additional Voting Shares" on Schedule B
attached hereto (the "Additional Voting Shares" and, collectively with the
Record Shares as to which Stockholder holds the right to vote, the "Voting
Shares"); (iv) Stockholder holds the right to sell or otherwise dispose of, but
cannot vote or direct the vote of, the additional shares of Class A Common
Stock, if any, set forth under the heading "Additional Disposition Shares" on
Schedule B attached hereto (the "Additional Disposition Shares" and, together
with the Record Shares as to which Stockholder holds the right of disposition,
the "Disposition Shares"; the Record Shares, the Additional Voting Shares, the
Additional Disposition Shares and the New Shares, as hereinafter defined, are
referred to in this Agreement as the "Shares"); (v) Stockholder does not
directly or indirectly hold or beneficially own any shares of capital stock or
other securities of Company, or any option, warrant or other right to acquire
capital stock or other securities of Company, or any option, warrant or other
right to acquire (by purchase, conversion or otherwise) any shares of capital
stock or other securities of Company, other than as described on Schedule B
hereto; (vi) Stockholder has full power and authority to make, enter into, and
carry out the terms of this Agreement; (vii) the execution, delivery, and
performance of this Agreement by Stockholder will not violate any agreement to
which Stockholder is a party, including, without limitation, any voting
agreement, stockholder agreement, or voting trust; and (viii) this Agreement
constitutes the legal, valid and binding obligation of Stockholder, enforceable
against Stockholder in accordance with its terms.
2. Agreement to Vote the Shares. During the term of this Agreement,
Stockholder shall vote all of the Voting Shares over which Stockholder has sole
voting power and will cause all of the Voting Shares over which he has shared
voting power as described on Schedule B to be voted (other than any Shares that
may have been sold in accordance with the terms of this Agreement) (i) in favor
of the Merger Agreement, and the Merger or any transaction contemplated by the
Merger Agreement, (ii) as otherwise necessary or appropriate to enable Parent,
Company and Merger Sub to consummate the transactions contemplated by the Merger
Agreement, (iii) against any action or agreement that would result in a breach
in any material aspect of any covenant, representation, or warranty or any other
obligation or agreement of Company under the Merger Agreement, (iv) against any
action or agreement that would terminate, impede, interfere with, delay,
postpone, or attempt to discourage the Merger, including, but not limited to:
(A) a sale or transfer of a material amount of the assets of Company or any of
its subsidiaries or a reorganization, recapitalization, or liquidation of
Company or any of its subsidiaries, (B) any change in the Company Board, except
as provided for in the last sentence of this Section or Section 10 or as
otherwise agreed to in writing by the Parties, (C) any change in the present
capitalization or dividend policy of Company, or (D) any other change in
Company's corporate structure; and (v) against any other proposal which would
result in any of the conditions to Parent's obligations under the Merger
Agreement not being fulfilled. Notwithstanding the foregoing, nothing herein
shall prevent Stockholder from taking any actions as an officer and/or a
director of Company so long as such actions are not prohibited by the Merger
Agreement or any other provision of this Agreement, including without
limitation, the nomination for and filling of any vacancy in the Company Board
2
arising due to the death, resignation or removal of any current director of
Company.
3. Grant of Irrevocable Proxy. In the event that Stockholder does not
vote all of the Voting Shares in accordance with Section 2 hereof, subject to
the approval of all applicable Gaming Authorities (as defined in the Merger
Agreement), Stockholder hereby irrevocably appoints Parent or any designee of
Parent the lawful agent, attorney, and proxy of Stockholder, during the term of
this Agreement, to vote all of the Voting Shares in accordance with Section 2
hereof. Stockholder intends this proxy to be irrevocable, during the term of
this Agreement, and coupled with an interest and will take such further action
or execute such other instruments as may be necessary to effectuate the intent
of this proxy and hereby revokes any proxy previously granted by Stockholder
with respect to the Voting Shares. Stockholder shall not hereafter, unless and
until the Termination Time, purport to vote (or execute a consent with respect
to) any of the Voting Shares (other than through this irrevocable proxy or in
accordance with Section 2 hereof) or grant any other proxy or power of attorney
with respect to any of the Voting Shares, deposit any of the Voting Shares into
a voting trust or enter into any agreement (other than this Agreement),
arrangement, or understanding with any person, directly or indirectly, to vote,
grant any proxy, or give instructions with respect to the voting of any of the
Voting Shares. Stockholder shall retain at all times the right to vote the
Voting Shares in Stockholder's sole discretion on all matters other than those
set forth in Section 2 hereof that are presented for a vote to the stockholders
of Company generally.
4. Manner of Voting. The Voting Shares may be voted pursuant to this
Agreement in person, by proxy, by written consent, or in any other manner
permitted by applicable law.
5. No Solicitation. From the date of this Agreement until the Effective
Time (as such date is defined in the Merger Agreement) or the Termination Time
(as hereinafter defined), Stockholder will not, nor will Stockholder permit any
investment banker, attorney, accountant or other advisor or representative of
Stockholder to, directly or indirectly, (i) initiate, solicit or encourage any
inquiries, offers or proposals that constitute, or may reasonably be expected to
lead to an Acquisition Proposal (as such term is defined in the Merger
Agreement), (ii) participate in any discussions or negotiations concerning, or
provide to any person any information or data relating to Company or any
subsidiary of Company for the purpose of making, or take any other action to
facilitate, any Acquisition Proposal or any inquiries or the making of any
proposal that constitutes, or may reasonably be expected to lead to, any
Acquisition Proposal, (iii) agree to, approve or recommend any Acquisition
Proposal or (iv) take any other action materially inconsistent with Company's
obligations and commitments assumed pursuant to Section 6.6 of the Merger
Agreement. For avoidance of doubt, if Stockholder is a director or officer of
Company, this Section 5 shall not limit Stockholder's participation as a
director or officer in actions permitted to be taken by the Company Board or
officers of Company, as applicable, under the Merger Agreement.
6. No Transfer. From the date of this Agreement until the earlier of
(a) the Effective Time (as defined in the Merger Agreement) and (b) the
Termination Time (as hereinafter defined), Stockholder shall not sell, pledge,
or otherwise transfer, dispose of or encumber any of the Record Shares,
Additional Disposition Shares or New Shares (as hereinafter defined), or any
rights in respect thereof and shall not consent to any sale, pledge or other
transfer, disposition of, or encumbrance of, any Additional Voting Shares, or
any rights in respect thereof; provided, however, that this Section 6 shall not
3
prohibit (i) the Record Share Encumbrances, (ii) the surrender of any Shares to
Company by Stockholder as consideration for the exercise of any Options, or
(iii) the pledge of any Shares as collateral for any funds used by Stockholder
to exercise any Options or to pay withholding taxes on any such Options,
provided such pledge is subject to the terms and conditions hereof and such
pledgee agrees to be bound by the terms and conditions hereof if such pledgee
acquires voting power or dispositive power with respect to, and/or becomes the
record owner of, such Shares. Notwithstanding anything in this Agreement to the
contrary, Stockholder may (i) sell, in any manner chosen in the sole discretion
of Stockholder, Shares held of record by Stockholder, his children, his
grandchildren or trusts for the benefit of his children or grandchildren, (ii)
margin, in any manner chosen in the sole discretion of Stockholder, Shares held
of record by Stockholder, his children, his grandchildren or trusts for the
benefit of his children or grandchildren or (iii) gift Shares to a charitable
organization or a relative of the Stockholder or a trust for the benefit of any
relative of the Stockholder; provided that in the case of clauses (i), (ii) and
(iii), the aggregate number of shares sold, margin, gifted or otherwise
transferred pursuant thereto, during the term of this Agreement, shall not
exceed 110,000 Shares.
7. Additional Purchases; Option Exercise. If, during the period
commencing on the date of this Agreement and ending on the earlier of (i) the
Effective Time and (ii) the Termination Time, Stockholder purchases or otherwise
acquires any additional shares of Class A Common Stock or any rights in respect
thereof, including, without limitation, pursuant to the exercise of
Stockholder's Options, such shares (the "New Shares") shall be subject to the
terms of this Agreement and for all purposes shall be and constitute a portion
of the Shares. As to all Options listed on Schedule B (other than Options for
which shares are issued by the Company as a result of Stockholder's exercise of
such Options), if the Merger is consummated, Stockholder shall receive, in
accordance with Section 2.2 of the Merger Agreement, cash for each such Option
in the amount of the difference between the Merger Consideration and the
exercise price of such Option plus applicable withholding tax. During the term
of this Agreement, the Company will not cause the expiration date of any of the
foregoing Options to be accelerated to a date prior to the Effective Time or
refuse to honor the exercise of the Options that expire on September 11, 2002 or
June 19, 2003, as long as the exercise of the Options is made within, but not
before, the 30-day period immediately preceding the expiration date of such
Options. The Parties' foregoing agreement with respect to such Options, shall
not be deemed an admission of any fact by, or used against, any Party in
connection with the defense or prosecution of the Lawsuits (as hereinafter
defined) or any other legal action brought by any of the Parties hereto other
than litigation arising out of a breach of this Agreement.
8. Adjustments to Prevent Dilution. In the event of any change in the
Class A Common Stock by reason of any stock dividend, split-up,
recapitalization, combination, or the exchange of shares, the term "Shares"
shall be deemed to refer to and include the Shares as well as all such stock
dividends and distributions and any shares into which or for which any or all of
the Shares may be changed or exchanged.
9. Waiver of Appraisal Rights. Stockholder hereby irrevocably and
unconditionally waives any right of appraisal relating to the Merger that
Stockholder may have by virtue of ownership of the Shares.
4
10. Director Qualifications; Resignation of Stockholder. Stockholder
shall comply with all orders, decrees, rulings or other requirements of all
Gaming Authorities (as defined in the Merger Agreement) and all Gaming Laws (as
defined in the Merger Agreement) having jurisdiction over or applicability to
Company or any of its subsidiaries at all times during which Stockholder is
serving in any position with the Company or any of its subsidiaries, whether as
a director, officer or otherwise, subject to Stockholder's right to appeal any
such orders in the manner provided for by, and in accordance with, applicable
law. Stockholder hereby resigns from all positions with the Company and any of
its subsidiaries, whether as a director, officer or otherwise, effective only at
the Effective Time (as defined in the Merger Agreement). Stockholder also agrees
to resign from all positions with Company and any of its subsidiaries, whether
as a director, officer or otherwise, at any time that a Gaming Authority
determines that Stockholder is not qualified or suitable to serve in any of such
positions, or otherwise denies or revokes approval of such individual for
service in any of such positions, subject to Stockholder's right to retain any
of such positions during any appeal of such determination to the extent such
retention is permitted under applicable law.
11. Litigation Standstill.
(a) Stay of Litigation. Stockholder and Company agree to stay
all activities in the Lawsuits until the Termination Time, including,
without limitation, refraining from seeking any discovery, filing any
motions or amendments to pleadings or previous motions, and to further
postpone any deadlines, discovery cut-offs, response dates, or similar
matters which have not expired prior to the date of this Agreement.
Stockholder and Company shall cooperate in taking all reasonable steps
to ensure a stay of all activities in the Lawsuits and to ensure that
the Lawsuits, to the extent within the control of Stockholder and
Company, remain inactive in all respects involving Stockholder and
Company. If not previously dismissed prior to the Effective Time, all
Lawsuits will be dismissed with prejudice promptly following the
Effective Time.
(b) Tolling. All limitations periods applicable to the
Lawsuits will be tolled until 15 days after the Termination Time.
(c) Definitions. For purposes of this Agreement, "Lawsuits"
means each of the lawsuits styled as follows: (a) Hollywood Casino
Corporation v. Jack E. Pratt v. Edward T. Pratt III, Walter E. Evans
and Paul C. Yates, Cause No. 02-01516, in the District Court of Dallas
County, Texas, 116th Judicial District; (b) Hollywood Casino
Corporation v. Harold C. Simmons, et al., Civil Action No.
3:02CV0325-M, in the United Stated District Court for the Northern
District of Texas, Dallas Division; and (c) Jack E. Pratt v. Hollywood
Casino Corporation, a Delaware corporation, C.A. No. 19504, in the
Court of Chancery of the State of Delaware in and for New Castle
County.
(d) Standstill on other Actions. From the date of this
Agreement through the earlier to occur of the Termination Time or the
Effective Time, the Parties agree as follows:
(i) The Stockholder Parties (as hereinafter defined)
and the Company Controlled Parties (as hereinafter defined)
shall not bring any actions against any Company Parties (as
hereinafter defined) or Stockholder Parties, respectively,
5
other than with respect to an activity that is unrelated to
the Company; provided, however, that such Parties may still
report or make public disclosure of any violations of Law (as
defined in the Merger Agreement).
(ii) Company shall not increase the size of its Board
of Directors.
(iii) Company will continue to pay or make available
to Stockholder the current salary and benefits of Stockholder.
12. General Release and Covenant Not to Sue.
(a) Release by Stockholder Parties. EFFECTIVE AS OF THE
EFFECTIVE TIME, STOCKHOLDER, ON BEHALF OF STOCKHOLDER, STOCKHOLDER'S
ATTORNEYS, HEIRS, EXECUTORS, ADMINISTRATORS, ASSIGNS, AND TRUSTS,
PARTNERSHIPS AND OTHER ENTITIES UNDER STOCKHOLDER'S CONTROL (TOGETHER
THE "STOCKHOLDER PARTIES"), HEREBY GENERALLY RELEASES AND FOREVER
DISCHARGES COMPANY AND ITS PREDECESSORS, SUCCESSORS, ASSIGNS,
SUBSIDIARIES AND AFFILIATES AND FAMILY MEMBERS (AS DEFINED BELOW),
OFFICERS (OTHER THAN PAUL YATES AND WALTER EVANS), EMPLOYEES, AGENTS,
REPRESENTATIVES, PRINCIPALS AND ATTORNEYS, AND, SUBJECT TO SECTION 14
HEREOF, DIRECTORS, PAUL YATES AND WALTER EVANS (TOGETHER THE "COMPANY
PARTIES") FROM ANY AND ALL CLAIMS, DEMANDS, LIABILITIES, SUITS,
DAMAGES, LOSSES, EXPENSES, ATTORNEYS' FEES, OBLIGATIONS OR CAUSES OF
ACTION, KNOWN OR UNKNOWN OF ANY KIND AND EVERY NATURE WHATSOEVER, AND
WHETHER OR NOT ACCRUED OR MATURED (COLLECTIVELY, "CLAIMS"), WHICH ANY
OF THEM MAY HAVE ARISING OUT OF OR RELATING TO ANY OMISSION, ACTS OR
FACTS THAT HAVE OCCURRED UP AND UNTIL AND INCLUDING THE EFFECTIVE TIME,
INCLUDING WITHOUT LIMITATION:
i. any and all Claims relating to, arising from, or
in connection with the Lawsuits;
ii. any and all Claims relating to, arising from, or
in connection with, the employment of Stockholder by the
Company or the termination of such employment;
iii. any and all Claims relating to, or arising from,
Stockholder's right to purchase, or actual purchase of shares
of stock of Company, including, without limitation, any Claims
for fraud, misrepresentation, breach of fiduciary duty, breach
of duty under applicable state corporate law, and securities
fraud under any state or federal law;
iv. any and all Claims for wrongful discharge of
employment; fraud; misrepresentation; termination in violation
of public policy; discrimination; breach of contract, both
express and implied; breach of a covenant of good faith and
fair dealing, both express and implied; promissory estoppel;
negligent or intentional infliction of emotional distress;
6
negligent or intentional misrepresentation; negligent or
intentional interference with contract or prospective economic
advantage; breach of fiduciary duty; unfair business
practices; breach of confidentiality provision, defamation;
libel; slander; negligence; personal injury; assault; battery;
invasion of privacy; false imprisonment; tortious
interference, theft, embezzlement, and conversion;
v. any and all Claims for violation of any federal,
state or municipal statute, including, but not limited to,
Title VII of the Civil Rights Act of 1964, the Civil Rights
Act of 1991, the Family Medical Leave Act, the Americans with
Disabilities Act of 1990, the Fair Labor Standards Act, the
Employee Retirement Income Security Act of 1974, The Worker
Adjustment and Retraining Notification Act, Older Workers
Benefit Protection Act and the Texas Commission on Human
Rights Act;
vi. any and all Claims for violation of the federal,
or any state, constitution;
vii. any and all Claims arising out of any other laws
and regulations relating to employment or employment
discrimination; and
viii. any and all Claims for attorneys' fees,
expenses, and costs other than fees, costs or expenses which
are otherwise indemnifiable under Section 6.8 of the Merger
Agreement.
"FAMILY MEMBERS" SHALL MEAN, WITH RESPECT TO ANY PARTY THAT IS AN INDIVIDUAL,
THE SPOUSE OF A PARTY, ANY PARENT OF SUCH PARTY, OR ANY LINEAL DESCENDENT OF A
PARENT OF SUCH PARTY (WHETHER NATURAL BORN OR ADOPTED).
NOTWITHSTANDING THE FOREGOING, THIS RELEASE DOES NOT IN ANY WAY RELEASE, IMPAIR,
OR LIMIT ANY OBLIGATIONS INCURRED BY OR OWING FROM THE COMPANY PARTIES (1) UNDER
THIS AGREEMENT, (2) UNDER THE MERGER AGREEMENT, INCLUDING, WITHOUT LIMITATION,
SECTION 6.8 THEREOF AND (3) WITH RESPECT TO CLAIMS UNDER THE AGE DISCRIMINATION
IN EMPLOYMENT ACT OF 1967 ("ADEA CLAIMS"). FURTHER, THIS RELEASE DOES NOT IN ANY
WAY RELEASE ANY OF COMPANY'S INSURERS FROM COVERING STOCKHOLDER FOR ANY CONDUCT,
ACTS, INJURIES, OR ACTIONS ARISING FROM, IN CONNECTION WITH, OR RELATED TO THE
TIME PERIOD SUCH PERSON WAS EMPLOYED BY OR SERVING AS AN OFFICER OR DIRECTOR OF
COMPANY.
(b) Prosecution by Stockholder and Stockholder Parties.
EFFECTIVE AS OF THE EFFECTIVE TIME, STOCKHOLDER, ON BEHALF OF
STOCKHOLDER AND THE STOCKHOLDER PARTIES, HEREBY COVENANTS FOREVER NOT
TO ASSERT, FILE, PROSECUTE, MAINTAIN, COMMENCE, INSTITUTE (OR SPONSOR
OR PURPOSELY FACILITATE ANY PERSON IN CONNECTION WITH THE FOREGOING),
ANY COMPLAINT OR LAWSUIT OR ANY LEGAL, EQUITABLE OR ADMINISTRATIVE
7
PROCEEDING OF ANY NATURE, AGAINST ANY OF THE COMPANY PARTIES IN
CONNECTION WITH ANY MATTER RELEASED IN SECTION 12(a), INCLUDING,
WITHOUT LIMITATION, THE LAWSUITS, AND REPRESENTS AND WARRANTS THAT TO
THE EXTENT WITHIN STOCKHOLDER'S CONTROL, NO OTHER PERSON OR ENTITY HAS
OR WILL INITIATE ANY SUCH PROCEEDING ON BEHALF OF STOCKHOLDER OR ANY
STOCKHOLDER PARTY.
NOTWITHSTANDING THE FOREGOING, THIS COVENANT DOES NOT IN ANY WAY PROHIBIT
STOCKHOLDER OR ANY OF THE STOCKHOLDER PARTIES FROM REPORTING OR MAKING PUBLIC
DISCLOSURE OF ANY VIOLATIONS OF LAW.
(c) Release by Company. EFFECTIVE AS OF THE EFFECTIVE TIME,
COMPANY, ON BEHALF OF ITSELF AND THE COMPANY PARTIES UNDER ITS CONTROL
(THE "COMPANY CONTROLLED PARTIES"), HEREBY GENERALLY RELEASES AND
FOREVER DISCHARGES STOCKHOLDER, THE STOCKHOLDER PARTIES AND THEIR
FAMILY MEMBERS FROM ANY AND ALL CLAIMS, WHICH ANY OF THEM MAY HAVE,
ARISING OUT OF OR RELATING TO ANY OMISSION, ACTS OR FACTS THAT HAVE
OCCURRED UP AND UNTIL AND INCLUDING THE EFFECTIVE TIME, INCLUDING
WITHOUT LIMITATION, THE LAWSUITS.
NOTWITHSTANDING THE FOREGOING, THIS RELEASE DOES NOT IN ANY WAY RELEASE, IMPAIR,
OR LIMIT (i) ANY OBLIGATIONS INCURRED BY OR OWING FROM STOCKHOLDER OR ANY OF THE
STOCKHOLDER PARTIES (1) UNDER THIS AGREEMENT, AND (2) WITH RESPECT TO ADEA
CLAIMS OR (ii) THE RIGHTS OF COMPANY OR ANY OF ITS PREDECESSORS, SUCCESSORS,
ASSIGNS OR SUBSIDIARIES AGAINST STOCKHOLDER OR STOCKHOLDER PARTIES WITH RESPECT
TO ANY CRIMINAL OR FRAUDULENT ACTIVITY OTHER THAN ACTIVITIES THAT ARE THE
SUBJECT OF THE LAWSUITS.
(d) Prosecutions by Company and Company Controlled Parties.
EFFECTIVE AS OF THE EFFECTIVE TIME, COMPANY, ON BEHALF OF ITSELF AND
THE COMPANY CONTROLLED PARTIES, HEREBY COVENANTS FOREVER NOT TO ASSERT,
FILE, PROSECUTE, MAINTAIN, COMMENCE, INSTITUTE (OR SPONSOR OR PURPOSELY
FACILITATE ANY PERSON IN CONNECTION WITH THE FOREGOING), ANY COMPLAINT
OR LAWSUIT OR ANY LEGAL, EQUITABLE OR ADMINISTRATIVE PROCEEDING OF ANY
NATURE, AGAINST ANY OF THE STOCKHOLDER PARTIES IN CONNECTION WITH ANY
MATTER RELEASED IN SECTION 12(c), INCLUDING, WITHOUT LIMITATION, THE
LAWSUITS, AND REPRESENTS AND WARRANTS THAT, TO THE EXTENT WITHIN ITS
CONTROL, NO OTHER PERSON OR ENTITY HAS INITIATED OR WILL INITIATE ANY
SUCH PROCEEDING ON ITS OR THEIR BEHALF.
8
NOTWITHSTANDING THE FOREGOING, THIS COVENANT DOES NOT IN ANY WAY PROHIBIT THE
COMPANY OR ANY OF THE COMPANY PARTIES FROM REPORTING OR MAKING PUBLIC DISCLOSURE
OF ANY VIOLATIONS OF LAW.
13. Employment, Severance and Pension Matters. In consideration for the
foregoing, promptly after the Effective Time, Parent agrees to cause Company to
pay to Stockholder $3,392,595 less any salary and consulting payments paid after
June 30, 2002, less applicable withholding and other taxes, as compensation for
and in full settlement of all employment, consulting, severance, pension, death
benefit or other matters.
14. Third-Party Beneficiary Rights. Subject to the following sentence,
no provision of this Agreement is intended to nor shall it be interpreted to
provide or create any third-party beneficiary rights or any other rights of any
kind in any other person or entity who is not a Party. The provisions of
Sections 11 and 12 are intended to and shall be interpreted to provide and
create third party beneficiary rights for each director, officer, employee, and
agent of the Company, provided that in the case of each director, Paul Yates and
Walter Evans, such person must, deliver to Stockholder a fully executed
agreement within five business days of the date of this Agreement containing
provisions, where reasonably applicable, identical to the provisions of Section
11 (with respect to the stay of the Lawsuits) and Section 12 (with respect to
the release of the Stockholder Parties).
15. Further Assurances. Each Party shall do and perform or cause to be
done and performed all such further acts and things and shall execute and
deliver all such other agreements, certificates, instruments, or documents as
any other Party shall reasonably request from time to time in order to carry out
the intent and purposes of this Agreement. No Party shall voluntarily undertake
any course of action inconsistent with satisfaction of the requirements
applicable to such Party as set forth in this Agreement, and each Party shall
promptly do all acts and take all measures as may be appropriate or necessary to
enable such Party to perform, as early as practicable, the obligations required
to be performed by such Party under this Agreement. Without limiting the
foregoing, if requested by Company or Parent, Stockholder will obtain a written
acknowledgement from any entity or person that Stockholder purports to act on
behalf of acknowledging that such Stockholder has the authority to execute this
Agreement on such person or entity's behalf and to so bind such person or
entity.
16. Injunctive Relief. The Parties acknowledge that it is impossible to
measure in money the damages that will accrue to one or more of them by reason
of the failure of either of them to abide by the provisions of this Agreement,
that every such provision is material, and that in the event of any such
failure, the other Party will not have an adequate remedy at law or damages.
Therefore, if any Party shall institute any action or proceeding to enforce the
provisions of this Agreement, in addition to any other relief, the court in such
action or proceeding may grant injunctive relief against any Party found to be
in breach or violation of this Agreement, as well as or in addition to any
remedies at law or damages, and such Party waives the claim or defense in any
such action or proceeding that the Party bringing such action has an adequate
remedy at law, and such Party shall not argue or assert in any such action or
proceeding the claim or defense that such remedy at law exists. No Party shall
seek and each Party shall waive any requirement for, the securing or posting of
a bond in connection with the other Party seeking or obtaining such equitable
relief.
9
17. Court Modification. Should any portion of this Agreement be
declared by a court of competent jurisdiction to be unreasonable, unenforceable,
or void for any reason or reasons, the involved court shall modify the
applicable provision(s) of this Agreement so as to be reasonable or as is
otherwise necessary to make this Agreement enforceable and valid and to protect
the interests of the Parties intended to be protected by this Agreement to the
maximum extent possible.
18. Facsimile Transmission and Counterparts. This Agreement may be
executed by facsimile transmission and in one or more counterparts, each of
which shall be deemed to be an original, but all of which taken together shall
constitute one and the same Agreement.
19. Notices. All notices, requests, demands, and other communications
under this Agreement ("Notices") shall be in writing and shall be delivered (i)
personally, (ii) by certified mail, return receipt requested, postage prepaid,
(iii) by overnight courier or (iv) by facsimile transmission properly addressed
as follows:
If to Parent to:
Penn National Gaming, Inc.
825 Berkshire Blvd., Suite 200
Wyomissing, PA 19610
Facsimile: (610) 373-4966
Attention: Peter M. Carlino, Chief Executive Officer
with a copy to:
Morgan, Lewis & Bockius LLP
1701 Market Street
Philadelphia, PA 19103
Facsimile: (215) 963-5299
Attention: Peter S. Sartorius, Esq.
If to Company to:
Hollywood Casino Corporation
Two Galleria Tower
13455 Noel Road, Suite 2200
Dallas, TX 75240
Facsimile: (972) 716-3903
Attention: Walter E. Evans, General Counsel
with a copy to:
10
Weil, Gotshal & Manges LLP
100 Crescent Court, Suite 1300
Dallas, TX 75201
Facsimile: (214) 746-7777
Attention: Michael A. Saslaw
and if to Stockholder, at the address specified in on the signature page to this
Agreement or, in either case, to such other address or addresses as a Party to
this Agreement may indicate to the other Party in the manner provided for in
this Paragraph 19. Notices given by mail, by overnight courier and by personal
delivery shall be deemed effective and complete upon delivery and notices by
facsimile transmission shall be deemed effective upon receipt.
20. Effective Date; Term. This Agreement shall become effective upon
(i) its execution and delivery by all Parties and (ii) the execution and
delivery of each of the Other Stockholder Agreements by the parties thereto;
provided, however, that Section 12 of this Agreement shall not become effective
until the Effective Time. This Agreement shall continue in full force and effect
until the first to occur of (A) the written agreement of all the Parties to
terminate this Agreement and (B) the termination of the Merger Agreement in
accordance with its terms (the first to occur of (A) and (B) the "Termination
Time").
21. Non-Solicitation of Employees. Stockholder hereby agrees for a
period of eighteen (18) months after the Effective Date that Stockholder will
not, without the prior written consent of Parent, such consent not to be
unreasonably withheld or delayed, directly or indirectly, (i) solicit, recruit
or hire any person who is now or in the future becomes an executive or
management employee of Company or any subsidiary of Company (a "Key Employee")
to work for any person or entity other than Company or any such subsidiary or
(ii) engage in any activity that would cause any employee to violate any
agreement with Company or any of its subsidiaries; provided, however, that the
above provisions shall not apply with respect to any Key Employee who is not
employed by Parent, Surviving Corporation (as defined in the Merger Agreement)
or any of their respective subsidiaries following the Effective Time for at
least one-hundred twenty (120) days unless such unemployment occurred in
connection with a violation by Stockholder of this Section 21.
22. Gaming Approvals; Cooperation. Company shall (i) promptly file all
required applications to obtain the approvals from all applicable Gaming
Authorities necessary for Stockholder to grant the proxy set forth in Section 3,
(ii) shall request an accelerated review from such Gaming Authorities in
connection with such filings, and (iii) shall otherwise use its reasonable best
efforts to obtain such approvals. Each of the Parties shall use such Party's
reasonable best efforts to cooperate with Company and all applicable Gaming
Authorities in making such filings and obtaining such approvals.
23. Other Agreements.
(a) This Agreement supersedes all prior agreements or
understandings of the Parties on the subject matter of this Agreement.
There are no representations, warranties, or agreements, whether
express or implied, or oral or written, with respect to the subject
matter of this Agreement, except as set forth in this Agreement. This
Agreement (i) shall not be modified by any oral agreement, either
11
express or implied, and all amendments or modifications of this
Agreement shall be in writing and be signed by all of the Parties, and
(ii) shall be binding on and shall inure to the benefit of the Parties
and their respective heirs, legal representatives, successors and
assigns.
(b) The paragraph headings in this Agreement are for the
purpose of convenience only and shall not limit or otherwise affect any
of the terms of this Agreement.
(c) Should any Party be in default under or breach of any of
the covenants or agreements contained in this Agreement, or in the
event a dispute shall arise as to the meaning of any term of this
Agreement, the defaulting or nonprevailing Party shall pay all costs
and expenses, including reasonable attorneys' fees, of the other Party
that may arise or accrue from enforcing this Agreement, securing an
interpretation of any provision of this Agreement, or in pursuing any
remedy provided by law whether such remedy is pursued or interpretation
is sought by the filing of a lawsuit, an appeal, or otherwise.
(d) This Agreement shall be governed by and construed in
accordance with the internal laws of the State of Delaware, which
internal laws exclude any provision or interpretation of such laws that
would call for, or permit, the application of the laws of any other
state or jurisdiction, and any dispute arising therefrom and the
remedies available shall be determined solely in accordance with such
internal laws.
(e) Where the context requires, the singular shall include the
plural, the plural shall include the singular, and any gender shall
include all other genders.
(f) Stockholder certifies that Stockholder has read the terms
of this Agreement, that Stockholder has been informed by this document
that Stockholder should discuss this Agreement with the attorney of
Stockholder's own choice, that Stockholder has had an opportunity to do
so and that Stockholder understands this Agreement's terms and effects.
(g) The Parties have jointly participated jointly in the
negotiation and drafting of this Agreement. In the event any ambiguity
or question of intent or interpretation arises, this Agreement shall be
construed as if drafted jointly by the Parties and no presumption or
burden of proof shall arise favoring or disfavoring any Party by virtue
of the authorship of any provisions of this Agreement.
24. Spousal Joinder. The spouse of Stockholder joins in the execution
of this Agreement for the purpose of evidencing her knowledge of its existence,
her acknowledgment that she agrees to the provisions of this Agreement and her
agreement to bind her community interest, if any, in any of the Shares to the
performance of this Agreement, and she further agrees that the covenants in this
Agreement shall be, and hereby are, accepted as binding on her individually and
upon all persons ever to claim under her as though such Shares were held of
record by her; provided, however, nothing contained in this Section 24 is
intended to, nor shall be deemed to, confer or create any community property
interest in the Shares upon her.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
12
IN WITNESS WHEREOF, each of the Parties has executed this Agreement on
or as of the date of this Agreement.
PARENT:
PENN NATIONAL GAMING, INC.
By: /s/ Robert S. Ippolito
---------------------------------------
Name: Robert S. Ippolito
Title: Vice President, Secretary
and Treasurer
COMPANY:
HOLLYWOOD CASINO CORPORATION
By: /s/ Edward T. Pratt III
---------------------------------------
Name: Edward T. Pratt III
Title: Chief Executive Officer
STOCKHOLDER: SPOUSE:
/s/ Jack E. Pratt, Sr. /s/ Aileen Pratt
- ---------------------- ----------------
Jack E. Pratt, Sr. Aileen Pratt
Address:
- -----------------------------------------------------
- -----------------------------------------------------
- -----------------------------------------------------
Telephone:
-------------------------------------
Facsimile:
-------------------------------------
With a copy to:
Sayles, Lidji & Werbner
Attn: Brian M. Lidji
4400 Renaissance Tower
1201 Elm Street
Dallas, Texas 75270
Facsimile: (214) 939-8787
SCHEDULE A
OTHER STOCKHOLDERS EXECUTING STOCKHOLDER AGREEMENTS
Maria A. Pratt
Sharon Pratt Naftel
Diana Pratt Wyatt
Carolyn Pratt Hickey
Michael Shannan Pratt
Jill Pratt LaFerney
John R. Pratt
Edward T. Pratt, Jr.
William D. Pratt
Edward T. Pratt III
William D. Pratt, Jr.
SCHEDULE B
SHARES HELD OF RECORD:
Stockholder holds of record 4,110,477 shares of Class A Common Stock.
OPTIONS:
Total of 875,000 options, of which options to acquire 800,000 shares of Class A
Common Stock are vested, and 75,000 additional shares vest in 25,000 share
increments on May 5 of 2003, 2004 and 2005. The right to acquire 150,000 of
these shares will expire on September 11, 2002; the right to acquire 150,000 of
these shares will expire on June 19, 2003; the right to acquire 450,000 of these
shares will expire on April 5, 2004; and the right to acquire 125,000 of these
shares will expire on May 5, 2010. All of such options, which have not been
previously exercised, will vest at the Effective Time of the Merger.
ADDITIONAL VOTING SHARES:
Stockholder has sole power to vote the following shares of Class A Common Stock:
1,642,001 shares owned of record by C.A. Pratt Partners, Ltd., of which
Stockholder is the General Partner; 487,568 shares that Stockholder owns of
record as Custodian for Michael Eldon Pratt; 487,568 shares that Stockholder
owns of record as Custodian for Caroline de La Fontaine Pratt; 31,500 shares
Stockholder holds as trustee under certain trusts for the benefit of
Stockholder's family; and 408,767 shares owned of record by Jill Pratt LaFerney
and 521,616 shares owned of record by John R. Pratt, both subject to a proxy
granting Stockholder the right to vote but not to dispose of such shares.
Stockholder has shared power to vote the following shares of Class A Common
Stock: 14,000 shares owned of record by the MEP Family Partnership, of which
Stockholder is the Managing Partner, and 7,000 shares owned of record by the CLP
Family Partnership, of which Stockholder is the Managing Partner.
ADDITIONAL DISPOSITION SHARES:
Stockholder has sole power to dispose of the following shares of Class A Common
Stock: 1,642,001 shares owned of record by C.A. Pratt Partners, Ltd., of which
Stockholder is the General Partner; 487,568 shares that Stockholder owns of
record as Custodian for Michael Eldon Pratt; 487,568 shares that Stockholder
owns of record as Custodian for Caroline de La Fontaine Pratt; and 31,500 shares
Stockholder holds as trustee under certain trusts for the benefit of
Stockholder's family.
Stockholder has shared power to dispose of the following shares of Class A
Common Stock: 14,000 shares owned of record by the MEP Family Partnership, of
which Stockholder is the Managing Partner, and 7,000 shares owned of record by
the CLP Family Partnership, of which Stockholder is the Managing Partner.
RECORD SHARE ENCUMBRANCES:
Stockholder has a $100,000 margin loan against an account, which contains
approximately 500,000 shares of Class A Common Stock. There is also a $91,918
margin loan against an account, which contains the 31,500 shares of Class A
Common Stock Stockholder holds as trustee under certain trusts for the benefit
of Stockholder's family.
EXHIBIT 1.5
STOCKHOLDER AGREEMENT
THIS STOCKHOLDER AGREEMENT (this "Agreement") is made and
entered into as of the 7th day of August, 2002, by and between Penn National
Gaming, Inc., a Pennsylvania corporation ("Parent"), Hollywood Casino
Corporation, a Delaware corporation ("Company"), and William D. Pratt
("Stockholder"). Parent, Company and Stockholder are sometimes referred to in
this Agreement individually as a "Party" or collectively as the "Parties."
RECITALS
This Agreement is entered into with reference to the following
facts, objectives and definitions:
A. Contemporaneously with the execution and delivery of this
Agreement, Parent, P Acquisition Corp., a Delaware corporation and a
wholly-owned subsidiary of Parent ("Merger Sub"), and Company, are entering into
an Agreement and Plan of Merger, dated as of the date of this Agreement (the
"Merger Agreement"), pursuant to which it is contemplated that Company will
merge (the "Merger") with Merger Sub, upon the terms and conditions set forth in
the Merger Agreement; and
B. The Board of Directors of Company (the "Company Board") has
previously approved the Merger Agreement and the execution and delivery by
Company of this Agreement; and
C. On the date hereof each of the other stockholders of
Company set forth on Schedule A attached hereto (collectively, the "Other
Stockholders") is entering into a Stockholder Agreement in a form substantially
similar to this Agreement (collectively, the "Other Stockholder Agreements");
and
D. Stockholder owns, or has rights with respect to, certain of
the outstanding shares of Class A Common Stock, par value $0.0001 per share
("Class A Common Stock"), of Company, and may acquire rights with respect to
additional shares of Class A Common Stock after the date of this Agreement, and
desires to facilitate the consummation of the Merger, and for such purpose and
in order to induce Parent to enter into the Merger Agreement, Stockholder has
agreed, among other matters set forth herein, (i) to vote these shares and (ii)
to grant Parent or its designee an irrevocable proxy to exercise the voting
power of Stockholder with respect to these shares, all as provided in this
Agreement.
NOW, THEREFORE, in consideration of the covenants and
conditions contained in this Agreement, the Parties represent, warrant, and
agree as follows:
AGREEMENT
1. Representations and Warranties of Stockholder. Stockholder
represents and warrants that: (i) Stockholder is the holder of record (free and
clear of any liens, encumbrances, pledges or restrictions except as described
under the heading "Record Share Encumbrances" on Schedule B attached hereto (the
"Record Share Encumbrances")), of the number of outstanding shares of Class A
Common Stock, if any, set forth under the heading "Shares Held of Record" on
Schedule B attached hereto (the "Record Shares"), and, except as may be
described on Schedule B attached hereto, Stockholder possesses the sole right to
vote and dispose of the Record Shares; (ii) Stockholder holds (free and clear of
any liens, encumbrances, pledges or restrictions) the options to acquire shares
of Class A Common Stock, if any, set forth under the heading "Options" on
Schedule B attached hereto (the "Options"); (iii) except as may be described
under the heading "Additional Voting Shares" on Schedule B attached hereto
Stockholder maintains the right to vote or direct the vote of, but does not
solely own and cannot dispose of, the additional shares of Class A Common Stock,
if any, set forth under the heading "Additional Voting Shares" on Schedule B
attached hereto (the "Additional Voting Shares" and, collectively with the
Record Shares as to which Stockholder holds the right to vote, the "Voting
Shares"); (iv) Stockholder holds the right to sell or otherwise dispose of, but
cannot vote or direct the vote of, the additional shares of Class A Common
Stock, if any, set forth under the heading "Additional Disposition Shares" on
Schedule B attached hereto (the "Additional Disposition Shares" and, together
with the Record Shares as to which Stockholder holds the right of disposition,
the "Disposition Shares"; the Record Shares, the Additional Voting Shares, the
Additional Disposition Shares and the New Shares, as hereinafter defined, are
referred to in this Agreement as the "Shares"); (v) Stockholder does not
directly or indirectly hold or beneficially own any shares of capital stock or
other securities of Company, or any option, warrant or other right to acquire
capital stock or other securities of Company, or any option, warrant or other
right to acquire (by purchase, conversion or otherwise) any shares of capital
stock or other securities of Company, other than as described on Schedule B
hereto; (vi) Stockholder has full power and authority to make, enter into, and
carry out the terms of this Agreement; (vii) the execution, delivery, and
performance of this Agreement by Stockholder will not violate any agreement to
which Stockholder is a party, including, without limitation, any voting
agreement, stockholder agreement, or voting trust; and (viii) this Agreement
constitutes the legal, valid and binding obligation of Stockholder, enforceable
against Stockholder in accordance with its terms.
2. Agreement to Vote the Shares. During the term of this Agreement,
Stockholder shall vote all of the Voting Shares over which Stockholder has sole
voting power and will cause all of the Voting Shares over which he has shared
voting power as described on Schedule B to be voted (other than any Shares that
may have been sold in accordance with the terms of this Agreement) (i) in favor
of the Merger Agreement, and the Merger or any transaction contemplated by the
Merger Agreement, (ii) as otherwise necessary or appropriate to enable Parent,
Company and Merger Sub to consummate the transactions contemplated by the Merger
Agreement, (iii) against any action or agreement that would result in a breach
in any material aspect of any covenant, representation, or warranty or any other
obligation or agreement of Company under the Merger Agreement, (iv) against any
action or agreement that would terminate, impede, interfere with, delay,
postpone, or attempt to discourage the Merger, including, but not limited to:
(A) a sale or transfer of a material amount of the assets of Company or any of
its subsidiaries or a reorganization, recapitalization, or liquidation of
Company or any of its subsidiaries, (B) any change in the Company Board, except
as provided for in the last sentence of this Section or Section 10 or as
otherwise agreed to in writing by the Parties, (C) any change in the present
capitalization or dividend policy of Company, or (D) any other change in
Company's corporate structure; and (v) against any other proposal which would
result in any of the conditions to Parent's obligations under the Merger
Agreement not being fulfilled. Notwithstanding the foregoing, nothing herein
shall prevent Stockholder from taking any actions as an officer and/or a
director of Company so long as such actions are not prohibited by the Merger
Agreement or any other provision of this Agreement, including without
2
limitation, the nomination for and filling of any vacancy in the Company Board
arising due to the death, resignation or removal of any current director of
Company.
3. Grant of Irrevocable Proxy. In the event that Stockholder does not
vote all of the Voting Shares in accordance with Section 2 hereof, subject to
the approval of all applicable Gaming Authorities (as defined in the Merger
Agreement), Stockholder hereby irrevocably appoints Parent or any designee of
Parent the lawful agent, attorney, and proxy of Stockholder, during the term of
this Agreement, to vote all of the Voting Shares in accordance with Section 2
hereof. Stockholder intends this proxy to be irrevocable, during the term of
this Agreement, and coupled with an interest and will take such further action
or execute such other instruments as may be necessary to effectuate the intent
of this proxy and hereby revokes any proxy previously granted by Stockholder
with respect to the Voting Shares. Stockholder shall not hereafter, unless and
until the Termination Time, purport to vote (or execute a consent with respect
to) any of the Voting Shares (other than through this irrevocable proxy or in
accordance with Section 2 hereof) or grant any other proxy or power of attorney
with respect to any of the Voting Shares, deposit any of the Voting Shares into
a voting trust or enter into any agreement (other than this Agreement),
arrangement, or understanding with any person, directly or indirectly, to vote,
grant any proxy, or give instructions with respect to the voting of any of the
Voting Shares. Stockholder shall retain at all times the right to vote the
Voting Shares in Stockholder's sole discretion on all matters other than those
set forth in Section 2 hereof that are presented for a vote to the stockholders
of Company generally.
4. Manner of Voting. The Voting Shares may be voted pursuant to this
Agreement in person, by proxy, by written consent, or in any other manner
permitted by applicable law.
5. No Solicitation. From the date of this Agreement until the Effective
Time (as such date is defined in the Merger Agreement) or the Termination Time
(as hereinafter defined), Stockholder will not, nor will Stockholder permit any
investment banker, attorney, accountant or other advisor or representative of
Stockholder to, directly or indirectly, (i) initiate, solicit or encourage any
inquiries, offers or proposals that constitute, or may reasonably be expected to
lead to an Acquisition Proposal (as such term is defined in the Merger
Agreement), (ii) participate in any discussions or negotiations concerning, or
provide to any person any information or data relating to Company or any
subsidiary of Company for the purpose of making, or take any other action to
facilitate, any Acquisition Proposal or any inquiries or the making of any
proposal that constitutes, or may reasonably be expected to lead to, any
Acquisition Proposal, (iii) agree to, approve or recommend any Acquisition
Proposal or (iv) take any other action materially inconsistent with Company's
obligations and commitments assumed pursuant to Section 6.6 of the Merger
Agreement. For avoidance of doubt, if Stockholder is a director or officer of
Company, this Section 5 shall not limit Stockholder's participation as a
director or officer in actions permitted to be taken by the Company Board or
officers of Company, as applicable, under the Merger Agreement.
6. No Transfer. From the date of this Agreement until the earlier of
(a) the Effective Time (as defined in the Merger Agreement) and (b) the
Termination Time (as hereinafter defined), Stockholder shall not sell, pledge,
or otherwise transfer, dispose of or encumber any of the Record Shares,
Additional Disposition Shares or New Shares (as hereinafter defined), or any
rights in respect thereof and shall not consent to any sale, pledge or other
transfer, disposition of, or encumbrance of, any Additional Voting Shares, or
any rights in respect thereof; provided, however, that this Section 6 shall not
3
prohibit (i) the Record Share Encumbrances, (ii) the surrender of any Shares to
Company by Stockholder as consideration for the exercise of any Options, or
(iii) the pledge of any Shares as collateral for any funds used by Stockholder
to exercise any Options or to pay withholding taxes on any such Options,
provided such pledge is subject to the terms and conditions hereof and such
pledgee agrees to be bound by the terms and conditions hereof if such pledgee
acquires voting power or dispositive power with respect to, and/or becomes the
record owner of, such Shares. Notwithstanding anything in this Agreement to the
contrary, Stockholder may (i) sell, in any manner chosen in the sole discretion
of Stockholder, Shares held of record by Stockholder, his children, his
grandchildren or trusts for the benefit of his children or grandchildren, (ii)
margin, in any manner chosen in the sole discretion of Stockholder, Shares held
of record by Stockholder, his children, his grandchildren or trusts for the
benefit of his children or grandchildren or (iii) gift Shares to a charitable
organization or a relative of the Stockholder or a trust for the benefit of any
relative of the Stockholder; provided that in the case of clauses (i), (ii) and
(iii), the aggregate number of shares sold, margin, gifted or otherwise
transferred pursuant thereto, during the term of this Agreement, shall not
exceed 20,000 Shares.
7. Additional Purchases; Option Exercise. If, during the period
commencing on the date of this Agreement and ending on the earlier of (i) the
Effective Time and (ii) the Termination Time, Stockholder purchases or otherwise
acquires any additional shares of Class A Common Stock or any rights in respect
thereof, including, without limitation, pursuant to the exercise of
Stockholder's Options, such shares (the "New Shares") shall be subject to the
terms of this Agreement and for all purposes shall be and constitute a portion
of the Shares. As to all Options listed on Schedule B (other than Options for
which shares are issued by the Company as a result of Stockholder's exercise of
such Options), if the Merger is consummated, Stockholder shall receive, in
accordance with Section 2.2 of the Merger Agreement, cash for each such Option
in the amount of the difference between the Merger Consideration and the
exercise price of such Option plus applicable withholding tax.
8. Adjustments to Prevent Dilution. In the event of any change in the
Class A Common Stock by reason of any stock dividend, split-up,
recapitalization, combination, or the exchange of shares, the term "Shares"
shall be deemed to refer to and include the Shares as well as all such stock
dividends and distributions and any shares into which or for which any or all of
the Shares may be changed or exchanged.
9. Waiver of Appraisal Rights. Stockholder hereby irrevocably and
unconditionally waives any right of appraisal relating to the Merger that
Stockholder may have by virtue of ownership of the Shares.
10. Director Qualifications; Resignation of Stockholder. Stockholder
shall comply with all orders, decrees, rulings or other requirements of all
Gaming Authorities (as defined in the Merger Agreement) and all Gaming Laws (as
defined in the Merger Agreement) having jurisdiction over or applicability to
Company or any of its subsidiaries at all times during which Stockholder is
serving in any position with the Company or any of its subsidiaries, whether as
a director, officer or otherwise, subject to Stockholder's right to appeal any
such orders in the manner provided for by, and in accordance with, applicable
law. Stockholder hereby resigns from all positions with the Company and any of
its subsidiaries, whether as a director, officer or otherwise, effective only at
the Effective Time (as defined in the Merger Agreement). Stockholder also agrees
4
to resign from all positions with Company and any of its subsidiaries, whether
as a director, officer or otherwise, at any time that a Gaming Authority
determines that Stockholder is not qualified or suitable to serve in any of such
positions, or otherwise denies or revokes approval of such individual for
service in any of such positions, subject to Stockholder's right to retain any
of such positions during any appeal of such determination to the extent such
retention is permitted under applicable law.
11. Litigation Standstill.
(a) Stay of Litigation. Stockholder and Company agree to stay
all activities in the Lawsuits until the Termination Time, including,
without limitation, refraining from seeking any discovery, filing any
motions or amendments to pleadings or previous motions, and to further
postpone any deadlines, discovery cut-offs, response dates, or similar
matters which have not expired prior to the date of this Agreement.
Stockholder and Company shall cooperate in taking all reasonable steps
to ensure a stay of all activities in the Lawsuits and to ensure that
the Lawsuits, to the extent within the control of Stockholder and
Company, remain inactive in all respects involving Stockholder and
Company. If not previously dismissed prior to the Effective Time, all
Lawsuits will be dismissed with prejudice promptly following the
Effective Time.
(b) Tolling. All limitations periods applicable to the
Lawsuits will be tolled until 15 days after the Termination Time.
(c) Definitions. For purposes of this Agreement, "Lawsuits"
means each of the lawsuits styled as follows: (a) Hollywood Casino
Corporation v. Jack E. Pratt v. Edward T. Pratt III, Walter E. Evans
and Paul C. Yates, Cause No. 02-01516, in the District Court of Dallas
County, Texas, 116th Judicial District; (b) Hollywood Casino
Corporation v. Harold C. Simmons, et al., Civil Action No.
3:02CV0325-M, in the United Stated District Court for the Northern
District of Texas, Dallas Division; and (c) Jack E. Pratt v. Hollywood
Casino Corporation, a Delaware corporation, C.A. No. 19504, in the
Court of Chancery of the State of Delaware in and for New Castle
County.
(d) Standstill on other Actions. From the date of this
Agreement through the earlier to occur of the Termination Time or the
Effective Time, the Parties agree as follows:
(i) The Stockholder Parties (as hereinafter defined)
and the Company Controlled Parties (as hereinafter defined)
shall not bring any actions against any Company Parties (as
hereinafter defined) or Stockholder Parties, respectively,
other than with respect to an activity that is unrelated to
the Company; provided, however, that such Parties may still
report or make public disclosure of any violations of Law (as
defined in the Merger Agreement).
(ii) Company shall not increase the size of its Board
of Directors.
(iii) Company will continue to pay or make available
to Stockholder the current salary and benefits of Stockholder
through December 31, 2002 and consulting compensation pursuant
to the terms of Stockholder's employment agreement with
Company from and after January 1, 2003.
5
12. General Release and Covenant Not to Sue.
(a) Release by Stockholder Parties. EFFECTIVE AS OF THE
EFFECTIVE TIME, STOCKHOLDER, ON BEHALF OF STOCKHOLDER, STOCKHOLDER'S
ATTORNEYS, HEIRS, EXECUTORS, ADMINISTRATORS, ASSIGNS, AND TRUSTS,
PARTNERSHIPS AND OTHER ENTITIES UNDER STOCKHOLDER'S CONTROL (TOGETHER
THE "STOCKHOLDER PARTIES"), HEREBY GENERALLY RELEASES AND FOREVER
DISCHARGES COMPANY AND ITS PREDECESSORS, SUCCESSORS, ASSIGNS,
SUBSIDIARIES AND AFFILIATES AND FAMILY MEMBERS (AS DEFINED BELOW),
OFFICERS (OTHER THAN PAUL YATES AND WALTER EVANS), EMPLOYEES, AGENTS,
REPRESENTATIVES, PRINCIPALS AND ATTORNEYS, AND, SUBJECT TO SECTION 14
HEREOF, DIRECTORS, PAUL YATES AND WALTER EVANS (TOGETHER THE "COMPANY
PARTIES") FROM ANY AND ALL CLAIMS, DEMANDS, LIABILITIES, SUITS,
DAMAGES, LOSSES, EXPENSES, ATTORNEYS' FEES, OBLIGATIONS OR CAUSES OF
ACTION, KNOWN OR UNKNOWN OF ANY KIND AND EVERY NATURE WHATSOEVER, AND
WHETHER OR NOT ACCRUED OR MATURED (COLLECTIVELY, "CLAIMS"), WHICH ANY
OF THEM MAY HAVE ARISING OUT OF OR RELATING TO ANY OMISSION, ACTS OR
FACTS THAT HAVE OCCURRED UP AND UNTIL AND INCLUDING THE EFFECTIVE TIME,
INCLUDING WITHOUT LIMITATION:
i. any and all Claims relating to, arising from, or
in connection with the Lawsuits;
ii. any and all Claims relating to, arising from, or
in connection with, the employment of Stockholder by the
Company or the termination of such employment;
iii. any and all Claims relating to, or arising from,
Stockholder's right to purchase, or actual purchase of shares
of stock of Company, including, without limitation, any Claims
for fraud, misrepresentation, breach of fiduciary duty, breach
of duty under applicable state corporate law, and securities
fraud under any state or federal law;
iv. any and all Claims for wrongful discharge of
employment; fraud; misrepresentation; termination in violation
of public policy; discrimination; breach of contract, both
express and implied; breach of a covenant of good faith and
fair dealing, both express and implied; promissory estoppel;
negligent or intentional infliction of emotional distress;
negligent or intentional misrepresentation; negligent or
intentional interference with contract or prospective economic
advantage; breach of fiduciary duty; unfair business
practices; breach of confidentiality provision, defamation;
libel; slander; negligence; personal injury; assault; battery;
invasion of privacy; false imprisonment; tortious
interference, theft, embezzlement, and conversion;
v. any and all Claims for violation of any federal,
state or municipal statute, including, but not limited to,
Title VII of the Civil Rights Act of 1964, the Civil Rights
6
Act of 1991, the Family Medical Leave Act, the Americans with
Disabilities Act of 1990, the Fair Labor Standards Act, the
Employee Retirement Income Security Act of 1974, The Worker
Adjustment and Retraining Notification Act, Older Workers
Benefit Protection Act and the Texas Commission on Human
Rights Act;
vi. any and all Claims for violation of the federal,
or any state, constitution;
vii. any and all Claims arising out of any other laws
and regulations relating to employment or employment
discrimination; and
viii. any and all Claims for attorneys' fees,
expenses, and costs other than fees, costs or expenses which
are otherwise indemnifiable under Section 6.8 of the Merger
Agreement.
"FAMILY MEMBERS" SHALL MEAN, WITH RESPECT TO ANY PARTY THAT IS AN INDIVIDUAL,
THE SPOUSE OF A PARTY, ANY PARENT OF SUCH PARTY, OR ANY LINEAL DESCENDENT OF A
PARENT OF SUCH PARTY (WHETHER NATURAL BORN OR ADOPTED).
NOTWITHSTANDING THE FOREGOING, THIS RELEASE DOES NOT IN ANY WAY RELEASE, IMPAIR,
OR LIMIT ANY OBLIGATIONS INCURRED BY OR OWING FROM THE COMPANY PARTIES (1) UNDER
THIS AGREEMENT, (2) UNDER THE MERGER AGREEMENT, INCLUDING, WITHOUT LIMITATION,
SECTION 6.8 THEREOF AND (3) WITH RESPECT TO CLAIMS UNDER THE AGE DISCRIMINATION
IN EMPLOYMENT ACT OF 1967 ("ADEA CLAIMS"). FURTHER, THIS RELEASE DOES NOT IN ANY
WAY RELEASE ANY OF COMPANY'S INSURERS FROM COVERING STOCKHOLDER FOR ANY CONDUCT,
ACTS, INJURIES, OR ACTIONS ARISING FROM, IN CONNECTION WITH, OR RELATED TO THE
TIME PERIOD SUCH PERSON WAS EMPLOYED BY OR SERVING AS AN OFFICER OR DIRECTOR OF
COMPANY.
(b) Prosecution by Stockholder and Stockholder Parties.
EFFECTIVE AS OF THE EFFECTIVE TIME, STOCKHOLDER, ON BEHALF OF
STOCKHOLDER AND THE STOCKHOLDER PARTIES, HEREBY COVENANTS FOREVER NOT
TO ASSERT, FILE, PROSECUTE, MAINTAIN, COMMENCE, INSTITUTE (OR SPONSOR
OR PURPOSELY FACILITATE ANY PERSON IN CONNECTION WITH THE FOREGOING),
ANY COMPLAINT OR LAWSUIT OR ANY LEGAL, EQUITABLE OR ADMINISTRATIVE
PROCEEDING OF ANY NATURE, AGAINST ANY OF THE COMPANY PARTIES IN
CONNECTION WITH ANY MATTER RELEASED IN SECTION 12(a), INCLUDING,
WITHOUT LIMITATION, THE LAWSUITS, AND REPRESENTS AND WARRANTS THAT TO
THE EXTENT WITHIN STOCKHOLDER'S CONTROL, NO OTHER PERSON OR ENTITY HAS
OR WILL INITIATE ANY SUCH PROCEEDING ON BEHALF OF STOCKHOLDER OR ANY
STOCKHOLDER PARTY.
7
NOTWITHSTANDING THE FOREGOING, THIS COVENANT DOES NOT IN ANY WAY PROHIBIT
STOCKHOLDER OR ANY OF THE STOCKHOLDER PARTIES FROM REPORTING OR MAKING PUBLIC
DISCLOSURE OF ANY VIOLATIONS OF LAW.
(c) Release by Company. EFFECTIVE AS OF THE EFFECTIVE TIME,
COMPANY, ON BEHALF OF ITSELF AND THE COMPANY PARTIES UNDER ITS CONTROL
(THE "COMPANY CONTROLLED PARTIES"), HEREBY GENERALLY RELEASES AND
FOREVER DISCHARGES STOCKHOLDER, THE STOCKHOLDER PARTIES AND THEIR
FAMILY MEMBERS FROM ANY AND ALL CLAIMS, WHICH ANY OF THEM MAY HAVE,
ARISING OUT OF OR RELATING TO ANY OMISSION, ACTS OR FACTS THAT HAVE
OCCURRED UP AND UNTIL AND INCLUDING THE EFFECTIVE TIME, INCLUDING
WITHOUT LIMITATION, THE LAWSUITS.
NOTWITHSTANDING THE FOREGOING, THIS RELEASE DOES NOT IN ANY WAY RELEASE, IMPAIR,
OR LIMIT (i) ANY OBLIGATIONS INCURRED BY OR OWING FROM STOCKHOLDER OR ANY OF THE
STOCKHOLDER PARTIES (1) UNDER THIS AGREEMENT, AND (2) WITH RESPECT TO ADEA
CLAIMS OR (ii) THE RIGHTS OF COMPANY OR ANY OF ITS PREDECESSORS, SUCCESSORS,
ASSIGNS OR SUBSIDIARIES AGAINST STOCKHOLDER OR STOCKHOLDER PARTIES WITH RESPECT
TO ANY CRIMINAL OR FRAUDULENT ACTIVITY OTHER THAN ACTIVITIES THAT ARE THE
SUBJECT OF THE LAWSUITS.
(d) Prosecutions by Company and Company Controlled Parties.
EFFECTIVE AS OF THE EFFECTIVE TIME, COMPANY, ON BEHALF OF ITSELF AND
THE COMPANY CONTROLLED PARTIES, HEREBY COVENANTS FOREVER NOT TO ASSERT,
FILE, PROSECUTE, MAINTAIN, COMMENCE, INSTITUTE (OR SPONSOR OR PURPOSELY
FACILITATE ANY PERSON IN CONNECTION WITH THE FOREGOING), ANY COMPLAINT
OR LAWSUIT OR ANY LEGAL, EQUITABLE OR ADMINISTRATIVE PROCEEDING OF ANY
NATURE, AGAINST ANY OF THE STOCKHOLDER PARTIES IN CONNECTION WITH ANY
MATTER RELEASED IN SECTION 12(c), INCLUDING, WITHOUT LIMITATION, THE
LAWSUITS, AND REPRESENTS AND WARRANTS THAT, TO THE EXTENT WITHIN ITS
CONTROL, NO OTHER PERSON OR ENTITY HAS INITIATED OR WILL INITIATE ANY
SUCH PROCEEDING ON ITS OR THEIR BEHALF.
NOTWITHSTANDING THE FOREGOING, THIS COVENANT DOES NOT IN ANY WAY PROHIBIT THE
COMPANY OR ANY OF THE COMPANY PARTIES FROM REPORTING OR MAKING PUBLIC DISCLOSURE
OF ANY VIOLATIONS OF LAW.
13. Employment, Severance and Pension Matters. In consideration for the
foregoing, promptly after the Effective Time, Parent agrees to cause Company to
pay to Stockholder $1,838,589 less any salary and consulting payments paid after
June 30, 2002, less applicable withholding and other taxes, as compensation for
8
and in full settlement of all employment, consulting, severance, pension, death
benefit or other matters.
14. Third-Party Beneficiary Rights. Subject to the following sentence,
no provision of this Agreement is intended to nor shall it be interpreted to
provide or create any third-party beneficiary rights or any other rights of any
kind in any other person or entity who is not a Party. The provisions of
Sections 11 and 12 are intended to and shall be interpreted to provide and
create third party beneficiary rights for each director, officer, employee, and
agent of the Company, provided that in the case of each director, Paul Yates and
Walter Evans, such person must, deliver to Stockholder a fully executed
agreement within five business days of the date of this Agreement containing
provisions, where reasonably applicable, identical to the provisions of Section
11 (with respect to the stay of the Lawsuits) and Section 12 (with respect to
the release of the Stockholder Parties).
15. Further Assurances. Each Party shall do and perform or cause to be
done and performed all such further acts and things and shall execute and
deliver all such other agreements, certificates, instruments, or documents as
any other Party shall reasonably request from time to time in order to carry out
the intent and purposes of this Agreement. No Party shall voluntarily undertake
any course of action inconsistent with satisfaction of the requirements
applicable to such Party as set forth in this Agreement, and each Party shall
promptly do all acts and take all measures as may be appropriate or necessary to
enable such Party to perform, as early as practicable, the obligations required
to be performed by such Party under this Agreement. Without limiting the
foregoing, if requested by Company or Parent, Stockholder will obtain a written
acknowledgement from any entity or person that Stockholder purports to act on
behalf of acknowledging that such Stockholder has the authority to execute this
Agreement on such person or entity's behalf and to so bind such person or
entity.
16. Injunctive Relief. The Parties acknowledge that it is impossible to
measure in money the damages that will accrue to one or more of them by reason
of the failure of either of them to abide by the provisions of this Agreement,
that every such provision is material, and that in the event of any such
failure, the other Party will not have an adequate remedy at law or damages.
Therefore, if any Party shall institute any action or proceeding to enforce the
provisions of this Agreement, in addition to any other relief, the court in such
action or proceeding may grant injunctive relief against any Party found to be
in breach or violation of this Agreement, as well as or in addition to any
remedies at law or damages, and such Party waives the claim or defense in any
such action or proceeding that the Party bringing such action has an adequate
remedy at law, and such Party shall not argue or assert in any such action or
proceeding the claim or defense that such remedy at law exists. No Party shall
seek and each Party shall waive any requirement for, the securing or posting of
a bond in connection with the other Party seeking or obtaining such equitable
relief.
17. Court Modification. Should any portion of this Agreement be
declared by a court of competent jurisdiction to be unreasonable, unenforceable,
or void for any reason or reasons, the involved court shall modify the
applicable provision(s) of this Agreement so as to be reasonable or as is
otherwise necessary to make this Agreement enforceable and valid and to protect
the interests of the Parties intended to be protected by this Agreement to the
maximum extent possible.
9
18. Facsimile Transmission and Counterparts. This Agreement may be
executed by facsimile transmission and in one or more counterparts, each of
which shall be deemed to be an original, but all of which taken together shall
constitute one and the same Agreement.
19. Notices. All notices, requests, demands, and other communications
under this Agreement ("Notices") shall be in writing and shall be delivered (i)
personally, (ii) by certified mail, return receipt requested, postage prepaid,
(iii) by overnight courier or (iv) by facsimile transmission properly addressed
as follows:
If to Parent to:
Penn National Gaming, Inc.
825 Berkshire Blvd., Suite 200
Wyomissing, PA 19610
Facsimile: (610) 373-4966
Attention: Peter M. Carlino, Chief Executive Officer
with a copy to:
Morgan, Lewis & Bockius LLP
1701 Market Street
Philadelphia, PA 19103
Facsimile: (215) 963-5299
Attention: Peter S. Sartorius, Esq.
If to Company to:
Hollywood Casino Corporation
Two Galleria Tower
13455 Noel Road, Suite 2200
Dallas, TX 75240
Facsimile: (972) 716-3903
Attention: Walter E. Evans, General Counsel
with a copy to:
Weil, Gotshal & Manges LLP
100 Crescent Court, Suite 1300
Dallas, TX 75201
Facsimile: (214) 746-7777
Attention: Michael A. Saslaw
and if to Stockholder, at the address specified in on the signature page to this
Agreement or, in either case, to such other address or addresses as a Party to
this Agreement may indicate to the other Party in the manner provided for in
this Paragraph 19. Notices given by mail, by overnight courier and by personal
10
delivery shall be deemed effective and complete upon delivery and notices by
facsimile transmission shall be deemed effective upon receipt.
20. Effective Date; Term. This Agreement shall become effective upon
(i) its execution and delivery by all Parties and (ii) the execution and
delivery of each of the Other Stockholder Agreements by the parties thereto;
provided, however, that Section 12 of this Agreement shall not become effective
until the Effective Time. This Agreement shall continue in full force and effect
until the first to occur of (A) the written agreement of all the Parties to
terminate this Agreement and (B) the termination of the Merger Agreement in
accordance with its terms (the first to occur of (A) and (B) the "Termination
Time").
21. Non-Solicitation of Employees. Stockholder hereby agrees for a
period of eighteen (18) months after the Effective Date that Stockholder will
not, without the prior written consent of Parent, such consent not to be
unreasonably withheld or delayed, directly or indirectly, (i) solicit, recruit
or hire any person who is now or in the future becomes an executive or
management employee of Company or any subsidiary of Company (a "Key Employee")
to work for any person or entity other than Company or any such subsidiary or
(ii) engage in any activity that would cause any employee to violate any
agreement with Company or any of its subsidiaries; provided, however, that the
above provisions shall not apply with respect to any Key Employee who is not
employed by Parent, Surviving Corporation (as defined in the Merger Agreement)
or any of their respective subsidiaries following the Effective Time for at
least one-hundred twenty (120) days unless such unemployment occurred in
connection with a violation by Stockholder of this Section 21.
22. Gaming Approvals; Cooperation. Company shall (i) promptly file all
required applications to obtain the approvals from all applicable Gaming
Authorities necessary for Stockholder to grant the proxy set forth in Section 3,
(ii) shall request an accelerated review from such Gaming Authorities in
connection with such filings, and (iii) shall otherwise use its reasonable best
efforts to obtain such approvals. Each of the Parties shall use such Party's
reasonable best efforts to cooperate with Company and all applicable Gaming
Authorities in making such filings and obtaining such approvals.
23. Other Agreements.
(a) This Agreement supersedes all prior agreements or
understandings of the Parties on the subject matter of this Agreement.
There are no representations, warranties, or agreements, whether
express or implied, or oral or written, with respect to the subject
matter of this Agreement, except as set forth in this Agreement. This
Agreement (i) shall not be modified by any oral agreement, either
express or implied, and all amendments or modifications of this
Agreement shall be in writing and be signed by all of the Parties, and
(ii) shall be binding on and shall inure to the benefit of the Parties
and their respective heirs, legal representatives, successors and
assigns.
(b) The paragraph headings in this Agreement are for the
purpose of convenience only and shall not limit or otherwise affect any
of the terms of this Agreement.
11
(c) Should any Party be in default under or breach of any of
the covenants or agreements contained in this Agreement, or in the
event a dispute shall arise as to the meaning of any term of this
Agreement, the defaulting or nonprevailing Party shall pay all costs
and expenses, including reasonable attorneys' fees, of the other Party
that may arise or accrue from enforcing this Agreement, securing an
interpretation of any provision of this Agreement, or in pursuing any
remedy provided by law whether such remedy is pursued or interpretation
is sought by the filing of a lawsuit, an appeal, or otherwise.
(d) This Agreement shall be governed by and construed in
accordance with the internal laws of the State of Delaware, which
internal laws exclude any provision or interpretation of such laws that
would call for, or permit, the application of the laws of any other
state or jurisdiction, and any dispute arising therefrom and the
remedies available shall be determined solely in accordance with such
internal laws.
(e) Where the context requires, the singular shall include the
plural, the plural shall include the singular, and any gender shall
include all other genders.
(f) Stockholder certifies that Stockholder has read the terms
of this Agreement, that Stockholder has been informed by this document
that Stockholder should discuss this Agreement with the attorney of
Stockholder's own choice, that Stockholder has had an opportunity to do
so and that Stockholder understands this Agreement's terms and effects.
(g) The Parties have jointly participated jointly in the
negotiation and drafting of this Agreement. In the event any ambiguity
or question of intent or interpretation arises, this Agreement shall be
construed as if drafted jointly by the Parties and no presumption or
burden of proof shall arise favoring or disfavoring any Party by virtue
of the authorship of any provisions of this Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
12
IN WITNESS WHEREOF, each of the Parties has executed this Agreement on
or as of the date of this Agreement.
PARENT:
PENN NATIONAL GAMING, INC.
By: /s/ Robert S. Ippolito
---------------------------------------
Name: Robert S. Ippolito
Title: Vice President, Secretary
and Treasurer
COMPANY:
HOLLYWOOD CASINO CORPORATION
By: /s/ Edward T. Pratt III
---------------------------------------
Name: Edward T. Pratt III
Title: Chief Executive Officer
STOCKHOLDER:
/s/ William D. Pratt
- --------------------
William D. Pratt
Address:
- ----------------------------------------------------------
- ----------------------------------------------------------
- ----------------------------------------------------------
Telephone:
--------------------------------------
Facsimile:
--------------------------------------
With a copy to:
Sayles, Lidji & Werbner
Attn: Brian M. Lidji
4400 Renaissance Tower
1201 Elm Street
Dallas, Texas 75270
Facsimile: (214) 939-8787
SCHEDULE A
OTHER STOCKHOLDERS EXECUTING STOCKHOLDER AGREEMENTS
Maria A. Pratt
Sharon Pratt Naftel
Diana Pratt Wyatt
Carolyn Pratt Hickey
Michael Shannan Pratt
Jill Pratt LaFerney
John R. Pratt
Edward T. Pratt, Jr.
William D. Pratt, Jr.
Edward T. Pratt III
Jack E. Pratt, Sr.
SCHEDULE B
SHARES HELD OF RECORD:
Stockholder holds of record 13,200 shares of Class A Common Stock.
OPTIONS:
Total of 13,500 options, of which options to acquire 4,500 of Class A Common
Stock are vested, and 9,000 additional shares vest in 3,000 share increments on
May 5 of 2003, 2004 and 2005. The right to acquire these 13,500 shares will
expire on May 5, 2010. All of such options, which have not been previously
exercised, will vest at the Effective Time of the Merger.
ADDITIONAL VOTING SHARES:
Stockholder has sole power to vote the following shares of Class A Common Stock:
200,294 shares owned of record by the WDP Jr. Family Trust, of which Stockholder
is trustee; and 400,582 shares owned of record by WDP Family, Ltd., of which
Stockholder is Managing General Partner.
Stockholder has shared power to vote the following shares of Class A Common
Stock: 275,544 shares owned of record by Michael Shannan Pratt subject to a
proxy granting Stockholder the right to vote but not to dispose of such shares.
ADDITIONAL DISPOSITION SHARES:
Stockholder has sole power to dispose of the following shares of Class A Common
Stock: 200,294 shares owned of record by the WDP Jr. Family Trust, of which
Stockholder is trustee; and 400,582 shares owned of record by WDP Family, Ltd.,
of which Stockholder is Managing General Partner.
RECORD SHARE ENCUMBRANCES:
None
EXHIBIT 1.6
SSTOCKHOLDER AGREEMENT
THIS STOCKHOLDER AGREEMENT (this "Agreement") is made and
entered into as of the 7th day of August, 2002, by and between Penn National
Gaming, Inc., a Pennsylvania corporation ("Parent"), Hollywood Casino
Corporation, a Delaware corporation ("Company"), and Maria A. Pratt
("Stockholder"). Parent, Company and Stockholder are sometimes referred to in
this Agreement individually as a "Party" or collectively as the "Parties."
RECITALS
This Agreement is entered into with reference to the following
facts, objectives and definitions:
A. Contemporaneously with the execution and delivery of this
Agreement, Parent, P Acquisition Corp., a Delaware corporation and a
wholly-owned subsidiary of Parent ("Merger Sub"), and Company, are entering into
an Agreement and Plan of Merger, dated as of the date of this Agreement (the
"Merger Agreement"), pursuant to which it is contemplated that Company will
merge (the "Merger") with Merger Sub, upon the terms and conditions set forth in
the Merger Agreement; and
B. The Board of Directors of Company (the "Company Board") has
previously approved the Merger Agreement and the execution and delivery by
Company of this Agreement; and
C. On the date hereof each of the other stockholders of
Company set forth on Schedule A attached hereto (collectively, the "Other
Stockholders") is entering into a Stockholder Agreement in a form substantially
similar to this Agreement (collectively, the "Other Stockholder Agreements");
and
D. Stockholder owns, or has rights with respect to, certain of
the outstanding shares of Class A Common Stock, par value $0.0001 per share
("Class A Common Stock"), of Company, and may acquire rights with respect to
additional shares of Class A Common Stock after the date of this Agreement, and
desires to facilitate the consummation of the Merger, and for such purpose and
in order to induce Parent to enter into the Merger Agreement, Stockholder has
agreed, among other matters set forth herein, (i) to vote these shares and (ii)
to grant Parent or its designee an irrevocable proxy to exercise the voting
power of Stockholder with respect to these shares, all as provided in this
Agreement.
NOW, THEREFORE, in consideration of the covenants and
conditions contained in this Agreement, the Parties represent, warrant, and
agree as follows:
AGREEMENT
1. Representations and Warranties of Stockholder. Stockholder
represents and warrants that: (i) Stockholder is the holder of record (free and
clear of any liens, encumbrances, pledges or restrictions except as described
under the heading "Record Share Encumbrances" on Schedule B attached hereto (the
"Record Share Encumbrances")), of the number of outstanding shares of Class A
Common Stock, if any, set forth under the heading "Shares Held of Record" on
Schedule B attached hereto (the "Record Shares"), and, except as may be
described on Schedule B attached hereto, Stockholder possesses the sole right to
vote and dispose of the Record Shares; (ii) Stockholder holds (free and clear of
any liens, encumbrances, pledges or restrictions) the options to acquire shares
of Class A Common Stock, if any, set forth under the heading "Options" on
Schedule B attached hereto (the "Options"); (iii) except as may be described
under the heading "Additional Voting Shares" on Schedule B attached hereto
Stockholder maintains the right to vote or direct the vote of, but does not
solely own and cannot dispose of, the additional shares of Class A Common Stock,
if any, set forth under the heading "Additional Voting Shares" on Schedule B
attached hereto (the "Additional Voting Shares" and, collectively with the
Record Shares as to which Stockholder holds the right to vote, the "Voting
Shares"); (iv) Stockholder holds the right to sell or otherwise dispose of, but
cannot vote or direct the vote of, the additional shares of Class A Common
Stock, if any, set forth under the heading "Additional Disposition Shares" on
Schedule B attached hereto (the "Additional Disposition Shares" and, together
with the Record Shares as to which Stockholder holds the right of disposition,
the "Disposition Shares"; the Record Shares, the Additional Voting Shares, the
Additional Disposition Shares and the New Shares, as hereinafter defined, are
referred to in this Agreement as the "Shares"); (v) Stockholder does not
directly or indirectly hold or beneficially own any shares of capital stock or
other securities of Company, or any option, warrant or other right to acquire
capital stock or other securities of Company, or any option, warrant or other
right to acquire (by purchase, conversion or otherwise) any shares of capital
stock or other securities of Company, other than as described on Schedule B
hereto; (vi) Stockholder has full power and authority to make, enter into, and
carry out the terms of this Agreement; (vii) the execution, delivery, and
performance of this Agreement by Stockholder will not violate any agreement to
which Stockholder is a party, including, without limitation, any voting
agreement, stockholder agreement, or voting trust; and (viii) this Agreement
constitutes the legal, valid and binding obligation of Stockholder, enforceable
against Stockholder in accordance with its terms.
2. Agreement to Vote the Shares. During the term of this Agreement,
Stockholder shall vote all of the Voting Shares over which Stockholder has sole
voting power and will cause all of the Voting Shares over which he has shared
voting power as described on Schedule B to be voted (other than any Shares that
may have been sold in accordance with the terms of this Agreement) (i) in favor
of the Merger Agreement, and the Merger or any transaction contemplated by the
Merger Agreement, (ii) as otherwise necessary or appropriate to enable Parent,
Company and Merger Sub to consummate the transactions contemplated by the Merger
Agreement, (iii) against any action or agreement that would result in a breach
in any material aspect of any covenant, representation, or warranty or any other
obligation or agreement of Company under the Merger Agreement, (iv) against any
action or agreement that would terminate, impede, interfere with, delay,
postpone, or attempt to discourage the Merger, including, but not limited to:
(A) a sale or transfer of a material amount of the assets of Company or any of
its subsidiaries or a reorganization, recapitalization, or liquidation of
Company or any of its subsidiaries, (B) any change in the Company Board, except
as otherwise agreed to in writing by the Parties, (C) any change in the present
capitalization or dividend policy of Company, or (D) any other change in
Company's corporate structure; and (v) against any other proposal which would
result in any of the conditions to Parent's obligations under the Merger
Agreement not being fulfilled.
3. Grant of Irrevocable Proxy. In the event that Stockholder does not
vote all of the Voting Shares in accordance with Section 2 hereof, subject to
the approval of all applicable Gaming Authorities (as defined in the Merger
2
Agreement), Stockholder hereby irrevocably appoints Parent or any designee of
Parent the lawful agent, attorney, and proxy of Stockholder, during the term of
this Agreement, to vote all of the Voting Shares in accordance with Section 2
hereof. Stockholder intends this proxy to be irrevocable, during the term of
this Agreement, and coupled with an interest and will take such further action
or execute such other instruments as may be necessary to effectuate the intent
of this proxy and hereby revokes any proxy previously granted by Stockholder
with respect to the Voting Shares. Stockholder shall not hereafter, unless and
until the Termination Time, purport to vote (or execute a consent with respect
to) any of the Voting Shares (other than through this irrevocable proxy or in
accordance with Section 2 hereof) or grant any other proxy or power of attorney
with respect to any of the Voting Shares, deposit any of the Voting Shares into
a voting trust or enter into any agreement (other than this Agreement),
arrangement, or understanding with any person, directly or indirectly, to vote,
grant any proxy, or give instructions with respect to the voting of any of the
Voting Shares. Stockholder shall retain at all times the right to vote the
Voting Shares in Stockholder's sole discretion on all matters other than those
set forth in Section 2 hereof that are presented for a vote to the stockholders
of Company generally.
4. Manner of Voting. The Voting Shares may be voted pursuant to this
Agreement in person, by proxy, by written consent, or in any other manner
permitted by applicable law.
5. No Solicitation. From the date of this Agreement until the Effective
Time (as such date is defined in the Merger Agreement) or the Termination Time
(as hereinafter defined), Stockholder will not, nor will Stockholder permit any
investment banker, attorney, accountant or other advisor or representative of
Stockholder to, directly or indirectly, (i) initiate, solicit or encourage any
inquiries, offers or proposals that constitute, or may reasonably be expected to
lead to an Acquisition Proposal (as such term is defined in the Merger
Agreement), (ii) participate in any discussions or negotiations concerning, or
provide to any person any information or data relating to Company or any
subsidiary of Company for the purpose of making, or take any other action to
facilitate, any Acquisition Proposal or any inquiries or the making of any
proposal that constitutes, or may reasonably be expected to lead to, any
Acquisition Proposal, (iii) agree to, approve or recommend any Acquisition
Proposal or (iv) take any other action materially inconsistent with Company's
obligations and commitments assumed pursuant to Section 6.6 of the Merger
Agreement.
6. No Transfer. From the date of this Agreement until the earlier of
(a) the Effective Time (as defined in the Merger Agreement) and (b) the
Termination Time (as hereinafter defined), Stockholder shall not sell, pledge,
or otherwise transfer, dispose of or encumber any of the Record Shares,
Additional Disposition Shares or New Shares (as hereinafter defined), or any
rights in respect thereof and shall not consent to any sale, pledge or other
transfer, disposition of, or encumbrance of, any Additional Voting Shares, or
any rights in respect thereof; provided, however, that this Section 6 shall not
prohibit the Record Share Encumbrances.
3
7. Additional Purchases; Option Exercise. If, during the period
commencing on the date of this Agreement and ending on the earlier of (i) the
Effective Time and (ii) the Termination Time, Stockholder purchases or otherwise
acquires any additional shares of Class A Common Stock or any rights in respect
thereof, including, without limitation, pursuant to the exercise of
Stockholder's Options, if any, such shares (the "New Shares") shall be subject
to the terms of this Agreement and for all purposes shall be and constitute a
portion of the Shares.
8. Adjustments to Prevent Dilution. In the event of any change in the
Class A Common Stock by reason of any stock dividend, split-up,
recapitalization, combination, or the exchange of shares, the term "Shares"
shall be deemed to refer to and include the Shares as well as all such stock
dividends and distributions and any shares into which or for which any or all of
the Shares may be changed or exchanged.
9. Waiver of Appraisal Rights. Stockholder hereby irrevocably and
unconditionally waives any right of appraisal relating to the Merger that
Stockholder may have by virtue of ownership of the Shares.
10. [Intentionally Omitted.]
11. No Litigation. From the date of this Agreement through the earlier
to occur of the Termination Time or the Effective Time, the Parties agree that
the Stockholder Parties (as hereinafter defined) and the Company Controlled
Parties (as hereinafter defined) shall not bring any actions against any Company
Parties (as hereinafter defined) or Stockholder Parties, respectively, other
than with respect to an activity that is unrelated to the Company; provided,
however, that such Parties may still report or make public disclosure of any
violations of Law (as defined in the Merger Agreement).
12. General Release and Covenant Not to Sue.
(a) Release by Stockholder Parties. EFFECTIVE AS OF THE
EFFECTIVE TIME, STOCKHOLDER, ON BEHALF OF STOCKHOLDER, STOCKHOLDER'S
ATTORNEYS, HEIRS, EXECUTORS, ADMINISTRATORS, ASSIGNS, AND TRUSTS,
PARTNERSHIPS AND OTHER ENTITIES UNDER STOCKHOLDER'S CONTROL (TOGETHER
THE "STOCKHOLDER PARTIES"), HEREBY GENERALLY RELEASES AND FOREVER
DISCHARGES COMPANY AND ITS PREDECESSORS, SUCCESSORS, ASSIGNS,
SUBSIDIARIES AND AFFILIATES AND FAMILY MEMBERS (AS DEFINED BELOW),
OFFICERS (OTHER THAN PAUL YATES AND WALTER EVANS), EMPLOYEES, AGENTS,
REPRESENTATIVES, PRINCIPALS AND ATTORNEYS, AND, SUBJECT TO SECTION 14
HEREOF, DIRECTORS, PAUL YATES AND WALTER EVANS (TOGETHER THE "COMPANY
PARTIES") FROM ANY AND ALL CLAIMS, DEMANDS, LIABILITIES, SUITS,
DAMAGES, LOSSES, EXPENSES, ATTORNEYS' FEES, OBLIGATIONS OR CAUSES OF
ACTION, KNOWN OR UNKNOWN OF ANY KIND AND EVERY NATURE WHATSOEVER, AND
WHETHER OR NOT ACCRUED OR MATURED (COLLECTIVELY, "CLAIMS"), WHICH ANY
OF THEM MAY HAVE ARISING OUT OF OR RELATING TO ANY OMISSION, ACTS OR
FACTS THAT HAVE OCCURRED UP AND UNTIL AND INCLUDING THE EFFECTIVE TIME,
INCLUDING WITHOUT LIMITATION:
4
i. any and all Claims relating to, arising from, or in
connection with the following lawsuits: (a) Hollywood Casino
Corporation v. Jack E. Pratt v. Edward T. Pratt III, Walter E. Evans
and Paul C. Yates, Cause No. 02-01516, in the District Court of Dallas
County, Texas, 116th Judicial District; (b) Hollywood Casino
Corporation v. Harold C. Simmons, et al., Civil Action No.
3:02CV0325-M, in the United Stated District Court for the Northern
District of Texas, Dallas Division; and (c) Jack E. Pratt v. Hollywood
Casino Corporation, a Delaware corporation, C.A. No. 19504, in the
Court of Chancery of the State of Delaware in and for New Castle County
(the "Lawsuits");
ii. any and all Claims relating to, arising from, or in
connection with, the employment of Stockholder by the Company or the
termination of such employment;
iii. any and all Claims relating to, or arising from,
Stockholder's right to purchase, or actual purchase of shares of stock
of Company, including, without limitation, any Claims for fraud,
misrepresentation, breach of fiduciary duty, breach of duty under
applicable state corporate law, and securities fraud under any state or
federal law;
iv. any and all Claims for wrongful discharge of employment;
fraud; misrepresentation; termination in violation of public policy;
discrimination; breach of contract, both express and implied; breach of
a covenant of good faith and fair dealing, both express and implied;
promissory estoppel; negligent or intentional infliction of emotional
distress; negligent or intentional misrepresentation; negligent or
intentional interference with contract or prospective economic
advantage; breach of fiduciary duty; unfair business practices; breach
of confidentiality provision, defamation; libel; slander; negligence;
personal injury; assault; battery; invasion of privacy; false
imprisonment; tortious interference, theft, embezzlement, and
conversion;
v. any and all Claims for violation of any federal, state or
municipal statute, including, but not limited to, Title VII of the
Civil Rights Act of 1964, the Civil Rights Act of 1991, the Family
Medical Leave Act, the Americans with Disabilities Act of 1990, the
Fair Labor Standards Act, the Employee Retirement Income Security Act
of 1974, The Worker Adjustment and Retraining Notification Act, Older
Workers Benefit Protection Act and the Texas Commission on Human Rights
Act;
vi. any and all Claims for violation of the federal, or any
state, constitution;
vii. any and all Claims arising out of any other laws and
regulations relating to employment or employment discrimination; and
viii. any and all Claims for attorneys' fees, expenses, and
costs other than fees, costs or expenses which are otherwise
indemnifiable under Section 6.8 of the Merger Agreement.
5
"FAMILY MEMBERS" SHALL MEAN, WITH RESPECT TO ANY PARTY THAT IS AN INDIVIDUAL,
THE SPOUSE OF A PARTY, ANY PARENT OF SUCH PARTY, OR ANY LINEAL DESCENDENT OF A
PARENT OF SUCH PARTY (WHETHER NATURAL BORN OR ADOPTED).
NOTWITHSTANDING THE FOREGOING, THIS RELEASE DOES NOT IN ANY WAY RELEASE, IMPAIR,
OR LIMIT ANY OBLIGATIONS INCURRED BY OR OWING FROM THE COMPANY PARTIES (1) UNDER
THIS AGREEMENT, (2) UNDER THE MERGER AGREEMENT, INCLUDING, WITHOUT LIMITATION,
SECTION 6.8 THEREOF AND (3) WITH RESPECT TO CLAIMS UNDER THE AGE DISCRIMINATION
IN EMPLOYMENT ACT OF 1967 ("ADEA CLAIMS"). FURTHER, THIS RELEASE DOES NOT IN ANY
WAY RELEASE ANY OF COMPANY'S INSURERS FROM COVERING STOCKHOLDER FOR ANY CONDUCT,
ACTS, INJURIES, OR ACTIONS ARISING FROM, IN CONNECTION WITH, OR RELATED TO THE
TIME PERIOD SUCH PERSON WAS EMPLOYED BY OR SERVING AS AN OFFICER OR DIRECTOR OF
COMPANY.
(b) Prosecution by Stockholder and Stockholder Parties.
EFFECTIVE AS OF THE EFFECTIVE TIME, STOCKHOLDER, ON BEHALF OF
STOCKHOLDER AND THE STOCKHOLDER PARTIES, HEREBY COVENANTS FOREVER NOT
TO ASSERT, FILE, PROSECUTE, MAINTAIN, COMMENCE, INSTITUTE (OR SPONSOR
OR PURPOSELY FACILITATE ANY PERSON IN CONNECTION WITH THE FOREGOING),
ANY COMPLAINT OR LAWSUIT OR ANY LEGAL, EQUITABLE OR ADMINISTRATIVE
PROCEEDING OF ANY NATURE, AGAINST ANY OF THE COMPANY PARTIES IN
CONNECTION WITH ANY MATTER RELEASED IN SECTION 12(a), INCLUDING,
WITHOUT LIMITATION, THE LAWSUITS, AND REPRESENTS AND WARRANTS THAT TO
THE EXTENT WITHIN STOCKHOLDER'S CONTROL, NO OTHER PERSON OR ENTITY HAS
OR WILL INITIATE ANY SUCH PROCEEDING ON BEHALF OF STOCKHOLDER OR ANY
STOCKHOLDER PARTY.
NOTWITHSTANDING THE FOREGOING, THIS COVENANT DOES NOT IN ANY WAY PROHIBIT
STOCKHOLDER OR ANY OF THE STOCKHOLDER PARTIES FROM REPORTING OR MAKING PUBLIC
DISCLOSURE OF ANY VIOLATIONS OF LAW.
(c) Release by Company. EFFECTIVE AS OF THE EFFECTIVE TIME,
COMPANY, ON BEHALF OF ITSELF AND THE COMPANY PARTIES UNDER ITS CONTROL
(THE "COMPANY CONTROLLED PARTIES"), HEREBY GENERALLY RELEASES AND
FOREVER DISCHARGES STOCKHOLDER, THE STOCKHOLDER PARTIES AND THEIR
FAMILY MEMBERS FROM ANY AND ALL CLAIMS, WHICH ANY OF THEM MAY HAVE,
ARISING OUT OF OR RELATING TO ANY OMISSION, ACTS OR FACTS THAT HAVE
OCCURRED UP AND UNTIL AND INCLUDING THE EFFECTIVE TIME, INCLUDING
WITHOUT LIMITATION, THE LAWSUITS.
6
NOTWITHSTANDING THE FOREGOING, THIS RELEASE DOES NOT IN ANY WAY RELEASE, IMPAIR,
OR LIMIT (i) ANY OBLIGATIONS INCURRED BY OR OWING FROM STOCKHOLDER OR ANY OF THE
STOCKHOLDER PARTIES (1) UNDER THIS AGREEMENT, AND (2) WITH RESPECT TO ADEA
CLAIMS OR (ii) THE RIGHTS OF COMPANY OR ANY OF ITS PREDECESSORS, SUCCESSORS,
ASSIGNS OR SUBSIDIARIES AGAINST STOCKHOLDER OR STOCKHOLDER PARTIES WITH RESPECT
TO ANY CRIMINAL OR FRAUDULENT ACTIVITY OTHER THAN ACTIVITIES THAT ARE THE
SUBJECT OF THE LAWSUITS.
(d) Prosecutions by Company and Company Controlled Parties.
EFFECTIVE AS OF THE EFFECTIVE TIME, COMPANY, ON BEHALF OF ITSELF AND
THE COMPANY CONTROLLED PARTIES, HEREBY COVENANTS FOREVER NOT TO ASSERT,
FILE, PROSECUTE, MAINTAIN, COMMENCE, INSTITUTE (OR SPONSOR OR PURPOSELY
FACILITATE ANY PERSON IN CONNECTION WITH THE FOREGOING), ANY COMPLAINT
OR LAWSUIT OR ANY LEGAL, EQUITABLE OR ADMINISTRATIVE PROCEEDING OF ANY
NATURE, AGAINST ANY OF THE STOCKHOLDER PARTIES IN CONNECTION WITH ANY
MATTER RELEASED IN SECTION 12(c), INCLUDING, WITHOUT LIMITATION, THE
LAWSUITS, AND REPRESENTS AND WARRANTS THAT, TO THE EXTENT WITHIN ITS
CONTROL, NO OTHER PERSON OR ENTITY HAS INITIATED OR WILL INITIATE ANY
SUCH PROCEEDING ON ITS OR THEIR BEHALF.
NOTWITHSTANDING THE FOREGOING, THIS COVENANT DOES NOT IN ANY WAY PROHIBIT THE
COMPANY OR ANY OF THE COMPANY PARTIES FROM REPORTING OR MAKING PUBLIC DISCLOSURE
OF ANY VIOLATIONS OF LAW.
13. [Intentionally Omitted.]
14. Third-Party Beneficiary Rights. Subject to the following sentence,
no provision of this Agreement is intended to nor shall it be interpreted to
provide or create any third-party beneficiary rights or any other rights of any
kind in any other person or entity who is not a Party. The provisions of
Sections 11 and 12 are intended to and shall be interpreted to provide and
create third party beneficiary rights for each director, officer, employee, and
agent of the Company, provided that in the case of each director, Paul Yates and
Walter Evans, such person must, deliver to Stockholder a fully executed
agreement within five business days of the date of this Agreement containing
provisions, where reasonably applicable, identical to the provisions of Section
12 (with respect to the release of the Stockholder Parties).
15. Further Assurances. Each Party shall do and perform or cause to be
done and performed all such further acts and things and shall execute and
deliver all such other agreements, certificates, instruments, or documents as
any other Party shall reasonably request from time to time in order to carry out
the intent and purposes of this Agreement. No Party shall voluntarily undertake
any course of action inconsistent with satisfaction of the requirements
applicable to such Party as set forth in this Agreement, and each Party shall
promptly do all acts and take all measures as may be appropriate or necessary to
enable such Party to perform, as early as practicable, the obligations required
to be performed by such Party under this Agreement. Without limiting the
foregoing, if requested by Company or Parent, Stockholder will obtain a written
7
acknowledgement from any entity or person that Stockholder purports to act on
behalf of acknowledging that such Stockholder has the authority to execute this
Agreement on such person or entity's behalf and to so bind such person or
entity.
16. Injunctive Relief. The Parties acknowledge that it is impossible to
measure in money the damages that will accrue to one or more of them by reason
of the failure of either of them to abide by the provisions of this Agreement,
that every such provision is material, and that in the event of any such
failure, the other Party will not have an adequate remedy at law or damages.
Therefore, if any Party shall institute any action or proceeding to enforce the
provisions of this Agreement, in addition to any other relief, the court in such
action or proceeding may grant injunctive relief against any Party found to be
in breach or violation of this Agreement, as well as or in addition to any
remedies at law or damages, and such Party waives the claim or defense in any
such action or proceeding that the Party bringing such action has an adequate
remedy at law, and such Party shall not argue or assert in any such action or
proceeding the claim or defense that such remedy at law exists. No Party shall
seek and each Party shall waive any requirement for, the securing or posting of
a bond in connection with the other Party seeking or obtaining such equitable
relief.
17. Court Modification. Should any portion of this Agreement be
declared by a court of competent jurisdiction to be unreasonable, unenforceable,
or void for any reason or reasons, the involved court shall modify the
applicable provision(s) of this Agreement so as to be reasonable or as is
otherwise necessary to make this Agreement enforceable and valid and to protect
the interests of the Parties intended to be protected by this Agreement to the
maximum extent possible.
18. Facsimile Transmission and Counterparts. This Agreement may be
executed by facsimile transmission and in one or more counterparts, each of
which shall be deemed to be an original, but all of which taken together shall
constitute one and the same Agreement.
19. Notices. All notices, requests, demands, and other communications
under this Agreement ("Notices") shall be in writing and shall be delivered (i)
personally, (ii) by certified mail, return receipt requested, postage prepaid,
(iii) by overnight courier or (iv) by facsimile transmission properly addressed
as follows:
If to Parent to:
Penn National Gaming, Inc.
825 Berkshire Blvd., Suite 200
Wyomissing, PA 19610
Facsimile: (610) 373-4966
Attention: Peter M. Carlino, Chief Executive Officer
8
with a copy to:
Morgan, Lewis & Bockius LLP
1701 Market Street
Philadelphia, PA 19103
Facsimile: (215) 963-5299
Attention: Peter S. Sartorius, Esq.
If to Company to:
Hollywood Casino Corporation
Two Galleria Tower
13455 Noel Road, Suite 2200
Dallas, TX 75240
Facsimile: (972) 716-3903
Attention: Walter E. Evans, General Counsel
with a copy to:
Weil, Gotshal & Manges LLP
100 Crescent Court, Suite 1300
Dallas, TX 75201
Facsimile: (214) 746-7777
Attention: Michael A. Saslaw
and if to Stockholder, at the address specified in on the signature page to this
Agreement or, in either case, to such other address or addresses as a Party to
this Agreement may indicate to the other Party in the manner provided for in
this Paragraph 19. Notices given by mail, by overnight courier and by personal
delivery shall be deemed effective and complete upon delivery and notices by
facsimile transmission shall be deemed effective upon receipt.
20. Effective Date; Term. This Agreement shall become effective upon
(i) its execution and delivery by all Parties and (ii) the execution and
delivery of each of the Other Stockholder Agreements by the parties thereto;
provided, however, that Section 12 of this Agreement shall not become effective
until the Effective Time. This Agreement shall continue in full force and effect
until the first to occur of (A) the written agreement of all the Parties to
terminate this Agreement and (B) the termination of the Merger Agreement in
accordance with its terms (the first to occur of (A) and (B) the "Termination
Time").
21. [Intentionally Omitted.]
22. Gaming Approvals; Cooperation. Company shall (i) promptly file all
required applications to obtain the approvals from all applicable Gaming
Authorities necessary for Stockholder to grant the proxy set forth in Section 3,
(ii) shall request an accelerated review from such Gaming Authorities in
connection with such filings, and (iii) shall otherwise use its reasonable best
efforts to obtain such approvals. Each of the Parties shall use such Party's
9
reasonable best efforts to cooperate with Company and all applicable Gaming
Authorities in making such filings and obtaining such approvals.
23. Other Agreements.
(a) This Agreement supersedes all prior agreements or
understandings of the Parties on the subject matter of this Agreement.
There are no representations, warranties, or agreements, whether
express or implied, or oral or written, with respect to the subject
matter of this Agreement, except as set forth in this Agreement. This
Agreement (i) shall not be modified by any oral agreement, either
express or implied, and all amendments or modifications of this
Agreement shall be in writing and be signed by all of the Parties, and
(ii) shall be binding on and shall inure to the benefit of the Parties
and their respective heirs, legal representatives, successors and
assigns.
(b) The paragraph headings in this Agreement are for the
purpose of convenience only and shall not limit or otherwise affect any
of the terms of this Agreement.
(c) Should any Party be in default under or breach of any of
the covenants or agreements contained in this Agreement, or in the
event a dispute shall arise as to the meaning of any term of this
Agreement, the defaulting or nonprevailing Party shall pay all costs
and expenses, including reasonable attorneys' fees, of the other Party
that may arise or accrue from enforcing this Agreement, securing an
interpretation of any provision of this Agreement, or in pursuing any
remedy provided by law whether such remedy is pursued or interpretation
is sought by the filing of a lawsuit, an appeal, or otherwise.
(d) This Agreement shall be governed by and construed in
accordance with the internal laws of the State of Delaware, which
internal laws exclude any provision or interpretation of such laws that
would call for, or permit, the application of the laws of any other
state or jurisdiction, and any dispute arising therefrom and the
remedies available shall be determined solely in accordance with such
internal laws.
(e) Where the context requires, the singular shall include the
plural, the plural shall include the singular, and any gender shall
include all other genders.
(f) Stockholder certifies that Stockholder has read the terms
of this Agreement, that Stockholder has been informed by this document
that Stockholder should discuss this Agreement with the attorney of
Stockholder's own choice, that Stockholder has had an opportunity to do
so and that Stockholder understands this Agreement's terms and effects.
(g) The Parties have jointly participated jointly in the
negotiation and drafting of this Agreement. In the event any ambiguity
or question of intent or interpretation arises, this Agreement shall be
construed as if drafted jointly by the Parties and no presumption or
burden of proof shall arise favoring or disfavoring any Party by virtue
of the authorship of any provisions of this Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
10
IN WITNESS WHEREOF, each of the Parties has executed this Agreement on
or as of the date of this Agreement.
PARENT:
PENN NATIONAL GAMING, INC.
By: /s/ Robert S. Ippolito
---------------------------------------
Name: Robert S. Ippolito
Title: Vice President, Secretary
and Treasurer
COMPANY:
HOLLYWOOD CASINO CORPORATION
By: /s/ Edward T. Pratt III
---------------------------------------
Name: Edward T. Pratt III
Title: Chief Executive Officer
STOCKHOLDER:
/s/ Maria A. Pratt
- ------------------
Maria A. Pratt
Address:
- ----------------------------------------------------------
- ----------------------------------------------------------
- ----------------------------------------------------------
Telephone:
-------------------------------------
Facsimile:
-------------------------------------
SCHEDULE A
OTHER STOCKHOLDERS EXECUTING STOCKHOLDER AGREEMENTS
Sharon Pratt Naftel
Diana Pratt Wyatt
Carolyn Pratt Hickey
Michael Shannan Pratt
Jill Pratt LaFerney
John R. Pratt
Edward T. Pratt, Jr.
William D. Pratt
Edward T. Pratt III
William D. Pratt, Jr.
Jack E. Pratt, Sr.
SCHEDULE B
SHARES HELD OF RECORD:
Stockholder holds of record 814,970 shares of Class A Common Stock.
OPTIONS:
None
ADDITIONAL VOTING SHARES:
None
ADDITIONAL DISPOSITION SHARES:
None
RECORD SHARE ENCUMBRANCES:
None
EXHIBIT 1.7
STOCKHOLDER AGREEMENT
THIS STOCKHOLDER AGREEMENT (this "Agreement") is made and
entered into as of the 7th day of August, 2002, by and between Penn National
Gaming, Inc., a Pennsylvania corporation ("Parent"), Hollywood Casino
Corporation, a Delaware corporation ("Company"), and Sharon Pratt Naftel
("Stockholder"). Parent, Company and Stockholder are sometimes referred to in
this Agreement individually as a "Party" or collectively as the "Parties."
RECITALS
This Agreement is entered into with reference to the following
facts, objectives and definitions:
A. Contemporaneously with the execution and delivery of this
Agreement, Parent, P Acquisition Corp., a Delaware corporation and a
wholly-owned subsidiary of Parent ("Merger Sub"), and Company, are entering into
an Agreement and Plan of Merger, dated as of the date of this Agreement (the
"Merger Agreement"), pursuant to which it is contemplated that Company will
merge (the "Merger") with Merger Sub, upon the terms and conditions set forth in
the Merger Agreement; and
B. The Board of Directors of Company (the "Company Board") has
previously approved the Merger Agreement and the execution and delivery by
Company of this Agreement; and
C. On the date hereof each of the other stockholders of
Company set forth on Schedule A attached hereto (collectively, the "Other
Stockholders") is entering into a Stockholder Agreement in a form substantially
similar to this Agreement (collectively, the "Other Stockholder Agreements");
and
D. Stockholder owns, or has rights with respect to, certain of
the outstanding shares of Class A Common Stock, par value $0.0001 per share
("Class A Common Stock"), of Company, and may acquire rights with respect to
additional shares of Class A Common Stock after the date of this Agreement, and
desires to facilitate the consummation of the Merger, and for such purpose and
in order to induce Parent to enter into the Merger Agreement, Stockholder has
agreed, among other matters set forth herein, (i) to vote these shares and (ii)
to grant Parent or its designee an irrevocable proxy to exercise the voting
power of Stockholder with respect to these shares, all as provided in this
Agreement.
NOW, THEREFORE, in consideration of the covenants and
conditions contained in this Agreement, the Parties represent, warrant, and
agree as follows:
AGREEMENT
1. Representations and Warranties of Stockholder. Stockholder
represents and warrants that: (i) Stockholder is the holder of record (free and
clear of any liens, encumbrances, pledges or restrictions except as described
under the heading "Record Share Encumbrances" on Schedule B attached hereto (the
"Record Share Encumbrances")), of the number of outstanding shares of Class A
Common Stock, if any, set forth under the heading "Shares Held of Record" on
Schedule B attached hereto (the "Record Shares"), and, except as may be
described on Schedule B attached hereto, Stockholder possesses the sole right to
vote and dispose of the Record Shares; (ii) Stockholder holds (free and clear of
any liens, encumbrances, pledges or restrictions) the options to acquire shares
of Class A Common Stock, if any, set forth under the heading "Options" on
Schedule B attached hereto (the "Options"); (iii) except as may be described
under the heading "Additional Voting Shares" on Schedule B attached hereto
Stockholder maintains the right to vote or direct the vote of, but does not
solely own and cannot dispose of, the additional shares of Class A Common Stock,
if any, set forth under the heading "Additional Voting Shares" on Schedule B
attached hereto (the "Additional Voting Shares" and, collectively with the
Record Shares as to which Stockholder holds the right to vote, the "Voting
Shares"); (iv) Stockholder holds the right to sell or otherwise dispose of, but
cannot vote or direct the vote of, the additional shares of Class A Common
Stock, if any, set forth under the heading "Additional Disposition Shares" on
Schedule B attached hereto (the "Additional Disposition Shares" and, together
with the Record Shares as to which Stockholder holds the right of disposition,
the "Disposition Shares"; the Record Shares, the Additional Voting Shares, the
Additional Disposition Shares and the New Shares, as hereinafter defined, are
referred to in this Agreement as the "Shares"); (v) Stockholder does not
directly or indirectly hold or beneficially own any shares of capital stock or
other securities of Company, or any option, warrant or other right to acquire
capital stock or other securities of Company, or any option, warrant or other
right to acquire (by purchase, conversion or otherwise) any shares of capital
stock or other securities of Company, other than as described on Schedule B
hereto; (vi) Stockholder has full power and authority to make, enter into, and
carry out the terms of this Agreement; (vii) the execution, delivery, and
performance of this Agreement by Stockholder will not violate any agreement to
which Stockholder is a party, including, without limitation, any voting
agreement, stockholder agreement, or voting trust; and (viii) this Agreement
constitutes the legal, valid and binding obligation of Stockholder, enforceable
against Stockholder in accordance with its terms.
2. Agreement to Vote the Shares. The Record Shares are subject to a
voting trust agreement pursuant to which Edward T. Pratt III has been granted an
irrevocable proxy (the "Proxy"), which provides him with the power to vote such
Record Shares. To the extent the Proxy is held invalid, unenforceable or
revoked, Stockholder shall vote all of the Voting Shares over which Stockholder
has sole voting power and will cause all of the Voting Shares over which he has
shared voting power as described on Schedule B to be voted (other than any
Shares that may have been sold in accordance with the terms of this Agreement)
(i) in favor of the Merger Agreement, and the Merger or any transaction
contemplated by the Merger Agreement, (ii) as otherwise necessary or appropriate
to enable Parent, Company and Merger Sub to consummate the transactions
contemplated by the Merger Agreement, (iii) against any action or agreement that
would result in a breach in any material aspect of any covenant, representation,
or warranty or any other obligation or agreement of Company under the Merger
Agreement, (iv) against any action or agreement that would terminate, impede,
interfere with, delay, postpone, or attempt to discourage the Merger, including,
but not limited to: (A) a sale or transfer of a material amount of the assets of
Company or any of its subsidiaries or a reorganization, recapitalization, or
liquidation of Company or any of its subsidiaries, (B) any change in the Company
Board, except as otherwise agreed to in writing by the Parties, (C) any change
in the present capitalization or dividend policy of Company, or (D) any other
change in Company's corporate structure; and (v) against any other proposal
which would result in any of the conditions to Parent's obligations under the
Merger Agreement not being fulfilled.
2
3. Grant of Irrevocable Proxy. In the event that the Proxy is held
invalid, unenforceable or revoked and Stockholder does not vote all of the
Voting Shares in accordance with Section 2 hereof, subject to the approval of
all applicable Gaming Authorities (as defined in the Merger Agreement),
Stockholder hereby irrevocably appoints Parent or any designee of Parent the
lawful agent, attorney, and proxy of Stockholder, during the term of this
Agreement, to vote all of the Voting Shares in accordance with Section 2 hereof.
Stockholder intends this proxy to be irrevocable, during the term of this
Agreement, and coupled with an interest and will take such further action or
execute such other instruments as may be necessary to effectuate the intent of
this proxy and hereby revokes any proxy previously granted by Stockholder with
respect to the Voting Shares other than the Proxy. Stockholder shall not
hereafter, unless and until the Termination Time, purport to vote (or execute a
consent with respect to) any of the Voting Shares (other than through this
irrevocable proxy or in accordance with Section 2 hereof) or grant any other
proxy or power of attorney with respect to any of the Voting Shares, deposit any
of the Voting Shares into a voting trust or enter into any agreement (other than
this Agreement), arrangement, or understanding with any person, directly or
indirectly, to vote, grant any proxy, or give instructions with respect to the
voting of any of the Voting Shares. Stockholder shall retain at all times the
right to vote the Voting Shares in Stockholder's sole discretion on all matters
other than those set forth in Section 2 hereof that are presented for a vote to
the stockholders of Company generally.
4. Manner of Voting. The Voting Shares may be voted pursuant to this
Agreement in person, by proxy, by written consent, or in any other manner
permitted by applicable law.
5. No Solicitation. From the date of this Agreement until the Effective
Time (as such date is defined in the Merger Agreement) or the Termination Time
(as hereinafter defined), Stockholder will not, nor will Stockholder permit any
investment banker, attorney, accountant or other advisor or representative of
Stockholder to, directly or indirectly, (i) initiate, solicit or encourage any
inquiries, offers or proposals that constitute, or may reasonably be expected to
lead to an Acquisition Proposal (as such term is defined in the Merger
Agreement), (ii) participate in any discussions or negotiations concerning, or
provide to any person any information or data relating to Company or any
subsidiary of Company for the purpose of making, or take any other action to
facilitate, any Acquisition Proposal or any inquiries or the making of any
proposal that constitutes, or may reasonably be expected to lead to, any
Acquisition Proposal, (iii) agree to, approve or recommend any Acquisition
Proposal or (iv) take any other action materially inconsistent with Company's
obligations and commitments assumed pursuant to Section 6.6 of the Merger
Agreement.
6. No Transfer. From the date of this Agreement until the earlier of
(a) the Effective Time (as defined in the Merger Agreement) and (b) the
Termination Time (as hereinafter defined), Stockholder shall not sell, pledge,
or otherwise transfer, dispose of or encumber any of the Record Shares,
Additional Disposition Shares or New Shares (as hereinafter defined), or any
rights in respect thereof and shall not consent to any sale, pledge or other
transfer, disposition of, or encumbrance of, any Additional Voting Shares, or
any rights in respect thereof; provided, however, that this Section 6 shall not
prohibit the Record Share Encumbrances.
3
7. Additional Purchases; Option Exercise. If, during the period
commencing on the date of this Agreement and ending on the earlier of (i) the
Effective Time and (ii) the Termination Time, Stockholder purchases or otherwise
acquires any additional shares of Class A Common Stock or any rights in respect
thereof, including, without limitation, pursuant to the exercise of
Stockholder's Options, if any, such shares (the "New Shares") shall be subject
to the terms of this Agreement and for all purposes shall be and constitute a
portion of the Shares.
8. Adjustments to Prevent Dilution. In the event of any change in the
Class A Common Stock by reason of any stock dividend, split-up,
recapitalization, combination, or the exchange of shares, the term "Shares"
shall be deemed to refer to and include the Shares as well as all such stock
dividends and distributions and any shares into which or for which any or all of
the Shares may be changed or exchanged.
9. Waiver of Appraisal Rights. Stockholder hereby irrevocably and
unconditionally waives any right of appraisal relating to the Merger that
Stockholder may have by virtue of ownership of the Shares.
10. [Intentionally Omitted.]
11. No Litigation. From the date of this Agreement through the earlier
to occur of the Termination Time or the Effective Time, the Parties agree that
the Stockholder Parties (as hereinafter defined) and the Company Controlled
Parties (as hereinafter defined) shall not bring any actions against any Company
Parties (as hereinafter defined) or Stockholder Parties, respectively, other
than with respect to an activity that is unrelated to the Company; provided,
however, that such Parties may still report or make public disclosure of any
violations of Law (as defined in the Merger Agreement).
4
12. General Release and Covenant Not to Sue.
(a) Release by Stockholder Parties. EFFECTIVE AS OF THE
EFFECTIVE TIME, STOCKHOLDER, ON BEHALF OF STOCKHOLDER, STOCKHOLDER'S
ATTORNEYS, HEIRS, EXECUTORS, ADMINISTRATORS, ASSIGNS, AND TRUSTS,
PARTNERSHIPS AND OTHER ENTITIES UNDER STOCKHOLDER'S CONTROL (TOGETHER
THE "STOCKHOLDER PARTIES"), HEREBY GENERALLY RELEASES AND FOREVER
DISCHARGES COMPANY AND ITS PREDECESSORS, SUCCESSORS, ASSIGNS,
SUBSIDIARIES AND AFFILIATES AND FAMILY MEMBERS (AS DEFINED BELOW),
OFFICERS (OTHER THAN PAUL YATES AND WALTER EVANS), EMPLOYEES, AGENTS,
REPRESENTATIVES, PRINCIPALS AND ATTORNEYS, AND, SUBJECT TO SECTION 14
HEREOF, DIRECTORS, PAUL YATES AND WALTER EVANS (TOGETHER THE "COMPANY
PARTIES") FROM ANY AND ALL CLAIMS, DEMANDS, LIABILITIES, SUITS,
DAMAGES, LOSSES, EXPENSES, ATTORNEYS' FEES, OBLIGATIONS OR CAUSES OF
ACTION, KNOWN OR UNKNOWN OF ANY KIND AND EVERY NATURE WHATSOEVER, AND
WHETHER OR NOT ACCRUED OR MATURED (COLLECTIVELY, "CLAIMS"), WHICH ANY
OF THEM MAY HAVE ARISING OUT OF OR RELATING TO ANY OMISSION, ACTS OR
FACTS THAT HAVE OCCURRED UP AND UNTIL AND INCLUDING THE EFFECTIVE TIME,
INCLUDING WITHOUT LIMITATION:
i. any and all Claims relating to, arising from, or
in connection with the following lawsuits: (a) Hollywood
Casino Corporation v. Jack E. Pratt v. Edward T. Pratt III,
Walter E. Evans and Paul C. Yates, Cause No. 02-01516, in the
District Court of Dallas County, Texas, 116th Judicial
District; (b) Hollywood Casino Corporation v. Harold C.
Simmons, et al., Civil Action No. 3:02CV0325-M, in the United
Stated District Court for the Northern District of Texas,
Dallas Division; and (c) Jack E. Pratt v. Hollywood Casino
Corporation, a Delaware corporation, C.A. No. 19504, in the
Court of Chancery of the State of Delaware in and for New
Castle County (the "Lawsuits");
ii. any and all Claims relating to, arising from, or
in connection with, the employment of Stockholder by the
Company or the termination of such employment;
iii. any and all Claims relating to, or arising from,
Stockholder's right to purchase, or actual purchase of shares
of stock of Company, including, without limitation, any Claims
for fraud, misrepresentation, breach of fiduciary duty, breach
of duty under applicable state corporate law, and securities
fraud under any state or federal law;
iv. any and all Claims for wrongful discharge of
employment; fraud; misrepresentation; termination in violation
of public policy; discrimination; breach of contract, both
express and implied; breach of a covenant of good faith and
fair dealing, both express and implied; promissory estoppel;
negligent or intentional infliction of emotional distress;
negligent or intentional misrepresentation; negligent or
intentional interference with contract or prospective economic
5
advantage; breach of fiduciary duty; unfair business
practices; breach of confidentiality provision, defamation;
libel; slander; negligence; personal injury; assault; battery;
invasion of privacy; false imprisonment; tortious
interference, theft, embezzlement, and conversion;
v. any and all Claims for violation of any federal,
state or municipal statute, including, but not limited to,
Title VII of the Civil Rights Act of 1964, the Civil Rights
Act of 1991, the Family Medical Leave Act, the Americans with
Disabilities Act of 1990, the Fair Labor Standards Act, the
Employee Retirement Income Security Act of 1974, The Worker
Adjustment and Retraining Notification Act, Older Workers
Benefit Protection Act and the Texas Commission on Human
Rights Act;
vi. any and all Claims for violation of the federal,
or any state, constitution;
vii. any and all Claims arising out of any other laws
and regulations relating to employment or employment
discrimination; and
viii. any and all Claims for attorneys' fees,
expenses, and costs other than fees, costs or expenses which
are otherwise indemnifiable under Section 6.8 of the Merger
Agreement.
"FAMILY MEMBERS" SHALL MEAN, WITH RESPECT TO ANY PARTY THAT IS AN INDIVIDUAL,
THE SPOUSE OF A PARTY, ANY PARENT OF SUCH PARTY, OR ANY LINEAL DESCENDENT OF A
PARENT OF SUCH PARTY (WHETHER NATURAL BORN OR ADOPTED).
NOTWITHSTANDING THE FOREGOING, THIS RELEASE DOES NOT IN ANY WAY RELEASE, IMPAIR,
OR LIMIT ANY OBLIGATIONS INCURRED BY OR OWING FROM THE COMPANY PARTIES (1) UNDER
THIS AGREEMENT, (2) UNDER THE MERGER AGREEMENT, INCLUDING, WITHOUT LIMITATION,
SECTION 6.8 THEREOF AND (3) WITH RESPECT TO CLAIMS UNDER THE AGE DISCRIMINATION
IN EMPLOYMENT ACT OF 1967 ("ADEA CLAIMS"). FURTHER, THIS RELEASE DOES NOT IN ANY
WAY RELEASE ANY OF COMPANY'S INSURERS FROM COVERING STOCKHOLDER FOR ANY CONDUCT,
ACTS, INJURIES, OR ACTIONS ARISING FROM, IN CONNECTION WITH, OR RELATED TO THE
TIME PERIOD SUCH PERSON WAS EMPLOYED BY OR SERVING AS AN OFFICER OR DIRECTOR OF
COMPANY.
(b) Prosecution by Stockholder and Stockholder Parties.
EFFECTIVE AS OF THE EFFECTIVE TIME, STOCKHOLDER, ON BEHALF OF
STOCKHOLDER AND THE STOCKHOLDER PARTIES, HEREBY COVENANTS FOREVER NOT
TO ASSERT, FILE, PROSECUTE, MAINTAIN, COMMENCE, INSTITUTE (OR SPONSOR
OR PURPOSELY FACILITATE ANY PERSON IN CONNECTION WITH THE FOREGOING),
ANY COMPLAINT OR LAWSUIT OR ANY LEGAL, EQUITABLE OR ADMINISTRATIVE
PROCEEDING OF ANY NATURE, AGAINST ANY OF THE COMPANY PARTIES IN
6
CONNECTION WITH ANY MATTER RELEASED IN SECTION 12(a), INCLUDING,
WITHOUT LIMITATION, THE LAWSUITS, AND REPRESENTS AND WARRANTS THAT TO
THE EXTENT WITHIN STOCKHOLDER'S CONTROL, NO OTHER PERSON OR ENTITY HAS
OR WILL INITIATE ANY SUCH PROCEEDING ON BEHALF OF STOCKHOLDER OR ANY
STOCKHOLDER PARTY.
NOTWITHSTANDING THE FOREGOING, THIS COVENANT DOES NOT IN ANY WAY PROHIBIT
STOCKHOLDER OR ANY OF THE STOCKHOLDER PARTIES FROM REPORTING OR MAKING PUBLIC
DISCLOSURE OF ANY VIOLATIONS OF LAW.
(c) Release by Company. EFFECTIVE AS OF THE EFFECTIVE TIME,
COMPANY, ON BEHALF OF ITSELF AND THE COMPANY PARTIES UNDER ITS CONTROL
(THE "COMPANY CONTROLLED PARTIES"), HEREBY GENERALLY RELEASES AND
FOREVER DISCHARGES STOCKHOLDER, THE STOCKHOLDER PARTIES AND THEIR
FAMILY MEMBERS FROM ANY AND ALL CLAIMS, WHICH ANY OF THEM MAY HAVE,
ARISING OUT OF OR RELATING TO ANY OMISSION, ACTS OR FACTS THAT HAVE
OCCURRED UP AND UNTIL AND INCLUDING THE EFFECTIVE TIME, INCLUDING
WITHOUT LIMITATION, THE LAWSUITS.
NOTWITHSTANDING THE FOREGOING, THIS RELEASE DOES NOT IN ANY WAY RELEASE, IMPAIR,
OR LIMIT (i) ANY OBLIGATIONS INCURRED BY OR OWING FROM STOCKHOLDER OR ANY OF THE
STOCKHOLDER PARTIES (1) UNDER THIS AGREEMENT, AND (2) WITH RESPECT TO ADEA
CLAIMS OR (ii) THE RIGHTS OF COMPANY OR ANY OF ITS PREDECESSORS, SUCCESSORS,
ASSIGNS OR SUBSIDIARIES AGAINST STOCKHOLDER OR STOCKHOLDER PARTIES WITH RESPECT
TO ANY CRIMINAL OR FRAUDULENT ACTIVITY OTHER THAN ACTIVITIES THAT ARE THE
SUBJECT OF THE LAWSUITS.
(d) Prosecutions by Company and Company Controlled Parties.
EFFECTIVE AS OF THE EFFECTIVE TIME, COMPANY, ON BEHALF OF ITSELF AND
THE COMPANY CONTROLLED PARTIES, HEREBY COVENANTS FOREVER NOT TO ASSERT,
FILE, PROSECUTE, MAINTAIN, COMMENCE, INSTITUTE (OR SPONSOR OR PURPOSELY
FACILITATE ANY PERSON IN CONNECTION WITH THE FOREGOING), ANY COMPLAINT
OR LAWSUIT OR ANY LEGAL, EQUITABLE OR ADMINISTRATIVE PROCEEDING OF ANY
NATURE, AGAINST ANY OF THE STOCKHOLDER PARTIES IN CONNECTION WITH ANY
MATTER RELEASED IN SECTION 12(c), INCLUDING, WITHOUT LIMITATION, THE
LAWSUITS, AND REPRESENTS AND WARRANTS THAT, TO THE EXTENT WITHIN ITS
CONTROL, NO OTHER PERSON OR ENTITY HAS INITIATED OR WILL INITIATE ANY
SUCH PROCEEDING ON ITS OR THEIR BEHALF.
7
NOTWITHSTANDING THE FOREGOING, THIS COVENANT DOES NOT IN ANY WAY PROHIBIT THE
COMPANY OR ANY OF THE COMPANY PARTIES FROM REPORTING OR MAKING PUBLIC DISCLOSURE
OF ANY VIOLATIONS OF LAW.
13. [Intentionally Omitted.]
14. Third-Party Beneficiary Rights. Subject to the following sentence,
no provision of this Agreement is intended to nor shall it be interpreted to
provide or create any third-party beneficiary rights or any other rights of any
kind in any other person or entity who is not a Party. The provisions of
Sections 11 and 12 are intended to and shall be interpreted to provide and
create third party beneficiary rights for each director, officer, employee, and
agent of the Company, provided that in the case of each director, Paul Yates and
Walter Evans, such person must, deliver to Stockholder a fully executed
agreement within five business days of the date of this Agreement containing
provisions, where reasonably applicable, identical to the provisions of Section
12 (with respect to the release of the Stockholder Parties).
15. Further Assurances. Each Party shall do and perform or cause to be
done and performed all such further acts and things and shall execute and
deliver all such other agreements, certificates, instruments, or documents as
any other Party shall reasonably request from time to time in order to carry out
the intent and purposes of this Agreement. No Party shall voluntarily undertake
any course of action inconsistent with satisfaction of the requirements
applicable to such Party as set forth in this Agreement, and each Party shall
promptly do all acts and take all measures as may be appropriate or necessary to
enable such Party to perform, as early as practicable, the obligations required
to be performed by such Party under this Agreement. Without limiting the
foregoing, if requested by Company or Parent, Stockholder will obtain a written
acknowledgement from any entity or person that Stockholder purports to act on
behalf of acknowledging that such Stockholder has the authority to execute this
Agreement on such person or entity's behalf and to so bind such person or
entity.
16. Injunctive Relief. The Parties acknowledge that it is impossible to
measure in money the damages that will accrue to one or more of them by reason
of the failure of either of them to abide by the provisions of this Agreement,
that every such provision is material, and that in the event of any such
failure, the other Party will not have an adequate remedy at law or damages.
Therefore, if any Party shall institute any action or proceeding to enforce the
provisions of this Agreement, in addition to any other relief, the court in such
action or proceeding may grant injunctive relief against any Party found to be
in breach or violation of this Agreement, as well as or in addition to any
remedies at law or damages, and such Party waives the claim or defense in any
such action or proceeding that the Party bringing such action has an adequate
remedy at law, and such Party shall not argue or assert in any such action or
proceeding the claim or defense that such remedy at law exists. No Party shall
seek and each Party shall waive any requirement for, the securing or posting of
a bond in connection with the other Party seeking or obtaining such equitable
relief.
17. Court Modification. Should any portion of this Agreement be
declared by a court of competent jurisdiction to be unreasonable, unenforceable,
or void for any reason or reasons, the involved court shall modify the
applicable provision(s) of this Agreement so as to be reasonable or as is
otherwise necessary to make this Agreement enforceable and valid and to protect
8
the interests of the Parties intended to be protected by this Agreement to the
maximum extent possible.
18. Facsimile Transmission and Counterparts. This Agreement may be
executed by facsimile transmission and in one or more counterparts, each of
which shall be deemed to be an original, but all of which taken together shall
constitute one and the same Agreement.
19. Notices. All notices, requests, demands, and other communications
under this Agreement ("Notices") shall be in writing and shall be delivered (i)
personally, (ii) by certified mail, return receipt requested, postage prepaid,
(iii) by overnight courier or (iv) by facsimile transmission properly addressed
as follows:
If to Parent to:
Penn National Gaming, Inc.
825 Berkshire Blvd., Suite 200
Wyomissing, PA 19610
Facsimile: (610) 373-4966
Attention: Peter M. Carlino, Chief Executive Officer
with a copy to:
Morgan, Lewis & Bockius LLP
1701 Market Street
Philadelphia, PA 19103
Facsimile: (215) 963-5299
Attention: Peter S. Sartorius, Esq.
If to Company to:
Hollywood Casino Corporation
Two Galleria Tower
13455 Noel Road, Suite 2200
Dallas, TX 75240
Facsimile: (972) 716-3903
Attention: Walter E. Evans, General Counsel
with a copy to:
Weil, Gotshal & Manges LLP
100 Crescent Court, Suite 1300
Dallas, TX 75201
Facsimile: (214) 746-7777
Attention: Michael A. Saslaw
9
and if to Stockholder, at the address specified in on the signature page to this
Agreement or, in either case, to such other address or addresses as a Party to
this Agreement may indicate to the other Party in the manner provided for in
this Paragraph 19. Notices given by mail, by overnight courier and by personal
delivery shall be deemed effective and complete upon delivery and notices by
facsimile transmission shall be deemed effective upon receipt.
20. Effective Date; Term. This Agreement shall become effective upon
(i) its execution and delivery by all Parties and (ii) the execution and
delivery of each of the Other Stockholder Agreements by the parties thereto;
provided, however, that Section 12 of this Agreement shall not become effective
until the Effective Time. This Agreement shall continue in full force and effect
until the first to occur of (A) the written agreement of all the Parties to
terminate this Agreement and (B) the termination of the Merger Agreement in
accordance with its terms (the first to occur of (A) and (B) the "Termination
Time").
21. [Intentionally Omitted.]
22. Gaming Approvals; Cooperation. Company shall (i) promptly file all
required applications to obtain the approvals from all applicable Gaming
Authorities necessary for Stockholder to grant the proxy set forth in Section 3,
(ii) shall request an accelerated review from such Gaming Authorities in
connection with such filings, and (iii) shall otherwise use its reasonable best
efforts to obtain such approvals. Each of the Parties shall use such Party's
reasonable best efforts to cooperate with Company and all applicable Gaming
Authorities in making such filings and obtaining such approvals.
23. Other Agreements.
(a) This Agreement supersedes all prior agreements or
understandings of the Parties on the subject matter of this Agreement.
There are no representations, warranties, or agreements, whether
express or implied, or oral or written, with respect to the subject
matter of this Agreement, except as set forth in this Agreement. This
Agreement (i) shall not be modified by any oral agreement, either
express or implied, and all amendments or modifications of this
Agreement shall be in writing and be signed by all of the Parties, and
(ii) shall be binding on and shall inure to the benefit of the Parties
and their respective heirs, legal representatives, successors and
assigns.
(b) The paragraph headings in this Agreement are for the
purpose of convenience only and shall not limit or otherwise affect any
of the terms of this Agreement.
(c) Should any Party be in default under or breach of any of
the covenants or agreements contained in this Agreement, or in the
event a dispute shall arise as to the meaning of any term of this
Agreement, the defaulting or nonprevailing Party shall pay all costs
and expenses, including reasonable attorneys' fees, of the other Party
that may arise or accrue from enforcing this Agreement, securing an
interpretation of any provision of this Agreement, or in pursuing any
remedy provided by law whether such remedy is pursued or interpretation
is sought by the filing of a lawsuit, an appeal, or otherwise.
10
(d) This Agreement shall be governed by and construed in
accordance with the internal laws of the State of Delaware, which
internal laws exclude any provision or interpretation of such laws that
would call for, or permit, the application of the laws of any other
state or jurisdiction, and any dispute arising therefrom and the
remedies available shall be determined solely in accordance with such
internal laws.
(e) Where the context requires, the singular shall include the
plural, the plural shall include the singular, and any gender shall
include all other genders.
(f) Stockholder certifies that Stockholder has read the terms
of this Agreement, that Stockholder has been informed by this document
that Stockholder should discuss this Agreement with the attorney of
Stockholder's own choice, that Stockholder has had an opportunity to do
so and that Stockholder understands this Agreement's terms and effects.
(g) The Parties have jointly participated jointly in the
negotiation and drafting of this Agreement. In the event any ambiguity
or question of intent or interpretation arises, this Agreement shall be
construed as if drafted jointly by the Parties and no presumption or
burden of proof shall arise favoring or disfavoring any Party by virtue
of the authorship of any provisions of this Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
11
IN WITNESS WHEREOF, each of the Parties has executed this Agreement on
or as of the date of this Agreement.
PARENT:
PENN NATIONAL GAMING, INC.
By: /s/ Robert S. Ippolito
---------------------------------------
Name: Robert S. Ippolito
Title: Vice President, Secretary
and Treasurer
COMPANY:
HOLLYWOOD CASINO CORPORATION
By: /s/ Edward T. Pratt III
---------------------------------------
Name: Edward T. Pratt III
Title: Chief Executive Officer
STOCKHOLDER:
/s/ Sharon Pratt Naftel
- -----------------------------------------
Sharon Pratt Naftel
Address:
- ----------------------------------------------------------
- ----------------------------------------------------------
- ----------------------------------------------------------
Telephone:
-------------------------------------
Facsimile:
-------------------------------------
SCHEDULE A
OTHER STOCKHOLDERS EXECUTING STOCKHOLDER AGREEMENTS
Maria A. Pratt
Diana Pratt Wyatt
Carolyn Pratt Hickey
Michael Shannan Pratt
Jill Pratt LaFerney
John R. Pratt
Edward T. Pratt, Jr.
William D. Pratt
Edward T. Pratt III
William D. Pratt, Jr.
Jack E. Pratt, Sr.
SCHEDULE B
SHARES HELD OF RECORD:
Stockholder holds of record 479,604 shares of Class A Common Stock, which shares
are subject to a voting trust arrangement giving Edward T. Pratt III voting
power.
OPTIONS:
None
ADDITIONAL VOTING SHARES:
None
ADDITIONAL DISPOSITION SHARES:
None
RECORD SHARE ENCUMBRANCES:
None
EXHIBIT 1.8
STOCKHOLDER AGREEMENT
THIS STOCKHOLDER AGREEMENT (this "Agreement") is made and
entered into as of the 7th day of August, 2002, by and between Penn National
Gaming, Inc., a Pennsylvania corporation ("Parent"), Hollywood Casino
Corporation, a Delaware corporation ("Company"), and Diana Pratt Wyatt
("Stockholder"). Parent, Company and Stockholder are sometimes referred to in
this Agreement individually as a "Party" or collectively as the "Parties."
RECITALS
This Agreement is entered into with reference to the following
facts, objectives and definitions:
A. Contemporaneously with the execution and delivery of this
Agreement, Parent, P Acquisition Corp., a Delaware corporation and a
wholly-owned subsidiary of Parent ("Merger Sub"), and Company, are entering into
an Agreement and Plan of Merger, dated as of the date of this Agreement (the
"Merger Agreement"), pursuant to which it is contemplated that Company will
merge (the "Merger") with Merger Sub, upon the terms and conditions set forth in
the Merger Agreement; and
B. The Board of Directors of Company (the "Company Board") has
previously approved the Merger Agreement and the execution and delivery by
Company of this Agreement; and
C. On the date hereof each of the other stockholders of
Company set forth on Schedule A attached hereto (collectively, the "Other
Stockholders") is entering into a Stockholder Agreement in a form substantially
similar to this Agreement (collectively, the "Other Stockholder Agreements");
and
D. Stockholder owns, or has rights with respect to, certain of
the outstanding shares of Class A Common Stock, par value $0.0001 per share
("Class A Common Stock"), of Company, and may acquire rights with respect to
additional shares of Class A Common Stock after the date of this Agreement, and
desires to facilitate the consummation of the Merger, and for such purpose and
in order to induce Parent to enter into the Merger Agreement, Stockholder has
agreed, among other matters set forth herein, (i) to vote these shares and (ii)
to grant Parent or its designee an irrevocable proxy to exercise the voting
power of Stockholder with respect to these shares, all as provided in this
Agreement.
NOW, THEREFORE, in consideration of the covenants and
conditions contained in this Agreement, the Parties represent, warrant, and
agree as follows:
AGREEMENT
1. Representations and Warranties of Stockholder. Stockholder
represents and warrants that: (i) Stockholder is the holder of record (free and
clear of any liens, encumbrances, pledges or restrictions except as described
under the heading "Record Share Encumbrances" on Schedule B attached hereto (the
"Record Share Encumbrances")), of the number of outstanding shares of Class A
Common Stock, if any, set forth under the heading "Shares Held of Record" on
Schedule B attached hereto (the "Record Shares"), and, except as may be
described on Schedule B attached hereto, Stockholder possesses the sole right to
vote and dispose of the Record Shares; (ii) Stockholder holds (free and clear of
any liens, encumbrances, pledges or restrictions) the options to acquire shares
of Class A Common Stock, if any, set forth under the heading "Options" on
Schedule B attached hereto (the "Options"); (iii) except as may be described
under the heading "Additional Voting Shares" on Schedule B attached hereto
Stockholder maintains the right to vote or direct the vote of, but does not
solely own and cannot dispose of, the additional shares of Class A Common Stock,
if any, set forth under the heading "Additional Voting Shares" on Schedule B
attached hereto (the "Additional Voting Shares" and, collectively with the
Record Shares as to which Stockholder holds the right to vote, the "Voting
Shares"); (iv) Stockholder holds the right to sell or otherwise dispose of, but
cannot vote or direct the vote of, the additional shares of Class A Common
Stock, if any, set forth under the heading "Additional Disposition Shares" on
Schedule B attached hereto (the "Additional Disposition Shares" and, together
with the Record Shares as to which Stockholder holds the right of disposition,
the "Disposition Shares"; the Record Shares, the Additional Voting Shares, the
Additional Disposition Shares and the New Shares, as hereinafter defined, are
referred to in this Agreement as the "Shares"); (v) Stockholder does not
directly or indirectly hold or beneficially own any shares of capital stock or
other securities of Company, or any option, warrant or other right to acquire
capital stock or other securities of Company, or any option, warrant or other
right to acquire (by purchase, conversion or otherwise) any shares of capital
stock or other securities of Company, other than as described on Schedule B
hereto; (vi) Stockholder has full power and authority to make, enter into, and
carry out the terms of this Agreement; (vii) the execution, delivery, and
performance of this Agreement by Stockholder will not violate any agreement to
which Stockholder is a party, including, without limitation, any voting
agreement, stockholder agreement, or voting trust; and (viii) this Agreement
constitutes the legal, valid and binding obligation of Stockholder, enforceable
against Stockholder in accordance with its terms.
2. Agreement to Vote the Shares. The Record Shares are subject to a
voting trust agreement pursuant to which Edward T. Pratt III has been granted an
irrevocable proxy (the "Proxy"), which provides him with the power to vote such
Record Shares. To the extent the Proxy is held invalid, unenforceable or
revoked, Stockholder shall vote all of the Voting Shares over which Stockholder
has sole voting power and will cause all of the Voting Shares over which he has
shared voting power as described on Schedule B to be voted (other than any
Shares that may have been sold in accordance with the terms of this Agreement)
(i) in favor of the Merger Agreement, and the Merger or any transaction
contemplated by the Merger Agreement, (ii) as otherwise necessary or appropriate
to enable Parent, Company and Merger Sub to consummate the transactions
contemplated by the Merger Agreement, (iii) against any action or agreement that
would result in a breach in any material aspect of any covenant, representation,
or warranty or any other obligation or agreement of Company under the Merger
Agreement, (iv) against any action or agreement that would terminate, impede,
interfere with, delay, postpone, or attempt to discourage the Merger, including,
but not limited to: (A) a sale or transfer of a material amount of the assets of
Company or any of its subsidiaries or a reorganization, recapitalization, or
liquidation of Company or any of its subsidiaries, (B) any change in the Company
Board, except as otherwise agreed to in writing by the Parties, (C) any change
in the present capitalization or dividend policy of Company, or (D) any other
change in Company's corporate structure; and (v) against any other proposal
which would result in any of the conditions to Parent's obligations under the
Merger Agreement not being fulfilled.
2
3. Grant of Irrevocable Proxy. In the event that the Proxy is held
invalid, unenforceable or revoked and Stockholder does not vote all of the
Voting Shares in accordance with Section 2 hereof, subject to the approval of
all applicable Gaming Authorities (as defined in the Merger Agreement),
Stockholder hereby irrevocably appoints Parent or any designee of Parent the
lawful agent, attorney, and proxy of Stockholder, during the term of this
Agreement, to vote all of the Voting Shares in accordance with Section 2 hereof.
Stockholder intends this proxy to be irrevocable, during the term of this
Agreement, and coupled with an interest and will take such further action or
execute such other instruments as may be necessary to effectuate the intent of
this proxy and hereby revokes any proxy previously granted by Stockholder with
respect to the Voting Shares other than the Proxy. Stockholder shall not
hereafter, unless and until the Termination Time, purport to vote (or execute a
consent with respect to) any of the Voting Shares (other than through this
irrevocable proxy or in accordance with Section 2 hereof) or grant any other
proxy or power of attorney with respect to any of the Voting Shares, deposit any
of the Voting Shares into a voting trust or enter into any agreement (other than
this Agreement), arrangement, or understanding with any person, directly or
indirectly, to vote, grant any proxy, or give instructions with respect to the
voting of any of the Voting Shares. Stockholder shall retain at all times the
right to vote the Voting Shares in Stockholder's sole discretion on all matters
other than those set forth in Section 2 hereof that are presented for a vote to
the stockholders of Company generally.
4. Manner of Voting. The Voting Shares may be voted pursuant to this
Agreement in person, by proxy, by written consent, or in any other manner
permitted by applicable law.
5. No Solicitation. From the date of this Agreement until the Effective
Time (as such date is defined in the Merger Agreement) or the Termination Time
(as hereinafter defined), Stockholder will not, nor will Stockholder permit any
investment banker, attorney, accountant or other advisor or representative of
Stockholder to, directly or indirectly, (i) initiate, solicit or encourage any
inquiries, offers or proposals that constitute, or may reasonably be expected to
lead to an Acquisition Proposal (as such term is defined in the Merger
Agreement), (ii) participate in any discussions or negotiations concerning, or
provide to any person any information or data relating to Company or any
subsidiary of Company for the purpose of making, or take any other action to
facilitate, any Acquisition Proposal or any inquiries or the making of any
proposal that constitutes, or may reasonably be expected to lead to, any
Acquisition Proposal, (iii) agree to, approve or recommend any Acquisition
Proposal or (iv) take any other action materially inconsistent with Company's
obligations and commitments assumed pursuant to Section 6.6 of the Merger
Agreement.
6. No Transfer. From the date of this Agreement until the earlier of
(a) the Effective Time (as defined in the Merger Agreement) and (b) the
Termination Time (as hereinafter defined), Stockholder shall not sell, pledge,
or otherwise transfer, dispose of or encumber any of the Record Shares,
Additional Disposition Shares or New Shares (as hereinafter defined), or any
rights in respect thereof and shall not consent to any sale, pledge or other
transfer, disposition of, or encumbrance of, any Additional Voting Shares, or
any rights in respect thereof; provided, however, that this Section 6 shall not
prohibit the Record Share Encumbrances.
3
7. Additional Purchases; Option Exercise. If, during the period
commencing on the date of this Agreement and ending on the earlier of (i) the
Effective Time and (ii) the Termination Time, Stockholder purchases or otherwise
acquires any additional shares of Class A Common Stock or any rights in respect
thereof, including, without limitation, pursuant to the exercise of
Stockholder's Options, if any, such shares (the "New Shares") shall be subject
to the terms of this Agreement and for all purposes shall be and constitute a
portion of the Shares.
8. Adjustments to Prevent Dilution. In the event of any change in the
Class A Common Stock by reason of any stock dividend, split-up,
recapitalization, combination, or the exchange of shares, the term "Shares"
shall be deemed to refer to and include the Shares as well as all such stock
dividends and distributions and any shares into which or for which any or all of
the Shares may be changed or exchanged.
9. Waiver of Appraisal Rights. Stockholder hereby irrevocably and
unconditionally waives any right of appraisal relating to the Merger that
Stockholder may have by virtue of ownership of the Shares.
10. [Intentionally Omitted.]
11. No Litigation. From the date of this Agreement through the earlier
to occur of the Termination Time or the Effective Time, the Parties agree that
the Stockholder Parties (as hereinafter defined) and the Company Controlled
Parties (as hereinafter defined) shall not bring any actions against any Company
Parties (as hereinafter defined) or Stockholder Parties, respectively, other
than with respect to an activity that is unrelated to the Company; provided,
however, that such Parties may still report or make public disclosure of any
violations of Law (as defined in the Merger Agreement).
4
12. General Release and Covenant Not to Sue.
(a) Release by Stockholder Parties. EFFECTIVE AS OF THE
EFFECTIVE TIME, STOCKHOLDER, ON BEHALF OF STOCKHOLDER, STOCKHOLDER'S
ATTORNEYS, HEIRS, EXECUTORS, ADMINISTRATORS, ASSIGNS, AND TRUSTS,
PARTNERSHIPS AND OTHER ENTITIES UNDER STOCKHOLDER'S CONTROL (TOGETHER
THE "STOCKHOLDER PARTIES"), HEREBY GENERALLY RELEASES AND FOREVER
DISCHARGES COMPANY AND ITS PREDECESSORS, SUCCESSORS, ASSIGNS,
SUBSIDIARIES AND AFFILIATES AND FAMILY MEMBERS (AS DEFINED BELOW),
OFFICERS (OTHER THAN PAUL YATES AND WALTER EVANS), EMPLOYEES, AGENTS,
REPRESENTATIVES, PRINCIPALS AND ATTORNEYS, AND, SUBJECT TO SECTION 14
HEREOF, DIRECTORS, PAUL YATES AND WALTER EVANS (TOGETHER THE "COMPANY
PARTIES") FROM ANY AND ALL CLAIMS, DEMANDS, LIABILITIES, SUITS,
DAMAGES, LOSSES, EXPENSES, ATTORNEYS' FEES, OBLIGATIONS OR CAUSES OF
ACTION, KNOWN OR UNKNOWN OF ANY KIND AND EVERY NATURE WHATSOEVER, AND
WHETHER OR NOT ACCRUED OR MATURED (COLLECTIVELY, "CLAIMS"), WHICH ANY
OF THEM MAY HAVE ARISING OUT OF OR RELATING TO ANY OMISSION, ACTS OR
FACTS THAT HAVE OCCURRED UP AND UNTIL AND INCLUDING THE EFFECTIVE TIME,
INCLUDING WITHOUT LIMITATION:
i. any and all Claims relating to, arising from, or
in connection with the following lawsuits: (a) Hollywood
Casino Corporation v. Jack E. Pratt v. Edward T. Pratt III,
Walter E. Evans and Paul C. Yates, Cause No. 02-01516, in the
District Court of Dallas County, Texas, 116th Judicial
District; (b) Hollywood Casino Corporation v. Harold C.
Simmons, et al., Civil Action No. 3:02CV0325-M, in the United
Stated District Court for the Northern District of Texas,
Dallas Division; and (c) Jack E. Pratt v. Hollywood Casino
Corporation, a Delaware corporation, C.A. No. 19504, in the
Court of Chancery of the State of Delaware in and for New
Castle County (the "Lawsuits");
ii. any and all Claims relating to, arising from, or
in connection with, the employment of Stockholder by the
Company or the termination of such employment;
iii. any and all Claims relating to, or arising from,
Stockholder's right to purchase, or actual purchase of shares
of stock of Company, including, without limitation, any Claims
for fraud, misrepresentation, breach of fiduciary duty, breach
of duty under applicable state corporate law, and securities
fraud under any state or federal law;
iv. any and all Claims for wrongful discharge of
employment; fraud; misrepresentation; termination in violation
of public policy; discrimination; breach of contract, both
express and implied; breach of a covenant of good faith and
fair dealing, both express and implied; promissory estoppel;
negligent or intentional infliction of emotional distress;
negligent or intentional misrepresentation; negligent or
intentional interference with contract or prospective economic
5
advantage; breach of fiduciary duty; unfair business
practices; breach of confidentiality provision, defamation;
libel; slander; negligence; personal injury; assault; battery;
invasion of privacy; false imprisonment; tortious
interference, theft, embezzlement, and conversion;
v. any and all Claims for violation of any federal,
state or municipal statute, including, but not limited to,
Title VII of the Civil Rights Act of 1964, the Civil Rights
Act of 1991, the Family Medical Leave Act, the Americans with
Disabilities Act of 1990, the Fair Labor Standards Act, the
Employee Retirement Income Security Act of 1974, The Worker
Adjustment and Retraining Notification Act, Older Workers
Benefit Protection Act and the Texas Commission on Human
Rights Act;
vi. any and all Claims for violation of the federal,
or any state, constitution;
vii. any and all Claims arising out of any other laws
and regulations relating to employment or employment
discrimination; and
viii. any and all Claims for attorneys' fees,
expenses, and costs other than fees, costs or expenses which
are otherwise indemnifiable under Section 6.8 of the Merger
Agreement.
"FAMILY MEMBERS" SHALL MEAN, WITH RESPECT TO ANY PARTY THAT IS AN INDIVIDUAL,
THE SPOUSE OF A PARTY, ANY PARENT OF SUCH PARTY, OR ANY LINEAL DESCENDENT OF A
PARENT OF SUCH PARTY (WHETHER NATURAL BORN OR ADOPTED).
NOTWITHSTANDING THE FOREGOING, THIS RELEASE DOES NOT IN ANY WAY RELEASE, IMPAIR,
OR LIMIT ANY OBLIGATIONS INCURRED BY OR OWING FROM THE COMPANY PARTIES (1) UNDER
THIS AGREEMENT, (2) UNDER THE MERGER AGREEMENT, INCLUDING, WITHOUT LIMITATION,
SECTION 6.8 THEREOF AND (3) WITH RESPECT TO CLAIMS UNDER THE AGE DISCRIMINATION
IN EMPLOYMENT ACT OF 1967 ("ADEA CLAIMS"). FURTHER, THIS RELEASE DOES NOT IN ANY
WAY RELEASE ANY OF COMPANY'S INSURERS FROM COVERING STOCKHOLDER FOR ANY CONDUCT,
ACTS, INJURIES, OR ACTIONS ARISING FROM, IN CONNECTION WITH, OR RELATED TO THE
TIME PERIOD SUCH PERSON WAS EMPLOYED BY OR SERVING AS AN OFFICER OR DIRECTOR OF
COMPANY.
(b) Prosecution by Stockholder and Stockholder Parties.
EFFECTIVE AS OF THE EFFECTIVE TIME, STOCKHOLDER, ON BEHALF OF
STOCKHOLDER AND THE STOCKHOLDER PARTIES, HEREBY COVENANTS FOREVER NOT
TO ASSERT, FILE, PROSECUTE, MAINTAIN, COMMENCE, INSTITUTE (OR SPONSOR
OR PURPOSELY FACILITATE ANY PERSON IN CONNECTION WITH THE FOREGOING),
ANY COMPLAINT OR LAWSUIT OR ANY LEGAL, EQUITABLE OR ADMINISTRATIVE
PROCEEDING OF ANY NATURE, AGAINST ANY OF THE COMPANY PARTIES IN
6
CONNECTION WITH ANY MATTER RELEASED IN SECTION 12(a), INCLUDING,
WITHOUT LIMITATION, THE LAWSUITS, AND REPRESENTS AND WARRANTS THAT TO
THE EXTENT WITHIN STOCKHOLDER'S CONTROL, NO OTHER PERSON OR ENTITY HAS
OR WILL INITIATE ANY SUCH PROCEEDING ON BEHALF OF STOCKHOLDER OR ANY
STOCKHOLDER PARTY.
NOTWITHSTANDING THE FOREGOING, THIS COVENANT DOES NOT IN ANY WAY PROHIBIT
STOCKHOLDER OR ANY OF THE STOCKHOLDER PARTIES FROM REPORTING OR MAKING PUBLIC
DISCLOSURE OF ANY VIOLATIONS OF LAW.
(c) Release by Company. EFFECTIVE AS OF THE EFFECTIVE TIME,
COMPANY, ON BEHALF OF ITSELF AND THE COMPANY PARTIES UNDER ITS CONTROL
(THE "COMPANY CONTROLLED PARTIES"), HEREBY GENERALLY RELEASES AND
FOREVER DISCHARGES STOCKHOLDER, THE STOCKHOLDER PARTIES AND THEIR
FAMILY MEMBERS FROM ANY AND ALL CLAIMS, WHICH ANY OF THEM MAY HAVE,
ARISING OUT OF OR RELATING TO ANY OMISSION, ACTS OR FACTS THAT HAVE
OCCURRED UP AND UNTIL AND INCLUDING THE EFFECTIVE TIME, INCLUDING
WITHOUT LIMITATION, THE LAWSUITS.
NOTWITHSTANDING THE FOREGOING, THIS RELEASE DOES NOT IN ANY WAY RELEASE, IMPAIR,
OR LIMIT (i) ANY OBLIGATIONS INCURRED BY OR OWING FROM STOCKHOLDER OR ANY OF THE
STOCKHOLDER PARTIES (1) UNDER THIS AGREEMENT, AND (2) WITH RESPECT TO ADEA
CLAIMS OR (ii) THE RIGHTS OF COMPANY OR ANY OF ITS PREDECESSORS, SUCCESSORS,
ASSIGNS OR SUBSIDIARIES AGAINST STOCKHOLDER OR STOCKHOLDER PARTIES WITH RESPECT
TO ANY CRIMINAL OR FRAUDULENT ACTIVITY OTHER THAN ACTIVITIES THAT ARE THE
SUBJECT OF THE LAWSUITS.
(d) Prosecutions by Company and Company Controlled Parties.
EFFECTIVE AS OF THE EFFECTIVE TIME, COMPANY, ON BEHALF OF ITSELF AND
THE COMPANY CONTROLLED PARTIES, HEREBY COVENANTS FOREVER NOT TO ASSERT,
FILE, PROSECUTE, MAINTAIN, COMMENCE, INSTITUTE (OR SPONSOR OR PURPOSELY
FACILITATE ANY PERSON IN CONNECTION WITH THE FOREGOING), ANY COMPLAINT
OR LAWSUIT OR ANY LEGAL, EQUITABLE OR ADMINISTRATIVE PROCEEDING OF ANY
NATURE, AGAINST ANY OF THE STOCKHOLDER PARTIES IN CONNECTION WITH ANY
MATTER RELEASED IN SECTION 12(c), INCLUDING, WITHOUT LIMITATION, THE
LAWSUITS, AND REPRESENTS AND WARRANTS THAT, TO THE EXTENT WITHIN ITS
CONTROL, NO OTHER PERSON OR ENTITY HAS INITIATED OR WILL INITIATE ANY
SUCH PROCEEDING ON ITS OR THEIR BEHALF.
7
NOTWITHSTANDING THE FOREGOING, THIS COVENANT DOES NOT IN ANY WAY PROHIBIT THE
COMPANY OR ANY OF THE COMPANY PARTIES FROM REPORTING OR MAKING PUBLIC DISCLOSURE
OF ANY VIOLATIONS OF LAW.
13. [Intentionally Omitted.]
14. Third-Party Beneficiary Rights. Subject to the following sentence,
no provision of this Agreement is intended to nor shall it be interpreted to
provide or create any third-party beneficiary rights or any other rights of any
kind in any other person or entity who is not a Party. The provisions of
Sections 11 and 12 are intended to and shall be interpreted to provide and
create third party beneficiary rights for each director, officer, employee, and
agent of the Company, provided that in the case of each director, Paul Yates and
Walter Evans, such person must, deliver to Stockholder a fully executed
agreement within five business days of the date of this Agreement containing
provisions, where reasonably applicable, identical to the provisions of Section
12 (with respect to the release of the Stockholder Parties).
15. Further Assurances. Each Party shall do and perform or cause to be
done and performed all such further acts and things and shall execute and
deliver all such other agreements, certificates, instruments, or documents as
any other Party shall reasonably request from time to time in order to carry out
the intent and purposes of this Agreement. No Party shall voluntarily undertake
any course of action inconsistent with satisfaction of the requirements
applicable to such Party as set forth in this Agreement, and each Party shall
promptly do all acts and take all measures as may be appropriate or necessary to
enable such Party to perform, as early as practicable, the obligations required
to be performed by such Party under this Agreement. Without limiting the
foregoing, if requested by Company or Parent, Stockholder will obtain a written
acknowledgement from any entity or person that Stockholder purports to act on
behalf of acknowledging that such Stockholder has the authority to execute this
Agreement on such person or entity's behalf and to so bind such person or
entity.
16. Injunctive Relief. The Parties acknowledge that it is impossible to
measure in money the damages that will accrue to one or more of them by reason
of the failure of either of them to abide by the provisions of this Agreement,
that every such provision is material, and that in the event of any such
failure, the other Party will not have an adequate remedy at law or damages.
Therefore, if any Party shall institute any action or proceeding to enforce the
provisions of this Agreement, in addition to any other relief, the court in such
action or proceeding may grant injunctive relief against any Party found to be
in breach or violation of this Agreement, as well as or in addition to any
remedies at law or damages, and such Party waives the claim or defense in any
such action or proceeding that the Party bringing such action has an adequate
remedy at law, and such Party shall not argue or assert in any such action or
proceeding the claim or defense that such remedy at law exists. No Party shall
seek and each Party shall waive any requirement for, the securing or posting of
a bond in connection with the other Party seeking or obtaining such equitable
relief.
17. Court Modification. Should any portion of this Agreement be
declared by a court of competent jurisdiction to be unreasonable, unenforceable,
or void for any reason or reasons, the involved court shall modify the
applicable provision(s) of this Agreement so as to be reasonable or as is
otherwise necessary to make this Agreement enforceable and valid and to protect
8
the interests of the Parties intended to be protected by this Agreement to the
maximum extent possible.
18. Facsimile Transmission and Counterparts. This Agreement may be
executed by facsimile transmission and in one or more counterparts, each of
which shall be deemed to be an original, but all of which taken together shall
constitute one and the same Agreement.
19. Notices. All notices, requests, demands, and other communications
under this Agreement ("Notices") shall be in writing and shall be delivered (i)
personally, (ii) by certified mail, return receipt requested, postage prepaid,
(iii) by overnight courier or (iv) by facsimile transmission properly addressed
as follows:
If to Parent to:
Penn National Gaming, Inc.
825 Berkshire Blvd., Suite 200
Wyomissing, PA 19610
Facsimile: (610) 373-4966
Attention: Peter M. Carlino, Chief Executive Officer
with a copy to:
Morgan, Lewis & Bockius LLP
1701 Market Street
Philadelphia, PA 19103
Facsimile: (215) 963-5299
Attention: Peter S. Sartorius, Esq.
If to Company to:
Hollywood Casino Corporation
Two Galleria Tower
13455 Noel Road, Suite 2200
Dallas, TX 75240
Facsimile: (972) 716-3903
Attention: Walter E. Evans, General Counsel
with a copy to:
Weil, Gotshal & Manges LLP
100 Crescent Court, Suite 1300
Dallas, TX 75201
Facsimile: (214) 746-7777
Attention: Michael A. Saslaw
9
and if to Stockholder, at the address specified in on the signature page to this
Agreement or, in either case, to such other address or addresses as a Party to
this Agreement may indicate to the other Party in the manner provided for in
this Paragraph 19. Notices given by mail, by overnight courier and by personal
delivery shall be deemed effective and complete upon delivery and notices by
facsimile transmission shall be deemed effective upon receipt.
20. Effective Date; Term. This Agreement shall become effective upon
(i) its execution and delivery by all Parties and (ii) the execution and
delivery of each of the Other Stockholder Agreements by the parties thereto;
provided, however, that Section 12 of this Agreement shall not become effective
until the Effective Time. This Agreement shall continue in full force and effect
until the first to occur of (A) the written agreement of all the Parties to
terminate this Agreement and (B) the termination of the Merger Agreement in
accordance with its terms (the first to occur of (A) and (B) the "Termination
Time").
21. [Intentionally Omitted.]
22. Gaming Approvals; Cooperation. Company shall (i) promptly file all
required applications to obtain the approvals from all applicable Gaming
Authorities necessary for Stockholder to grant the proxy set forth in Section 3,
(ii) shall request an accelerated review from such Gaming Authorities in
connection with such filings, and (iii) shall otherwise use its reasonable best
efforts to obtain such approvals. Each of the Parties shall use such Party's
reasonable best efforts to cooperate with Company and all applicable Gaming
Authorities in making such filings and obtaining such approvals.
23. Other Agreements.
(a) This Agreement supersedes all prior agreements or
understandings of the Parties on the subject matter of this Agreement.
There are no representations, warranties, or agreements, whether
express or implied, or oral or written, with respect to the subject
matter of this Agreement, except as set forth in this Agreement. This
Agreement (i) shall not be modified by any oral agreement, either
express or implied, and all amendments or modifications of this
Agreement shall be in writing and be signed by all of the Parties, and
(ii) shall be binding on and shall inure to the benefit of the Parties
and their respective heirs, legal representatives, successors and
assigns.
(b) The paragraph headings in this Agreement are for the
purpose of convenience only and shall not limit or otherwise affect any
of the terms of this Agreement.
(c) Should any Party be in default under or breach of any of
the covenants or agreements contained in this Agreement, or in the
event a dispute shall arise as to the meaning of any term of this
Agreement, the defaulting or nonprevailing Party shall pay all costs
and expenses, including reasonable attorneys' fees, of the other Party
that may arise or accrue from enforcing this Agreement, securing an
interpretation of any provision of this Agreement, or in pursuing any
remedy provided by law whether such remedy is pursued or interpretation
is sought by the filing of a lawsuit, an appeal, or otherwise.
10
(d) This Agreement shall be governed by and construed in
accordance with the internal laws of the State of Delaware, which
internal laws exclude any provision or interpretation of such laws that
would call for, or permit, the application of the laws of any other
state or jurisdiction, and any dispute arising therefrom and the
remedies available shall be determined solely in accordance with such
internal laws.
(e) Where the context requires, the singular shall include the
plural, the plural shall include the singular, and any gender shall
include all other genders.
(f) Stockholder certifies that Stockholder has read the terms
of this Agreement, that Stockholder has been informed by this document
that Stockholder should discuss this Agreement with the attorney of
Stockholder's own choice, that Stockholder has had an opportunity to do
so and that Stockholder understands this Agreement's terms and effects.
(g) The Parties have jointly participated jointly in the
negotiation and drafting of this Agreement. In the event any ambiguity
or question of intent or interpretation arises, this Agreement shall be
construed as if drafted jointly by the Parties and no presumption or
burden of proof shall arise favoring or disfavoring any Party by virtue
of the authorship of any provisions of this Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
11
IN WITNESS WHEREOF, each of the Parties has executed this Agreement on
or as of the date of this Agreement.
PARENT:
PENN NATIONAL GAMING, INC.
By: /s/ Robert S. Ippolito
---------------------------------------
Name: Robert S. Ippolito
Title: Vice President, Secretary
and Treasurer
COMPANY:
HOLLYWOOD CASINO CORPORATION
By: /s/ Edward T. Pratt III
---------------------------------------
Name: Edward T. Pratt III
Title: Chief Executive Officer
STOCKHOLDER:
/s/ Diana Pratt Wyatt
- -------------------------------------
Diana Pratt Wyatt
Address:
- ----------------------------------------------------------
- ----------------------------------------------------------
- ----------------------------------------------------------
Telephone:
-------------------------------------
Facsimile:
-------------------------------------
SCHEDULE A
OTHER STOCKHOLDERS EXECUTING STOCKHOLDER AGREEMENTS
Maria A. Pratt
Sharon Pratt Naftel
Carolyn Pratt Hickey
Michael Shannan Pratt
Jill Pratt LaFerney
John R. Pratt
Edward T. Pratt, Jr.
William D. Pratt
Edward T. Pratt III
William D. Pratt, Jr.
Jack E. Pratt, Sr.
SCHEDULE B
SHARES HELD OF RECORD:
Stockholder holds of record 479,604 shares of Class A Common Stock, which shares
are subject to a voting trust arrangement giving Edward T. Pratt III voting
power.
OPTIONS:
None
ADDITIONAL VOTING SHARES:
None
ADDITIONAL DISPOSITION SHARES:
None
RECORD SHARE ENCUMBRANCES:
None
EXHIBIT 1.9
STOCKHOLDER AGREEMENT
THIS STOCKHOLDER AGREEMENT (this "Agreement") is made and
entered into as of the 7th day of August, 2002, by and between Penn National
Gaming, Inc., a Pennsylvania corporation ("Parent"), Hollywood Casino
Corporation, a Delaware corporation ("Company"), and Carolyn Pratt Hickey
("Stockholder"). Parent, Company and Stockholder are sometimes referred to in
this Agreement individually as a "Party" or collectively as the "Parties."
RECITALS
This Agreement is entered into with reference to the following
facts, objectives and definitions:
A. Contemporaneously with the execution and delivery of this
Agreement, Parent, P Acquisition Corp., a Delaware corporation and a
wholly-owned subsidiary of Parent ("Merger Sub"), and Company, are entering into
an Agreement and Plan of Merger, dated as of the date of this Agreement (the
"Merger Agreement"), pursuant to which it is contemplated that Company will
merge (the "Merger") with Merger Sub, upon the terms and conditions set forth in
the Merger Agreement; and
B. The Board of Directors of Company (the "Company Board") has
previously approved the Merger Agreement and the execution and delivery by
Company of this Agreement; and
C. On the date hereof each of the other stockholders of
Company set forth on Schedule A attached hereto (collectively, the "Other
Stockholders") is entering into a Stockholder Agreement in a form substantially
similar to this Agreement (collectively, the "Other Stockholder Agreements");
and
D. Stockholder owns, or has rights with respect to, certain of
the outstanding shares of Class A Common Stock, par value $0.0001 per share
("Class A Common Stock"), of Company, and may acquire rights with respect to
additional shares of Class A Common Stock after the date of this Agreement, and
desires to facilitate the consummation of the Merger, and for such purpose and
in order to induce Parent to enter into the Merger Agreement, Stockholder has
agreed, among other matters set forth herein, (i) to vote these shares and (ii)
to grant Parent or its designee an irrevocable proxy to exercise the voting
power of Stockholder with respect to these shares, all as provided in this
Agreement.
NOW, THEREFORE, in consideration of the covenants and
conditions contained in this Agreement, the Parties represent, warrant, and
agree as follows:
AGREEMENT
1. Representations and Warranties of Stockholder. Stockholder
represents and warrants that: (i) Stockholder is the holder of record (free and
clear of any liens, encumbrances, pledges or restrictions except as described
under the heading "Record Share Encumbrances" on Schedule B attached hereto (the
"Record Share Encumbrances")), of the number of outstanding shares of Class A
Common Stock, if any, set forth under the heading "Shares Held of Record" on
Schedule B attached hereto (the "Record Shares"), and, except as may be
described on Schedule B attached hereto, Stockholder possesses the sole right to
vote and dispose of the Record Shares; (ii) Stockholder holds (free and clear of
any liens, encumbrances, pledges or restrictions) the options to acquire shares
of Class A Common Stock, if any, set forth under the heading "Options" on
Schedule B attached hereto (the "Options"); (iii) except as may be described
under the heading "Additional Voting Shares" on Schedule B attached hereto
Stockholder maintains the right to vote or direct the vote of, but does not
solely own and cannot dispose of, the additional shares of Class A Common Stock,
if any, set forth under the heading "Additional Voting Shares" on Schedule B
attached hereto (the "Additional Voting Shares" and, collectively with the
Record Shares as to which Stockholder holds the right to vote, the "Voting
Shares"); (iv) Stockholder holds the right to sell or otherwise dispose of, but
cannot vote or direct the vote of, the additional shares of Class A Common
Stock, if any, set forth under the heading "Additional Disposition Shares" on
Schedule B attached hereto (the "Additional Disposition Shares" and, together
with the Record Shares as to which Stockholder holds the right of disposition,
the "Disposition Shares"; the Record Shares, the Additional Voting Shares, the
Additional Disposition Shares and the New Shares, as hereinafter defined, are
referred to in this Agreement as the "Shares"); (v) Stockholder does not
directly or indirectly hold or beneficially own any shares of capital stock or
other securities of Company, or any option, warrant or other right to acquire
capital stock or other securities of Company, or any option, warrant or other
right to acquire (by purchase, conversion or otherwise) any shares of capital
stock or other securities of Company, other than as described on Schedule B
hereto; (vi) Stockholder has full power and authority to make, enter into, and
carry out the terms of this Agreement; (vii) the execution, delivery, and
performance of this Agreement by Stockholder will not violate any agreement to
which Stockholder is a party, including, without limitation, any voting
agreement, stockholder agreement, or voting trust; and (viii) this Agreement
constitutes the legal, valid and binding obligation of Stockholder, enforceable
against Stockholder in accordance with its terms.
2. Agreement to Vote the Shares. The Record Shares are subject to a
voting trust agreement pursuant to which Edward T. Pratt III has been granted an
irrevocable proxy (the "Proxy"), which provides him with the power to vote such
Record Shares. To the extent the Proxy is held invalid, unenforceable or
revoked, Stockholder shall vote all of the Voting Shares over which Stockholder
has sole voting power and will cause all of the Voting Shares over which he has
shared voting power as described on Schedule B to be voted (other than any
Shares that may have been sold in accordance with the terms of this Agreement)
(i) in favor of the Merger Agreement, and the Merger or any transaction
contemplated by the Merger Agreement, (ii) as otherwise necessary or appropriate
to enable Parent, Company and Merger Sub to consummate the transactions
contemplated by the Merger Agreement, (iii) against any action or agreement that
would result in a breach in any material aspect of any covenant, representation,
or warranty or any other obligation or agreement of Company under the Merger
Agreement, (iv) against any action or agreement that would terminate, impede,
interfere with, delay, postpone, or attempt to discourage the Merger, including,
but not limited to: (A) a sale or transfer of a material amount of the assets of
Company or any of its subsidiaries or a reorganization, recapitalization, or
liquidation of Company or any of its subsidiaries, (B) any change in the Company
Board, except as otherwise agreed to in writing by the Parties, (C) any change
in the present capitalization or dividend policy of Company, or (D) any other
change in Company's corporate structure; and (v) against any other proposal
which would result in any of the conditions to Parent's obligations under the
Merger Agreement not being fulfilled.
2
3. Grant of Irrevocable Proxy. In the event that the Proxy is held
invalid, unenforceable or revoked and Stockholder does not vote all of the
Voting Shares in accordance with Section 2 hereof, subject to the approval of
all applicable Gaming Authorities (as defined in the Merger Agreement),
Stockholder hereby irrevocably appoints Parent or any designee of Parent the
lawful agent, attorney, and proxy of Stockholder, during the term of this
Agreement, to vote all of the Voting Shares in accordance with Section 2 hereof.
Stockholder intends this proxy to be irrevocable, during the term of this
Agreement, and coupled with an interest and will take such further action or
execute such other instruments as may be necessary to effectuate the intent of
this proxy and hereby revokes any proxy previously granted by Stockholder with
respect to the Voting Shares other than the Proxy. Stockholder shall not
hereafter, unless and until the Termination Time, purport to vote (or execute a
consent with respect to) any of the Voting Shares (other than through this
irrevocable proxy or in accordance with Section 2 hereof) or grant any other
proxy or power of attorney with respect to any of the Voting Shares, deposit any
of the Voting Shares into a voting trust or enter into any agreement (other than
this Agreement), arrangement, or understanding with any person, directly or
indirectly, to vote, grant any proxy, or give instructions with respect to the
voting of any of the Voting Shares. Stockholder shall retain at all times the
right to vote the Voting Shares in Stockholder's sole discretion on all matters
other than those set forth in Section 2 hereof that are presented for a vote to
the stockholders of Company generally.
4. Manner of Voting. The Voting Shares may be voted pursuant to this
Agreement in person, by proxy, by written consent, or in any other manner
permitted by applicable law.
5. No Solicitation. From the date of this Agreement until the Effective
Time (as such date is defined in the Merger Agreement) or the Termination Time
(as hereinafter defined), Stockholder will not, nor will Stockholder permit any
investment banker, attorney, accountant or other advisor or representative of
Stockholder to, directly or indirectly, (i) initiate, solicit or encourage any
inquiries, offers or proposals that constitute, or may reasonably be expected to
lead to an Acquisition Proposal (as such term is defined in the Merger
Agreement), (ii) participate in any discussions or negotiations concerning, or
provide to any person any information or data relating to Company or any
subsidiary of Company for the purpose of making, or take any other action to
facilitate, any Acquisition Proposal or any inquiries or the making of any
proposal that constitutes, or may reasonably be expected to lead to, any
Acquisition Proposal, (iii) agree to, approve or recommend any Acquisition
Proposal or (iv) take any other action materially inconsistent with Company's
obligations and commitments assumed pursuant to Section 6.6 of the Merger
Agreement.
6. No Transfer. From the date of this Agreement until the earlier of
(a) the Effective Time (as defined in the Merger Agreement) and (b) the
Termination Time (as hereinafter defined), Stockholder shall not sell, pledge,
or otherwise transfer, dispose of or encumber any of the Record Shares,
Additional Disposition Shares or New Shares (as hereinafter defined), or any
rights in respect thereof and shall not consent to any sale, pledge or other
transfer, disposition of, or encumbrance of, any Additional Voting Shares, or
any rights in respect thereof; provided, however, that this Section 6 shall not
prohibit the Record Share Encumbrances.
3
7. Additional Purchases; Option Exercise. If, during the period
commencing on the date of this Agreement and ending on the earlier of (i) the
Effective Time and (ii) the Termination Time, Stockholder purchases or otherwise
acquires any additional shares of Class A Common Stock or any rights in respect
thereof, including, without limitation, pursuant to the exercise of
Stockholder's Options, if any, such shares (the "New Shares") shall be subject
to the terms of this Agreement and for all purposes shall be and constitute a
portion of the Shares.
8. Adjustments to Prevent Dilution. In the event of any change in the
Class A Common Stock by reason of any stock dividend, split-up,
recapitalization, combination, or the exchange of shares, the term "Shares"
shall be deemed to refer to and include the Shares as well as all such stock
dividends and distributions and any shares into which or for which any or all of
the Shares may be changed or exchanged.
9. Waiver of Appraisal Rights. Stockholder hereby irrevocably and
unconditionally waives any right of appraisal relating to the Merger that
Stockholder may have by virtue of ownership of the Shares.
10. [Intentionally Omitted.]
11. No Litigation. From the date of this Agreement through the earlier
to occur of the Termination Time or the Effective Time, the Parties agree that
the Stockholder Parties (as hereinafter defined) and the Company Controlled
Parties (as hereinafter defined) shall not bring any actions against any Company
Parties (as hereinafter defined) or Stockholder Parties, respectively, other
than with respect to an activity that is unrelated to the Company; provided,
however, that such Parties may still report or make public disclosure of any
violations of Law (as defined in the Merger Agreement).
4
12. General Release and Covenant Not to Sue.
(a) Release by Stockholder Parties. EFFECTIVE AS OF THE
EFFECTIVE TIME, STOCKHOLDER, ON BEHALF OF STOCKHOLDER, STOCKHOLDER'S
ATTORNEYS, HEIRS, EXECUTORS, ADMINISTRATORS, ASSIGNS, AND TRUSTS,
PARTNERSHIPS AND OTHER ENTITIES UNDER STOCKHOLDER'S CONTROL (TOGETHER
THE "STOCKHOLDER PARTIES"), HEREBY GENERALLY RELEASES AND FOREVER
DISCHARGES COMPANY AND ITS PREDECESSORS, SUCCESSORS, ASSIGNS,
SUBSIDIARIES AND AFFILIATES AND FAMILY MEMBERS (AS DEFINED BELOW),
OFFICERS (OTHER THAN PAUL YATES AND WALTER EVANS), EMPLOYEES, AGENTS,
REPRESENTATIVES, PRINCIPALS AND ATTORNEYS, AND, SUBJECT TO SECTION 14
HEREOF, DIRECTORS, PAUL YATES AND WALTER EVANS (TOGETHER THE "COMPANY
PARTIES") FROM ANY AND ALL CLAIMS, DEMANDS, LIABILITIES, SUITS,
DAMAGES, LOSSES, EXPENSES, ATTORNEYS' FEES, OBLIGATIONS OR CAUSES OF
ACTION, KNOWN OR UNKNOWN OF ANY KIND AND EVERY NATURE WHATSOEVER, AND
WHETHER OR NOT ACCRUED OR MATURED (COLLECTIVELY, "CLAIMS"), WHICH ANY
OF THEM MAY HAVE ARISING OUT OF OR RELATING TO ANY OMISSION, ACTS OR
FACTS THAT HAVE OCCURRED UP AND UNTIL AND INCLUDING THE EFFECTIVE TIME,
INCLUDING WITHOUT LIMITATION:
i. any and all Claims relating to, arising from, or
in connection with the following lawsuits: (a) Hollywood
Casino Corporation v. Jack E. Pratt v. Edward T. Pratt III,
Walter E. Evans and Paul C. Yates, Cause No. 02-01516, in the
District Court of Dallas County, Texas, 116th Judicial
District; (b) Hollywood Casino Corporation v. Harold C.
Simmons, et al., Civil Action No. 3:02CV0325-M, in the United
Stated District Court for the Northern District of Texas,
Dallas Division; and (c) Jack E. Pratt v. Hollywood Casino
Corporation, a Delaware corporation, C.A. No. 19504, in the
Court of Chancery of the State of Delaware in and for New
Castle County (the "Lawsuits");
ii. any and all Claims relating to, arising from, or
in connection with, the employment of Stockholder by the
Company or the termination of such employment;
iii. any and all Claims relating to, or arising from,
Stockholder's right to purchase, or actual purchase of shares
of stock of Company, including, without limitation, any Claims
for fraud, misrepresentation, breach of fiduciary duty, breach
of duty under applicable state corporate law, and securities
fraud under any state or federal law;
iv. any and all Claims for wrongful discharge of
employment; fraud; misrepresentation; termination in violation
of public policy; discrimination; breach of contract, both
express and implied; breach of a covenant of good faith and
fair dealing, both express and implied; promissory estoppel;
negligent or intentional infliction of emotional distress;
negligent or intentional misrepresentation; negligent or
intentional interference with contract or prospective economic
5
advantage; breach of fiduciary duty; unfair business
practices; breach of confidentiality provision, defamation;
libel; slander; negligence; personal injury; assault; battery;
invasion of privacy; false imprisonment; tortious
interference, theft, embezzlement, and conversion;
v. any and all Claims for violation of any federal,
state or municipal statute, including, but not limited to,
Title VII of the Civil Rights Act of 1964, the Civil Rights
Act of 1991, the Family Medical Leave Act, the Americans with
Disabilities Act of 1990, the Fair Labor Standards Act, the
Employee Retirement Income Security Act of 1974, The Worker
Adjustment and Retraining Notification Act, Older Workers
Benefit Protection Act and the Texas Commission on Human
Rights Act;
vi. any and all Claims for violation of the federal,
or any state, constitution;
vii. any and all Claims arising out of any other laws
and regulations relating to employment or employment
discrimination; and
viii. any and all Claims for attorneys' fees,
expenses, and costs other than fees, costs or expenses which
are otherwise indemnifiable under Section 6.8 of the Merger
Agreement.
"FAMILY MEMBERS" SHALL MEAN, WITH RESPECT TO ANY PARTY THAT IS AN INDIVIDUAL,
THE SPOUSE OF A PARTY, ANY PARENT OF SUCH PARTY, OR ANY LINEAL DESCENDENT OF A
PARENT OF SUCH PARTY (WHETHER NATURAL BORN OR ADOPTED).
NOTWITHSTANDING THE FOREGOING, THIS RELEASE DOES NOT IN ANY WAY RELEASE, IMPAIR,
OR LIMIT ANY OBLIGATIONS INCURRED BY OR OWING FROM THE COMPANY PARTIES (1) UNDER
THIS AGREEMENT, (2) UNDER THE MERGER AGREEMENT, INCLUDING, WITHOUT LIMITATION,
SECTION 6.8 THEREOF AND (3) WITH RESPECT TO CLAIMS UNDER THE AGE DISCRIMINATION
IN EMPLOYMENT ACT OF 1967 ("ADEA CLAIMS"). FURTHER, THIS RELEASE DOES NOT IN ANY
WAY RELEASE ANY OF COMPANY'S INSURERS FROM COVERING STOCKHOLDER FOR ANY CONDUCT,
ACTS, INJURIES, OR ACTIONS ARISING FROM, IN CONNECTION WITH, OR RELATED TO THE
TIME PERIOD SUCH PERSON WAS EMPLOYED BY OR SERVING AS AN OFFICER OR DIRECTOR OF
COMPANY.
(b) Prosecution by Stockholder and Stockholder Parties.
EFFECTIVE AS OF THE EFFECTIVE TIME, STOCKHOLDER, ON BEHALF OF
STOCKHOLDER AND THE STOCKHOLDER PARTIES, HEREBY COVENANTS FOREVER NOT
TO ASSERT, FILE, PROSECUTE, MAINTAIN, COMMENCE, INSTITUTE (OR SPONSOR
OR PURPOSELY FACILITATE ANY PERSON IN CONNECTION WITH THE FOREGOING),
ANY COMPLAINT OR LAWSUIT OR ANY LEGAL, EQUITABLE OR ADMINISTRATIVE
PROCEEDING OF ANY NATURE, AGAINST ANY OF THE COMPANY PARTIES IN
6
CONNECTION WITH ANY MATTER RELEASED IN SECTION 12(a), INCLUDING,
WITHOUT LIMITATION, THE LAWSUITS, AND REPRESENTS AND WARRANTS THAT TO
THE EXTENT WITHIN STOCKHOLDER'S CONTROL, NO OTHER PERSON OR ENTITY HAS
OR WILL INITIATE ANY SUCH PROCEEDING ON BEHALF OF STOCKHOLDER OR ANY
STOCKHOLDER PARTY.
NOTWITHSTANDING THE FOREGOING, THIS COVENANT DOES NOT IN ANY WAY PROHIBIT
STOCKHOLDER OR ANY OF THE STOCKHOLDER PARTIES FROM REPORTING OR MAKING PUBLIC
DISCLOSURE OF ANY VIOLATIONS OF LAW.
(c) Release by Company. EFFECTIVE AS OF THE EFFECTIVE TIME,
COMPANY, ON BEHALF OF ITSELF AND THE COMPANY PARTIES UNDER ITS CONTROL
(THE "COMPANY CONTROLLED PARTIES"), HEREBY GENERALLY RELEASES AND
FOREVER DISCHARGES STOCKHOLDER, THE STOCKHOLDER PARTIES AND THEIR
FAMILY MEMBERS FROM ANY AND ALL CLAIMS, WHICH ANY OF THEM MAY HAVE,
ARISING OUT OF OR RELATING TO ANY OMISSION, ACTS OR FACTS THAT HAVE
OCCURRED UP AND UNTIL AND INCLUDING THE EFFECTIVE TIME, INCLUDING
WITHOUT LIMITATION, THE LAWSUITS.
NOTWITHSTANDING THE FOREGOING, THIS RELEASE DOES NOT IN ANY WAY RELEASE, IMPAIR,
OR LIMIT (i) ANY OBLIGATIONS INCURRED BY OR OWING FROM STOCKHOLDER OR ANY OF THE
STOCKHOLDER PARTIES (1) UNDER THIS AGREEMENT, AND (2) WITH RESPECT TO ADEA
CLAIMS OR (ii) THE RIGHTS OF COMPANY OR ANY OF ITS PREDECESSORS, SUCCESSORS,
ASSIGNS OR SUBSIDIARIES AGAINST STOCKHOLDER OR STOCKHOLDER PARTIES WITH RESPECT
TO ANY CRIMINAL OR FRAUDULENT ACTIVITY OTHER THAN ACTIVITIES THAT ARE THE
SUBJECT OF THE LAWSUITS.
(d) Prosecutions by Company and Company Controlled Parties.
EFFECTIVE AS OF THE EFFECTIVE TIME, COMPANY, ON BEHALF OF ITSELF AND
THE COMPANY CONTROLLED PARTIES, HEREBY COVENANTS FOREVER NOT TO ASSERT,
FILE, PROSECUTE, MAINTAIN, COMMENCE, INSTITUTE (OR SPONSOR OR PURPOSELY
FACILITATE ANY PERSON IN CONNECTION WITH THE FOREGOING), ANY COMPLAINT
OR LAWSUIT OR ANY LEGAL, EQUITABLE OR ADMINISTRATIVE PROCEEDING OF ANY
NATURE, AGAINST ANY OF THE STOCKHOLDER PARTIES IN CONNECTION WITH ANY
MATTER RELEASED IN SECTION 12(c), INCLUDING, WITHOUT LIMITATION, THE
LAWSUITS, AND REPRESENTS AND WARRANTS THAT, TO THE EXTENT WITHIN ITS
CONTROL, NO OTHER PERSON OR ENTITY HAS INITIATED OR WILL INITIATE ANY
SUCH PROCEEDING ON ITS OR THEIR BEHALF.
7
NOTWITHSTANDING THE FOREGOING, THIS COVENANT DOES NOT IN ANY WAY PROHIBIT THE
COMPANY OR ANY OF THE COMPANY PARTIES FROM REPORTING OR MAKING PUBLIC DISCLOSURE
OF ANY VIOLATIONS OF LAW.
13. [Intentionally Omitted.]
14. Third-Party Beneficiary Rights. Subject to the following sentence,
no provision of this Agreement is intended to nor shall it be interpreted to
provide or create any third-party beneficiary rights or any other rights of any
kind in any other person or entity who is not a Party. The provisions of
Sections 11 and 12 are intended to and shall be interpreted to provide and
create third party beneficiary rights for each director, officer, employee, and
agent of the Company, provided that in the case of each director, Paul Yates and
Walter Evans, such person must, deliver to Stockholder a fully executed
agreement within five business days of the date of this Agreement containing
provisions, where reasonably applicable, identical to the provisions of Section
12 (with respect to the release of the Stockholder Parties).
15. Further Assurances. Each Party shall do and perform or cause to be
done and performed all such further acts and things and shall execute and
deliver all such other agreements, certificates, instruments, or documents as
any other Party shall reasonably request from time to time in order to carry out
the intent and purposes of this Agreement. No Party shall voluntarily undertake
any course of action inconsistent with satisfaction of the requirements
applicable to such Party as set forth in this Agreement, and each Party shall
promptly do all acts and take all measures as may be appropriate or necessary to
enable such Party to perform, as early as practicable, the obligations required
to be performed by such Party under this Agreement. Without limiting the
foregoing, if requested by Company or Parent, Stockholder will obtain a written
acknowledgement from any entity or person that Stockholder purports to act on
behalf of acknowledging that such Stockholder has the authority to execute this
Agreement on such person or entity's behalf and to so bind such person or
entity.
16. Injunctive Relief. The Parties acknowledge that it is impossible to
measure in money the damages that will accrue to one or more of them by reason
of the failure of either of them to abide by the provisions of this Agreement,
that every such provision is material, and that in the event of any such
failure, the other Party will not have an adequate remedy at law or damages.
Therefore, if any Party shall institute any action or proceeding to enforce the
provisions of this Agreement, in addition to any other relief, the court in such
action or proceeding may grant injunctive relief against any Party found to be
in breach or violation of this Agreement, as well as or in addition to any
remedies at law or damages, and such Party waives the claim or defense in any
such action or proceeding that the Party bringing such action has an adequate
remedy at law, and such Party shall not argue or assert in any such action or
proceeding the claim or defense that such remedy at law exists. No Party shall
seek and each Party shall waive any requirement for, the securing or posting of
a bond in connection with the other Party seeking or obtaining such equitable
relief.
17. Court Modification. Should any portion of this Agreement be
declared by a court of competent jurisdiction to be unreasonable, unenforceable,
or void for any reason or reasons, the involved court shall modify the
applicable provision(s) of this Agreement so as to be reasonable or as is
otherwise necessary to make this Agreement enforceable and valid and to protect
8
the interests of the Parties intended to be protected by this Agreement to the
maximum extent possible.
18. Facsimile Transmission and Counterparts. This Agreement may be
executed by facsimile transmission and in one or more counterparts, each of
which shall be deemed to be an original, but all of which taken together shall
constitute one and the same Agreement.
19. Notices. All notices, requests, demands, and other communications
under this Agreement ("Notices") shall be in writing and shall be delivered (i)
personally, (ii) by certified mail, return receipt requested, postage prepaid,
(iii) by overnight courier or (iv) by facsimile transmission properly addressed
as follows:
If to Parent to:
Penn National Gaming, Inc.
825 Berkshire Blvd., Suite 200
Wyomissing, PA 19610
Facsimile: (610) 373-4966
Attention: Peter M. Carlino, Chief Executive Officer
with a copy to:
Morgan, Lewis & Bockius LLP
1701 Market Street
Philadelphia, PA 19103
Facsimile: (215) 963-5299
Attention: Peter S. Sartorius, Esq.
If to Company to:
Hollywood Casino Corporation
Two Galleria Tower
13455 Noel Road, Suite 2200
Dallas, TX 75240
Facsimile: (972) 716-3903
Attention: Walter E. Evans, General Counsel
with a copy to:
Weil, Gotshal & Manges LLP
100 Crescent Court, Suite 1300
Dallas, TX 75201
Facsimile: (214) 746-7777
Attention: Michael A. Saslaw
9
and if to Stockholder, at the address specified in on the signature page to this
Agreement or, in either case, to such other address or addresses as a Party to
this Agreement may indicate to the other Party in the manner provided for in
this Paragraph 19. Notices given by mail, by overnight courier and by personal
delivery shall be deemed effective and complete upon delivery and notices by
facsimile transmission shall be deemed effective upon receipt.
20. Effective Date; Term. This Agreement shall become effective upon
(i) its execution and delivery by all Parties and (ii) the execution and
delivery of each of the Other Stockholder Agreements by the parties thereto;
provided, however, that Section 12 of this Agreement shall not become effective
until the Effective Time. This Agreement shall continue in full force and effect
until the first to occur of (A) the written agreement of all the Parties to
terminate this Agreement and (B) the termination of the Merger Agreement in
accordance with its terms (the first to occur of (A) and (B) the "Termination
Time").
21. [Intentionally Omitted.]
22. Gaming Approvals; Cooperation. Company shall (i) promptly file all
required applications to obtain the approvals from all applicable Gaming
Authorities necessary for Stockholder to grant the proxy set forth in Section 3,
(ii) shall request an accelerated review from such Gaming Authorities in
connection with such filings, and (iii) shall otherwise use its reasonable best
efforts to obtain such approvals. Each of the Parties shall use such Party's
reasonable best efforts to cooperate with Company and all applicable Gaming
Authorities in making such filings and obtaining such approvals.
23. Other Agreements.
(a) This Agreement supersedes all prior agreements or
understandings of the Parties on the subject matter of this Agreement.
There are no representations, warranties, or agreements, whether
express or implied, or oral or written, with respect to the subject
matter of this Agreement, except as set forth in this Agreement. This
Agreement (i) shall not be modified by any oral agreement, either
express or implied, and all amendments or modifications of this
Agreement shall be in writing and be signed by all of the Parties, and
(ii) shall be binding on and shall inure to the benefit of the Parties
and their respective heirs, legal representatives, successors and
assigns.
(b) The paragraph headings in this Agreement are for the
purpose of convenience only and shall not limit or otherwise affect any
of the terms of this Agreement.
(c) Should any Party be in default under or breach of any of
the covenants or agreements contained in this Agreement, or in the
event a dispute shall arise as to the meaning of any term of this
Agreement, the defaulting or nonprevailing Party shall pay all costs
and expenses, including reasonable attorneys' fees, of the other Party
that may arise or accrue from enforcing this Agreement, securing an
interpretation of any provision of this Agreement, or in pursuing any
remedy provided by law whether such remedy is pursued or interpretation
is sought by the filing of a lawsuit, an appeal, or otherwise.
10
(d) This Agreement shall be governed by and construed in
accordance with the internal laws of the State of Delaware, which
internal laws exclude any provision or interpretation of such laws that
would call for, or permit, the application of the laws of any other
state or jurisdiction, and any dispute arising therefrom and the
remedies available shall be determined solely in accordance with such
internal laws.
(e) Where the context requires, the singular shall include the
plural, the plural shall include the singular, and any gender shall
include all other genders.
(f) Stockholder certifies that Stockholder has read the terms
of this Agreement, that Stockholder has been informed by this document
that Stockholder should discuss this Agreement with the attorney of
Stockholder's own choice, that Stockholder has had an opportunity to do
so and that Stockholder understands this Agreement's terms and effects.
(g) The Parties have jointly participated jointly in the
negotiation and drafting of this Agreement. In the event any ambiguity
or question of intent or interpretation arises, this Agreement shall be
construed as if drafted jointly by the Parties and no presumption or
burden of proof shall arise favoring or disfavoring any Party by virtue
of the authorship of any provisions of this Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
11
IN WITNESS WHEREOF, each of the Parties has executed this Agreement on
or as of the date of this Agreement.
PARENT:
PENN NATIONAL GAMING, INC.
By: /s/ Robert S. Ippolito
---------------------------------------
Name: Robert S. Ippolito
Title: Vice President, Secretary
and Treasurer
COMPANY:
HOLLYWOOD CASINO CORPORATION
By: /s/ Edward T. Pratt III
---------------------------------------
Name: Edward T. Pratt III
Title: Chief Executive Officer
STOCKHOLDER:
/s/ Carolyn Pratt Hickey
- -------------------------------------
Carolyn Pratt Hickey
Address:
- ----------------------------------------------------------
- ----------------------------------------------------------
- ----------------------------------------------------------
Telephone:
-------------------------------------
Facsimile:
-------------------------------------
SCHEDULE A
OTHER STOCKHOLDERS EXECUTING STOCKHOLDER AGREEMENTS
Maria A. Pratt
Sharon Pratt Naftel
Diana Pratt Wyatt
Michael Shannan Pratt
Jill Pratt LaFerney
John R. Pratt
Edward T. Pratt, Jr.
William D. Pratt
Edward T. Pratt III
William D. Pratt, Jr.
Jack E. Pratt, Sr.
SCHEDULE B
SHARES HELD OF RECORD:
Stockholder holds of record 479,604 shares of Class A Common Stock, which shares
are subject to a voting trust arrangement giving Edward T. Pratt III voting
power.
OPTIONS:
None
ADDITIONAL VOTING SHARES:
None
ADDITIONAL DISPOSITION SHARES:
None
RECORD SHARE ENCUMBRANCES:
None
EXHIBIT 1.10
STOCKHOLDER AGREEMENT
THIS STOCKHOLDER AGREEMENT (this "Agreement") is made and
entered into as of the 7th day of August, 2002, by and between Penn National
Gaming, Inc., a Pennsylvania corporation ("Parent"), Hollywood Casino
Corporation, a Delaware corporation ("Company"), and Michael Shannan Pratt
("Stockholder"). Parent, Company and Stockholder are sometimes referred to in
this Agreement individually as a "Party" or collectively as the "Parties."
RECITALS
This Agreement is entered into with reference to the following
facts, objectives and definitions:
A. Contemporaneously with the execution and delivery of this
Agreement, Parent, P Acquisition Corp., a Delaware corporation and a
wholly-owned subsidiary of Parent ("Merger Sub"), and Company, are entering into
an Agreement and Plan of Merger, dated as of the date of this Agreement (the
"Merger Agreement"), pursuant to which it is contemplated that Company will
merge (the "Merger") with Merger Sub, upon the terms and conditions set forth in
the Merger Agreement; and
B. The Board of Directors of Company (the "Company Board") has
previously approved the Merger Agreement and the execution and delivery by
Company of this Agreement; and
C. On the date hereof each of the other stockholders of
Company set forth on Schedule A attached hereto (collectively, the "Other
Stockholders") is entering into a Stockholder Agreement in a form substantially
similar to this Agreement (collectively, the "Other Stockholder Agreements");
and
D. Stockholder owns, or has rights with respect to, certain of
the outstanding shares of Class A Common Stock, par value $0.0001 per share
("Class A Common Stock"), of Company, and may acquire rights with respect to
additional shares of Class A Common Stock after the date of this Agreement, and
desires to facilitate the consummation of the Merger, and for such purpose and
in order to induce Parent to enter into the Merger Agreement, Stockholder has
agreed, among other matters set forth herein, (i) to vote these shares and (ii)
to grant Parent or its designee an irrevocable proxy to exercise the voting
power of Stockholder with respect to these shares, all as provided in this
Agreement.
NOW, THEREFORE, in consideration of the covenants and
conditions contained in this Agreement, the Parties represent, warrant, and
agree as follows:
AGREEMENT
1. Representations and Warranties of Stockholder. Stockholder
represents and warrants that: (i) Stockholder is the holder of record (free and
clear of any liens, encumbrances, pledges or restrictions except as described
under the heading "Record Share Encumbrances" on Schedule B attached hereto (the
"Record Share Encumbrances")), of the number of outstanding shares of Class A
Common Stock, if any, set forth under the heading "Shares Held of Record" on
Schedule B attached hereto (the "Record Shares"), and, except as may be
described on Schedule B attached hereto, Stockholder possesses the sole right to
vote and dispose of the Record Shares; (ii) Stockholder holds (free and clear of
any liens, encumbrances, pledges or restrictions) the options to acquire shares
of Class A Common Stock, if any, set forth under the heading "Options" on
Schedule B attached hereto (the "Options"); (iii) except as may be described
under the heading "Additional Voting Shares" on Schedule B attached hereto
Stockholder maintains the right to vote or direct the vote of, but does not
solely own and cannot dispose of, the additional shares of Class A Common Stock,
if any, set forth under the heading "Additional Voting Shares" on Schedule B
attached hereto (the "Additional Voting Shares" and, collectively with the
Record Shares as to which Stockholder holds the right to vote, the "Voting
Shares"); (iv) Stockholder holds the right to sell or otherwise dispose of, but
cannot vote or direct the vote of, the additional shares of Class A Common
Stock, if any, set forth under the heading "Additional Disposition Shares" on
Schedule B attached hereto (the "Additional Disposition Shares" and, together
with the Record Shares as to which Stockholder holds the right of disposition,
the "Disposition Shares"; the Record Shares, the Additional Voting Shares, the
Additional Disposition Shares and the New Shares, as hereinafter defined, are
referred to in this Agreement as the "Shares"); (v) Stockholder does not
directly or indirectly hold or beneficially own any shares of capital stock or
other securities of Company, or any option, warrant or other right to acquire
capital stock or other securities of Company, or any option, warrant or other
right to acquire (by purchase, conversion or otherwise) any shares of capital
stock or other securities of Company, other than as described on Schedule B
hereto; (vi) Stockholder has full power and authority to make, enter into, and
carry out the terms of this Agreement; (vii) the execution, delivery, and
performance of this Agreement by Stockholder will not violate any agreement to
which Stockholder is a party, including, without limitation, any voting
agreement, stockholder agreement, or voting trust; and (viii) this Agreement
constitutes the legal, valid and binding obligation of Stockholder, enforceable
against Stockholder in accordance with its terms.
2. Agreement to Vote the Shares. The Record Shares are subject to a
voting trust agreement pursuant to which William D. Pratt has been granted an
irrevocable proxy (the "Proxy"), which provides him with the power to vote such
Record Shares. To the extent the Proxy is held invalid, unenforceable or
revoked, Stockholder shall vote all of the Voting Shares over which Stockholder
has sole voting power and will cause all of the Voting Shares over which he has
shared voting power as described on Schedule B to be voted (other than any
Shares that may have been sold in accordance with the terms of this Agreement)
(i) in favor of the Merger Agreement, and the Merger or any transaction
contemplated by the Merger Agreement, (ii) as otherwise necessary or appropriate
to enable Parent, Company and Merger Sub to consummate the transactions
contemplated by the Merger Agreement, (iii) against any action or agreement that
would result in a breach in any material aspect of any covenant, representation,
or warranty or any other obligation or agreement of Company under the Merger
Agreement, (iv) against any action or agreement that would terminate, impede,
interfere with, delay, postpone, or attempt to discourage the Merger, including,
but not limited to: (A) a sale or transfer of a material amount of the assets of
Company or any of its subsidiaries or a reorganization, recapitalization, or
liquidation of Company or any of its subsidiaries, (B) any change in the Company
Board, except as otherwise agreed to in writing by the Parties, (C) any change
in the present capitalization or dividend policy of Company, or (D) any other
change in Company's corporate structure; and (v) against any other proposal
which would result in any of the conditions to Parent's obligations under the
Merger Agreement not being fulfilled.
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3. Grant of Irrevocable Proxy. In the event that the Proxy is held
invalid, unenforceable or revoked and Stockholder does not vote all of the
Voting Shares in accordance with Section 2 hereof, subject to the approval of
all applicable Gaming Authorities (as defined in the Merger Agreement),
Stockholder hereby irrevocably appoints Parent or any designee of Parent the
lawful agent, attorney, and proxy of Stockholder, during the term of this
Agreement, to vote all of the Voting Shares in accordance with Section 2 hereof.
Stockholder intends this proxy to be irrevocable, during the term of this
Agreement, and coupled with an interest and will take such further action or
execute such other instruments as may be necessary to effectuate the intent of
this proxy and hereby revokes any proxy previously granted by Stockholder with
respect to the Voting Shares other than the Proxy. Stockholder shall not
hereafter, unless and until the Termination Time, purport to vote (or execute a
consent with respect to) any of the Voting Shares (other than through this
irrevocable proxy or in accordance with Section 2 hereof) or grant any other
proxy or power of attorney with respect to any of the Voting Shares, deposit any
of the Voting Shares into a voting trust or enter into any agreement (other than
this Agreement), arrangement, or understanding with any person, directly or
indirectly, to vote, grant any proxy, or give instructions with respect to the
voting of any of the Voting Shares. Stockholder shall retain at all times the
right to vote the Voting Shares in Stockholder's sole discretion on all matters
other than those set forth in Section 2 hereof that are presented for a vote to
the stockholders of Company generally.
4. Manner of Voting. The Voting Shares may be voted pursuant to this
Agreement in person, by proxy, by written consent, or in any other manner
permitted by applicable law.
5. No Solicitation. From the date of this Agreement until the Effective
Time (as such date is defined in the Merger Agreement) or the Termination Time
(as hereinafter defined), Stockholder will not, nor will Stockholder permit any
investment banker, attorney, accountant or other advisor or representative of
Stockholder to, directly or indirectly, (i) initiate, solicit or encourage any
inquiries, offers or proposals that constitute, or may reasonably be expected to
lead to an Acquisition Proposal (as such term is defined in the Merger
Agreement), (ii) participate in any discussions or negotiations concerning, or
provide to any person any information or data relating to Company or any
subsidiary of Company for the purpose of making, or take any other action to
facilitate, any Acquisition Proposal or any inquiries or the making of any
proposal that constitutes, or may reasonably be expected to lead to, any
Acquisition Proposal, (iii) agree to, approve or recommend any Acquisition
Proposal or (iv) take any other action materially inconsistent with Company's
obligations and commitments assumed pursuant to Section 6.6 of the Merger
Agreement.
6. No Transfer. From the date of this Agreement until the earlier of
(a) the Effective Time (as defined in the Merger Agreement) and (b) the
Termination Time (as hereinafter defined), Stockholder shall not sell, pledge,
or otherwise transfer, dispose of or encumber any of the Record Shares,
Additional Disposition Shares or New Shares (as hereinafter defined), or any
rights in respect thereof and shall not consent to any sale, pledge or other
transfer, disposition of, or encumbrance of, any Additional Voting Shares, or
any rights in respect thereof; provided, however, that this Section 6 shall not
prohibit the Record Share Encumbrances. Notwithstanding anything in this
Agreement to the contrary, Stockholder may (i) sell, in any manner chosen in the
sole discretion of Stockholder, Shares held of record by Stockholder, his
3
children, his grandchildren or trusts for the benefit of his children or
grandchildren, (ii) margin, in any manner chosen in the sole discretion of
Stockholder, Shares held of record by Stockholder, his children, his
grandchildren or trusts for the benefit of his children or grandchildren or
(iii) gift Shares to a charitable organization or a relative of the Stockholder
or a trust for the benefit of any relative of the Stockholder; provided that in
the case of clauses (i), (ii) and (iii), the aggregate number of shares sold,
margin, gifted or otherwise transferred pursuant thereto, during the term of
this Agreement, shall not exceed 20,000 Shares.
7. Additional Purchases; Option Exercise. If, during the period
commencing on the date of this Agreement and ending on the earlier of (i) the
Effective Time and (ii) the Termination Time, Stockholder purchases or otherwise
acquires any additional shares of Class A Common Stock or any rights in respect
thereof, including, without limitation, pursuant to the exercise of
Stockholder's Options, if any, such shares (the "New Shares") shall be subject
to the terms of this Agreement and for all purposes shall be and constitute a
portion of the Shares.
8. Adjustments to Prevent Dilution. In the event of any change in the
Class A Common Stock by reason of any stock dividend, split-up,
recapitalization, combination, or the exchange of shares, the term "Shares"
shall be deemed to refer to and include the Shares as well as all such stock
dividends and distributions and any shares into which or for which any or all of
the Shares may be changed or exchanged.
9. Waiver of Appraisal Rights. Stockholder hereby irrevocably and
unconditionally waives any right of appraisal relating to the Merger that
Stockholder may have by virtue of ownership of the Shares.
10. [Intentionally Omitted.]
11. No Litigation. From the date of this Agreement through the earlier
to occur of the Termination Time or the Effective Time, the Parties agree that
the Stockholder Parties (as hereinafter defined) and the Company Controlled
Parties (as hereinafter defined) shall not bring any actions against any Company
Parties (as hereinafter defined) or Stockholder Parties, respectively, other
than with respect to an activity that is unrelated to the Company; provided,
however, that such Parties may still report or make public disclosure of any
violations of Law (as defined in the Merger Agreement).
12. General Release and Covenant Not to Sue.
(a) Release by Stockholder Parties. EFFECTIVE AS OF THE
EFFECTIVE TIME, STOCKHOLDER, ON BEHALF OF STOCKHOLDER, STOCKHOLDER'S
ATTORNEYS, HEIRS, EXECUTORS, ADMINISTRATORS, ASSIGNS, AND TRUSTS,
PARTNERSHIPS AND OTHER ENTITIES UNDER STOCKHOLDER'S CONTROL (TOGETHER
THE "STOCKHOLDER PARTIES"), HEREBY GENERALLY RELEASES AND FOREVER
DISCHARGES COMPANY AND ITS PREDECESSORS, SUCCESSORS, ASSIGNS,
SUBSIDIARIES AND AFFILIATES AND FAMILY MEMBERS (AS DEFINED BELOW),
OFFICERS (OTHER THAN PAUL YATES AND WALTER EVANS), EMPLOYEES, AGENTS,
REPRESENTATIVES, PRINCIPALS AND ATTORNEYS, AND, SUBJECT TO SECTION 14
HEREOF, DIRECTORS, PAUL YATES AND WALTER EVANS (TOGETHER THE "COMPANY
PARTIES") FROM ANY AND ALL CLAIMS, DEMANDS, LIABILITIES, SUITS,
4
DAMAGES, LOSSES, EXPENSES, ATTORNEYS' FEES, OBLIGATIONS OR CAUSES OF
ACTION, KNOWN OR UNKNOWN OF ANY KIND AND EVERY NATURE WHATSOEVER, AND
WHETHER OR NOT ACCRUED OR MATURED (COLLECTIVELY, "CLAIMS"), WHICH ANY
OF THEM MAY HAVE ARISING OUT OF OR RELATING TO ANY OMISSION, ACTS OR
FACTS THAT HAVE OCCURRED UP AND UNTIL AND INCLUDING THE EFFECTIVE TIME,
INCLUDING WITHOUT LIMITATION:
i. any and all Claims relating to, arising from, or
in connection with the following lawsuits: (a) Hollywood
Casino Corporation v. Jack E. Pratt v. Edward T. Pratt III,
Walter E. Evans and Paul C. Yates, Cause No. 02-01516, in the
District Court of Dallas County, Texas, 116th Judicial
District; (b) Hollywood Casino Corporation v. Harold C.
Simmons, et al., Civil Action No. 3:02CV0325-M, in the United
Stated District Court for the Northern District of Texas,
Dallas Division; and (c) Jack E. Pratt v. Hollywood Casino
Corporation, a Delaware corporation, C.A. No. 19504, in the
Court of Chancery of the State of Delaware in and for New
Castle County (the "Lawsuits");
ii. any and all Claims relating to, arising from, or
in connection with, the employment of Stockholder by the
Company or the termination of such employment;
iii. any and all Claims relating to, or arising from,
Stockholder's right to purchase, or actual purchase of shares
of stock of Company, including, without limitation, any Claims
for fraud, misrepresentation, breach of fiduciary duty, breach
of duty under applicable state corporate law, and securities
fraud under any state or federal law;
iv. any and all Claims for wrongful discharge of
employment; fraud; misrepresentation; termination in violation
of public policy; discrimination; breach of contract, both
express and implied; breach of a covenant of good faith and
fair dealing, both express and implied; promissory estoppel;
negligent or intentional infliction of emotional distress;
negligent or intentional misrepresentation; negligent or
intentional interference with contract or prospective economic
advantage; breach of fiduciary duty; unfair business
practices; breach of confidentiality provision, defamation;
libel; slander; negligence; personal injury; assault; battery;
invasion of privacy; false imprisonment; tortious
interference, theft, embezzlement, and conversion;
v. any and all Claims for violation of any federal,
state or municipal statute, including, but not limited to,
Title VII of the Civil Rights Act of 1964, the Civil Rights
Act of 1991, the Family Medical Leave Act, the Americans with
Disabilities Act of 1990, the Fair Labor Standards Act, the
Employee Retirement Income Security Act of 1974, The Worker
Adjustment and Retraining Notification Act, Older Workers
Benefit Protection Act and the Texas Commission on Human
Rights Act;
vi. any and all Claims for violation of the federal,
or any state, constitution;
5
vii. any and all Claims arising out of any other laws
and regulations relating to employment or employment
discrimination; and
viii. any and all Claims for attorneys' fees,
expenses, and costs other than fees, costs or expenses which
are otherwise indemnifiable under Section 6.8 of the Merger
Agreement.
"FAMILY MEMBERS" SHALL MEAN, WITH RESPECT TO ANY PARTY THAT IS AN INDIVIDUAL,
THE SPOUSE OF A PARTY, ANY PARENT OF SUCH PARTY, OR ANY LINEAL DESCENDENT OF A
PARENT OF SUCH PARTY (WHETHER NATURAL BORN OR ADOPTED).
NOTWITHSTANDING THE FOREGOING, THIS RELEASE DOES NOT IN ANY WAY RELEASE, IMPAIR,
OR LIMIT ANY OBLIGATIONS INCURRED BY OR OWING FROM THE COMPANY PARTIES (1) UNDER
THIS AGREEMENT, (2) UNDER THE MERGER AGREEMENT, INCLUDING, WITHOUT LIMITATION,
SECTION 6.8 THEREOF AND (3) WITH RESPECT TO CLAIMS UNDER THE AGE DISCRIMINATION
IN EMPLOYMENT ACT OF 1967 ("ADEA CLAIMS"). FURTHER, THIS RELEASE DOES NOT IN ANY
WAY RELEASE ANY OF COMPANY'S INSURERS FROM COVERING STOCKHOLDER FOR ANY CONDUCT,
ACTS, INJURIES, OR ACTIONS ARISING FROM, IN CONNECTION WITH, OR RELATED TO THE
TIME PERIOD SUCH PERSON WAS EMPLOYED BY OR SERVING AS AN OFFICER OR DIRECTOR OF
COMPANY.
(b) Prosecution by Stockholder and Stockholder Parties.
EFFECTIVE AS OF THE EFFECTIVE TIME, STOCKHOLDER, ON BEHALF OF
STOCKHOLDER AND THE STOCKHOLDER PARTIES, HEREBY COVENANTS FOREVER NOT
TO ASSERT, FILE, PROSECUTE, MAINTAIN, COMMENCE, INSTITUTE (OR SPONSOR
OR PURPOSELY FACILITATE ANY PERSON IN CONNECTION WITH THE FOREGOING),
ANY COMPLAINT OR LAWSUIT OR ANY LEGAL, EQUITABLE OR ADMINISTRATIVE
PROCEEDING OF ANY NATURE, AGAINST ANY OF THE COMPANY PARTIES IN
CONNECTION WITH ANY MATTER RELEASED IN SECTION 12(a), INCLUDING,
WITHOUT LIMITATION, THE LAWSUITS, AND REPRESENTS AND WARRANTS THAT TO
THE EXTENT WITHIN STOCKHOLDER'S CONTROL, NO OTHER PERSON OR ENTITY HAS
OR WILL INITIATE ANY SUCH PROCEEDING ON BEHALF OF STOCKHOLDER OR ANY
STOCKHOLDER PARTY.
NOTWITHSTANDING THE FOREGOING, THIS COVENANT DOES NOT IN ANY WAY PROHIBIT
STOCKHOLDER OR ANY OF THE STOCKHOLDER PARTIES FROM REPORTING OR MAKING PUBLIC
DISCLOSURE OF ANY VIOLATIONS OF LAW.
(c) Release by Company. EFFECTIVE AS OF THE EFFECTIVE TIME,
COMPANY, ON BEHALF OF ITSELF AND THE COMPANY PARTIES UNDER ITS CONTROL
(THE "COMPANY CONTROLLED PARTIES"), HEREBY GENERALLY RELEASES AND
6
FOREVER DISCHARGES STOCKHOLDER, THE STOCKHOLDER PARTIES AND THEIR
FAMILY MEMBERS FROM ANY AND ALL CLAIMS, WHICH ANY OF THEM MAY HAVE,
ARISING OUT OF OR RELATING TO ANY OMISSION, ACTS OR FACTS THAT HAVE
OCCURRED UP AND UNTIL AND INCLUDING THE EFFECTIVE TIME, INCLUDING
WITHOUT LIMITATION, THE LAWSUITS.
NOTWITHSTANDING THE FOREGOING, THIS RELEASE DOES NOT IN ANY WAY RELEASE, IMPAIR,
OR LIMIT (i) ANY OBLIGATIONS INCURRED BY OR OWING FROM STOCKHOLDER OR ANY OF THE
STOCKHOLDER PARTIES (1) UNDER THIS AGREEMENT, AND (2) WITH RESPECT TO ADEA
CLAIMS OR (ii) THE RIGHTS OF COMPANY OR ANY OF ITS PREDECESSORS, SUCCESSORS,
ASSIGNS OR SUBSIDIARIES AGAINST STOCKHOLDER OR STOCKHOLDER PARTIES WITH RESPECT
TO ANY CRIMINAL OR FRAUDULENT ACTIVITY OTHER THAN ACTIVITIES THAT ARE THE
SUBJECT OF THE LAWSUITS.
(d) Prosecutions by Company and Company Controlled Parties.
EFFECTIVE AS OF THE EFFECTIVE TIME, COMPANY, ON BEHALF OF ITSELF AND
THE COMPANY CONTROLLED PARTIES, HEREBY COVENANTS FOREVER NOT TO ASSERT,
FILE, PROSECUTE, MAINTAIN, COMMENCE, INSTITUTE (OR SPONSOR OR PURPOSELY
FACILITATE ANY PERSON IN CONNECTION WITH THE FOREGOING), ANY COMPLAINT
OR LAWSUIT OR ANY LEGAL, EQUITABLE OR ADMINISTRATIVE PROCEEDING OF ANY
NATURE, AGAINST ANY OF THE STOCKHOLDER PARTIES IN CONNECTION WITH ANY
MATTER RELEASED IN SECTION 12(c), INCLUDING, WITHOUT LIMITATION, THE
LAWSUITS, AND REPRESENTS AND WARRANTS THAT, TO THE EXTENT WITHIN ITS
CONTROL, NO OTHER PERSON OR ENTITY HAS INITIATED OR WILL INITIATE ANY
SUCH PROCEEDING ON ITS OR THEIR BEHALF.
NOTWITHSTANDING THE FOREGOING, THIS COVENANT DOES NOT IN ANY WAY PROHIBIT THE
COMPANY OR ANY OF THE COMPANY PARTIES FROM REPORTING OR MAKING PUBLIC DISCLOSURE
OF ANY VIOLATIONS OF LAW.
13. [Intentionally Omitted.]
14. Third-Party Beneficiary Rights. Subject to the following sentence,
no provision of this Agreement is intended to nor shall it be interpreted to
provide or create any third-party beneficiary rights or any other rights of any
kind in any other person or entity who is not a Party. The provisions of
Sections 11 and 12 are intended to and shall be interpreted to provide and
create third party beneficiary rights for each director, officer, employee, and
agent of the Company, provided that in the case of each director, Paul Yates and
Walter Evans, such person must, deliver to Stockholder a fully executed
agreement within five business days of the date of this Agreement containing
provisions, where reasonably applicable, identical to the provisions of Section
12 (with respect to the release of the Stockholder Parties).
7
15. Further Assurances. Each Party shall do and perform or cause to be
done and performed all such further acts and things and shall execute and
deliver all such other agreements, certificates, instruments, or documents as
any other Party shall reasonably request from time to time in order to carry out
the intent and purposes of this Agreement. No Party shall voluntarily undertake
any course of action inconsistent with satisfaction of the requirements
applicable to such Party as set forth in this Agreement, and each Party shall
promptly do all acts and take all measures as may be appropriate or necessary to
enable such Party to perform, as early as practicable, the obligations required
to be performed by such Party under this Agreement. Without limiting the
foregoing, if requested by Company or Parent, Stockholder will obtain a written
acknowledgement from any entity or person that Stockholder purports to act on
behalf of acknowledging that such Stockholder has the authority to execute this
Agreement on such person or entity's behalf and to so bind such person or
entity.
16. Injunctive Relief. The Parties acknowledge that it is impossible to
measure in money the damages that will accrue to one or more of them by reason
of the failure of either of them to abide by the provisions of this Agreement,
that every such provision is material, and that in the event of any such
failure, the other Party will not have an adequate remedy at law or damages.
Therefore, if any Party shall institute any action or proceeding to enforce the
provisions of this Agreement, in addition to any other relief, the court in such
action or proceeding may grant injunctive relief against any Party found to be
in breach or violation of this Agreement, as well as or in addition to any
remedies at law or damages, and such Party waives the claim or defense in any
such action or proceeding that the Party bringing such action has an adequate
remedy at law, and such Party shall not argue or assert in any such action or
proceeding the claim or defense that such remedy at law exists. No Party shall
seek and each Party shall waive any requirement for, the securing or posting of
a bond in connection with the other Party seeking or obtaining such equitable
relief.
17. Court Modification. Should any portion of this Agreement be
declared by a court of competent jurisdiction to be unreasonable, unenforceable,
or void for any reason or reasons, the involved court shall modify the
applicable provision(s) of this Agreement so as to be reasonable or as is
otherwise necessary to make this Agreement enforceable and valid and to protect
the interests of the Parties intended to be protected by this Agreement to the
maximum extent possible.
18. Facsimile Transmission and Counterparts. This Agreement may be
executed by facsimile transmission and in one or more counterparts, each of
which shall be deemed to be an original, but all of which taken together shall
constitute one and the same Agreement.
19. Notices. All notices, requests, demands, and other communications
under this Agreement ("Notices") shall be in writing and shall be delivered (i)
personally, (ii) by certified mail, return receipt requested, postage prepaid,
(iii) by overnight courier or (iv) by facsimile transmission properly addressed
as follows:
8
If to Parent to:
Penn National Gaming, Inc.
825 Berkshire Blvd., Suite 200
Wyomissing, PA 19610
Facsimile: (610) 373-4966
Attention: Peter M. Carlino, Chief Executive Officer
with a copy to:
Morgan, Lewis & Bockius LLP
1701 Market Street
Philadelphia, PA 19103
Facsimile: (215) 963-5299
Attention: Peter S. Sartorius, Esq.
If to Company to:
Hollywood Casino Corporation
Two Galleria Tower
13455 Noel Road, Suite 2200
Dallas, TX 75240
Facsimile: (972) 716-3903
Attention: Walter E. Evans, General Counsel
with a copy to:
Weil, Gotshal & Manges LLP
100 Crescent Court, Suite 1300
Dallas, TX 75201
Facsimile: (214) 746-7777
Attention: Michael A. Saslaw
and if to Stockholder, at the address specified in on the signature page to this
Agreement or, in either case, to such other address or addresses as a Party to
this Agreement may indicate to the other Party in the manner provided for in
this Paragraph 19. Notices given by mail, by overnight courier and by personal
delivery shall be deemed effective and complete upon delivery and notices by
facsimile transmission shall be deemed effective upon receipt.
20. Effective Date; Term. This Agreement shall become effective upon
(i) its execution and delivery by all Parties and (ii) the execution and
delivery of each of the Other Stockholder Agreements by the parties thereto;
provided, however, that Section 12 of this Agreement shall not become effective
until the Effective Time. This Agreement shall continue in full force and effect
until the first to occur of (A) the written agreement of all the Parties to
terminate this Agreement and (B) the termination of the Merger Agreement in
accordance with its terms (the first to occur of (A) and (B) the "Termination
Time").
9
21. [Intentionally Omitted.]
22. Gaming Approvals; Cooperation. Company shall (i) promptly file all
required applications to obtain the approvals from all applicable Gaming
Authorities necessary for Stockholder to grant the proxy set forth in Section 3,
(ii) shall request an accelerated review from such Gaming Authorities in
connection with such filings, and (iii) shall otherwise use its reasonable best
efforts to obtain such approvals. Each of the Parties shall use such Party's
reasonable best efforts to cooperate with Company and all applicable Gaming
Authorities in making such filings and obtaining such approvals.
23. Other Agreements.
(a) This Agreement supersedes all prior agreements or
understandings of the Parties on the subject matter of this Agreement.
There are no representations, warranties, or agreements, whether
express or implied, or oral or written, with respect to the subject
matter of this Agreement, except as set forth in this Agreement. This
Agreement (i) shall not be modified by any oral agreement, either
express or implied, and all amendments or modifications of this
Agreement shall be in writing and be signed by all of the Parties, and
(ii) shall be binding on and shall inure to the benefit of the Parties
and their respective heirs, legal representatives, successors and
assigns.
(b) The paragraph headings in this Agreement are for the
purpose of convenience only and shall not limit or otherwise affect any
of the terms of this Agreement.
(c) Should any Party be in default under or breach of any of
the covenants or agreements contained in this Agreement, or in the
event a dispute shall arise as to the meaning of any term of this
Agreement, the defaulting or nonprevailing Party shall pay all costs
and expenses, including reasonable attorneys' fees, of the other Party
that may arise or accrue from enforcing this Agreement, securing an
interpretation of any provision of this Agreement, or in pursuing any
remedy provided by law whether such remedy is pursued or interpretation
is sought by the filing of a lawsuit, an appeal, or otherwise.
(d) This Agreement shall be governed by and construed in
accordance with the internal laws of the State of Delaware, which
internal laws exclude any provision or interpretation of such laws that
would call for, or permit, the application of the laws of any other
state or jurisdiction, and any dispute arising therefrom and the
remedies available shall be determined solely in accordance with such
internal laws.
(e) Where the context requires, the singular shall include the
plural, the plural shall include the singular, and any gender shall
include all other genders.
(f) Stockholder certifies that Stockholder has read the terms
of this Agreement, that Stockholder has been informed by this document
that Stockholder should discuss this Agreement with the attorney of
Stockholder's own choice, that Stockholder has had an opportunity to do
so and that Stockholder understands this Agreement's terms and effects.
10
(g) The Parties have jointly participated jointly in the
negotiation and drafting of this Agreement. In the event any ambiguity
or question of intent or interpretation arises, this Agreement shall be
construed as if drafted jointly by the Parties and no presumption or
burden of proof shall arise favoring or disfavoring any Party by virtue
of the authorship of any provisions of this Agreement.
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11
IN WITNESS WHEREOF, each of the Parties has executed this Agreement on
or as of the date of this Agreement.
PARENT:
PENN NATIONAL GAMING, INC.
By: /s/ Robert S. Ippolito
---------------------------------------
Name: Robert S. Ippolito
Title: Vice President, Secretary
and Treasurer
COMPANY:
HOLLYWOOD CASINO CORPORATION
By: /s/ Edward T. Pratt III
---------------------------------------
Name: Edward T. Pratt III
Title: Chief Executive Officer
STOCKHOLDER:
/s/ Michael Shannan Pratt
- -----------------------------------------
Michael Shannan Pratt
Address:
- ----------------------------------------------------------
- ----------------------------------------------------------
- ----------------------------------------------------------
Telephone:
-------------------------------------
Facsimile:
-------------------------------------
With a copy to:
Sayles, Lidji & Werbner
Attn: Brian M. Lidji
4400 Renaissance Tower
1201 Elm Street
Dallas, Texas 75270
Facsimile: (214) 939-8787
SCHEDULE A
OTHER STOCKHOLDERS EXECUTING STOCKHOLDER AGREEMENTS
Maria A. Pratt
Sharon Pratt Naftel
Diana Pratt Wyatt
Carolyn Pratt Hickey
Jill Pratt LaFerney
John R. Pratt
Edward T. Pratt, Jr.
William D. Pratt
Edward T. Pratt III
William D. Pratt, Jr.
Jack E. Pratt, Sr.
SCHEDULE B
SHARES HELD OF RECORD:
Stockholder holds of record 275,544 shares of Class A Common Stock, which shares
are subject to a voting trust arrangement giving William D. Pratt, or his
successor, voting power.
OPTIONS:
None
ADDITIONAL VOTING SHARES:
None
ADDITIONAL DISPOSITION SHARES:
None
RECORD SHARE ENCUMBRANCES:
190,000 shares of Class A Common Stock have been pledged to William D. Pratt
pursuant to a pledge agreement.
EXHIBIT 1.11
STOCKHOLDER AGREEMENT
THIS STOCKHOLDER AGREEMENT (this "Agreement") is made and
entered into as of the 7th day of August, 2002, by and between Penn National
Gaming, Inc., a Pennsylvania corporation ("Parent"), Hollywood Casino
Corporation, a Delaware corporation ("Company"), and Jill Pratt LaFerney
("Stockholder"). Parent, Company and Stockholder are sometimes referred to in
this Agreement individually as a "Party" or collectively as the "Parties."
RECITALS
This Agreement is entered into with reference to the following
facts, objectives and definitions:
A. Contemporaneously with the execution and delivery of this
Agreement, Parent, P Acquisition Corp., a Delaware corporation and a
wholly-owned subsidiary of Parent ("Merger Sub"), and Company, are entering into
an Agreement and Plan of Merger, dated as of the date of this Agreement (the
"Merger Agreement"), pursuant to which it is contemplated that Company will
merge (the "Merger") with Merger Sub, upon the terms and conditions set forth in
the Merger Agreement; and
B. The Board of Directors of Company (the "Company Board") has
previously approved the Merger Agreement and the execution and delivery by
Company of this Agreement; and
C. On the date hereof each of the other stockholders of
Company set forth on Schedule A attached hereto (collectively, the "Other
Stockholders") is entering into a Stockholder Agreement in a form substantially
similar to this Agreement (collectively, the "Other Stockholder Agreements");
and
D. Stockholder owns, or has rights with respect to, certain of
the outstanding shares of Class A Common Stock, par value $0.0001 per share
("Class A Common Stock"), of Company, and may acquire rights with respect to
additional shares of Class A Common Stock after the date of this Agreement, and
desires to facilitate the consummation of the Merger, and for such purpose and
in order to induce Parent to enter into the Merger Agreement, Stockholder has
agreed, among other matters set forth herein, (i) to vote these shares and (ii)
to grant Parent or its designee an irrevocable proxy to exercise the voting
power of Stockholder with respect to these shares, all as provided in this
Agreement.
NOW, THEREFORE, in consideration of the covenants and
conditions contained in this Agreement, the Parties represent, warrant, and
agree as follows:
AGREEMENT
1. Representations and Warranties of Stockholder. Stockholder
represents and warrants that: (i) Stockholder is the holder of record (free and
clear of any liens, encumbrances, pledges or restrictions except as described
under the heading "Record Share Encumbrances" on Schedule B attached hereto (the
"Record Share Encumbrances")), of the number of outstanding shares of Class A
Common Stock, if any, set forth under the heading "Shares Held of Record" on
Schedule B attached hereto (the "Record Shares"), and, except as may be
described on Schedule B attached hereto, Stockholder possesses the sole right to
vote and dispose of the Record Shares; (ii) Stockholder holds (free and clear of
any liens, encumbrances, pledges or restrictions) the options to acquire shares
of Class A Common Stock, if any, set forth under the heading "Options" on
Schedule B attached hereto (the "Options"); (iii) except as may be described
under the heading "Additional Voting Shares" on Schedule B attached hereto
Stockholder maintains the right to vote or direct the vote of, but does not
solely own and cannot dispose of, the additional shares of Class A Common Stock,
if any, set forth under the heading "Additional Voting Shares" on Schedule B
attached hereto (the "Additional Voting Shares" and, collectively with the
Record Shares as to which Stockholder holds the right to vote, the "Voting
Shares"); (iv) Stockholder holds the right to sell or otherwise dispose of, but
cannot vote or direct the vote of, the additional shares of Class A Common
Stock, if any, set forth under the heading "Additional Disposition Shares" on
Schedule B attached hereto (the "Additional Disposition Shares" and, together
with the Record Shares as to which Stockholder holds the right of disposition,
the "Disposition Shares"; the Record Shares, the Additional Voting Shares, the
Additional Disposition Shares and the New Shares, as hereinafter defined, are
referred to in this Agreement as the "Shares"); (v) Stockholder does not
directly or indirectly hold or beneficially own any shares of capital stock or
other securities of Company, or any option, warrant or other right to acquire
capital stock or other securities of Company, or any option, warrant or other
right to acquire (by purchase, conversion or otherwise) any shares of capital
stock or other securities of Company, other than as described on Schedule B
hereto; (vi) Stockholder has full power and authority to make, enter into, and
carry out the terms of this Agreement; (vii) the execution, delivery, and
performance of this Agreement by Stockholder will not violate any agreement to
which Stockholder is a party, including, without limitation, any voting
agreement, stockholder agreement, or voting trust; and (viii) this Agreement
constitutes the legal, valid and binding obligation of Stockholder, enforceable
against Stockholder in accordance with its terms.
2. Agreement to Vote the Shares. The Record Shares are subject to a
voting trust agreement pursuant to which Jack E. Pratt has been granted an
irrevocable proxy (the "Proxy"), which provides him with the power to vote such
Record Shares. To the extent the Proxy is held invalid, unenforceable or
revoked, Stockholder shall vote all of the Voting Shares over which Stockholder
has sole voting power and will cause all of the Voting Shares over which he has
shared voting power as described on Schedule B to be voted (other than any
Shares that may have been sold in accordance with the terms of this Agreement)
(i) in favor of the Merger Agreement, and the Merger or any transaction
contemplated by the Merger Agreement, (ii) as otherwise necessary or appropriate
to enable Parent, Company and Merger Sub to consummate the transactions
contemplated by the Merger Agreement, (iii) against any action or agreement that
would result in a breach in any material aspect of any covenant, representation,
or warranty or any other obligation or agreement of Company under the Merger
Agreement, (iv) against any action or agreement that would terminate, impede,
interfere with, delay, postpone, or attempt to discourage the Merger, including,
but not limited to: (A) a sale or transfer of a material amount of the assets of
Company or any of its subsidiaries or a reorganization, recapitalization, or
liquidation of Company or any of its subsidiaries, (B) any change in the Company
Board, except as otherwise agreed to in writing by the Parties, (C) any change
in the present capitalization or dividend policy of Company, or (D) any other
change in Company's corporate structure; and (v) against any other proposal
which would result in any of the conditions to Parent's obligations under the
Merger Agreement not being fulfilled.
2
3. Grant of Irrevocable Proxy. In the event that the Proxy is held
invalid, unenforceable or revoked and Stockholder does not vote all of the
Voting Shares in accordance with Section 2 hereof, subject to the approval of
all applicable Gaming Authorities (as defined in the Merger Agreement),
Stockholder hereby irrevocably appoints Parent or any designee of Parent the
lawful agent, attorney, and proxy of Stockholder, during the term of this
Agreement, to vote all of the Voting Shares in accordance with Section 2 hereof.
Stockholder intends this proxy to be irrevocable, during the term of this
Agreement, and coupled with an interest and will take such further action or
execute such other instruments as may be necessary to effectuate the intent of
this proxy and hereby revokes any proxy previously granted by Stockholder with
respect to the Voting Shares other than the Proxy. Stockholder shall not
hereafter, unless and until the Termination Time, purport to vote (or execute a
consent with respect to) any of the Voting Shares (other than through this
irrevocable proxy or in accordance with Section 2 hereof) or grant any other
proxy or power of attorney with respect to any of the Voting Shares, deposit any
of the Voting Shares into a voting trust or enter into any agreement (other than
this Agreement), arrangement, or understanding with any person, directly or
indirectly, to vote, grant any proxy, or give instructions with respect to the
voting of any of the Voting Shares. Stockholder shall retain at all times the
right to vote the Voting Shares in Stockholder's sole discretion on all matters
other than those set forth in Section 2 hereof that are presented for a vote to
the stockholders of Company generally.
4. Manner of Voting. The Voting Shares may be voted pursuant to this
Agreement in person, by proxy, by written consent, or in any other manner
permitted by applicable law.
5. No Solicitation. From the date of this Agreement until the Effective
Time (as such date is defined in the Merger Agreement) or the Termination Time
(as hereinafter defined), Stockholder will not, nor will Stockholder permit any
investment banker, attorney, accountant or other advisor or representative of
Stockholder to, directly or indirectly, (i) initiate, solicit or encourage any
inquiries, offers or proposals that constitute, or may reasonably be expected to
lead to an Acquisition Proposal (as such term is defined in the Merger
Agreement), (ii) participate in any discussions or negotiations concerning, or
provide to any person any information or data relating to Company or any
subsidiary of Company for the purpose of making, or take any other action to
facilitate, any Acquisition Proposal or any inquiries or the making of any
proposal that constitutes, or may reasonably be expected to lead to, any
Acquisition Proposal, (iii) agree to, approve or recommend any Acquisition
Proposal or (iv) take any other action materially inconsistent with Company's
obligations and commitments assumed pursuant to Section 6.6 of the Merger
Agreement.
6. No Transfer. From the date of this Agreement until the earlier of
(a) the Effective Time (as defined in the Merger Agreement) and (b) the
Termination Time (as hereinafter defined), Stockholder shall not sell, pledge,
or otherwise transfer, dispose of or encumber any of the Record Shares,
Additional Disposition Shares or New Shares (as hereinafter defined), or any
rights in respect thereof and shall not consent to any sale, pledge or other
transfer, disposition of, or encumbrance of, any Additional Voting Shares, or
any rights in respect thereof; provided, however, that this Section 6 shall not
prohibit (i) the Record Share Encumbrances or (ii) the sale or margin of Shares
as permitted pursuant to, and in accordance with, the terms of that certain
Stockholder Agreement, dated as of even date herewith, by and between Parent,
Company and Jack E. Pratt, Sr.
3
7. Additional Purchases; Option Exercise. If, during the period
commencing on the date of this Agreement and ending on the earlier of (i) the
Effective Time and (ii) the Termination Time, Stockholder purchases or otherwise
acquires any additional shares of Class A Common Stock or any rights in respect
thereof, including, without limitation, pursuant to the exercise of
Stockholder's Options, if any, such shares (the "New Shares") shall be subject
to the terms of this Agreement and for all purposes shall be and constitute a
portion of the Shares.
8. Adjustments to Prevent Dilution. In the event of any change in the
Class A Common Stock by reason of any stock dividend, split-up,
recapitalization, combination, or the exchange of shares, the term "Shares"
shall be deemed to refer to and include the Shares as well as all such stock
dividends and distributions and any shares into which or for which any or all of
the Shares may be changed or exchanged.
9. Waiver of Appraisal Rights. Stockholder hereby irrevocably and
unconditionally waives any right of appraisal relating to the Merger that
Stockholder may have by virtue of ownership of the Shares.
10. [Intentionally Omitted.]
11. No Litigation. From the date of this Agreement through the earlier
to occur of the Termination Time or the Effective Time, the Parties agree that
the Stockholder Parties (as hereinafter defined) and the Company Controlled
Parties (as hereinafter defined) shall not bring any actions against any Company
Parties (as hereinafter defined) or Stockholder Parties, respectively, other
than with respect to an activity that is unrelated to the Company; provided,
however, that such Parties may still report or make public disclosure of any
violations of Law (as defined in the Merger Agreement).
12. General Release and Covenant Not to Sue.
(a) Release by Stockholder Parties. EFFECTIVE AS OF THE
EFFECTIVE TIME, STOCKHOLDER, ON BEHALF OF STOCKHOLDER, STOCKHOLDER'S
ATTORNEYS, HEIRS, EXECUTORS, ADMINISTRATORS, ASSIGNS, AND TRUSTS,
PARTNERSHIPS AND OTHER ENTITIES UNDER STOCKHOLDER'S CONTROL (TOGETHER
THE "STOCKHOLDER PARTIES"), HEREBY GENERALLY RELEASES AND FOREVER
DISCHARGES COMPANY AND ITS PREDECESSORS, SUCCESSORS, ASSIGNS,
SUBSIDIARIES AND AFFILIATES AND FAMILY MEMBERS (AS DEFINED BELOW),
OFFICERS (OTHER THAN PAUL YATES AND WALTER EVANS), EMPLOYEES, AGENTS,
REPRESENTATIVES, PRINCIPALS AND ATTORNEYS, AND, SUBJECT TO SECTION 14
HEREOF, DIRECTORS, PAUL YATES AND WALTER EVANS (TOGETHER THE "COMPANY
PARTIES") FROM ANY AND ALL CLAIMS, DEMANDS, LIABILITIES, SUITS,
DAMAGES, LOSSES, EXPENSES, ATTORNEYS' FEES, OBLIGATIONS OR CAUSES OF
ACTION, KNOWN OR UNKNOWN OF ANY KIND AND EVERY NATURE WHATSOEVER, AND
WHETHER OR NOT ACCRUED OR MATURED (COLLECTIVELY, "CLAIMS"), WHICH ANY
OF THEM MAY HAVE ARISING OUT OF OR RELATING TO ANY OMISSION, ACTS OR
FACTS THAT HAVE OCCURRED UP AND UNTIL AND INCLUDING THE EFFECTIVE TIME,
INCLUDING WITHOUT LIMITATION:
4
i. any and all Claims relating to, arising from, or
in connection with the following lawsuits: (a) Hollywood
Casino Corporation v. Jack E. Pratt v. Edward T. Pratt III,
Walter E. Evans and Paul C. Yates, Cause No. 02-01516, in the
District Court of Dallas County, Texas, 116th Judicial
District; (b) Hollywood Casino Corporation v. Harold C.
Simmons, et al., Civil Action No. 3:02CV0325-M, in the United
Stated District Court for the Northern District of Texas,
Dallas Division; and (c) Jack E. Pratt v. Hollywood Casino
Corporation, a Delaware corporation, C.A. No. 19504, in the
Court of Chancery of the State of Delaware in and for New
Castle County (the "Lawsuits");
ii. any and all Claims relating to, arising from, or
in connection with, the employment of Stockholder by the
Company or the termination of such employment;
iii. any and all Claims relating to, or arising from,
Stockholder's right to purchase, or actual purchase of shares
of stock of Company, including, without limitation, any Claims
for fraud, misrepresentation, breach of fiduciary duty, breach
of duty under applicable state corporate law, and securities
fraud under any state or federal law;
iv. any and all Claims for wrongful discharge of
employment; fraud; misrepresentation; termination in violation
of public policy; discrimination; breach of contract, both
express and implied; breach of a covenant of good faith and
fair dealing, both express and implied; promissory estoppel;
negligent or intentional infliction of emotional distress;
negligent or intentional misrepresentation; negligent or
intentional interference with contract or prospective economic
advantage; breach of fiduciary duty; unfair business
practices; breach of confidentiality provision, defamation;
libel; slander; negligence; personal injury; assault; battery;
invasion of privacy; false imprisonment; tortious
interference, theft, embezzlement, and conversion;
v. any and all Claims for violation of any federal,
state or municipal statute, including, but not limited to,
Title VII of the Civil Rights Act of 1964, the Civil Rights
Act of 1991, the Family Medical Leave Act, the Americans with
Disabilities Act of 1990, the Fair Labor Standards Act, the
Employee Retirement Income Security Act of 1974, The Worker
Adjustment and Retraining Notification Act, Older Workers
Benefit Protection Act and the Texas Commission on Human
Rights Act;
vi. any and all Claims for violation of the federal,
or any state, constitution;
vii. any and all Claims arising out of any other laws
and regulations relating to employment or employment
discrimination; and
viii. any and all Claims for attorneys' fees,
expenses, and costs other than fees, costs or expenses which
are otherwise indemnifiable under Section 6.8 of the Merger
Agreement.
5
"FAMILY MEMBERS" SHALL MEAN, WITH RESPECT TO ANY PARTY THAT IS AN INDIVIDUAL,
THE SPOUSE OF A PARTY, ANY PARENT OF SUCH PARTY, OR ANY LINEAL DESCENDENT OF A
PARENT OF SUCH PARTY (WHETHER NATURAL BORN OR ADOPTED).
NOTWITHSTANDING THE FOREGOING, THIS RELEASE DOES NOT IN ANY WAY RELEASE, IMPAIR,
OR LIMIT ANY OBLIGATIONS INCURRED BY OR OWING FROM THE COMPANY PARTIES (1) UNDER
THIS AGREEMENT, (2) UNDER THE MERGER AGREEMENT, INCLUDING, WITHOUT LIMITATION,
SECTION 6.8 THEREOF AND (3) WITH RESPECT TO CLAIMS UNDER THE AGE DISCRIMINATION
IN EMPLOYMENT ACT OF 1967 ("ADEA CLAIMS"). FURTHER, THIS RELEASE DOES NOT IN ANY
WAY RELEASE ANY OF COMPANY'S INSURERS FROM COVERING STOCKHOLDER FOR ANY CONDUCT,
ACTS, INJURIES, OR ACTIONS ARISING FROM, IN CONNECTION WITH, OR RELATED TO THE
TIME PERIOD SUCH PERSON WAS EMPLOYED BY OR SERVING AS AN OFFICER OR DIRECTOR OF
COMPANY.
(b) Prosecution by Stockholder and Stockholder Parties.
EFFECTIVE AS OF THE EFFECTIVE TIME, STOCKHOLDER, ON BEHALF OF
STOCKHOLDER AND THE STOCKHOLDER PARTIES, HEREBY COVENANTS FOREVER NOT
TO ASSERT, FILE, PROSECUTE, MAINTAIN, COMMENCE, INSTITUTE (OR SPONSOR
OR PURPOSELY FACILITATE ANY PERSON IN CONNECTION WITH THE FOREGOING),
ANY COMPLAINT OR LAWSUIT OR ANY LEGAL, EQUITABLE OR ADMINISTRATIVE
PROCEEDING OF ANY NATURE, AGAINST ANY OF THE COMPANY PARTIES IN
CONNECTION WITH ANY MATTER RELEASED IN SECTION 12(a), INCLUDING,
WITHOUT LIMITATION, THE LAWSUITS, AND REPRESENTS AND WARRANTS THAT TO
THE EXTENT WITHIN STOCKHOLDER'S CONTROL, NO OTHER PERSON OR ENTITY HAS
OR WILL INITIATE ANY SUCH PROCEEDING ON BEHALF OF STOCKHOLDER OR ANY
STOCKHOLDER PARTY.
NOTWITHSTANDING THE FOREGOING, THIS COVENANT DOES NOT IN ANY WAY PROHIBIT
STOCKHOLDER OR ANY OF THE STOCKHOLDER PARTIES FROM REPORTING OR MAKING PUBLIC
DISCLOSURE OF ANY VIOLATIONS OF LAW.
(c) Release by Company. EFFECTIVE AS OF THE EFFECTIVE TIME,
COMPANY, ON BEHALF OF ITSELF AND THE COMPANY PARTIES UNDER ITS CONTROL
(THE "COMPANY CONTROLLED PARTIES"), HEREBY GENERALLY RELEASES AND
FOREVER DISCHARGES STOCKHOLDER, THE STOCKHOLDER PARTIES AND THEIR
FAMILY MEMBERS FROM ANY AND ALL CLAIMS, WHICH ANY OF THEM MAY HAVE,
ARISING OUT OF OR RELATING TO ANY OMISSION, ACTS OR FACTS THAT HAVE
OCCURRED UP AND UNTIL AND INCLUDING THE EFFECTIVE TIME, INCLUDING
WITHOUT LIMITATION, THE LAWSUITS.
6
NOTWITHSTANDING THE FOREGOING, THIS RELEASE DOES NOT IN ANY WAY RELEASE, IMPAIR,
OR LIMIT (i) ANY OBLIGATIONS INCURRED BY OR OWING FROM STOCKHOLDER OR ANY OF THE
STOCKHOLDER PARTIES (1) UNDER THIS AGREEMENT, AND (2) WITH RESPECT TO ADEA
CLAIMS OR (ii) THE RIGHTS OF COMPANY OR ANY OF ITS PREDECESSORS, SUCCESSORS,
ASSIGNS OR SUBSIDIARIES AGAINST STOCKHOLDER OR STOCKHOLDER PARTIES WITH RESPECT
TO ANY CRIMINAL OR FRAUDULENT ACTIVITY OTHER THAN ACTIVITIES THAT ARE THE
SUBJECT OF THE LAWSUITS.
(d) Prosecutions by Company and Company Controlled Parties.
EFFECTIVE AS OF THE EFFECTIVE TIME, COMPANY, ON BEHALF OF ITSELF AND
THE COMPANY CONTROLLED PARTIES, HEREBY COVENANTS FOREVER NOT TO ASSERT,
FILE, PROSECUTE, MAINTAIN, COMMENCE, INSTITUTE (OR SPONSOR OR PURPOSELY
FACILITATE ANY PERSON IN CONNECTION WITH THE FOREGOING), ANY COMPLAINT
OR LAWSUIT OR ANY LEGAL, EQUITABLE OR ADMINISTRATIVE PROCEEDING OF ANY
NATURE, AGAINST ANY OF THE STOCKHOLDER PARTIES IN CONNECTION WITH ANY
MATTER RELEASED IN SECTION 12(c), INCLUDING, WITHOUT LIMITATION, THE
LAWSUITS, AND REPRESENTS AND WARRANTS THAT, TO THE EXTENT WITHIN ITS
CONTROL, NO OTHER PERSON OR ENTITY HAS INITIATED OR WILL INITIATE ANY
SUCH PROCEEDING ON ITS OR THEIR BEHALF.
NOTWITHSTANDING THE FOREGOING, THIS COVENANT DOES NOT IN ANY WAY PROHIBIT THE
COMPANY OR ANY OF THE COMPANY PARTIES FROM REPORTING OR MAKING PUBLIC DISCLOSURE
OF ANY VIOLATIONS OF LAW.
13. [Intentionally Omitted.]
14. Third-Party Beneficiary Rights. Subject to the following sentence,
no provision of this Agreement is intended to nor shall it be interpreted to
provide or create any third-party beneficiary rights or any other rights of any
kind in any other person or entity who is not a Party. The provisions of
Sections 11 and 12 are intended to and shall be interpreted to provide and
create third party beneficiary rights for each director, officer, employee, and
agent of the Company, provided that in the case of each director, Paul Yates and
Walter Evans, such person must, deliver to Stockholder a fully executed
agreement within five business days of the date of this Agreement containing
provisions, where reasonably applicable, identical to the provisions of Section
12 (with respect to the release of the Stockholder Parties).
15. Further Assurances. Each Party shall do and perform or cause to be
done and performed all such further acts and things and shall execute and
deliver all such other agreements, certificates, instruments, or documents as
any other Party shall reasonably request from time to time in order to carry out
the intent and purposes of this Agreement. No Party shall voluntarily undertake
any course of action inconsistent with satisfaction of the requirements
applicable to such Party as set forth in this Agreement, and each Party shall
promptly do all acts and take all measures as may be appropriate or necessary to
enable such Party to perform, as early as practicable, the obligations required
to be performed by such Party under this Agreement. Without limiting the
7
foregoing, if requested by Company or Parent, Stockholder will obtain a written
acknowledgement from any entity or person that Stockholder purports to act on
behalf of acknowledging that such Stockholder has the authority to execute this
Agreement on such person or entity's behalf and to so bind such person or
entity.
16. Injunctive Relief. The Parties acknowledge that it is impossible to
measure in money the damages that will accrue to one or more of them by reason
of the failure of either of them to abide by the provisions of this Agreement,
that every such provision is material, and that in the event of any such
failure, the other Party will not have an adequate remedy at law or damages.
Therefore, if any Party shall institute any action or proceeding to enforce the
provisions of this Agreement, in addition to any other relief, the court in such
action or proceeding may grant injunctive relief against any Party found to be
in breach or violation of this Agreement, as well as or in addition to any
remedies at law or damages, and such Party waives the claim or defense in any
such action or proceeding that the Party bringing such action has an adequate
remedy at law, and such Party shall not argue or assert in any such action or
proceeding the claim or defense that such remedy at law exists. No Party shall
seek and each Party shall waive any requirement for, the securing or posting of
a bond in connection with the other Party seeking or obtaining such equitable
relief.
17. Court Modification. Should any portion of this Agreement be
declared by a court of competent jurisdiction to be unreasonable, unenforceable,
or void for any reason or reasons, the involved court shall modify the
applicable provision(s) of this Agreement so as to be reasonable or as is
otherwise necessary to make this Agreement enforceable and valid and to protect
the interests of the Parties intended to be protected by this Agreement to the
maximum extent possible.
18. Facsimile Transmission and Counterparts. This Agreement may be
executed by facsimile transmission and in one or more counterparts, each of
which shall be deemed to be an original, but all of which taken together shall
constitute one and the same Agreement.
19. Notices. All notices, requests, demands, and other communications
under this Agreement ("Notices") shall be in writing and shall be delivered (i)
personally, (ii) by certified mail, return receipt requested, postage prepaid,
(iii) by overnight courier or (iv) by facsimile transmission properly addressed
as follows:
If to Parent to:
Penn National Gaming, Inc.
825 Berkshire Blvd., Suite 200
Wyomissing, PA 19610
Facsimile: (610) 373-4966
Attention: Peter M. Carlino, Chief Executive Officer
8
with a copy to:
Morgan, Lewis & Bockius LLP
1701 Market Street
Philadelphia, PA 19103
Facsimile: (215) 963-5299
Attention: Peter S. Sartorius, Esq.
If to Company to:
Hollywood Casino Corporation
Two Galleria Tower
13455 Noel Road, Suite 2200
Dallas, TX 75240
Facsimile: (972) 716-3903
Attention: Walter E. Evans, General Counsel
with a copy to:
Weil, Gotshal & Manges LLP
100 Crescent Court, Suite 1300
Dallas, TX 75201
Facsimile: (214) 746-7777
Attention: Michael A. Saslaw
and if to Stockholder, at the address specified in on the signature page to this
Agreement or, in either case, to such other address or addresses as a Party to
this Agreement may indicate to the other Party in the manner provided for in
this Paragraph 19. Notices given by mail, by overnight courier and by personal
delivery shall be deemed effective and complete upon delivery and notices by
facsimile transmission shall be deemed effective upon receipt.
20. Effective Date; Term. This Agreement shall become effective upon
(i) its execution and delivery by all Parties and (ii) the execution and
delivery of each of the Other Stockholder Agreements by the parties thereto;
provided, however, that Section 12 of this Agreement shall not become effective
until the Effective Time. This Agreement shall continue in full force and effect
until the first to occur of (A) the written agreement of all the Parties to
terminate this Agreement and (B) the termination of the Merger Agreement in
accordance with its terms (the first to occur of (A) and (B) the "Termination
Time").
21. [Intentionally Omitted.]
22. Gaming Approvals; Cooperation. Company shall (i) promptly file all
required applications to obtain the approvals from all applicable Gaming
Authorities necessary for Stockholder to grant the proxy set forth in Section 3,
(ii) shall request an accelerated review from such Gaming Authorities in
connection with such filings, and (iii) shall otherwise use its reasonable best
efforts to obtain such approvals. Each of the Parties shall use such Party's
9
reasonable best efforts to cooperate with Company and all applicable Gaming
Authorities in making such filings and obtaining such approvals.
23. Other Agreements.
(a) This Agreement supersedes all prior agreements or
understandings of the Parties on the subject matter of this Agreement.
There are no representations, warranties, or agreements, whether
express or implied, or oral or written, with respect to the subject
matter of this Agreement, except as set forth in this Agreement. This
Agreement (i) shall not be modified by any oral agreement, either
express or implied, and all amendments or modifications of this
Agreement shall be in writing and be signed by all of the Parties, and
(ii) shall be binding on and shall inure to the benefit of the Parties
and their respective heirs, legal representatives, successors and
assigns.
(b) The paragraph headings in this Agreement are for the
purpose of convenience only and shall not limit or otherwise affect any
of the terms of this Agreement.
(c) Should any Party be in default under or breach of any of
the covenants or agreements contained in this Agreement, or in the
event a dispute shall arise as to the meaning of any term of this
Agreement, the defaulting or nonprevailing Party shall pay all costs
and expenses, including reasonable attorneys' fees, of the other Party
that may arise or accrue from enforcing this Agreement, securing an
interpretation of any provision of this Agreement, or in pursuing any
remedy provided by law whether such remedy is pursued or interpretation
is sought by the filing of a lawsuit, an appeal, or otherwise.
(d) This Agreement shall be governed by and construed in
accordance with the internal laws of the State of Delaware, which
internal laws exclude any provision or interpretation of such laws that
would call for, or permit, the application of the laws of any other
state or jurisdiction, and any dispute arising therefrom and the
remedies available shall be determined solely in accordance with such
internal laws.
(e) Where the context requires, the singular shall include the
plural, the plural shall include the singular, and any gender shall
include all other genders.
(f) Stockholder certifies that Stockholder has read the terms
of this Agreement, that Stockholder has been informed by this document
that Stockholder should discuss this Agreement with the attorney of
Stockholder's own choice, that Stockholder has had an opportunity to do
so and that Stockholder understands this Agreement's terms and effects.
(g) The Parties have jointly participated jointly in the
negotiation and drafting of this Agreement. In the event any ambiguity
or question of intent or interpretation arises, this Agreement shall be
construed as if drafted jointly by the Parties and no presumption or
burden of proof shall arise favoring or disfavoring any Party by virtue
of the authorship of any provisions of this Agreement.
10
IN WITNESS WHEREOF, each of the Parties has executed this Agreement on
or as of the date of this Agreement.
PARENT:
PENN NATIONAL GAMING, INC.
By: /s/ Robert S. Ippolito
---------------------------------------
Name: Robert S. Ippolito
Title: Vice President, Secretary
and Treasurer
COMPANY:
HOLLYWOOD CASINO CORPORATION
By: /s/ Edward T. Pratt III
---------------------------------------
Name: Edward T. Pratt III
Title: Chief Executive Officer
STOCKHOLDER:
/s/ Jill Pratt LaFerney
- ----------------------------------
Jill Pratt LaFerney
Address:
- ----------------------------------------------------------
- ----------------------------------------------------------
- ----------------------------------------------------------
Telephone:
-------------------------------------
Facsimile:
-------------------------------------
With a copy to:
Sayles, Lidji & Werbner
Attn: Brian M. Lidji
4400 Renaissance Tower
1201 Elm Street
Dallas, Texas 75270
Facsimile: (214) 939-8787
SCHEDULE A
OTHER STOCKHOLDERS EXECUTING STOCKHOLDER AGREEMENTS
Maria A. Pratt
Sharon Pratt Naftel
Diana Pratt Wyatt
Carolyn Pratt Hickey
Michael Shannan Pratt
John R. Pratt
Edward T. Pratt, Jr.
William D. Pratt
Edward T. Pratt III
William D. Pratt, Jr.
Jack E. Pratt, Sr.
SCHEDULE B
SHARES HELD OF RECORD:
Stockholder holds of record 408,767 shares of Class A Common Stock, which shares
are subject to a voting trust arrangement giving Jack E. Pratt voting power.
OPTIONS:
None
ADDITIONAL VOTING SHARES:
None
ADDITIONAL DISPOSITION SHARES:
None
RECORD SHARE ENCUMBRANCES:
None
EXHIBIT 1.12
STOCKHOLDER AGREEMENT
THIS STOCKHOLDER AGREEMENT (this "Agreement") is made and
entered into as of the 7th day of August, 2002, by and between Penn National
Gaming, Inc., a Pennsylvania corporation ("Parent"), Hollywood Casino
Corporation, a Delaware corporation ("Company"), and John R. Pratt
("Stockholder"). Parent, Company and Stockholder are sometimes referred to in
this Agreement individually as a "Party" or collectively as the "Parties."
RECITALS
This Agreement is entered into with reference to the following
facts, objectives and definitions:
A. Contemporaneously with the execution and delivery of this
Agreement, Parent, P Acquisition Corp., a Delaware corporation and a
wholly-owned subsidiary of Parent ("Merger Sub"), and Company, are entering into
an Agreement and Plan of Merger, dated as of the date of this Agreement (the
"Merger Agreement"), pursuant to which it is contemplated that Company will
merge (the "Merger") with Merger Sub, upon the terms and conditions set forth in
the Merger Agreement; and
B. The Board of Directors of Company (the "Company Board") has
previously approved the Merger Agreement and the execution and delivery by
Company of this Agreement; and
C. On the date hereof each of the other stockholders of
Company set forth on Schedule A attached hereto (collectively, the "Other
Stockholders") is entering into a Stockholder Agreement in a form substantially
similar to this Agreement (collectively, the "Other Stockholder Agreements");
and
D. Stockholder owns, or has rights with respect to, certain of
the outstanding shares of Class A Common Stock, par value $0.0001 per share
("Class A Common Stock"), of Company, and may acquire rights with respect to
additional shares of Class A Common Stock after the date of this Agreement, and
desires to facilitate the consummation of the Merger, and for such purpose and
in order to induce Parent to enter into the Merger Agreement, Stockholder has
agreed, among other matters set forth herein, (i) to vote these shares and (ii)
to grant Parent or its designee an irrevocable proxy to exercise the voting
power of Stockholder with respect to these shares, all as provided in this
Agreement.
NOW, THEREFORE, in consideration of the covenants and
conditions contained in this Agreement, the Parties represent, warrant, and
agree as follows:
AGREEMENT
1. Representations and Warranties of Stockholder. Stockholder
represents and warrants that: (i) Stockholder is the holder of record (free and
clear of any liens, encumbrances, pledges or restrictions except as described
under the heading "Record Share Encumbrances" on Schedule B attached hereto (the
"Record Share Encumbrances")), of the number of outstanding shares of Class A
Common Stock, if any, set forth under the heading "Shares Held of Record" on
Schedule B attached hereto (the "Record Shares"), and, except as may be
described on Schedule B attached hereto, Stockholder possesses the sole right to
vote and dispose of the Record Shares; (ii) Stockholder holds (free and clear of
any liens, encumbrances, pledges or restrictions) the options to acquire shares
of Class A Common Stock, if any, set forth under the heading "Options" on
Schedule B attached hereto (the "Options"); (iii) except as may be described
under the heading "Additional Voting Shares" on Schedule B attached hereto
Stockholder maintains the right to vote or direct the vote of, but does not
solely own and cannot dispose of, the additional shares of Class A Common Stock,
if any, set forth under the heading "Additional Voting Shares" on Schedule B
attached hereto (the "Additional Voting Shares" and, collectively with the
Record Shares as to which Stockholder holds the right to vote, the "Voting
Shares"); (iv) Stockholder holds the right to sell or otherwise dispose of, but
cannot vote or direct the vote of, the additional shares of Class A Common
Stock, if any, set forth under the heading "Additional Disposition Shares" on
Schedule B attached hereto (the "Additional Disposition Shares" and, together
with the Record Shares as to which Stockholder holds the right of disposition,
the "Disposition Shares"; the Record Shares, the Additional Voting Shares, the
Additional Disposition Shares and the New Shares, as hereinafter defined, are
referred to in this Agreement as the "Shares"); (v) Stockholder does not
directly or indirectly hold or beneficially own any shares of capital stock or
other securities of Company, or any option, warrant or other right to acquire
capital stock or other securities of Company, or any option, warrant or other
right to acquire (by purchase, conversion or otherwise) any shares of capital
stock or other securities of Company, other than as described on Schedule B
hereto; (vi) Stockholder has full power and authority to make, enter into, and
carry out the terms of this Agreement; (vii) the execution, delivery, and
performance of this Agreement by Stockholder will not violate any agreement to
which Stockholder is a party, including, without limitation, any voting
agreement, stockholder agreement, or voting trust; and (viii) this Agreement
constitutes the legal, valid and binding obligation of Stockholder, enforceable
against Stockholder in accordance with its terms.
2. Agreement to Vote the Shares. The Record Shares are subject to a
voting trust agreement pursuant to which Jack E. Pratt has been granted an
irrevocable proxy (the "Proxy"), which provides him with the power to vote such
Record Shares. To the extent the Proxy is held invalid, unenforceable or
revoked, Stockholder shall vote all of the Voting Shares over which Stockholder
has sole voting power and will cause all of the Voting Shares over which he has
shared voting power as described on Schedule B to be voted (other than any
Shares that may have been sold in accordance with the terms of this Agreement)
(i) in favor of the Merger Agreement, and the Merger or any transaction
contemplated by the Merger Agreement, (ii) as otherwise necessary or appropriate
to enable Parent, Company and Merger Sub to consummate the transactions
contemplated by the Merger Agreement, (iii) against any action or agreement that
would result in a breach in any material aspect of any covenant, representation,
or warranty or any other obligation or agreement of Company under the Merger
Agreement, (iv) against any action or agreement that would terminate, impede,
interfere with, delay, postpone, or attempt to discourage the Merger, including,
but not limited to: (A) a sale or transfer of a material amount of the assets of
Company or any of its subsidiaries or a reorganization, recapitalization, or
liquidation of Company or any of its subsidiaries, (B) any change in the Company
Board, except as otherwise agreed to in writing by the Parties, (C) any change
in the present capitalization or dividend policy of Company, or (D) any other
change in Company's corporate structure; and (v) against any other proposal
which would result in any of the conditions to Parent's obligations under the
Merger Agreement not being fulfilled.
2
3. Grant of Irrevocable Proxy. In the event that the Proxy is held
invalid, unenforceable or revoked and Stockholder does not vote all of the
Voting Shares in accordance with Section 2 hereof, subject to the approval of
all applicable Gaming Authorities (as defined in the Merger Agreement),
Stockholder hereby irrevocably appoints Parent or any designee of Parent the
lawful agent, attorney, and proxy of Stockholder, during the term of this
Agreement, to vote all of the Voting Shares in accordance with Section 2 hereof.
Stockholder intends this proxy to be irrevocable, during the term of this
Agreement, and coupled with an interest and will take such further action or
execute such other instruments as may be necessary to effectuate the intent of
this proxy and hereby revokes any proxy previously granted by Stockholder with
respect to the Voting Shares other than the Proxy. Stockholder shall not
hereafter, unless and until the Termination Time, purport to vote (or execute a
consent with respect to) any of the Voting Shares (other than through this
irrevocable proxy or in accordance with Section 2 hereof) or grant any other
proxy or power of attorney with respect to any of the Voting Shares, deposit any
of the Voting Shares into a voting trust or enter into any agreement (other than
this Agreement), arrangement, or understanding with any person, directly or
indirectly, to vote, grant any proxy, or give instructions with respect to the
voting of any of the Voting Shares. Stockholder shall retain at all times the
right to vote the Voting Shares in Stockholder's sole discretion on all matters
other than those set forth in Section 2 hereof that are presented for a vote to
the stockholders of Company generally.
4. Manner of Voting. The Voting Shares may be voted pursuant to this
Agreement in person, by proxy, by written consent, or in any other manner
permitted by applicable law.
5. No Solicitation. From the date of this Agreement until the Effective
Time (as such date is defined in the Merger Agreement) or the Termination Time
(as hereinafter defined), Stockholder will not, nor will Stockholder permit any
investment banker, attorney, accountant or other advisor or representative of
Stockholder to, directly or indirectly, (i) initiate, solicit or encourage any
inquiries, offers or proposals that constitute, or may reasonably be expected to
lead to an Acquisition Proposal (as such term is defined in the Merger
Agreement), (ii) participate in any discussions or negotiations concerning, or
provide to any person any information or data relating to Company or any
subsidiary of Company for the purpose of making, or take any other action to
facilitate, any Acquisition Proposal or any inquiries or the making of any
proposal that constitutes, or may reasonably be expected to lead to, any
Acquisition Proposal, (iii) agree to, approve or recommend any Acquisition
Proposal or (iv) take any other action materially inconsistent with Company's
obligations and commitments assumed pursuant to Section 6.6 of the Merger
Agreement.
6. No Transfer. From the date of this Agreement until the earlier of
(a) the Effective Time (as defined in the Merger Agreement) and (b) the
Termination Time (as hereinafter defined), Stockholder shall not sell, pledge,
or otherwise transfer, dispose of or encumber any of the Record Shares,
Additional Disposition Shares or New Shares (as hereinafter defined), or any
rights in respect thereof and shall not consent to any sale, pledge or other
transfer, disposition of, or encumbrance of, any Additional Voting Shares, or
any rights in respect thereof; provided, however, that this Section 6 shall not
prohibit (i) the Record Share Encumbrances or (ii) the sale or margin of Shares
as permitted pursuant to, and in accordance with, the terms of that certain
Stockholder Agreement, dated as of even date herewith, by and between Parent,
Company and Jack E. Pratt, Sr.
3
7. Additional Purchases; Option Exercise. If, during the period
commencing on the date of this Agreement and ending on the earlier of (i) the
Effective Time and (ii) the Termination Time, Stockholder purchases or otherwise
acquires any additional shares of Class A Common Stock or any rights in respect
thereof, including, without limitation, pursuant to the exercise of
Stockholder's Options, if any, such shares (the "New Shares") shall be subject
to the terms of this Agreement and for all purposes shall be and constitute a
portion of the Shares.
8. Adjustments to Prevent Dilution. In the event of any change in the
Class A Common Stock by reason of any stock dividend, split-up,
recapitalization, combination, or the exchange of shares, the term "Shares"
shall be deemed to refer to and include the Shares as well as all such stock
dividends and distributions and any shares into which or for which any or all of
the Shares may be changed or exchanged.
9. Waiver of Appraisal Rights. Stockholder hereby irrevocably and
unconditionally waives any right of appraisal relating to the Merger that
Stockholder may have by virtue of ownership of the Shares.
10. [Intentionally Omitted.]
11. No Litigation. From the date of this Agreement through the earlier
to occur of the Termination Time or the Effective Time, the Parties agree that
the Stockholder Parties (as hereinafter defined) and the Company Controlled
Parties (as hereinafter defined) shall not bring any actions against any Company
Parties (as hereinafter defined) or Stockholder Parties, respectively, other
than with respect to an activity that is unrelated to the Company; provided,
however, that such Parties may still report or make public disclosure of any
violations of Law (as defined in the Merger Agreement).
12. General Release and Covenant Not to Sue.
(a) Release by Stockholder Parties. EFFECTIVE AS OF THE
EFFECTIVE TIME, STOCKHOLDER, ON BEHALF OF STOCKHOLDER, STOCKHOLDER'S
ATTORNEYS, HEIRS, EXECUTORS, ADMINISTRATORS, ASSIGNS, AND TRUSTS,
PARTNERSHIPS AND OTHER ENTITIES UNDER STOCKHOLDER'S CONTROL (TOGETHER
THE "STOCKHOLDER PARTIES"), HEREBY GENERALLY RELEASES AND FOREVER
DISCHARGES COMPANY AND ITS PREDECESSORS, SUCCESSORS, ASSIGNS,
SUBSIDIARIES AND AFFILIATES AND FAMILY MEMBERS (AS DEFINED BELOW),
OFFICERS (OTHER THAN PAUL YATES AND WALTER EVANS), EMPLOYEES, AGENTS,
REPRESENTATIVES, PRINCIPALS AND ATTORNEYS, AND, SUBJECT TO SECTION 14
HEREOF, DIRECTORS, PAUL YATES AND WALTER EVANS (TOGETHER THE "COMPANY
PARTIES") FROM ANY AND ALL CLAIMS, DEMANDS, LIABILITIES, SUITS,
DAMAGES, LOSSES, EXPENSES, ATTORNEYS' FEES, OBLIGATIONS OR CAUSES OF
ACTION, KNOWN OR UNKNOWN OF ANY KIND AND EVERY NATURE WHATSOEVER, AND
WHETHER OR NOT ACCRUED OR MATURED (COLLECTIVELY, "CLAIMS"), WHICH ANY
OF THEM MAY HAVE ARISING OUT OF OR RELATING TO ANY OMISSION, ACTS OR
FACTS THAT HAVE OCCURRED UP AND UNTIL AND INCLUDING THE EFFECTIVE TIME,
INCLUDING WITHOUT LIMITATION:
4
i. any and all Claims relating to, arising from, or
in connection with the following lawsuits: (a) Hollywood
Casino Corporation v. Jack E. Pratt v. Edward T. Pratt III,
Walter E. Evans and Paul C. Yates, Cause No. 02-01516, in the
District Court of Dallas County, Texas, 116th Judicial
District; (b) Hollywood Casino Corporation v. Harold C.
Simmons, et al., Civil Action No. 3:02CV0325-M, in the United
Stated District Court for the Northern District of Texas,
Dallas Division; and (c) Jack E. Pratt v. Hollywood Casino
Corporation, a Delaware corporation, C.A. No. 19504, in the
Court of Chancery of the State of Delaware in and for New
Castle County (the "Lawsuits");
ii. any and all Claims relating to, arising from, or
in connection with, the employment of Stockholder by the
Company or the termination of such employment;
iii. any and all Claims relating to, or arising from,
Stockholder's right to purchase, or actual purchase of shares
of stock of Company, including, without limitation, any Claims
for fraud, misrepresentation, breach of fiduciary duty, breach
of duty under applicable state corporate law, and securities
fraud under any state or federal law;
iv. any and all Claims for wrongful discharge of
employment; fraud; misrepresentation; termination in violation
of public policy; discrimination; breach of contract, both
express and implied; breach of a covenant of good faith and
fair dealing, both express and implied; promissory estoppel;
negligent or intentional infliction of emotional distress;
negligent or intentional misrepresentation; negligent or
intentional interference with contract or prospective economic
advantage; breach of fiduciary duty; unfair business
practices; breach of confidentiality provision, defamation;
libel; slander; negligence; personal injury; assault; battery;
invasion of privacy; false imprisonment; tortious
interference, theft, embezzlement, and conversion;
v. any and all Claims for violation of any federal,
state or municipal statute, including, but not limited to,
Title VII of the Civil Rights Act of 1964, the Civil Rights
Act of 1991, the Family Medical Leave Act, the Americans with
Disabilities Act of 1990, the Fair Labor Standards Act, the
Employee Retirement Income Security Act of 1974, The Worker
Adjustment and Retraining Notification Act, Older Workers
Benefit Protection Act and the Texas Commission on Human
Rights Act;
vi. any and all Claims for violation of the federal,
or any state, constitution;
vii. any and all Claims arising out of any other laws
and regulations relating to employment or employment
discrimination; and
viii. any and all Claims for attorneys' fees,
expenses, and costs other than fees, costs or expenses which
are otherwise indemnifiable under Section 6.8 of the Merger
Agreement.
5
"FAMILY MEMBERS" SHALL MEAN, WITH RESPECT TO ANY PARTY THAT IS AN INDIVIDUAL,
THE SPOUSE OF A PARTY, ANY PARENT OF SUCH PARTY, OR ANY LINEAL DESCENDENT OF A
PARENT OF SUCH PARTY (WHETHER NATURAL BORN OR ADOPTED).
NOTWITHSTANDING THE FOREGOING, THIS RELEASE DOES NOT IN ANY WAY RELEASE, IMPAIR,
OR LIMIT ANY OBLIGATIONS INCURRED BY OR OWING FROM THE COMPANY PARTIES (1) UNDER
THIS AGREEMENT, (2) UNDER THE MERGER AGREEMENT, INCLUDING, WITHOUT LIMITATION,
SECTION 6.8 THEREOF AND (3) WITH RESPECT TO CLAIMS UNDER THE AGE DISCRIMINATION
IN EMPLOYMENT ACT OF 1967 ("ADEA CLAIMS"). FURTHER, THIS RELEASE DOES NOT IN ANY
WAY RELEASE ANY OF COMPANY'S INSURERS FROM COVERING STOCKHOLDER FOR ANY CONDUCT,
ACTS, INJURIES, OR ACTIONS ARISING FROM, IN CONNECTION WITH, OR RELATED TO THE
TIME PERIOD SUCH PERSON WAS EMPLOYED BY OR SERVING AS AN OFFICER OR DIRECTOR OF
COMPANY.
(b) Prosecution by Stockholder and Stockholder Parties.
EFFECTIVE AS OF THE EFFECTIVE TIME, STOCKHOLDER, ON BEHALF OF
STOCKHOLDER AND THE STOCKHOLDER PARTIES, HEREBY COVENANTS FOREVER NOT
TO ASSERT, FILE, PROSECUTE, MAINTAIN, COMMENCE, INSTITUTE (OR SPONSOR
OR PURPOSELY FACILITATE ANY PERSON IN CONNECTION WITH THE FOREGOING),
ANY COMPLAINT OR LAWSUIT OR ANY LEGAL, EQUITABLE OR ADMINISTRATIVE
PROCEEDING OF ANY NATURE, AGAINST ANY OF THE COMPANY PARTIES IN
CONNECTION WITH ANY MATTER RELEASED IN SECTION 12(a), INCLUDING,
WITHOUT LIMITATION, THE LAWSUITS, AND REPRESENTS AND WARRANTS THAT TO
THE EXTENT WITHIN STOCKHOLDER'S CONTROL, NO OTHER PERSON OR ENTITY HAS
OR WILL INITIATE ANY SUCH PROCEEDING ON BEHALF OF STOCKHOLDER OR ANY
STOCKHOLDER PARTY.
NOTWITHSTANDING THE FOREGOING, THIS COVENANT DOES NOT IN ANY WAY PROHIBIT
STOCKHOLDER OR ANY OF THE STOCKHOLDER PARTIES FROM REPORTING OR MAKING PUBLIC
DISCLOSURE OF ANY VIOLATIONS OF LAW.
(c) Release by Company. EFFECTIVE AS OF THE EFFECTIVE TIME,
COMPANY, ON BEHALF OF ITSELF AND THE COMPANY PARTIES UNDER ITS CONTROL
(THE "COMPANY CONTROLLED PARTIES"), HEREBY GENERALLY RELEASES AND
FOREVER DISCHARGES STOCKHOLDER, THE STOCKHOLDER PARTIES AND THEIR
FAMILY MEMBERS FROM ANY AND ALL CLAIMS, WHICH ANY OF THEM MAY HAVE,
ARISING OUT OF OR RELATING TO ANY OMISSION, ACTS OR FACTS THAT HAVE
OCCURRED UP AND UNTIL AND INCLUDING THE EFFECTIVE TIME, INCLUDING
WITHOUT LIMITATION, THE LAWSUITS.
6
NOTWITHSTANDING THE FOREGOING, THIS RELEASE DOES NOT IN ANY WAY RELEASE, IMPAIR,
OR LIMIT (i) ANY OBLIGATIONS INCURRED BY OR OWING FROM STOCKHOLDER OR ANY OF THE
STOCKHOLDER PARTIES (1) UNDER THIS AGREEMENT, AND (2) WITH RESPECT TO ADEA
CLAIMS OR (ii) THE RIGHTS OF COMPANY OR ANY OF ITS PREDECESSORS, SUCCESSORS,
ASSIGNS OR SUBSIDIARIES AGAINST STOCKHOLDER OR STOCKHOLDER PARTIES WITH RESPECT
TO ANY CRIMINAL OR FRAUDULENT ACTIVITY OTHER THAN ACTIVITIES THAT ARE THE
SUBJECT OF THE LAWSUITS.
(d) Prosecutions by Company and Company Controlled Parties.
EFFECTIVE AS OF THE EFFECTIVE TIME, COMPANY, ON BEHALF OF ITSELF AND
THE COMPANY CONTROLLED PARTIES, HEREBY COVENANTS FOREVER NOT TO ASSERT,
FILE, PROSECUTE, MAINTAIN, COMMENCE, INSTITUTE (OR SPONSOR OR PURPOSELY
FACILITATE ANY PERSON IN CONNECTION WITH THE FOREGOING), ANY COMPLAINT
OR LAWSUIT OR ANY LEGAL, EQUITABLE OR ADMINISTRATIVE PROCEEDING OF ANY
NATURE, AGAINST ANY OF THE STOCKHOLDER PARTIES IN CONNECTION WITH ANY
MATTER RELEASED IN SECTION 12(c), INCLUDING, WITHOUT LIMITATION, THE
LAWSUITS, AND REPRESENTS AND WARRANTS THAT, TO THE EXTENT WITHIN ITS
CONTROL, NO OTHER PERSON OR ENTITY HAS INITIATED OR WILL INITIATE ANY
SUCH PROCEEDING ON ITS OR THEIR BEHALF.
NOTWITHSTANDING THE FOREGOING, THIS COVENANT DOES NOT IN ANY WAY PROHIBIT THE
COMPANY OR ANY OF THE COMPANY PARTIES FROM REPORTING OR MAKING PUBLIC DISCLOSURE
OF ANY VIOLATIONS OF LAW.
13. [Intentionally Omitted.]
14. Third-Party Beneficiary Rights. Subject to the following sentence,
no provision of this Agreement is intended to nor shall it be interpreted to
provide or create any third-party beneficiary rights or any other rights of any
kind in any other person or entity who is not a Party. The provisions of
Sections 11 and 12 are intended to and shall be interpreted to provide and
create third party beneficiary rights for each director, officer, employee, and
agent of the Company, provided that in the case of each director, Paul Yates and
Walter Evans, such person must, deliver to Stockholder a fully executed
agreement within five business days of the date of this Agreement containing
provisions, where reasonably applicable, identical to the provisions of Section
12 (with respect to the release of the Stockholder Parties).
15. Further Assurances. Each Party shall do and perform or cause to be
done and performed all such further acts and things and shall execute and
deliver all such other agreements, certificates, instruments, or documents as
any other Party shall reasonably request from time to time in order to carry out
the intent and purposes of this Agreement. No Party shall voluntarily undertake
any course of action inconsistent with satisfaction of the requirements
applicable to such Party as set forth in this Agreement, and each Party shall
promptly do all acts and take all measures as may be appropriate or necessary to
enable such Party to perform, as early as practicable, the obligations required
to be performed by such Party under this Agreement. Without limiting the
7
foregoing, if requested by Company or Parent, Stockholder will obtain a written
acknowledgement from any entity or person that Stockholder purports to act on
behalf of acknowledging that such Stockholder has the authority to execute this
Agreement on such person or entity's behalf and to so bind such person or
entity.
16. Injunctive Relief. The Parties acknowledge that it is impossible to
measure in money the damages that will accrue to one or more of them by reason
of the failure of either of them to abide by the provisions of this Agreement,
that every such provision is material, and that in the event of any such
failure, the other Party will not have an adequate remedy at law or damages.
Therefore, if any Party shall institute any action or proceeding to enforce the
provisions of this Agreement, in addition to any other relief, the court in such
action or proceeding may grant injunctive relief against any Party found to be
in breach or violation of this Agreement, as well as or in addition to any
remedies at law or damages, and such Party waives the claim or defense in any
such action or proceeding that the Party bringing such action has an adequate
remedy at law, and such Party shall not argue or assert in any such action or
proceeding the claim or defense that such remedy at law exists. No Party shall
seek and each Party shall waive any requirement for, the securing or posting of
a bond in connection with the other Party seeking or obtaining such equitable
relief.
17. Court Modification. Should any portion of this Agreement be
declared by a court of competent jurisdiction to be unreasonable, unenforceable,
or void for any reason or reasons, the involved court shall modify the
applicable provision(s) of this Agreement so as to be reasonable or as is
otherwise necessary to make this Agreement enforceable and valid and to protect
the interests of the Parties intended to be protected by this Agreement to the
maximum extent possible.
18. Facsimile Transmission and Counterparts. This Agreement may be
executed by facsimile transmission and in one or more counterparts, each of
which shall be deemed to be an original, but all of which taken together shall
constitute one and the same Agreement.
19. Notices. All notices, requests, demands, and other communications
under this Agreement ("Notices") shall be in writing and shall be delivered (i)
personally, (ii) by certified mail, return receipt requested, postage prepaid,
(iii) by overnight courier or (iv) by facsimile transmission properly addressed
as follows:
If to Parent to:
Penn National Gaming, Inc.
825 Berkshire Blvd., Suite 200
Wyomissing, PA 19610
Facsimile: (610) 373-4966
Attention: Peter M. Carlino, Chief Executive Officer
8
with a copy to:
Morgan, Lewis & Bockius LLP
1701 Market Street
Philadelphia, PA 19103
Facsimile: (215) 963-5299
Attention: Peter S. Sartorius, Esq.
If to Company to:
Hollywood Casino Corporation
Two Galleria Tower
13455 Noel Road, Suite 2200
Dallas, TX 75240
Facsimile: (972) 716-3903
Attention: Walter E. Evans, General Counsel
with a copy to:
Weil, Gotshal & Manges LLP
100 Crescent Court, Suite 1300
Dallas, TX 75201
Facsimile: (214) 746-7777
Attention: Michael A. Saslaw
and if to Stockholder, at the address specified in on the signature page to this
Agreement or, in either case, to such other address or addresses as a Party to
this Agreement may indicate to the other Party in the manner provided for in
this Paragraph 19. Notices given by mail, by overnight courier and by personal
delivery shall be deemed effective and complete upon delivery and notices by
facsimile transmission shall be deemed effective upon receipt.
20. Effective Date; Term. This Agreement shall become effective upon
(i) its execution and delivery by all Parties and (ii) the execution and
delivery of each of the Other Stockholder Agreements by the parties thereto;
provided, however, that Section 12 of this Agreement shall not become effective
until the Effective Time. This Agreement shall continue in full force and effect
until the first to occur of (A) the written agreement of all the Parties to
terminate this Agreement and (B) the termination of the Merger Agreement in
accordance with its terms (the first to occur of (A) and (B) the "Termination
Time").
21. [Intentionally Omitted.]
22. Gaming Approvals; Cooperation. Company shall (i) promptly file all
required applications to obtain the approvals from all applicable Gaming
Authorities necessary for Stockholder to grant the proxy set forth in Section 3,
(ii) shall request an accelerated review from such Gaming Authorities in
connection with such filings, and (iii) shall otherwise use its reasonable best
efforts to obtain such approvals. Each of the Parties shall use such Party's
9
reasonable best efforts to cooperate with Company and all applicable Gaming
Authorities in making such filings and obtaining such approvals.
23. OTHER AGREEMENTS.
(a) This Agreement supersedes all prior agreements or
understandings of the Parties on the subject matter of this Agreement.
There are no representations, warranties, or agreements, whether
express or implied, or oral or written, with respect to the subject
matter of this Agreement, except as set forth in this Agreement. This
Agreement (i) shall not be modified by any oral agreement, either
express or implied, and all amendments or modifications of this
Agreement shall be in writing and be signed by all of the Parties, and
(ii) shall be binding on and shall inure to the benefit of the Parties
and their respective heirs, legal representatives, successors and
assigns.
(b) The paragraph headings in this Agreement are for the
purpose of convenience only and shall not limit or otherwise affect any
of the terms of this Agreement.
(c) Should any Party be in default under or breach of any of
the covenants or agreements contained in this Agreement, or in the
event a dispute shall arise as to the meaning of any term of this
Agreement, the defaulting or nonprevailing Party shall pay all costs
and expenses, including reasonable attorneys' fees, of the other Party
that may arise or accrue from enforcing this Agreement, securing an
interpretation of any provision of this Agreement, or in pursuing any
remedy provided by law whether such remedy is pursued or interpretation
is sought by the filing of a lawsuit, an appeal, or otherwise.
(d) This Agreement shall be governed by and construed in
accordance with the internal laws of the State of Delaware, which
internal laws exclude any provision or interpretation of such laws that
would call for, or permit, the application of the laws of any other
state or jurisdiction, and any dispute arising therefrom and the
remedies available shall be determined solely in accordance with such
internal laws.
(e) Where the context requires, the singular shall include the
plural, the plural shall include the singular, and any gender shall
include all other genders.
(f) Stockholder certifies that Stockholder has read the terms
of this Agreement, that Stockholder has been informed by this document
that Stockholder should discuss this Agreement with the attorney of
Stockholder's own choice, that Stockholder has had an opportunity to do
so and that Stockholder understands this Agreement's terms and effects.
(g) The Parties have jointly participated jointly in the
negotiation and drafting of this Agreement. In the event any ambiguity
or question of intent or interpretation arises, this Agreement shall be
construed as if drafted jointly by the Parties and no presumption or
burden of proof shall arise favoring or disfavoring any Party by virtue
of the authorship of any provisions of this Agreement.
10
IN WITNESS WHEREOF, each of the Parties has executed this Agreement on
or as of the date of this Agreement.
PARENT:
PENN NATIONAL GAMING, INC.
By: /s/ Robert S. Ippolito
---------------------------------------
Name: Robert S. Ippolito
Title: Vice President, Secretary
and Treasurer
COMPANY:
HOLLYWOOD CASINO CORPORATION
By: /s/ Edward T. Pratt III
---------------------------------------
Name: Edward T. Pratt III
Title: Chief Executive Officer
STOCKHOLDER:
/s/ John R. Pratt
- --------------------------------
John R. Pratt
Address:
- ----------------------------------------------------------
- ----------------------------------------------------------
- ----------------------------------------------------------
Telephone:
-------------------------------------
Facsimile:
-------------------------------------
With a copy to:
Sayles, Lidji & Werbner
Attn: Brian M. Lidji
4400 Renaissance Tower
1201 Elm Street
Dallas, Texas 75270
Facsimile: (214) 939-8787
SCHEDULE A
OTHER STOCKHOLDERS EXECUTING STOCKHOLDER AGREEMENTS
Maria A. Pratt
Sharon Pratt Naftel
Diana Pratt Wyatt
Carolyn Pratt Hickey
Michael Shannan Pratt
Jill Pratt LaFerney
Edward T. Pratt, Jr.
William D. Pratt
Edward T. Pratt III
William D. Pratt, Jr.
Jack E. Pratt, Sr.
SCHEDULE B
SHARES HELD OF RECORD:
Stockholder holds of record 521,616 shares of Class A Common Stock, which shares
are subject to a voting trust arrangement giving Jack E. Pratt voting power.
OPTIONS:
Total of 7,500 options, of which options to acquire 4,500 shares of Class A
Common Stock are vested, and 3,000 additional shares vest in 1,500 share
increments on December 1 of 2002 and 2003. The right to acquire these 7,500
shares will expire on April 5, 2009. All of such options, which have not been
previously exercised, will vest at the Effective Time of the Merger.
ADDITIONAL VOTING SHARES:
None
ADDITIONAL DISPOSITION SHARES:
None
RECORD SHARE ENCUMBRANCES:
Stockholder has a margin loan for $75,000 secured by approximately 501,000
shares of Class A Common Stock in an account and a margin loan for $15,000
secured by approximately 15,000 shares of Class A Common Stock in an account.
EXHIBIT 1.13
STOCKHOLDER AGREEMENT
THIS STOCKHOLDER AGREEMENT (this "Agreement") is made and
entered into as of the 7th day of August, 2002, by and between Penn National
Gaming, Inc., a Pennsylvania corporation ("Parent"), Hollywood Casino
Corporation, a Delaware corporation ("Company"), and William D. Pratt, Jr.
("Stockholder"). Parent, Company and Stockholder are sometimes referred to in
this Agreement individually as a "Party" or collectively as the "Parties."
RECITALS
This Agreement is entered into with reference to the following
facts, objectives and definitions:
A. Contemporaneously with the execution and delivery of this
Agreement, Parent, P Acquisition Corp., a Delaware corporation and a
wholly-owned subsidiary of Parent ("Merger Sub"), and Company, are entering into
an Agreement and Plan of Merger, dated as of the date of this Agreement (the
"Merger Agreement"), pursuant to which it is contemplated that Company will
merge (the "Merger") with Merger Sub, upon the terms and conditions set forth in
the Merger Agreement; and
B. The Board of Directors of Company (the "Company Board") has
previously approved the Merger Agreement and the execution and delivery by
Company of this Agreement; and
C. On the date hereof each of the other stockholders of
Company set forth on Schedule A attached hereto (collectively, the "Other
Stockholders") is entering into a Stockholder Agreement in a form substantially
similar to this Agreement (collectively, the "Other Stockholder Agreements");
and
D. Stockholder owns, or has rights with respect to, certain of
the outstanding shares of Class A Common Stock, par value $0.0001 per share
("Class A Common Stock"), of Company, and may acquire rights with respect to
additional shares of Class A Common Stock after the date of this Agreement, and
desires to facilitate the consummation of the Merger, and for such purpose and
in order to induce Parent to enter into the Merger Agreement, Stockholder has
agreed, among other matters set forth herein, (i) to vote these shares and (ii)
to grant Parent or its designee an irrevocable proxy to exercise the voting
power of Stockholder with respect to these shares, all as provided in this
Agreement.
NOW, THEREFORE, in consideration of the covenants and
conditions contained in this Agreement, the Parties represent, warrant, and
agree as follows:
AGREEMENT
1. Representations and Warranties of Stockholder. Stockholder
represents and warrants that: (i) Stockholder is the holder of record (free and
clear of any liens, encumbrances, pledges or restrictions except as described
under the heading "Record Share Encumbrances" on Schedule B attached hereto (the
"Record Share Encumbrances")), of the number of outstanding shares of Class A
Common Stock, if any, set forth under the heading "Shares Held of Record" on
Schedule B attached hereto (the "Record Shares"), and, except as may be
described on Schedule B attached hereto, Stockholder possesses the sole right to
vote and dispose of the Record Shares; (ii) Stockholder holds (free and clear of
any liens, encumbrances, pledges or restrictions) the options to acquire shares
of Class A Common Stock, if any, set forth under the heading "Options" on
Schedule B attached hereto (the "Options"); (iii) except as may be described
under the heading "Additional Voting Shares" on Schedule B attached hereto
Stockholder maintains the right to vote or direct the vote of, but does not
solely own and cannot dispose of, the additional shares of Class A Common Stock,
if any, set forth under the heading "Additional Voting Shares" on Schedule B
attached hereto (the "Additional Voting Shares" and, collectively with the
Record Shares as to which Stockholder holds the right to vote, the "Voting
Shares"); (iv) Stockholder holds the right to sell or otherwise dispose of, but
cannot vote or direct the vote of, the additional shares of Class A Common
Stock, if any, set forth under the heading "Additional Disposition Shares" on
Schedule B attached hereto (the "Additional Disposition Shares" and, together
with the Record Shares as to which Stockholder holds the right of disposition,
the "Disposition Shares"; the Record Shares, the Additional Voting Shares, the
Additional Disposition Shares and the New Shares, as hereinafter defined, are
referred to in this Agreement as the "Shares"); (v) Stockholder does not
directly or indirectly hold or beneficially own any shares of capital stock or
other securities of Company, or any option, warrant or other right to acquire
capital stock or other securities of Company, or any option, warrant or other
right to acquire (by purchase, conversion or otherwise) any shares of capital
stock or other securities of Company, other than as described on Schedule B
hereto; (vi) Stockholder has full power and authority to make, enter into, and
carry out the terms of this Agreement; (vii) the execution, delivery, and
performance of this Agreement by Stockholder will not violate any agreement to
which Stockholder is a party, including, without limitation, any voting
agreement, stockholder agreement, or voting trust; and (viii) this Agreement
constitutes the legal, valid and binding obligation of Stockholder, enforceable
against Stockholder in accordance with its terms.
2. Agreement to Vote the Shares. The Record Shares are subject to a
voting trust agreement pursuant to which William D. Pratt has been granted an
irrevocable proxy (the "Proxy"), which provides him with the power to vote such
Record Shares. To the extent the Proxy is held invalid, unenforceable or
revoked, Stockholder shall vote all of the Voting Shares over which Stockholder
has sole voting power and will cause all of the Voting Shares over which he has
shared voting power as described on Schedule B to be voted (other than any
Shares that may have been sold in accordance with the terms of this Agreement)
(i) in favor of the Merger Agreement, and the Merger or any transaction
contemplated by the Merger Agreement, (ii) as otherwise necessary or appropriate
to enable Parent, Company and Merger Sub to consummate the transactions
contemplated by the Merger Agreement, (iii) against any action or agreement that
would result in a breach in any material aspect of any covenant, representation,
or warranty or any other obligation or agreement of Company under the Merger
Agreement, (iv) against any action or agreement that would terminate, impede,
interfere with, delay, postpone, or attempt to discourage the Merger, including,
but not limited to: (A) a sale or transfer of a material amount of the assets of
Company or any of its subsidiaries or a reorganization, recapitalization, or
liquidation of Company or any of its subsidiaries, (B) any change in the Company
Board, except as otherwise agreed to in writing by the Parties, (C) any change
in the present capitalization or dividend policy of Company, or (D) any other
change in Company's corporate structure; and (v) against any other proposal
which would result in any of the conditions to Parent's obligations under the
Merger Agreement not being fulfilled.
2
3. Grant of Irrevocable Proxy. In the event that the Proxy is held
invalid, unenforceable or revoked and Stockholder does not vote all of the
Voting Shares in accordance with Section 2 hereof, subject to the approval of
all applicable Gaming Authorities (as defined in the Merger Agreement),
Stockholder hereby irrevocably appoints Parent or any designee of Parent the
lawful agent, attorney, and proxy of Stockholder, during the term of this
Agreement, to vote all of the Voting Shares in accordance with Section 2 hereof.
Stockholder intends this proxy to be irrevocable, during the term of this
Agreement, and coupled with an interest and will take such further action or
execute such other instruments as may be necessary to effectuate the intent of
this proxy and hereby revokes any proxy previously granted by Stockholder with
respect to the Voting Shares other than the Proxy. Stockholder shall not
hereafter, unless and until the Termination Time, purport to vote (or execute a
consent with respect to) any of the Voting Shares (other than through this
irrevocable proxy or in accordance with Section 2 hereof) or grant any other
proxy or power of attorney with respect to any of the Voting Shares, deposit any
of the Voting Shares into a voting trust or enter into any agreement (other than
this Agreement), arrangement, or understanding with any person, directly or
indirectly, to vote, grant any proxy, or give instructions with respect to the
voting of any of the Voting Shares. Stockholder shall retain at all times the
right to vote the Voting Shares in Stockholder's sole discretion on all matters
other than those set forth in Section 2 hereof that are presented for a vote to
the stockholders of Company generally.
4. Manner of Voting. The Voting Shares may be voted pursuant to this
Agreement in person, by proxy, by written consent, or in any other manner
permitted by applicable law.
5. No Solicitation. From the date of this Agreement until the Effective
Time (as such date is defined in the Merger Agreement) or the Termination Time
(as hereinafter defined), Stockholder will not, nor will Stockholder permit any
investment banker, attorney, accountant or other advisor or representative of
Stockholder to, directly or indirectly, (i) initiate, solicit or encourage any
inquiries, offers or proposals that constitute, or may reasonably be expected to
lead to an Acquisition Proposal (as such term is defined in the Merger
Agreement), (ii) participate in any discussions or negotiations concerning, or
provide to any person any information or data relating to Company or any
subsidiary of Company for the purpose of making, or take any other action to
facilitate, any Acquisition Proposal or any inquiries or the making of any
proposal that constitutes, or may reasonably be expected to lead to, any
Acquisition Proposal, (iii) agree to, approve or recommend any Acquisition
Proposal or (iv) take any other action materially inconsistent with Company's
obligations and commitments assumed pursuant to Section 6.6 of the Merger
Agreement.
6. No Transfer. From the date of this Agreement until the earlier of
(a) the Effective Time (as defined in the Merger Agreement) and (b) the
Termination Time (as hereinafter defined), Stockholder shall not sell, pledge,
or otherwise transfer, dispose of or encumber any of the Record Shares,
Additional Disposition Shares or New Shares (as hereinafter defined), or any
rights in respect thereof and shall not consent to any sale, pledge or other
transfer, disposition of, or encumbrance of, any Additional Voting Shares, or
any rights in respect thereof; provided, however, that this Section 6 shall not
prohibit the Record Share Encumbrances.
3
7. Additional Purchases; Option Exercise. If, during the period
commencing on the date of this Agreement and ending on the earlier of (i) the
Effective Time and (ii) the Termination Time, Stockholder purchases or otherwise
acquires any additional shares of Class A Common Stock or any rights in respect
thereof, including, without limitation, pursuant to the exercise of
Stockholder's Options, if any, such shares (the "New Shares") shall be subject
to the terms of this Agreement and for all purposes shall be and constitute a
portion of the Shares.
8. Adjustments to Prevent Dilution. In the event of any change in the
Class A Common Stock by reason of any stock dividend, split-up,
recapitalization, combination, or the exchange of shares, the term "Shares"
shall be deemed to refer to and include the Shares as well as all such stock
dividends and distributions and any shares into which or for which any or all of
the Shares may be changed or exchanged.
9. Waiver of Appraisal Rights. Stockholder hereby irrevocably and
unconditionally waives any right of appraisal relating to the Merger that
Stockholder may have by virtue of ownership of the Shares.
10. [Intentionally Omitted.]
11. No Litigation. From the date of this Agreement through the earlier
to occur of the Termination Time or the Effective Time, the Parties agree that
the Stockholder Parties (as hereinafter defined) and the Company Controlled
Parties (as hereinafter defined) shall not bring any actions against any Company
Parties (as hereinafter defined) or Stockholder Parties, respectively, other
than with respect to an activity that is unrelated to the Company; provided,
however, that such Parties may still report or make public disclosure of any
violations of Law (as defined in the Merger Agreement).
12. General Release and Covenant Not to Sue.
(a) Release by Stockholder Parties. EFFECTIVE AS OF THE
EFFECTIVE TIME, STOCKHOLDER, ON BEHALF OF STOCKHOLDER, STOCKHOLDER'S
ATTORNEYS, HEIRS, EXECUTORS, ADMINISTRATORS, ASSIGNS, AND TRUSTS,
PARTNERSHIPS AND OTHER ENTITIES UNDER STOCKHOLDER'S CONTROL (TOGETHER
THE "STOCKHOLDER PARTIES"), HEREBY GENERALLY RELEASES AND FOREVER
DISCHARGES COMPANY AND ITS PREDECESSORS, SUCCESSORS, ASSIGNS,
SUBSIDIARIES AND AFFILIATES AND FAMILY MEMBERS (AS DEFINED BELOW),
OFFICERS (OTHER THAN PAUL YATES AND WALTER EVANS), EMPLOYEES, AGENTS,
REPRESENTATIVES, PRINCIPALS AND ATTORNEYS, AND, SUBJECT TO SECTION 14
HEREOF, DIRECTORS, PAUL YATES AND WALTER EVANS (TOGETHER THE "COMPANY
PARTIES") FROM ANY AND ALL CLAIMS, DEMANDS, LIABILITIES, SUITS,
DAMAGES, LOSSES, EXPENSES, ATTORNEYS' FEES, OBLIGATIONS OR CAUSES OF
ACTION, KNOWN OR UNKNOWN OF ANY KIND AND EVERY NATURE WHATSOEVER, AND
WHETHER OR NOT ACCRUED OR MATURED (COLLECTIVELY, "CLAIMS"), WHICH ANY
OF THEM MAY HAVE ARISING OUT OF OR RELATING TO ANY OMISSION, ACTS OR
FACTS THAT HAVE OCCURRED UP AND UNTIL AND INCLUDING THE EFFECTIVE TIME,
INCLUDING WITHOUT LIMITATION:
4
i. any and all Claims relating to, arising from, or
in connection with the following lawsuits: (a) Hollywood
Casino Corporation v. Jack E. Pratt v. Edward T. Pratt III,
Walter E. Evans and Paul C. Yates, Cause No. 02-01516, in the
District Court of Dallas County, Texas, 116th Judicial
District; (b) Hollywood Casino Corporation v. Harold C.
Simmons, et al., Civil Action No. 3:02CV0325-M, in the United
Stated District Court for the Northern District of Texas,
Dallas Division; and (c) Jack E. Pratt v. Hollywood Casino
Corporation, a Delaware corporation, C.A. No. 19504, in the
Court of Chancery of the State of Delaware in and for New
Castle County (the "Lawsuits");
ii. any and all Claims relating to, arising from, or
in connection with, the employment of Stockholder by the
Company or the termination of such employment;
iii. any and all Claims relating to, or arising from,
Stockholder's right to purchase, or actual purchase of shares
of stock of Company, including, without limitation, any Claims
for fraud, misrepresentation, breach of fiduciary duty, breach
of duty under applicable state corporate law, and securities
fraud under any state or federal law;
iv. any and all Claims for wrongful discharge of
employment; fraud; misrepresentation; termination in violation
of public policy; discrimination; breach of contract, both
express and implied; breach of a covenant of good faith and
fair dealing, both express and implied; promissory estoppel;
negligent or intentional infliction of emotional distress;
negligent or intentional misrepresentation; negligent or
intentional interference with contract or prospective economic
advantage; breach of fiduciary duty; unfair business
practices; breach of confidentiality provision, defamation;
libel; slander; negligence; personal injury; assault; battery;
invasion of privacy; false imprisonment; tortious
interference, theft, embezzlement, and conversion;
v. any and all Claims for violation of any federal,
state or municipal statute, including, but not limited to,
Title VII of the Civil Rights Act of 1964, the Civil Rights
Act of 1991, the Family Medical Leave Act, the Americans with
Disabilities Act of 1990, the Fair Labor Standards Act, the
Employee Retirement Income Security Act of 1974, The Worker
Adjustment and Retraining Notification Act, Older Workers
Benefit Protection Act and the Texas Commission on Human
Rights Act;
vi. any and all Claims for violation of the federal,
or any state, constitution;
vii. any and all Claims arising out of any other laws
and regulations relating to employment or employment
discrimination; and
viii. any and all Claims for attorneys' fees,
expenses, and costs other than fees, costs or expenses which
are otherwise indemnifiable under Section 6.8 of the Merger
Agreement.
5
"FAMILY MEMBERS" SHALL MEAN, WITH RESPECT TO ANY PARTY THAT IS AN INDIVIDUAL,
THE SPOUSE OF A PARTY, ANY PARENT OF SUCH PARTY, OR ANY LINEAL DESCENDENT OF A
PARENT OF SUCH PARTY (WHETHER NATURAL BORN OR ADOPTED).
NOTWITHSTANDING THE FOREGOING, THIS RELEASE DOES NOT IN ANY WAY RELEASE, IMPAIR,
OR LIMIT ANY OBLIGATIONS INCURRED BY OR OWING FROM THE COMPANY PARTIES (1) UNDER
THIS AGREEMENT, (2) UNDER THE MERGER AGREEMENT, INCLUDING, WITHOUT LIMITATION,
SECTION 6.8 THEREOF AND (3) WITH RESPECT TO CLAIMS UNDER THE AGE DISCRIMINATION
IN EMPLOYMENT ACT OF 1967 ("ADEA CLAIMS"). FURTHER, THIS RELEASE DOES NOT IN ANY
WAY RELEASE ANY OF COMPANY'S INSURERS FROM COVERING STOCKHOLDER FOR ANY CONDUCT,
ACTS, INJURIES, OR ACTIONS ARISING FROM, IN CONNECTION WITH, OR RELATED TO THE
TIME PERIOD SUCH PERSON WAS EMPLOYED BY OR SERVING AS AN OFFICER OR DIRECTOR OF
COMPANY. FURTHER, THIS RELEASE SHALL NOT APPLY TO THE PENDING LITIGATION BETWEEN
COMPANY AND STOCKHOLDER REGARDING STOCKHOLDER'S EMPLOYMENT WITH THE COMPANY.
(b) Prosecution by Stockholder and Stockholder Parties.
EFFECTIVE AS OF THE EFFECTIVE TIME, STOCKHOLDER, ON BEHALF OF
STOCKHOLDER AND THE STOCKHOLDER PARTIES, HEREBY COVENANTS FOREVER NOT
TO ASSERT, FILE, PROSECUTE, MAINTAIN, COMMENCE, INSTITUTE (OR SPONSOR
OR PURPOSELY FACILITATE ANY PERSON IN CONNECTION WITH THE FOREGOING),
ANY COMPLAINT OR LAWSUIT OR ANY LEGAL, EQUITABLE OR ADMINISTRATIVE
PROCEEDING OF ANY NATURE, AGAINST ANY OF THE COMPANY PARTIES IN
CONNECTION WITH ANY MATTER RELEASED IN SECTION 12(a), INCLUDING,
WITHOUT LIMITATION, THE LAWSUITS, AND REPRESENTS AND WARRANTS THAT TO
THE EXTENT WITHIN STOCKHOLDER'S CONTROL, NO OTHER PERSON OR ENTITY HAS
OR WILL INITIATE ANY SUCH PROCEEDING ON BEHALF OF STOCKHOLDER OR ANY
STOCKHOLDER PARTY.
NOTWITHSTANDING THE FOREGOING, THIS COVENANT DOES NOT IN ANY WAY PROHIBIT
STOCKHOLDER OR ANY OF THE STOCKHOLDER PARTIES FROM REPORTING OR MAKING PUBLIC
DISCLOSURE OF ANY VIOLATIONS OF LAW AND THIS COVENANT SHALL NOT APPLY TO THE
PENDING LITIGATION BETWEEN COMPANY AND STOCKHOLDER REGARDING STOCKHOLDER'S
EMPLOYMENT WITH THE COMPANY.
(c) Release by Company. EFFECTIVE AS OF THE EFFECTIVE TIME,
COMPANY, ON BEHALF OF ITSELF AND THE COMPANY PARTIES UNDER ITS CONTROL
(THE "COMPANY CONTROLLED PARTIES"), HEREBY GENERALLY RELEASES AND
FOREVER DISCHARGES STOCKHOLDER, THE STOCKHOLDER PARTIES AND THEIR
FAMILY MEMBERS FROM ANY AND ALL CLAIMS, WHICH ANY OF THEM MAY HAVE,
6
ARISING OUT OF OR RELATING TO ANY OMISSION, ACTS OR FACTS THAT HAVE
OCCURRED UP AND UNTIL AND INCLUDING THE EFFECTIVE TIME, INCLUDING
WITHOUT LIMITATION, THE LAWSUITS.
NOTWITHSTANDING THE FOREGOING, THIS RELEASE DOES NOT IN ANY WAY RELEASE, IMPAIR,
OR LIMIT (i) ANY OBLIGATIONS INCURRED BY OR OWING FROM STOCKHOLDER OR ANY OF THE
STOCKHOLDER PARTIES (1) UNDER THIS AGREEMENT, AND (2) WITH RESPECT TO ADEA
CLAIMS OR (ii) THE RIGHTS OF COMPANY OR ANY OF ITS PREDECESSORS, SUCCESSORS,
ASSIGNS OR SUBSIDIARIES AGAINST STOCKHOLDER OR STOCKHOLDER PARTIES WITH RESPECT
TO ANY CRIMINAL OR FRAUDULENT ACTIVITY OTHER THAN ACTIVITIES THAT ARE THE
SUBJECT OF THE LAWSUITS. FURTHER, THIS RELEASE SHALL NOT APPLY TO THE PENDING
LITIGATION BETWEEN COMPANY AND STOCKHOLDER REGARDING STOCKHOLDER'S EMPLOYMENT
WITH THE COMPANY.
(d) Prosecutions by Company and Company Controlled Parties.
EFFECTIVE AS OF THE EFFECTIVE TIME, COMPANY, ON BEHALF OF ITSELF AND
THE COMPANY CONTROLLED PARTIES, HEREBY COVENANTS FOREVER NOT TO ASSERT,
FILE, PROSECUTE, MAINTAIN, COMMENCE, INSTITUTE (OR SPONSOR OR PURPOSELY
FACILITATE ANY PERSON IN CONNECTION WITH THE FOREGOING), ANY COMPLAINT
OR LAWSUIT OR ANY LEGAL, EQUITABLE OR ADMINISTRATIVE PROCEEDING OF ANY
NATURE, AGAINST ANY OF THE STOCKHOLDER PARTIES IN CONNECTION WITH ANY
MATTER RELEASED IN SECTION 12(c), INCLUDING, WITHOUT LIMITATION, THE
LAWSUITS, AND REPRESENTS AND WARRANTS THAT, TO THE EXTENT WITHIN ITS
CONTROL, NO OTHER PERSON OR ENTITY HAS INITIATED OR WILL INITIATE ANY
SUCH PROCEEDING ON ITS OR THEIR BEHALF.
NOTWITHSTANDING THE FOREGOING, THIS COVENANT DOES NOT IN ANY WAY PROHIBIT THE
COMPANY OR ANY OF THE COMPANY PARTIES FROM REPORTING OR MAKING PUBLIC DISCLOSURE
OF ANY VIOLATIONS OF LAW AND THIS COVENANT SHALL NOT APPLY TO THE PENDING
LITIGATION BETWEEN COMPANY AND STOCKHOLDER REGARDING STOCKHOLDER'S EMPLOYMENT
WITH THE COMPANY.
13. [Intentionally Omitted.]
14. Third-Party Beneficiary Rights. Subject to the following sentence,
no provision of this Agreement is intended to nor shall it be interpreted to
provide or create any third-party beneficiary rights or any other rights of any
kind in any other person or entity who is not a Party. The provisions of
Sections 11 and 12 are intended to and shall be interpreted to provide and
create third party beneficiary rights for each director, officer, employee, and
agent of the Company, provided that in the case of each director, Paul Yates and
Walter Evans, such person must, deliver to Stockholder a fully executed
agreement within five business days of the date of this Agreement containing
7
provisions, where reasonably applicable, identical to the provisions of Section
12 (with respect to the release of the Stockholder Parties).
15. Further Assurances. Each Party shall do and perform or cause to be
done and performed all such further acts and things and shall execute and
deliver all such other agreements, certificates, instruments, or documents as
any other Party shall reasonably request from time to time in order to carry out
the intent and purposes of this Agreement. No Party shall voluntarily undertake
any course of action inconsistent with satisfaction of the requirements
applicable to such Party as set forth in this Agreement, and each Party shall
promptly do all acts and take all measures as may be appropriate or necessary to
enable such Party to perform, as early as practicable, the obligations required
to be performed by such Party under this Agreement. Without limiting the
foregoing, if requested by Company or Parent, Stockholder will obtain a written
acknowledgement from any entity or person that Stockholder purports to act on
behalf of acknowledging that such Stockholder has the authority to execute this
Agreement on such person or entity's behalf and to so bind such person or
entity.
16. Injunctive Relief. The Parties acknowledge that it is impossible to
measure in money the damages that will accrue to one or more of them by reason
of the failure of either of them to abide by the provisions of this Agreement,
that every such provision is material, and that in the event of any such
failure, the other Party will not have an adequate remedy at law or damages.
Therefore, if any Party shall institute any action or proceeding to enforce the
provisions of this Agreement, in addition to any other relief, the court in such
action or proceeding may grant injunctive relief against any Party found to be
in breach or violation of this Agreement, as well as or in addition to any
remedies at law or damages, and such Party waives the claim or defense in any
such action or proceeding that the Party bringing such action has an adequate
remedy at law, and such Party shall not argue or assert in any such action or
proceeding the claim or defense that such remedy at law exists. No Party shall
seek and each Party shall waive any requirement for, the securing or posting of
a bond in connection with the other Party seeking or obtaining such equitable
relief.
17. Court Modification. Should any portion of this Agreement be
declared by a court of competent jurisdiction to be unreasonable, unenforceable,
or void for any reason or reasons, the involved court shall modify the
applicable provision(s) of this Agreement so as to be reasonable or as is
otherwise necessary to make this Agreement enforceable and valid and to protect
the interests of the Parties intended to be protected by this Agreement to the
maximum extent possible.
18. Facsimile Transmission and Counterparts. This Agreement may be
executed by facsimile transmission and in one or more counterparts, each of
which shall be deemed to be an original, but all of which taken together shall
constitute one and the same Agreement.
19. Notices. All notices, requests, demands, and other communications
under this Agreement ("Notices") shall be in writing and shall be delivered (i)
personally, (ii) by certified mail, return receipt requested, postage prepaid,
(iii) by overnight courier or (iv) by facsimile transmission properly addressed
as follows:
8
If to Parent to:
Penn National Gaming, Inc.
825 Berkshire Blvd., Suite 200
Wyomissing, PA 19610
Facsimile: (610) 373-4966
Attention: Peter M. Carlino, Chief Executive Officer
with a copy to:
Morgan, Lewis & Bockius LLP
1701 Market Street
Philadelphia, PA 19103
Facsimile: (215) 963-5299
Attention: Peter S. Sartorius, Esq.
If to Company to:
Hollywood Casino Corporation
Two Galleria Tower
13455 Noel Road, Suite 2200
Dallas, TX 75240
Facsimile: (972) 716-3903
Attention: Walter E. Evans, General Counsel
with a copy to:
Weil, Gotshal & Manges LLP
100 Crescent Court, Suite 1300
Dallas, TX 75201
Facsimile: (214) 746-7777
Attention: Michael A. Saslaw
and if to Stockholder, at the address specified in on the signature page to this
Agreement or, in either case, to such other address or addresses as a Party to
this Agreement may indicate to the other Party in the manner provided for in
this Paragraph 19. Notices given by mail, by overnight courier and by personal
delivery shall be deemed effective and complete upon delivery and notices by
facsimile transmission shall be deemed effective upon receipt.
20. Effective Date; Term. This Agreement shall become effective upon
(i) its execution and delivery by all Parties and (ii) the execution and
delivery of each of the Other Stockholder Agreements by the parties thereto;
provided, however, that Section 12 of this Agreement shall not become effective
until the Effective Time. This Agreement shall continue in full force and effect
until the first to occur of (A) the written agreement of all the Parties to
terminate this Agreement and (B) the termination of the Merger Agreement in
accordance with its terms (the first to occur of (A) and (B) the "Termination
Time").
9
21. [Intentionally Omitted.]
22. Gaming Approvals; Cooperation. Company shall (i) promptly file all
required applications to obtain the approvals from all applicable Gaming
Authorities necessary for Stockholder to grant the proxy set forth in Section 3,
(ii) shall request an accelerated review from such Gaming Authorities in
connection with such filings, and (iii) shall otherwise use its reasonable best
efforts to obtain such approvals. Each of the Parties shall use such Party's
reasonable best efforts to cooperate with Company and all applicable Gaming
Authorities in making such filings and obtaining such approvals.
23. Other Agreements.
(a) This Agreement supersedes all prior agreements or
understandings of the Parties on the subject matter of this Agreement.
There are no representations, warranties, or agreements, whether
express or implied, or oral or written, with respect to the subject
matter of this Agreement, except as set forth in this Agreement. This
Agreement (i) shall not be modified by any oral agreement, either
express or implied, and all amendments or modifications of this
Agreement shall be in writing and be signed by all of the Parties, and
(ii) shall be binding on and shall inure to the benefit of the Parties
and their respective heirs, legal representatives, successors and
assigns.
(b) The paragraph headings in this Agreement are for the
purpose of convenience only and shall not limit or otherwise affect any
of the terms of this Agreement.
(c) Should any Party be in default under or breach of any of
the covenants or agreements contained in this Agreement, or in the
event a dispute shall arise as to the meaning of any term of this
Agreement, the defaulting or nonprevailing Party shall pay all costs
and expenses, including reasonable attorneys' fees, of the other Party
that may arise or accrue from enforcing this Agreement, securing an
interpretation of any provision of this Agreement, or in pursuing any
remedy provided by law whether such remedy is pursued or interpretation
is sought by the filing of a lawsuit, an appeal, or otherwise.
(d) This Agreement shall be governed by and construed in
accordance with the internal laws of the State of Delaware, which
internal laws exclude any provision or interpretation of such laws that
would call for, or permit, the application of the laws of any other
state or jurisdiction, and any dispute arising therefrom and the
remedies available shall be determined solely in accordance with such
internal laws.
(e) Where the context requires, the singular shall include the
plural, the plural shall include the singular, and any gender shall
include all other genders.
(f) Stockholder certifies that Stockholder has read the terms
of this Agreement, that Stockholder has been informed by this document
that Stockholder should discuss this Agreement with the attorney of
Stockholder's own choice, that Stockholder has had an opportunity to do
so and that Stockholder understands this Agreement's terms and effects.
10
(g) The Parties have jointly participated jointly in the
negotiation and drafting of this Agreement. In the event any ambiguity
or question of intent or interpretation arises, this Agreement shall be
construed as if drafted jointly by the Parties and no presumption or
burden of proof shall arise favoring or disfavoring any Party by virtue
of the authorship of any provisions of this Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
11
IN WITNESS WHEREOF, each of the Parties has executed this Agreement on
or as of the date of this Agreement.
PARENT:
PENN NATIONAL GAMING, INC.
By: /s/ Robert S. Ippolito
---------------------------------------
Name: Robert S. Ippolito
Title: Vice President, Secretary
and Treasurer
COMPANY:
HOLLYWOOD CASINO CORPORATION
By: /s/ Edward T. Pratt III
---------------------------------------
Name: Edward T. Pratt III
Title: Chief Executive Officer
STOCKHOLDER:
/s/ William D. Pratt, Jr.
- ----------------------------------
William D. Pratt, Jr.
Address:
- ----------------------------------------------------------
- ----------------------------------------------------------
- ----------------------------------------------------------
Telephone:
-------------------------------------
Facsimile:
-------------------------------------
With a copy to:
Sayles, Lidji & Werbner
Attn: Brian M. Lidji
4400 Renaissance Tower
1201 Elm Street
Dallas, Texas 75270
Facsimile: (214) 939-8787
SCHEDULE A
OTHER STOCKHOLDERS EXECUTING STOCKHOLDER AGREEMENTS
Maria A. Pratt
Sharon Pratt Naftel
Diana Pratt Wyatt
Carolyn Pratt Hickey
Michael Shannan Pratt
Jill Pratt LaFerney
John R. Pratt
Edward T. Pratt, Jr.
William D. Pratt
Edward T. Pratt III
Jack E. Pratt, Sr.
SCHEDULE B
SHARES HELD OF RECORD:
None
OPTIONS:
None
ADDITIONAL VOTING SHARES:
None
ADDITIONAL DISPOSITION SHARES:
None
RECORD SHARE ENCUMBRANCES:
None
EXHIBIT 1.14
August 5, 2002
Penn National Gaming, Inc.
825 Berkshire Boulevard
Suite 200
Wyomissing, Pennsylvania 19610
Attention: Robert S. Ippolito
RE: PROJECT LA--COMMITMENT LETTER
Ladies and Gentlemen:
Penn National Gaming, Inc. ("YOU" or "BORROWER") has advised Bear, Stearns
& Co. Inc. ("BEAR STEARNS"), Bear Stearns Corporate Lending Inc. ("BSCL") and
Merrill Lynch Capital Corporation ("MERRILL Lynch"; together with Bear Stearns
and BSCL, "WE" or "US") that you and a newly formed subsidiary of yours intend
to enter into a merger agreement (the "ACQUISITION AGREEMENT") with Hollywood
Casino Corporation ("TARGET") pursuant to which, you will acquire through merger
(the "ACQUISITION") all of the capital stock of Target for cash. In addition,
you have advised us of the following: (1) on the closing date of the Acquisition
(the "CLOSING DATE"), you will repay all outstanding borrowings under your
existing revolving credit facility and terminate the commitments in connection
therewith, (2) on the Closing Date, you will redeem (or irrevocably deposit into
trust sufficient funds with an irrevocable notice of redemption to cause the
obligations under the indenture in respect thereof to be discharged) Target's
outstanding floating rate senior secured notes due 2006, (3) on the Closing
Date, you will consummate a cash tender offer for not less than 85% of Target's
11.25% senior secured notes due 2007 (the "NON-CALLABLE NOTES"), obtain consents
to eliminate all significant covenants from the governing indenture in
connection therewith and modify the indenture governing the Non-Callable Notes
to permit the Credit Facilities referred to below to be secured by the
collateral securing the Non-Callable Notes on an equal and ratable basis or
otherwise discharge or defease the Non-Callable Notes with the same effect, (4)
you may commence change of control tender offers under the terms of the
indentures governing the first mortgage notes and senior secured notes
(collectively, the "EXISTING TARGET SUBSIDIARY BONDS") of Target's Shreveport
subsidiary (such subsidiary and its subsidiaries are referred to as the "TARGET
UNRESTRICTED GROUP") at a price of 101% of the principal amount thereof, plus
accrued and unpaid interest and (5) approximately $17.6 million of personal
property subject to capital leases at Target may be purchased and the associated
leases terminated, if necessitated by the Acquisition. The refinancing or
replacement of all of the foregoing debt (and related consent solicitations) of
Borrower, Target and their respective subsidiaries are referred to collectively
as the "REFINANCING." The sources and uses of funds necessary to consummate the
Transactions (as defined below) will be as set forth in Annex A hereto.
In order to effectuate the foregoing, you have advised us that you intend
to enter into senior secured credit facilities in the amount of $1,000.0 million
(the "CREDIT FACILITIES").
The Acquisition, the Refinancing, the entering into and borrowings under
the Credit Facilities by the parties herein described and the other transactions
contemplated hereby entered into and consummated in connection with the
Acquisition are herein referred to as the "TRANSACTIONS."
You have requested that BSCL and Merrill Lynch commit to provide the Credit
Facilities to finance the Acquisition and the Refinancing and to pay the related
fees and expenses.
Accordingly, subject to the terms and conditions set forth below, each of
BSCL and Merrill Lynch hereby agrees with you as follows:
1. COMMITMENT. Each of BSCL and Merrill Lynch (or one or more of their
affiliates) hereby commits to provide to Borrower 50% of each of the Credit
Facilities upon the terms and subject to the conditions set forth or
referred to herein, in the Fee Letter (the "FEE LETTER") dated the date
hereof and delivered to you and in the Senior Secured Credit Facilities
Summary of Terms and Conditions attached hereto (and incorporated by
reference herein) as EXHIBIT A (the "TERM SHEET").
2. SYNDICATION. We reserve the right and intend, prior to or after the
execution of the definitive documentation for the Credit Facilities (the
"CREDIT DOCUMENTS"), to syndicate all or a portion of our commitments to
one or more financial institutions (together with BSCL and Merrill Lynch,
the "LENDERS"). Our commitment hereunder is subject to each of Bear Stearns
(or one of its affiliates) and Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("MLPF&S") (or one of its affiliates) acting as a joint lead
arrangers of and joint book-runners for the Credit Facilities and each of
BSCL and Merrill Lynch acting as syndication agents for the Credit
Facilities. We (or one of our affiliates) will manage all aspects of the
syndication (in consultation with you), including decisions as to the
selection of potential Lenders to be approached and when they will be
approached, when their commitments will be accepted, which Lenders will
participate and the final allocations of the commitments among the Lenders
(which are likely not to be PRO RATA across facilities among Lenders), and
we will exclusively perform all functions and exercise all authority as
customarily performed and exercised in such capacities, including selecting
counsel for the Lenders, negotiating the Credit Documents and determining
the amount and distribution of fees among the Lenders, PROVIDED, HOWEVER,
that we agree not to syndicate any portion of our commitments hereunder to
Mackay-Shields. Any agent titles (including co-agents) awarded to other
Lenders are subject to our prior approval and shall not entail any role
with respect to the matters referred to in this paragraph without our prior
consent. You agree that no Lender will receive compensation outside the
terms contained herein and in the Fee Letter in order to obtain its
commitment to participate in the Credit Facilities. We may select (with
your consent, not to be unreasonably withheld, delayed or conditioned) a
Lender to act as an administrative agent (the "ADMINISTRATIVE AGENT") for
the Credit Facilities to perform such ministerial and administrative
functions as we shall reasonably designate.
You understand that we intend to commence the syndication of the
Credit Facilities promptly, and you agree to assist us actively in
achieving a timely syndication that is satisfactory to us. The syndication
efforts will be accomplished by a variety of means, including direct
contact during the syndication between senior management, advisors and
affiliates of Borrower and Target on the one hand, and the proposed Lenders
on the other hand and Borrower hosting, with us, at least one
2
meeting with prospective Lenders at such times and places as we may
reasonably request. You agree to, upon our request, (a) provide, and cause
your affiliates and advisors to provide, and use your reasonable best
efforts to have Target provide, to us all information reasonably requested
by us to successfully complete the syndication, including the information
and projections (including updated projections) contemplated hereby, and
(b) assist, and cause your affiliates and advisors to assist, and use your
reasonable best efforts to have Target assist, us in the preparation of a
Confidential Information Memorandum and other marketing materials (the
contents of which you shall be solely responsible for) to be used in
connection with the syndication, including making available representatives
of Borrower and Target. You also agree to use your reasonable best efforts
to ensure that our syndication efforts benefit materially from your (and
your affiliates') existing lending relationships. You further agree that,
at your expense, you will work with us to procure a rating for the Credit
Facilities by Moody's Investor's Service, Inc. and Standard & Poor's
Ratings Group promptly after the execution of the Acquisition Agreement.
3. FEES. As consideration for our commitment hereunder and our
agreement to arrange, manage, structure and syndicate the Credit
Facilities, you agree to pay to us the nonrefundable fees as set forth in
the Fee Letter as and when specified in such document.
4. CONDITIONS. Each of Bear Stearns', BSCL's and Merrill Lynch's
commitment hereunder is subject to the conditions set forth elsewhere
herein and in the Term Sheet.
Our commitment hereunder is also subject to (a) other than with
respect to changes in the Illinois gaming tax law enacted in June 2002,
there not having occurred or becoming known any material adverse change or
any condition or event that could reasonably be expected to result in a
material adverse change in the business, operations, condition (financial
or otherwise), assets, properties, liabilities (contingent or otherwise) or
prospects of either (1) Borrower and its subsidiaries taken as a whole
(before or after giving effect to the Transactions) since December 31, 2001
or (2) Target and its subsidiaries taken as a whole (before giving effect
to the Transactions) since December 31, 2001 (it being acknowledged that
neither (i) the existence of the Notice of Violation and Hearing from the
State of Louisiana Gaming Control Board dated July 22, 2002 addressed to
Hollywood Casino Shreveport nor (ii) the existence of the lawsuits by and
against Target and Jack E. Pratt et al shall, by itself, constitute a
material adverse change); (b) there not having occurred and be continuing
in or affecting current loan syndication or financial, banking or capital
market conditions generally that, individually or in the aggregate, in our
good faith judgment would materially adversely affect our ability to
syndicate the Credit Facilities; (c) our reasonable satisfaction that,
after the date hereof and prior to and during the syndication of the Credit
Facilities, none of Borrower, Target or any of their respective
subsidiaries or affiliates shall have syndicated or issued, attempted to
syndicate or issue, announced or authorized the announcement of, or engaged
in discussions concerning the syndication or issuance of, any debt facility
or debt security of any of them, including renewals thereof (other than the
Credit Facilities (including the Incremental Facility as defined in the
Term Sheet) and any debt financing which we have requested to replace the
Second Priority Facility and the Second Term Loan B Draw (each as defined
in the Term Sheet)) that shall have disrupted or interfered with the
syndication of the Credit Facilities; (d) our reasonable satisfaction that
the Acquisition will be consummated in all material respects in accordance
with the terms of the Acquisition Agreement (without the waiver or
amendment of any material condition unless consented to by the Lead
Arrangers), which terms, along with the
3
conditions and structure of the Acquisition and the Acquisition Agreement,
shall be in form and substance satisfactory to the Lead Arrangers (it being
acknowledged that the Acquisition Agreement as in effect on the date
hereof, and all exhibits, schedules, appendices and attachments thereto are
satisfactory); (e) our receipt of (i) quarterly consolidated financial
statements of Borrower and Target within 45 days of the end of each fiscal
quarter to the extent not previously filed with the Securities and Exchange
Commission and (ii) monthly consolidated financial statements of Borrower
and Target within 30 days of the end of each month subsequent to June 30,
2002 (which date will be extended to 35 days for the month for which the
SAS 71 review for the last twelve month period is being conducted and 45
days for the month ended December 31, 2002) (collectively, the "REQUIRED
FINANCIALS"); (f) you, Bear Stearns and MLPF&S shall have executed and
delivered the engagement letter (the "ENGAGEMENT LETTER") dated the date
hereof and you shall not be in breach thereof or in breach of the Fee
Letter; and (g) none of the Information and Projections (each as defined
below in Section 5 hereof) shall be misleading or incorrect in any material
respect taken as a whole, in light of the circumstances under which such
statements were made.
5. INFORMATION AND INVESTIGATIONS. You hereby represent and covenant
that (a) all information and data (excluding financial projections) that
have been or will be made available by you or any of your affiliates,
representatives or advisors to us or any Lender (whether prior to or on or
after the date hereof) in connection with the Transactions (including, to
our knowledge with respect to Target), taken as a whole (the
"INFORMATION"), is and will be complete and correct in all material
respects and does not and will not, taken as a whole, contain any untrue
statement of a material fact or omit to state any material fact necessary
in order to make the statements contained therein not misleading in light
of the circumstances under which such statements are made, and (b) all
financial projections concerning Borrower and its subsidiaries and, to our
knowledge, Target and its subsidiaries and the transactions contemplated
hereby (the "PROJECTIONS") that have been made or will be prepared by or on
behalf of you or any of your affiliates, representatives or advisors and
that have been or will be made available to us or any Lender in connection
with the transactions contemplated hereby have been and will be prepared in
good faith based upon assumptions believed by you to be reasonable at the
time they were prepared (it being understood that the Projections are
subject to significant contingencies and uncertainties, many of which are
beyond our control, and do not constitute a guarantee or representation of
future results). You agree to supplement the Information and the
Projections from time to time until the date of execution and delivery of
the Credit Documents and, if requested by us, for a reasonable period
thereafter necessary to complete the syndication of the Credit Facilities
so that the representation and covenant in the preceding sentence remain
correct in all material respects and to permit us to evaluate whether the
conditions to our commitments have been satisfied. In syndicating the
Credit Facilities we will be entitled to use and rely primarily on the
Information and the Projections without responsibility for independent
check or verification thereof.
6. INDEMNIFICATION. You agree (i) to indemnify and hold harmless each
of Bear Stearns, BSCL and Merrill Lynch and each of the other Lenders and
their respective officers, directors, employees, affiliates, agents and
controlling persons (Bear Stearns, BSCL, Merrill Lynch and each such other
person being an "INDEMNIFIED PARTY") from and against any and all losses,
claims, damages, costs, expenses and liabilities, joint or several, to
which any Indemnified Party may become subject under any applicable law, or
otherwise related to or arising out of or in connection with this
Commitment Letter, the Fee Letter, the Term Sheet, the Credit Facilities,
the loans under the Credit Facilities, the use of proceeds
4
of any such loan, any of the Transactions or any related transaction and
the performance by any Indemnified Party of the services contemplated
hereby and will reimburse each Indemnified Party for any and all expenses
(including reasonable counsel fees and expenses) as they are incurred in
connection with the investigation of or preparation for or defense of any
pending or threatened claim or any action or proceeding arising therefrom,
whether or not such Indemnified Party is a party and whether or not such
claim, action or proceeding is initiated or brought by or on behalf of you,
Target, or any of your or Target's respective affiliates and whether or not
any of the Transactions are consummated or this Commitment Letter is
terminated, except to the extent resulting primarily from such Indemnified
Party's bad faith, gross negligence or willful misconduct and (ii) not to
assert any claim against any Indemnified Party for consequential, punitive
or exemplary damages on any theory of liability in connection in any way
with the transactions described in or contemplated by this Commitment
Letter.
You agree that, without our prior written consent, neither you nor any
of your affiliates or subsidiaries will settle, compromise or consent to
the entry of any judgment in any pending or threatened claim, action or
proceeding in respect of which indemnification has been or could be sought
under the indemnification provisions hereof (whether or not any other
Indemnified Party is an actual or potential party to such claim, action or
proceeding), unless such settlement, compromise or consent (i) includes an
unconditional written release in form and substance satisfactory to the
Indemnified Parties of each Indemnified Party from all liability arising
out of such claim, action or proceeding and (ii) does not include any
statement as to or an admission of fault, culpability or failure to act by
or on behalf of any Indemnified Party.
In the event that an Indemnified Party is requested or required to
appear as a witness in any action brought by or on behalf of or against you
or any of your subsidiaries or affiliates in which such Indemnified Party
is not named as a defendant, you agree to reimburse such Indemnified Party
for all expenses incurred by it in connection with such Indemnified Party's
appearing and preparing to appear as such a witness, including, without
limitation, the reasonable fees and expenses of its legal counsel.
7. EXPENSES. You agree to reimburse us and our affiliates for our and
their reasonable expenses upon our request made from time to time
(including, without limitation, all reasonable due diligence investigation
expenses, fees of consultants engaged with your consent (not to be
unreasonably withheld), syndication expenses (including printing,
distribution and bank meetings), appraisal and valuation fees and expenses,
travel expenses, rating agency fees, duplication fees and expenses, audit
fees, search fees, filing and recording fees and the reasonable fees,
disbursements and other charges of counsel (and any local counsel) and any
sales, use or similar taxes (and any additions to such taxes) related to
any of the foregoing) incurred in connection with the negotiation,
preparation, execution and delivery, waiver or modification, collection and
enforcement of this Commitment Letter, the Term Sheet, the Fee Letter and
the Credit Documents and the security arrangements (if any) in connection
therewith and whether or not such fees and expenses are incurred before or
after the date hereof or any loan documentation is entered into or the
Transactions are consummated or any extensions of credit are made under the
Credit Facilities or this Commitment Letter is terminated or expires.
5
8. CONFIDENTIALITY. This Commitment Letter, the Term Sheet, the Fee
Letter, the contents of any of the foregoing and our and/or our affiliates'
activities pursuant hereto or thereto are confidential and shall not be
disclosed by or on behalf of you or any of your affiliates to any person
without our prior written consent, except that you may disclose this
Commitment Letter and the Term Sheet (i) to your and Target's and your and
its respective officers, directors, employees and advisors, and then only
in connection with the Transactions and on a confidential need-to-know
basis and (ii) as you are required to make by applicable law or compulsory
legal process (based on the advice of legal counsel); PROVIDED, HOWEVER,
that in the event of any such compulsory legal process you agree to give us
prompt notice thereof and to cooperate with us in securing a protective
order in the event of compulsory disclosure and that any disclosure made
pursuant to public filings shall be subject to our prior review. You agree
that you will permit us to review and approve any reference to any of us or
any of our affiliates in connection with the Credit Facilities or the
transactions contemplated hereby contained in any press release or similar
public disclosure prior to public release. You agree that we and our
affiliates may share information concerning you, and, subject to the
existing confidentiality agreement between Target and Borrower, Target and
your and Target's respective subsidiaries and affiliates among ourselves
solely in connection with the performance of our services hereunder and the
evaluation and consummation of financings and Transactions contemplated
hereby.
9. TERMINATION. Our commitment hereunder is based upon the financial
and other information regarding you and Target and your and its respective
subsidiaries previously provided to us. In the event that by means of
continuing review or otherwise we become aware of or discover new
information or developments concerning conditions or events previously
disclosed to us that is inconsistent in any material adverse respect with
the Projections or the Information provided to us prior to the date hereof,
or if any event or condition has occurred or become known (other than (i)
changes in Illinois gaming tax law enacted in June 2002, (ii) the existence
of the lawsuits by and against Target and Jack E. Pratt et al and (iii) the
existence of the Notice of Violation and Hearing from the State of
Louisiana Gaming Control Board dated July 22, 2002 addressed to Hollywood
Casino Shreveport that in our judgment has had or could reasonably be
expected to have a material adverse effect on the business, operations,
condition (financial or otherwise), assets, properties, liabilities
(contingent or otherwise) or prospects of either (1) Borrower and its
subsidiaries taken as a whole (either before or after giving effect to the
Transactions) since December 31, 2001 or (2) Target and its subsidiaries
taken as a whole (before giving effect to the Transactions) since December
31, 2001, this Commitment Letter and both of our commitments hereunder
shall terminate upon written notice by either Bear Stearns, BSCL or Merrill
Lynch. In addition, our commitments hereunder shall terminate in their
entirety (A) on the date that is 45 days after the receipt by you of all
requisite regulatory approvals but in any event no later than July 31, 2003
if the Credit Documents are not executed and delivered by Borrower and the
Lenders by such date, (B) on the date of execution and delivery of the
Credit Documents by Borrower and the Lenders and (C) the date of
termination or abandonment of the Acquisition or the date of the
Acquisition if the initial funding under the Credit Facilities does not
occur on such date. Notwithstanding the foregoing, the provisions of
Sections 6, 7, 8 and 11 hereof shall survive any termination pursuant to
this Section 9; PROVIDED that the provisions of Sections 6 and 7 shall be
superceded and replaced in their entirety by the provisions in the
definitive documentation relating to expenses and indemnification.
6
10. ASSIGNMENT; ETC. This Commitment Letter and our commitment
hereunder shall not be assignable by any party hereto (other than by us to
our affiliates) without the prior written consent of the other parties
hereto, and any attempted assignment shall be void and of no effect;
PROVIDED, HOWEVER, that nothing contained in this Section 10 shall prohibit
us (in our sole discretion) from (i) performing any of our duties hereunder
through any of our affiliates, and you will owe any related duties
(including those set forth in Section 2 above) to any such affiliate, and
(ii) granting (in consultation with you) participations in, or selling (in
consultation with you) assignments of all or a portion of, the commitments
or the loans under the Credit Facilities pursuant to arrangements
satisfactory to us. Upon any such assignment, upon the request of the Lead
Arrangers, the Company will enter into a customary assignment agreement
with any such assignee; following the execution and delivery thereof, our
commitments hereunder will be reduced by the amount of the commitment
assumed in such assignment agreement. Participation will not, in any event,
reduce commitments. This Commitment Letter is solely for the benefit of the
parties hereto and does not confer any benefits upon, or create any rights
in favor of, any other person.
11. GOVERNING LAW; WAIVER OF JURY TRIAL. This Commitment Letter shall
be governed by, and construed in accordance with, the laws of the State of
New York. Each of the parties hereto waives all right to trial by jury in
any action, proceeding or counterclaim (whether based upon contract, tort
or otherwise) related to or arising out of any of the Transactions or the
other transactions contemplated hereby, or the performance by us or any of
our affiliates of the services contemplated hereby.
12. AMENDMENTS; COUNTERPARTS; ETC. No amendment or waiver of any
provision hereof or of the Term Sheet shall be effective unless in writing
and signed by the parties hereto and then only in the specific instance and
for the specific purpose for which given. This Commitment Letter may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be
an original and all of which taken together shall constitute one and the
same agreement. Delivery of an executed counterpart by telecopier shall be
effective as delivery of a manually executed counterpart.
13. PUBLIC ANNOUNCEMENTS; NOTICES. We may, subject to your prior
consent (not to be unreasonably withheld, delayed or conditioned) at our
expense, publicly announce as we may choose the capacities in which we or
our affiliates have acted hereunder. Any notice given pursuant hereto shall
be mailed or hand delivered in writing, if to (i) you, at your address set
forth on page one hereof, with a copy to Peter S. Sartorius, Esq., at
Morgan, Lewis & Bockius, LLP, 1701 Market Street, Philadelphia,
Pennsylvania 19103; and (ii) Bear Stearns and BSCL at 383 Madison Avenue,
New York, New York 10179, Attention: Victor Bulzacchelli and Merrill Lynch,
at World Financial Center, North Tower, 27th Floor, 250 Vesey Street, New
York, New York 10281, Attention: Chris Ooten, with a copy, in either case,
to Jonathan A. Schaffzin, Esq., at Cahill Gordon & Reindel, 80 Pine Street,
New York, New York 10005.
(Signature Page Follows)
7
Please confirm that the foregoing correctly sets forth our agreement of the
terms hereof and the Fee Letter by signing and returning to the undersigned the
duplicate copy of this letter and the Fee Letter enclosed herewith. Unless we
receive your executed duplicate copies hereof and thereof by 5:00 p.m., New York
City time, on August 16, 2002, our commitment hereunder will expire at such
time.
We are pleased to have this opportunity and we look forward to working with
you on this transaction.
Very truly yours,
BEAR, STEARNS & CO. INC.
By: /s/ KEITH C. BARNISH
----------------------------------
Name: Keith C. Barnish
Title: Senior Managing Director
BEAR STEARNS CORPORATE LENDING INC.
By: /s/ KEITH C. BARNISH
----------------------------------
Name: Keith C. Barnish
Title: Executive Vice President
MERRILL LYNCH CAPITAL CORPORATION
By: /s/ STEPHEN D. PARTS
----------------------------------
Name: Stephen D. Paras
Title: Vice President
Accepted and agreed to as of the date first written above:
PENN NATIONAL GAMING, INC.
By: /s/ WILLIAM J. CLIFFORD
----------------------------------
Name: William J. Clifford
Title: Chief Financial Officer
ANNEX A
SOURCES AND USES OF FUNDS
(IN $ IN MILLIONS)
SOURCES USES
------- ----
Cash on hand at Borrower and Target $ 100.8 Cash purchase price of equity of Target $ 347.5
Revolving Facility(1) $ 12.9 Refinance Target 11.25% Senior Secured $ 378.4
Notes, Floating Rate Senior Secured
Notes, Capital Leases and Other
Term Loan A Facility $ 100.0 Refinancing Existing Borrower Revolving $ 5.2
Facility Debt
Term Loan B Facility(2) $ 600.0 Pension and Severance Costs $ 16.1
Second Priority Facility(3) $ 0.0 Transaction and tender fees and expenses $ 66.5
Repurchase of Shreveport Notes(4) $ 0.0
-------- ---------
Total Sources $ 813.7 Total Uses $ 813.7
======== =========
- --------------------
1. $100.0 million of commitments; approximately $12.9 drawn at closing
(assuming termination of Target capital leases).
2. $700.0 million of commitments; additional $100.0 million available draw for
repurchase of Shreveport Notes.
3. $100.0 million of commitments available for repurchase of Shreveport Notes.
4. Assumes no tender for Existing Target Subsidiary Notes.
CONFIDENTIAL
SENIOR SECURED CREDIT FACILITIES
SUMMARY OF TERMS AND CONDITIONS(a)
Borrower: Penn National Gaming, Inc. ("BORROWER").
Joint Lead Arrangers and Joint Bear, Stearns & Co. and MLPF&S (collectively,
Book Runners: the "LEAD ARRANGERS").
Syndication Agents: BSCL and Merrill Lynch.
Administrative Agent: A Lender or other financial institution to be selected by the Lead
Arrangers with the consent (not to be unreasonably withheld) of
Borrower (the "ADMINISTRATIVE AGENT").
Lenders: BSCL (or one of its affiliates), Merrill Lynch (or one of its
affiliates) and a syndicate of financial institutions (the
"Lenders") arranged by the Lead Arrangers in consultation with
Borrower.
Credit Facilities: Senior secured credit facilities (the "CREDIT FACILITIES") in an
aggregate principal amount of up to $1,000.0 million, such Credit
Facilities comprising:
(A) TERM LOAN FACILITIES. Term loan facilities in an
aggregate principal amount of $900.0 million (the "TERM LOAN
FACILITIES"), such aggregate principal amount to be
allocated among (i) a Term Loan A Facility in an aggregate
principal amount of up to $100.0 million (the "TERM LOAN A
FACILITY"), (ii) a Term Loan B Facility in an aggregate
principal amount of up to $700.0 million (the "TERM LOAN B
FACILITY"), of which $100.0 million will be available for
the Second Term Loan B Draw (as defined below), and (iii) a
Second Priority Term Loan Facility in an aggregate principal
amount of up to $100.0 million
- -------------------
(a) Capitalized terms used herein and not defined shall have the meanings
assigned to such terms in the Commitment Letter (the "COMMITMENT LETTER").
(the "SECOND PRIORITY FACILITY"). Loans under the Term Loan
Facilities are herein referred to as "TERM LOANS."
(B) REVOLVING CREDIT FACILITY. A revolving credit facility
in an aggregate principal amount of $100.0 million (the
"REVOLVING FACILITY"). Loans under the Revolving Facility
are herein referred to as "REVOLVING LOANS"; the Term Loans
and the Revolving Loans are herein referred to collectively
as "LOANS." An amount to be agreed of the Revolving Facility
will be available as a letter of credit subfacility.
Incremental Facility: In addition, the Credit Documents (as defined below) will provide
for additional term loans and/or revolving loans, at Borrower's
election (the "INCREMENTAL FACILITY"), in an aggregate principal
amount not to exceed $100.0 million so long as (i) immediately
before and immediately after the borrowing of any such loans there
is no Default or Event of Default and (ii) Borrower has received
gaming licenses from the State of Pennsylvania to operate slot
machines at either of its existing facilities in Pennsylvania;
PROVIDED, HOWEVER, that Borrower uses the funds drawn under the
Incremental Facility solely to buildout such slot operations; and
PROVIDED, FURTHER, that Borrower will be able to draw no more than
$50.0 million per gaming facility for such buildout.
Documentation: Usual for facilities and transactions of this type and reasonably
acceptable to Borrower and the Lenders. The documentation for the
Credit Facilities will include, among others, a credit agreement
(the "CREDIT AGREEMENT"), guarantees and appropriate pledge,
security interest, mortgage and other collateral documents
(collectively, the "CREDIT DOCUMENTS"). Borrower and the
Guarantors (as defined below under "Guarantors") are herein
referred to as the "CREDIT PARTIES" and individually referred to as
a "CREDIT PARTY."
Transactions: As set forth in the Commitment Letter.
Availability/Purpose: (A) TERM LOAN FACILITIES. Term Loans (other than $100.0 million
under the Term Loan B Facility and the Second Priority Term Loan
Facility) will be available to finance the Acquisition and the
Refinancing and to pay related fees
2
and expenses, subject to the terms and conditions set forth in the
Credit Documents, on the date of consummation of the Acquisition
(the "CLOSING DATE") in a single draw. The remaining $100.0 million
under the Term Loan B Facility (the "SECOND TERM LOAN B DRAW") and
amounts under the Second Priority Facility will only be available
to fund the "Change of Control Offers" hereinafter referred to. To
the extent the Second Term Loan B Draw and Second Priority Facility
Loans are not made on or prior to the expiration of such "Change of
Control Offers," the unutilized commitments in respect thereof
shall expire. Term Loans repaid or prepaid may not be reborrowed.
(B) REVOLVING FACILITY. Not more than approximately $90.0 million
of the Revolving Facility will be available to finance the
Acquisition and the Refinancing and will otherwise be solely
available for working capital and general corporate purposes on a
fully revolving basis, subject to the terms and conditions set
forth in the Credit Documents, in the form of revolving loans and
letters of credit on and after the Closing Date until the date that
is five years after the Closing Date (the "R/C MATURITY DATE").
Guarantors: Each of Borrower's direct and indirect domestic subsidiaries
existing on the Closing Date or thereafter created or acquired
shall unconditionally guarantee, on a joint and several basis, all
obligations of Borrower under the Credit Facilities and (to the
extent relating to the Loans) under each interest rate protection
agreement entered into with a Lender or an affiliate of a Lender;
PROVIDED that no guarantee need be provided by any member of the
Target Unrestricted Group to the extent prohibited by the Existing
Target Subsidiary Bonds and other indebtedness of Borrower; and
PROVIDED, FURTHER, that no guarantee need be provided by Hollywood
Casino - Aurora, Inc. to the extent such guarantee is prohibited
by Illinois gaming authorities provided that Borrower has used
commercially reasonable efforts with such authorities to arrange
for such guarantees. Each guarantor of any of the Credit
Facilities is herein referred to as a "GUARANTOR" and its
guarantee is referred to herein as a "GUARANTEE."
Security: The Credit Facilities, the Guarantees and (to the extent relating
to the Loans) the obligations of Borrower under each interest rate
protection agreement entered into with a Lender or any affiliate of
a Lender will be secured by (A) a perfected
3
lien on, and pledge of, all of the capital stock and intercompany
notes of each of the direct and indirect subsidiaries of Borrower
existing on the Closing Date or thereafter created or acquired,
except that with respect to foreign subsidiaries only the capital
stock of direct foreign subsidiaries of Borrower or a Guarantor
need be pledged and only 65% of the voting capital stock thereof
need be pledged; and (B) a perfected lien on, and security interest
in, all of the tangible and intangible properties and assets
(including all contract rights, real property interests,
trademarks, trade names, equipment and proceeds of the foregoing)
of each Credit Party (collectively, the "COLLATERAL"), except for
(1) in the case of clause (B), liens or security interests in the
Pennwood Joint Venture, the Casino Rama management contract and the
leasehold estate at Casino Rouge to the extent such liens or
security interests are prohibited by the terms thereof and liens or
security interests pertaining to the Aurora, Illinois facility of
Target if prohibited by Illinois gaming authorities to the extent
Borrower has used commercially reasonable best efforts with such
authorities to arrange for such liens and security interests; and
(2) in the case of clause (A) and clause (B), those properties and
assets as to which the Lead Arrangers shall determine in their sole
discretion that the costs of obtaining such security interest are
excessive in relation to the value of the security to be afforded
thereby (it being understood that none of the foregoing shall be
subject to any other liens or security interests, except for
certain customary exceptions to be agreed upon). All such security
interests will be created pursuant to documentation satisfactory in
all respects to the Lead Arrangers, and on the Closing Date, such
security interests shall have become perfected (or arrangements for
the perfection thereof reasonably satisfactory to the Lead
Arrangers shall have been made) and the Lead Arrangers shall have
received satisfactory evidence as to the enforceability and
priority thereof. All liens to secure the Credit Facilities shall
be equal and ratable, except that any Loans under the Second
Priority Facility will be secured on a basis junior to the other
Credit Facilities on a basis customary for facilities of this type.
Termination of Commitments: The commitments in respect of the Credit Facilities (including
pursuant to the Commitment Letter) will terminate in their entirety
(A) on the date that is 45 days after receipt by Borrower of all
requisite regulatory approvals but in any
4
event no later than July 31, 2003; (ii) the date of the Acquisition
if the initial funding under the Credit Facilities does not occur
on such date; and (iii) the termination or abandonment of the
Acquisition.
Final Maturity: (A) TERM LOAN FACILITIES. The Term Loan A Facility will mature on
the fifth anniversary of the Closing Date, the Term Loan B Facility
will mature on the sixth anniversary of the Closing Date and the
Second Priority Facility will mature on the seventh anniversary of
the Closing Date; PROVIDED that the Term Loan B Facility and the
Second Priority Facility will mature six months prior to the
maturity of Borrower's outstanding 11 1/8% Senior Subordinated
Notes due 2008, unless such notes are refinanced in full to a date
that is at least six months after the above-referenced maturity
dates of the Term Loan B Facility and the Second Priority Facility.
(B) REVOLVING FACILITY. The Revolving Facility will mature on the
R/C Maturity Date.
Amortization Schedule: The Term Loan A Facility will amortize on a quarterly basis
(beginning with the first full fiscal quarter after the Closing
Date) in amounts to be agreed.
Each of the Term Loan B Facility and the Second Priority Facility
will amortize at a rate of 1.00% PER ANNUM on a quarterly basis
(beginning with the first full fiscal quarter after the Closing
Date) for the first five and six years, respectively, after the
Closing Date with the balance paid in four equal quarterly
installments thereafter.
Letters of Credit: Letters of credit under the Revolving Facility ("LETTERS OF
CREDIT") will be issued by a Lender to be agreed by the Lead
Arrangers and Borrower (in such capacity, the "L/C LENDER"). The
issuance of all Letters of Credit shall be subject to the customary
procedures of the L/C Lender.
Letter of Credit Fees: Letter of Credit fees will be payable for the account of the
Revolving Facility Lenders on the daily average undrawn face amount
of each Letter of Credit at a rate PER ANNUM equal to the
applicable margin for Revolving Loans that are LIBOR rate loans in
effect at such time, which fees shall be paid quarterly in
arrears. In addition, an issuing fee on the face amount of each
Letter of Credit equal to 0.25% PER ANNUM
5
shall be payable to the L/C Lender for its own account, which fee
shall also be payable quarterly in arrears.
Interest Rates: Interest rates in connection with the Credit Facilities will be as
specified on ANNEX I attached hereto.
Default Rate: Overdue principal, interest and other amounts shall bear interest
at a rate PER ANNUM equal to 2% in excess of the applicable
interest rate (including applicable margin).
Mandatory Prepayments/ Subject to the next paragraph, the Credit Facilities will be
Reductions in Commitments: required to be prepaid with (a) beginning with the fiscal year
ended December 31, 2003, (i) if Total Leverage Ratio (as defined
below) is greater than 4.5x, 75% of annual Excess Cash Flow (to be
defined), (ii) if Total Leverage Ratio is less than 4.5x, 50% of
annual Excess Cash Flow or (iii) if Total Leverage Ratio is less
than 3.5x, 0% of annual Excess Cash Flow; PROVIDED, HOWEVER, that
such determinations with respect to the fiscal year ended December
31, 2003 shall be based on actual results from the Closing Date;
and PROVIDED, FURTHER, HOWEVER, that if there are amounts
outstanding under the Second Priority Facility, then, for the
Deferral Period (as defined in the Fee Letter) 62.5% of annual
Excess Cash Flow measured since the Closing Date will be applied to
the Second Priority Facility on a monthly basis and 37.5% to the
balance of the Credit Facilities as provided above, (b) 100% of the
net cash proceeds (including insurance proceeds) of asset sales and
other asset dispositions by Borrower or any of its subsidiaries
(subject to baskets and exceptions and customary reinvestment
rights), (c) 100% of the net cash proceeds of the issuance or
incurrence of debt by Borrower or any of its subsidiaries (subject
to baskets and exceptions to be agreed upon) and (d) (i) in the
event that any of the Second Priority Facility is drawn and remains
outstanding, 100% of the net proceeds from any issuance of equity
securities in any public offering or private placement or from any
capital contribution (subject to baskets and exceptions to be
agreed upon) and (ii) if there are no amounts outstanding under the
Second Priority Facility, 50% of such net proceeds until such time
as the Total Leverage Ratio (as defined below) is below 4.0:1.0.
Mandatory prepayments will be applied PRO RATA among the Term Loan
Facilities based on the aggregate principal
6
amount of Term Loans then outstanding under each such Term Loan
Facility; PROVIDED that (1) in the event that any of the Second
Priority Facility is drawn and remains outstanding, mandatory
prepayments of the type referred to in clause (c) or (d) of the
immediately preceding paragraph shall be applied, first, to the
Second Priority Facility and, at the Second Term Loan B Draw
Lenders' option, the Second Term Loan B Draw and, second, PRO RATA
among the remaining Term Loan Facilities and (2) mandatory
prepayments of the type referred to in clause (b) of the
immediately preceding paragraph shall be applied only to the Second
Priority Facility and, at the Second Term Loan B Draw Lenders'
option, the Second Term Loan B Draw, after application to the other
Term Loan Facilities. Any application to any Term Loan Facility
shall be applied PRO RATA to the remaining scheduled amortization
payments in respect thereof. Notwithstanding the foregoing, any
holder of Term Loans under the Term Loan B Facility may, to the
extent that Term Loans are then outstanding under the Term Loan A
Facility, elect not to have mandatory prepayments applied to such
holder's Term Loans under the Term Loan B Facility, in which case
the aggregate amount so declined shall be applied to the remaining
scheduled amortization payments under the Term Loan A Facility or
Second Priority Facility in accordance with the first sentence of
this paragraph. To the extent that the amount to be applied to the
prepayment of Term Loans exceeds the aggregate amount of Term Loans
then outstanding, such excess shall be applied to the Revolving
Facility to permanently reduce the commitments thereunder.
Revolving Loans will be immediately prepaid to the extent that the
aggregate extensions of credit under the Revolving Facility exceed
the commitments then in effect under the Revolving Facility. To the
extent that the amount to be applied to the repayment of the
Revolving Loans exceeds the amount thereof then outstanding,
Borrower shall cash collateralize outstanding Letters of Credit.
To the extent any debt incurrence or equity issuance (subject to
limited exceptions) occurs on or prior to the expiration of the
"Change of Control Offers" in respect of the Existing Target
Subsidiary Bonds, the net proceeds thereof shall be deposited in an
escrow account with the Administrative Agent to fund the "Change of
Control Offers" or Alternate
7
Target Subsidiary Bond Offer and the commitments for the Second
Priority Facility will be correspondingly reduced.
Voluntary Prepayments/ (A) TERM LOAN FACILITIES. Term Loans may be prepaid at
Reductions in Commitments: any time in whole or in part at the option of Borrower, in a
minimum principal amount and in multiples to be agreed upon,
without premium or penalty (except, in the case of LIBOR
borrowings, breakage costs related to prepayments not made on the
last day of the relevant interest period). Voluntary prepayments
will be applied first to the Second Priority Facility and then in
amounts and to tranches as determined by Borrower.
(B) REVOLVING FACILITY. The unutilized portion of the commitments
under the Revolving Facility may be reduced and loans under the
Revolving Facility may be repaid at any time, in each case, at the
option of Borrower, in a minimum principal amount and in multiples
to be agreed upon, without premium or penalty (except, in the case
of LIBOR borrowings, breakage costs related to prepayments not made
on the last day of the relevant interest period).
Conditions to Effectiveness The effectiveness of the credit agreement and the making
and to Initial Loans: of the initial Loans under the Credit Facilities shall be subject
to conditions precedent that are usual for facilities and
transactions of this type, to those specified herein and in the
Commitment Letter and to such additional conditions precedent as
may reasonably be required by either of the Lead Arrangers (all
such conditions to be satisfied in a manner satisfactory to both of
the Lead Arrangers, including, but not limited to, execution and
delivery of the Credit Documents reasonably acceptable in form and
substance to the Lead Arrangers by each Credit Party thereto on or
prior to the Closing Date; delivery of reasonably satisfactory
borrowing certificates and other customary closing certificates;
receipt of valid security interests as contemplated hereby; absence
of defaults, prepayment events or creation of liens under debt
instruments or other material agreements as a result of the
transactions contemplated hereby; absence of material litigation;
evidence of corporate authority; receipt of approvals or consents
from governmental authorities and third parties whose approval or
consent is required (i) under the Acquisition Agreement to
consummate the Transaction or (ii) to consummate the financing
therefor; compliance with applicable
8
laws, regulations and licensing requirements; delivery of
reasonably satisfactory legal opinions; and adequate insurance.
In addition to those conditions precedent set forth or referred to
in the Commitment Letter, the making of the initial Loans will be
subject to the following conditions:
(A) The delivery, on or prior to the Closing Date, of a
certificate on behalf of Borrower from the chief
financial officer of Borrower and, at the reasonable
request of the Lead Arrangers and at Borrower's
expense, a nationally recognized appraisal or valuation
consultant reasonably satisfactory to the Lead
Arrangers and in form and substance reasonably
satisfactory to the Lead Arrangers with respect to the
solvency (on a consolidated basis) of Borrower and,
with respect to such officer's certificate, of each
Credit Party (other than HWCC - Louisiana, Inc. and its
subsidiaries ("SHREVEPORT") immediately after the
consummation of the Transactions to occur on the
Closing Date (assuming the borrowing in full of the
Second Priority Facility and the Second Term Loan B
Draw).
(B) Simultaneously with the making of the initial Loans,
the Acquisition shall have been consummated in all
material respects in accordance with the terms of the
Acquisition Agreement (without the waiver or amendment
of any material condition unless consented to by the
Lead Arrangers), which terms, along with the conditions
and structure of the Acquisition and the Acquisition
Agreement, shall be in form and substance satisfactory
to the Lead Arrangers (it being acknowledged that the
Acquisition Agreement as in effect on the date hereof,
and all exhibits, schedules, appendices and attachments
thereto are satisfactory). Each of the parties thereto
shall have complied in all material respects with all
covenants set forth in the Acquisition Agreement to be
complied with by it on or prior to the Closing Date
(without the waiver or amendment of any of the material
terms thereof unless consented to by the Lead
Arrangers).
9
(C) Simultaneously with the making of the initial Loans,
the Refinancing shall have been effected on terms and
conditions and pursuant to documentation satisfactory
to the Lead Arrangers. As part of the Refinancing, (i)
not less than 85% of the Target Non-Callable Notes
shall have been tendered for cash pursuant to a tender
offer and consent solicitation at a price reasonably
acceptable to the Lead Arrangers, and, in connection
therewith, requisite consents shall have been received
for the elimination of all significant restrictive
covenants and the inclusion as "permitted liens" liens
to secure the Credit Facilities with the collateral
securing the Non-Callable Notes on an equal and ratable
basis or (ii) there shall have been a legal discharge
or defeasance of the Non-Callable Notes with the effect
that the restrictive covenants cease to have effect and
such collateral is available to secure the Credit
Facilities. All liens in respect of the indebtedness
subject to the Refinancing (with limited exceptions to
be agreed upon) shall have been released and the Lead
Arrangers shall have received evidence thereof
satisfactory to the Lead Arrangers and a "pay-off"
letter or letters reasonably satisfactory to the Lead
Arrangers with respect to such Indebtedness.
(D) The Lead Arrangers shall have received reasonably
satisfactory evidence (including satisfactory
supporting schedules and other data) that after giving
effect to the Transactions and the financing therefor
(other than the funding of the Second Term Loan B Draw
and the Second Priority Facility), a closing leverage
ratio (calculated in a manner satisfactory to the Lead
Arrangers) to be defined as the maximum ratio of total
debt (including amounts related to any off-balance
sheet receivables financings or other permitted
securitizations, whether or not they constitute debt
but excluding debt at Shreveport and any Loans under
the Incremental Facility) to pro forma EBITDA for the
combined company (including $7.0 million of add-backs
arising from expected synergies and including the
EBITDA of Target exclusive of Shreveport's EBITDA) for
the last 12 months ended for which financial statements
have been delivered in accordance with the Commitment
Letter for which a SAS 71 review has been completed
10
are available, of not greater than (i) 5.1:1.0 if such
ratio is being calculated for the last 12 months ended
November 30, 2002 or before and (ii) 5.0:1.0 thereafter.
(E) The Transactions and the financing therefor shall be in
compliance with all laws and regulations applicable to
the Transactions, including without limitation, all
requisite governmental authorities and third parties
whose approval or consent is required (i) under the
Acquisition Agreement to consummate the Transactions or
(ii) to consummate the financing therefor shall have
approved or consented to the Transactions and the other
transactions contemplated hereby to the extent required
(without the imposition of any materially burdensome
condition or qualification in the judgment of the Lead
Arrangers) and all such approvals shall be in full
force and effect, all applicable waiting periods shall
have expired and there shall be no governmental or
judicial action, actual or threatened, that has or
could reasonably be expected to have a reasonable
likelihood of restraining, preventing or imposing
materially burdensome or materially adverse conditions
on any of the Transactions or the other transactions
contemplated hereby.
(F) No law or regulation shall be applicable in the
judgment of the Lead Arrangers that restrains, prevents
or imposes material adverse conditions upon the
Transactions or the financing thereof, including the
Credit Facilities.
(G) After giving effect to the Transactions, Borrower and
its subsidiaries shall have outstanding no indebtedness
or preferred stock (or direct or indirect guarantees or
other credit support in respect thereof) other than (i)
the Loans, (ii) the existing senior subordinated notes
due 2008 and 2010 of Borrower, (iii) to the extent none
of the Existing Target Subsidiary Bonds are refinanced
with proceeds of the Second Priority Facility or the
Second Term Loan B Draw or otherwise in a manner
acceptable to the Lead Arrangers, the Existing Target
Subsidiary Bonds, (iv) approximately $800,000 of bank
debt at Target's casino hotel and entertainment
11
complex in Tunica County, Mississippi, (v) approximately
$17.6 million of personal property subject to capital
leases at Target to the extent not refinanced as part of
the Transactions and (vi) such other limited debt as is
reasonably acceptable to the Lead Arrangers, including not
more than 15% in principal amount of the Non-Callable
Notes. Any required or requested modifications to any debt
instruments of Target or any of its subsidiaries shall
have been obtained on a basis reasonably acceptable to the
Lead Arrangers.
(H) All accrued fees and expenses (including the reasonable
fees and expenses of counsel to the Lead Arrangers) of
the Lead Arrangers in connection with the Credit
Documents shall have been paid (which may be paid out
of the funds advanced on the Closing Date).
(I) The Lead Arrangers shall have received (i) satisfactory
title insurance policies (including such endorsements
as the Lead Arrangers may require), current certified
surveys, evidence of zoning and other legal compliance,
certificates of occupancy, legal opinions and other
customary documentation required by the Lead Arrangers
with respect to all real property subject to mortgages;
(ii) appraisals, satisfactory in form and substance to
the Lead Arrangers, from an appraiser satisfactory to
the Lead Arrangers, of the personal property and other
assets to be agreed upon of Borrower and its
subsidiaries after giving effect to the Transactions;
and (iii) FIRREA appraisals to the extent required by
applicable law or regulation.
(J) To the extent that a change of control offer has been
made and an Alternate Target Subsidiary Bond Offer has
been requested, Borrower shall have used its best
efforts to undertake it on a timely basis.
(K) The Lenders shall have received such other customary
legal opinions, corporate documents and other
instruments and/or certificates as they may reasonably
request.
12
Conditions to Second Term In addition to the conditions referred to above and in the
Loan B Draw and Second Commitment Letter, the drawing of the Second Term Loan B Draw and
Priority Facility Borrowings: the making of the Second Priority Facility Loans will be subject to
the conditions that (A) Existing Target Subsidiary Bonds shall have
been duly and validly tendered pursuant to the terms of the "Change
of Control Offers" made pursuant to and in compliance with Section
4.16 of the indenture governing the Existing Target Subsidiary
Bonds and (B) the proceeds from the Second Term Loan B Draw and the
Second Priority Facility Borrowings shall be used to consummate
such Change of Control Offer in accordance with its terms;
PROVIDED, HOWEVER, that all amounts under the Second Term Loan B
Draw shall have been drawn prior to funding of the Second Priority
Facility.
Conditions to All Each extension of credit under the Credit Facilities will be
Extensions of Credit: subject to customary conditions, including the (i) absence of any
Default or Event of Default (to be defined) and (ii) continued
accuracy of representations and warranties in all material respects
(which materiality exception will not apply to representations and
warranties qualified by materiality standards).
Representations and Customary for facilities similar to the Credit Facilities and
Warranties: such additional representations and warranties as may reasonably be
required by the Lead Arrangers.
Affirmative Covenants: Customary for facilities similar to the Credit Facilities and such
affirmative covenants as may reasonably be required by the Lead
Arrangers.
Negative Covenants: Customary for facilities similar to the Credit Facilities and such
others as may reasonably be required by the Lead Arrangers (all
such covenants to be subject to customary baskets and exceptions
and such others to be agreed upon), including, but not limited to,
limitation on indebtedness; limitation on liens and further
negative pledges; limitation on investments; limitation on
contingent obligations; limitation on dividends, redemptions and
repurchases of equity interests; limitation on mergers,
acquisitions and asset sales; limitation on capital expenditures;
limitation on sale-leaseback transactions; limitation on
transactions with affiliates; limitation on dividend and other
payment restrictions affecting subsidiaries; limitation on changes
in business conducted; limitation
13
on amendment of documents relating to other material indebtedness
and other material documents; limitation on creation of
subsidiaries; and limitation on prepayment or repurchase of other
indebtedness.
Financial Covenants: The Credit Facilities will contain financial covenants appropriate
in the context of the proposed transaction based upon the financial
information provided to the Lead Arrangers, including, but not
limited to (definitions and numerical calculations to be set forth
in the Credit Agreement): minimum Interest Coverage Ratio (to be
defined); maximum Senior Leverage Ratio (to be defined as the ratio
of total senior debt to EBITDA (to include approximately $7.0
million of add-backs arising from expected synergies)); minimum
Fixed Charge Coverage Ratio (to be defined); and Total Leverage
Ratio (to be defined as maximum ratio of total debt (including
amounts related to any off-balance sheet receivables financings or
other permitted securitizations, whether or not they would
constitute debt) to trailing four quarter EBITDA). The financial
covenants contemplated above will be tested on a quarterly basis
and will apply to Borrower and its subsidiaries on a consolidated
basis commencing with the first quarter after the Closing Date.
Interest Rate Management: An amount designated by the Lead Arrangers of the projected
outstandings under the Credit Facilities must be hedged on terms
and for a period of time satisfactory to the Lead Arrangers with a
counterparty acceptable to the Lead Arrangers.
Events of Default: Customary for facilities similar to the Credit Facilities and
others as may reasonably be required by the Lead Arrangers.
Taxes, Yield Protection and Usual for facilities and transactions of this type.
Increased Costs:
Assignments and Each assignment (unless to another Lender or its affiliates)
Participations: shall be in a minimum amount of $1.0 million (unless Borrower and
the Lead Arrangers otherwise consent or unless the assigning
Lender's exposure is thereby reduced to $ 0). Assignments (which
may be non-PRO RATA among loans and commitments) shall be permitted
with Borrower's and the Lead Arrangers' consent (such consent not
to be unreasonably withheld, delayed or conditioned), except that
no such
14
consent of Borrower need be obtained to effect an assignment to any
Lender (or its affiliates) or if any default has occurred and is
continuing or if determined by the Lead Arrangers, in consultation
with Borrower, to be necessary to achieve a successful syndication.
Participations shall be permitted without restriction. Voting
rights of participants will be subject to customary limitations.
Required Lenders: Lenders having a majority of the outstanding credit exposure (the
"REQUIRED LENDERS"), subject to amendments of certain provisions of
the Credit Documents requiring the consent of Lenders having a
greater share (or all) of the outstanding credit exposure or
requiring the consent of a specified affected Credit Facility.
Expenses and Indemnification: In addition to those out-of-pocket expenses reimbursable under the
Commitment Letter, all reasonable out-of-pocket expenses of the
Lead Arrangers and the Administrative Agent (and the Lenders for
enforcement costs and documentary taxes) associated with the
preparation, execution and delivery of any waiver or modification
(whether or not effective) of, and the enforcement of, any Credit
Document (including the reasonable fees, disbursements and other
charges of counsel for the Lead Arrangers) are to be paid by the
Credit Parties.
The Credit Parties will indemnify each of the Lead Arrangers, the
Administrative Agent and the other Lenders and hold them harmless
from and against all costs, expenses (including fees, disbursements
and other charges of counsel) and liabilities arising out of or
relating to any litigation or other proceeding (regardless of
whether the Lead Arrangers, the Administrative Agent or any such
other Lender is a party thereto) that relate to the Transactions or
any transactions related thereto, except to the extent arising
primarily from such person's bad faith, gross negligence or willful
misconduct.
Governing Law and Forum: New York.
Waiver of Jury Trial: All parties to the Credit Documents waive the right to trial by
jury.
Special Counsel for Lead Cahill Gordon & Reindel (and one or more local counsel and
Arrangers: regulatory counsel as selected by the Lead Arrangers).
15
ANNEX I
Interest Rates and Fees: Borrower will be entitled to make borrowings based on the ABR plus
the Applicable Margin or LIBOR plus the Applicable Margin. The
"APPLICABLE MARGIN" shall be (A) with respect to LIBOR Loans under
the (i) Revolving Facility, 2.50% PER ANNUM; (ii) Term Loan A
Facility 2.50% PER ANNUM; (iii) Term Loan B Facility, 2.75% PER
ANNUM; and (iv) Second Priority Facility, 4.25% PER ANNUM; and (B)
with respect to ABR Loans under the (i) Revolving Facility, 1.50%
PER ANNUM; (ii) Term Loan A Facility, 1.50% PER ANNUM; (iii) Term
Loan B Facility, 1.75% PER ANNUM; and (iv) Second Priority
Facility, 3.25% PER ANNUM.
Unless consented to by the Lead Arrangers in their sole discretion,
no LIBOR Loans may be elected on the Closing Date or prior to the
date 30 days thereafter (unless the completion of the primary
syndication of the Credit Facilities as determined by the Lead
Arrangers shall have occurred), except that, from and after the
fifth business day after the Closing Date, LIBOR periods of 14 days
may be elected until the thirtieth day after the Closing Date.
Notwithstanding the foregoing, on and after the date (the "TRIGGER
DATE") that is the later of (A) if the Second Priority Facility is
drawn down, the date following the expiration of the "Change of
Control Offers" upon which none of the Second Priority Facility is
outstanding, and (B) the first date after the Closing Date on which
Borrower delivers financial statements and a computation of the
Total Leverage Ratio for the first fiscal quarter ended at least
six months after the Closing Date in accordance with the Credit
Agreement, the Applicable Margins for the Revolving Facility and
Term Loan A Facility shall be subject to a grid based on the most
recent Total Leverage Ratio to be negotiated.
"ABR" means the higher of (i) the corporate base rate of interest
announced by the Administrative Agent from time to time, changing
effective on the date of announcement of said corporate base rate
changes, and (ii) the Federal Funds Rate plus 0.50% PER ANNUM. The
corporate base rate is not necessarily the lowest rate charged by
the Administrative Agent to its customers.
"LIBOR" means the rate determined by the Administrative Agent to be
available to the Lenders in the London interbank market for
deposits in US Dollars in the amount of, and for a maturity
corresponding to, the amount of the applicable LIBOR Loan, as
adjusted for maximum statutory reserves.
Borrower may select interest periods of one, two, three or six
months for LIBOR borrowings. Interest will be payable in arrears
(i) in the case of ABR Loans, at the end of each quarter and (ii)
in the case of LIBOR Loans, at the end of each interest period and,
in the case of any interest period longer than three months, no
less frequently than every three months; PROVIDED, HOWEVER, that if
the Second Priority Facility and the Second Term Loan B Draw are
drawn down, interest shall be paid not less frequently than
interest is paid on the Second Priority Facility and the Second
Term Loan B Draw. Interest on all borrowings shall be calculated on
the basis of the actual number of days elapsed over (x) in the case
of LIBOR Loans, a 360-day year, and (y) in the case of ABR Loans, a
365- or 366-day year, as the case may be.
Commitment fees accrue on the undrawn amount of the Credit
Facilities, commencing on the date of the execution and delivery of
the Credit Documents. The commitment fee in respect of the Credit
Facilities will accrue as set forth in the table below:
TOTAL LEVERAGE COMMITMENT FEE
-------------- --------------
(greater than) 5.0x .750%
(less than) 5.0x .625%
(less than) 4.5x .500%
(less than) 3.5x .375%
All commitment fees will be payable in arrears at the end of each
quarter and upon any termination of any commitment, in each case
for the actual number of days elapsed over a 365- or 366-day year.
2
EXHIBIT 1.15
PENN NATIONAL HOLLYWOOD
GAMING, INC. CASINO
News Announcement
--------------------------------------------------------
CONFERENCE CALL: TODAY, AUGUST 7, 2002 AT 5:30 P.M. EDT
DIAL-IN NUMBERS: 800/215-4598
WEBCAST: www.companyboardroom.com
REPLAY INFORMATION PROVIDED BELOW.
--------------------------------------------------------
CONTACT:
William J. Clifford Paul C. Yates Joseph N. Jaffoni
Chief Financial Officer Chief Financial Officer Jaffoni & Collins Incorporated
Penn National Gaming, Inc. Hollywood Casino Corporation 212/835-8500 or penn@jcir.com
610/373-2400 972/392-7777
FOR IMMEDIATE RELEASE
PENN NATIONAL GAMING TO ACQUIRE HOLLYWOOD CASINO CORPORATION
FOR $12.75 PER SHARE IN CASH IN A $780 MILLION TRANSACTION
Wyomissing, Penn. and Dallas, Tex. (August 7, 2002) -- Penn National Gaming,
Inc. (PENN: Nasdaq) announced today that it has entered into a definitive
agreement to acquire Hollywood Casino Corporation (HWD: AMEX) for total
consideration of approximately $780 million. The total consideration is net of
Hollywood Casino's cash and cash equivalents of approximately $136 million and
includes approximately $569 million of long-term debt of Hollywood Casino and
its subsidiaries. Under the terms of the agreement, Hollywood Casino will merge
with a wholly-owned subsidiary of Penn National, and Hollywood Casino
stockholders will receive cash in the amount of $12.75 per share at closing.
Hollywood Casino and its subsidiaries own and operate Hollywood-themed casino
entertainment facilities in Aurora, Illinois; Tunica, Mississippi; and
Shreveport, Louisiana. Following the proposed acquisition of Hollywood Casino,
Penn National will own six dockside gaming facilities, a pari-mutuel horse
racing facility with slots, a land-based casino, two pari-mutuel horse racing
operations and eleven off-track wagering sites and hold a casino management
contract for an international casino. The combined company will be the seventh
largest public gaming company in the U.S. with annual revenues in excess of $1
billion. Penn National believes the transaction will be accretive to its
operating results upon closing based on its analysis of Hollywood Casino's
assets and their prospects, as well as expected financial and operating
synergies.
The transaction has been approved by the Boards of Directors of both Penn
National Gaming, Inc. and Hollywood Casino Corporation. The transaction is
subject to a vote by stockholders of Hollywood Casino, gaming authorities and
other regulatory approvals (including expiration of the
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PENN NATIONAL GAMING TO ACQUIRE HOLLYWOOD CASINO, 8/7/02 page 2
applicable Hart-Scott-Rodino waiting period) and other customary closing
conditions, and is expected to be consummated in the first half of 2003. Certain
stockholders of Hollywood Casino who control approximately 50.3% of its
outstanding shares have agreed to vote in favor of the transaction.
Commenting on the transaction, Peter M. Carlino, Chief Executive Officer of Penn
National, said, "The acquisition of these well established properties represents
a significant growth and expansion opportunity for Penn National and is
attractive both strategically and financially. The acquisition, which almost
doubles our revenue base, is expected to be accretive to our operating results
upon closing, builds the critical mass of our gaming operations and further
diversifies the geographic reach of our operations without any overlap with our
existing properties.
"We believe Hollywood's assets will prove to be excellent additions to Penn
National. Hollywood Casino's Aurora facility recently completed a major
expansion and the company's $230 million Shreveport resort has only been in
operation for a year and a half. As a result, neither of these properties will
require major near term capital investments to expand or refurbish these
facilities. In both cases these properties are viewed as the premier facility in
their respective market and have access to major metropolitan feeder markets of
Chicago and Dallas. Hollywood Tunica has proven to be a consistent performer
with over 500 rooms, ample meeting space, an 18-hole championship golf course
and is an attractive destination resort. Like its Aurora and Shreveport
counterparts, the Tunica casino is a superior quality facility that will require
very modest near-term capital expenditures. Our vision is to blend the
successful operating and management disciplines of both companies to generate
improved financial performance over prior year periods. Finally, in Hollywood
Casino we are acquiring a solid brand with widespread recognition that can be
applied to other Penn National assets to drive marketing programs and
efficiencies."
Edward T. Pratt III, Chairman and Chief Executive Officer of Hollywood Casino
Corporation, continued, "The Board and management of Hollywood Casino are very
pleased to announce this transaction. The significant value our shareholders
will be receiving reflects the culmination of several years of hard work by many
dedicated employees of Hollywood. The $12.75 per share purchase price clearly
reflects the tremendous value that Hollywood Casino has created for its
shareholders. The terms of the transaction provide Hollywood Casino shareholders
with a 34% premium to the closing price of our stock on June 27, 2002, the day
before we publicly disclosed that the company had been conducting a sale
process. We are confident that our superior quality facilities will continue to
generate impressive operating results under Penn National.
"In addition to being a terrific transaction for our shareholders, we think the
merger of our two companies provides our employees with a tremendous
opportunity. The combined company will be a large, diversified gaming company
with a bright future. We are pleased to note that after the merger our
properties will continue to operate under the Hollywood Casino brand. We also
understand that Penn National's existing properties plan to adopt the Hollywood
Casino name and theme after the merger."
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PENN NATIONAL GAMING TO ACQUIRE HOLLYWOOD CASINO, 8/7/02 page 3
Hollywood Casino Corporation owns and operates:
|X| Hollywood Casino - Aurora, arguably the finest gaming and entertainment
product in the Chicago marketplace. The 117,000 square foot dockside
casino and entertainment facility is located in Aurora, Illinois,
approximately 35 miles west of downtown Chicago. The property recently
opened a new spectacular dockside casino that replaced its two original,
four level riverboat casinos. The dockside casino has 53,000 square feet
of gaming space on a single level featuring 1,105 slot machines and 36
table games including the only poker room in Chicago. The property also
features the Hollywood Epic Buffet (R), which offers the latest in
presentation style cooking, the Fairbanks (R) Steakhouse, the property's
gourmet steak restaurant and a high-end player's lounge.
|X| Hollywood Casino - Tunica, a casino, hotel and entertainment complex
located in Tunica County, Mississippi, approximately 30 miles south of
Memphis, Tennessee. The Tunica Casino was designed to replicate a motion
picture sound stage and features a 54,000 square-foot, single-level casino
with approximately 1,600 slot machines and 40 table games. The casino
includes the Adventure Slots themed gaming area featuring multimedia
displays of memorabilia from famous adventure motion pictures and over 200
slot machines. The Tunica Casino's 505-room hotel is currently undergoing
an $8 million renovation which is expected to be completed in mid-2003.
|X| Hollywood Casino - Shreveport, a 229,000 square foot entertainment
facility located in Shreveport, Louisiana, approximately 180 miles east of
Dallas, Texas. The property is Shreveport's first "true" destination
resort and is also the market's first highly themed facility, utilizing an
art-deco Hollywood theme throughout the property. The Shreveport resort
features the largest dockside casino in the Shreveport market, a 403-room,
all-suite hotel, an elegant land-based pavilion that includes a sixty-foot
high atrium and extensive restaurant and entertainment amenities. The
property's dockside casino contains approximately 59,000 square feet of
space with approximately 1,422 slot machines and approximately 66 table
games. Located in the pavilion are the property's acclaimed Epic Buffet,
Hollywood Diner and Fairbanks Steakhouse restaurants and its
state-of-the-art spa and fitness center.
Penn National has received financing commitments from Bear, Stearns & Co. Inc.
and Merrill Lynch & Co. to consummate the transaction which commitments are
subject to several customary conditions.
Lehman Brothers Inc. acted as financial advisor to Penn National Gaming and
Goldman, Sachs & Co. served as financial advisor to Hollywood Casino Corporation
in the transaction.
Penn National and Hollywood Casino will be hosting a conference call and
simultaneous webcast at 5:30 p.m. EDT today, both of which are open to the
general public. The conference call number is 800/215-4598; please call five
minutes in advance to ensure that you are connected prior to the presentation.
Questions and answers will be reserved for call-in analysts and investors.
Interested parties may also access the live call on the Internet at
www.companyboardroom.com; allow
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PENN NATIONAL GAMING TO ACQUIRE HOLLYWOOD CASINO, 8/7/02 page 4
15 minutes to register and download and install any necessary software.
Following its completion, a replay of the call can be accessed until August 20,
by dialing 800/633-8284 or 402/977-9140 (international callers). The access code
for the replay is 20814618. A replay of the call can also be accessed for thirty
days on the Internet via www.companyboardroom.com.
Penn National Gaming owns and operates Charles Town Races in Charles Town, West
Virginia, which presently features 2,587 gaming machines (with approval to offer
3,500 machines); two Mississippi casinos, the Casino Magic hotel, casino, golf
resort and marina in Bay St. Louis and the Boomtown Biloxi casino in Biloxi; the
Casino Rouge, a riverboat gaming facility in Baton Rouge, Louisiana and the
Bullwhackers properties in Black Hawk, Colorado. Penn National also owns two
racetracks and eleven off-track wagering facilities in Pennsylvania and the
racetrack at Charles Town Races in West Virginia, and operates the Casino Rama,
a gaming facility located approximately 90 miles north of Toronto, Canada,
pursuant to a management contract.
In addition to historical facts or statements of current condition, this press
release contains forward-looking statements made by Penn National or Hollywood
Casino (collectively, the "Companies") within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended. Some of these statements are those regarding the
accretive nature of the merger, synergies arising from the merger, future
capital expenditures, prospects for future growth, expectation of continued
acquisitions and optimism in light of current economic conditions. These
statements are subject to a number of risks and uncertainties that could cause
the statements made to be incorrect and the actual results to differ materially.
The Companies describe certain of these risks and uncertainties in their filings
with the Securities and Exchange Commission, including their Annual Reports on
Form 10-K for the year ended December 31, 2001. Some of these risks include
those relating to the ability of the Penn National to integrate and manage
facilities it acquires, risks relating to the development and expansion of
properties, risks of increased competition and risks relating to the fact that
they are heavily regulated by gaming authorities. In addition, consummation of
Penn National's acquisition of Hollywood Casino is subject to several conditions
including the completion of Penn National's acquisition financing as well as the
approval of various governmental entities, including certain gaming regulatory
authorities to which the Companies are subject. Furthermore, the Companies do
not intend to update publicly any forward-looking statements except as required
by law. The cautionary advice in this paragraph is permitted by the Private
Securities Litigation Reform Act of 1995.
Hollywood Casino anticipates filing a proxy statement with the Securities and
Exchange Commission in the near future. Investors and security holders will be
able to obtain a free copy of this document when it becomes available at the
Commission's web site www.sec.gov. STOCKHOLDERS OF HOLLYWOOD CASINO SHOULD READ
THE PROXY STATEMENT CAREFULLY BEFORE MAKING A DECISION REGARDING THE
TRANSACTION. INVESTORS AND STOCKHOLDERS ARE URGED TO READ THE PROXY STATEMENT
AND ANY OTHER RELEVANT DOCUMENTS RELATED TO THE TRANSACTION WHEN THEY BECOME
AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION.
# # #
