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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-1
TENDER OFFER STATEMENT
PURSUANT TO SECTION 14(D)(1)
OF THE SECURITIES EXCHANGE ACT OF 1934
AND
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
----------------
CAESARS WORLD, INC.
(NAME OF SUBJECT COMPANY)
----------------
ITT FLORIDA ENTERPRISES, INC.
ITT CORPORATION
(BIDDERS)
----------------
COMMON STOCK, PAR VALUE $0.10 PER SHARE
(INCLUDING THE ASSOCIATED JUNIOR PARTICIPATING PREFERRED STOCK PURCHASE RIGHTS)
(TITLE OF CLASS OF SECURITIES)
----------------
127695104
(CUSIP NUMBER OF CLASS OF SECURITIES)
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WALTER DIEHL, ESQ.
ITT CORPORATION
1330 AVENUE OF THE AMERICAS
NEW YORK, NY 10019-5490
(212) 258-1000
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSONS AUTHORIZED TO
RECEIVE NOTICES AND COMMUNICATIONS ON BEHALF OF BIDDERS)
----------------
COPIES TO:
PHILIP A. GELSTON, ESQ.
CRAVATH, SWAINE & MOORE
WORLDWIDE PLAZA
825 EIGHTH AVENUE
NEW YORK, NEW YORK 10019
(212) 474-1000
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CALCULATION OF FILING FEE
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TRANSACTION VALUATION* AMOUNT OF FILING FEE
$1,754,003,025 $350,801
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* For purposes of calculating amount of filing fee only. The amount assumes
the purchase of 25,985,230 shares of Common Stock, par value $0.10 per
share, together with the associated junior participating preferred stock
purchase rights issued pursuant to the Rights Agreement dated as of January
10, 1989, as amended, between the Company and First Chicago Trust Company of
New York, at a price per Share of $67.50 in cash.
[_] Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the Form
or Schedule and the date of its filing.
Amount Previously Paid: None Filing Party: N/A
Form or Registration No.: N/A Date Filed: N/A
Page 1 of 8. Exhibit Index on Page 8.
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14D-1 AND 13D
CUSIP NO. 127695104
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1. NAME OF REPORTING PERSONS: S.S. OR I.R.S.
IDENTIFICATION NO. OF ABOVE PERSON:
ITT Florida Enterprises, Inc. (13-3799502)
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2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [_]
(b) [_]
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3. SEC USE ONLY
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4. SOURCES OF FUNDS: AF
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5. CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS ISREQUIRED PURSUANT TO ITEMS
2(e) or 2(f) [_]
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6. CITIZENSHIP OR PLACE OF ORGANIZATION:
Florida
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7. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON:
6,379,438
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8. CHECK IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES
CERTAIN SHARES [_]
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9. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7):
Approximately 25.3% of the Shares Outstanding as of
December 21, 1994.
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10. TYPE OF REPORTING PERSON:
CO
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Page 2 of 8
14D-1 AND 13D
CUSIP NO. 127695104
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1. NAME OF REPORTING PERSONS: S.S. OR I.R.S.
IDENTIFICATION NO. OF ABOVE PERSON:
ITT Corporation (13-5158950)
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2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [_]
(b) [_]
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3. SEC USE ONLY:
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4. SOURCES OF FUNDS:
BK, WC, OO
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5. CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED PURSUANT TO ITEMS 2(e) or 2(f) [_]
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6. CITIZENSHIP OR PLACE OF ORGANIZATION:
Delaware
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7. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH
REPORTING PERSON:
6,379,438
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8. CHECK IF THE AGGREGATE AMOUNT IN ROW (7)
EXCLUDES CERTAIN SHARES: [_]
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9. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
Approximately 25.3% of the Shares Outstanding as of
December 21, 1994.
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10. TYPE OF REPORTING PERSON:
CO, HC
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Page 3 of 8
ITEM 1. SECURITY AND SUBJECT COMPANY.
(a) The name of the subject company is Caesars World, Inc., a Florida
corporation (the "Company"), which has its principal executive offices at 1801
Century Park East, Los Angeles, California 90067.
(b) This Schedule 14D-1 relates to the offer by ITT Florida Enterprises,
Inc., a Florida corporation (the "Purchaser"), to purchase all the outstanding
shares of Common Stock (the "Common Stock"), par value $0.10 per share, of the
Company, together with the associated junior participating preferred stock
purchase rights (the "Rights") issued pursuant to the Rights Agreement dated as
of January 10, 1989 (the "Rights Agreement"), between the Company and First
Chicago Trust Company of New York, as Rights Agent (the Common Stock, together
with the Rights being herein referred to as the "Shares"), at a price of $67.50
per Share, net to the seller in cash (the "Offer Price"), upon the terms and
subject to the conditions set forth in the Offer to Purchase dated December 23,
1994 (the "Offer to Purchase"), and in the related Letter of Transmittal
(which, together with any amendments or supplements thereto, collectively
constitute the "Offer"), copies of which are attached hereto as Exhibits (a)(1)
and (a)(2), respectively. Information concerning the number of outstanding
Shares is set forth in the "Introduction" of the Offer to Purchase and is
incorporated herein by reference.
(c) Information concerning the principal market in which the Shares are
traded and the high and low sales prices of the Shares for each quarterly
period during the past two years is set forth in Section 6 ("Price Range of the
Shares; Dividends on the Shares") of the Offer to Purchase and is incorporated
herein by reference.
ITEM 2. IDENTITY AND BACKGROUND.
(a)-(d) and (g) This Schedule 14D-1 is being filed by the Purchaser, a
Florida corporation and ITT Corporation, a Delaware corporation ("Parent"). The
Purchaser is a wholly owned subsidiary of Parent. Information concerning the
principal business and the address of the principal offices of the Purchaser
and Parent is set forth in Section 9 ("Certain Information Concerning the
Purchaser and Parent") of the Offer to Purchase and is incorporated herein by
reference. The names, business addresses, present principal occupations or
employment, material occupations, positions, offices or employment during the
last five years and citizenship of the directors and executive officers of the
Purchaser and Parent are set forth in Schedule I to the Offer to Purchase and
are incorporated herein by reference.
(e) and (f) The information set forth in Section 9 ("Certain Information
Concerning the Purchaser and Parent") and Section 15 ("Certain Legal Matters")
of the Offer to Purchase is incorporated herein by reference.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY.
(a) The information set forth in Section 11 ("Contacts with the Company;
Background of the Offer") of the Offer to Purchase is incorporated herein by
reference.
(b) The information set forth in Section 11 ("Contacts with the Company;
Background of the Offer") and Section 12 ("Purpose of the Offer; The Merger
Agreement; Other Agreements") of the Offer to Purchase is incorporated herein
by reference.
ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a) and (b) The information set forth in Section 10 ("Source and Amount of
Funds") of the Offer to Purchase is incorporated herein by reference.
(c) Not applicable.
Page 4 of 8
ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDERS.
(a)-(e) The information set forth in Section 12 ("Purpose of the Offer; The
Merger Agreement; Other Agreements") of the Offer to Purchase is incorporated
herein by reference.
(f) and (g) The information set forth in Section 7 ("Effect of the Offer on
the Market for the Shares, Stock Listing and Exchange Act Registration") of the
Offer to Purchase is incorporated herein by reference.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
(a) and (b) The information set forth in "Introduction", Section 9 ("Certain
Information Concerning the Purchaser and Parent"), Section 12 ("Purpose of the
Offer; The Merger Agreement; Other Agreements") and Schedule II of the Offer to
Purchase is incorporated herein by reference.
ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO THE SUBJECT COMPANY'S SECURITIES.
The information set forth in "Introduction", Section 9 ("Certain Information
Concerning the Purchaser and Parent"), Section 11 ("Contacts with the Company;
Background of the Offer") and Section 12 ("Purpose of the Offer; The Merger
Agreement; Other Agreements") of the Offer to Purchase is incorporated herein
by reference.
ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The information set forth in "Introduction" and Section 16 ("Fees and
Expenses") of the Offer to Purchase is incorporated herein by reference.
ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS.
The information set forth in Section 9 ("Certain Information Concerning the
Purchaser and Parent") of the Offer to Purchase is incorporated herein by
reference.
ITEM 10. ADDITIONAL INFORMATION.
(a) The information set forth in Section 12 ("Purpose of the Offer; The
Merger Agreement; Other Agreements") of the Offer to Purchase is incorporated
herein by reference.
(b), (c) and (e) The information set forth in Section 15 ("Certain Legal
Matters") of the Offer to Purchase is incorporated herein by reference.
(d) The information set forth in Section 7 ("Effect of the Offer on the
Market for the Shares, Stock Listing and Exchange Act Registration") of the
Offer to Purchase is incorporated herein by reference.
(f) The information set forth in the Offer to Purchase, the Letter of
Transmittal, the Agreement and Plan of Merger dated as of December 19, 1994,
among Parent, the Purchaser and the Company, copies of which are attached
hereto as Exhibits (a)(1), (a)(2) and (c)(1), respectively, is incorporated
herein by reference.
Page 5 of 8
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
(a)(1) Offer to Purchase.
(a)(2) Letter of Transmittal.
(a)(3) Notice of Guaranteed Delivery.
(a)(4) Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other
Nominees.
(a)(5) Letter to Clients for use by Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees.
(a)(6) Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.
(a)(7) Form of Summary Advertisement dated December 23, 1994.
(a)(8) Text of Press Release dated December 19, 1994, issued by the Company and
Parent.
(a)(9) Text of Press Release dated December 23, 1994 issued by the Company and
Parent.
(b) None.
(c)(1) Agreement and Plan of Merger dated as of December 19, 1994, among
Parent, the Purchaser and the Company.
(c)(2) Option Agreement dated as of December 19, 1994, among Parent, the
Purchaser and the Company.
(d) None.
(e) Not applicable.
(f) None.
Page 6 of 8
SIGNATURE
After due 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.
Dated: December 23, 1994
ITT Florida Enterprises, Inc.
By:
---------------------------------
Name: Richard S. Ward
Title: Executive Vice President
ITT Corporation
By:
---------------------------------
Name: Richard S. Ward
Title: Executive Vice President
Page 7 of 8
EXHIBIT INDEX
EXHIBIT
NUMBER EXHIBIT NAME PAGE NO.
------- ------------ --------
(a)(1) Offer to Purchase...........................................
(a)(2) Letter of Transmittal.......................................
(a)(3) Notice of Guaranteed Delivery...............................
(a)(4) Letter to Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees...............................
(a)(5) Letter to Clients for use by Brokers, Dealers, Commercial
Banks, Trust Companies and Other Nominees..................
(a)(6) Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9..............................
(a)(7) Form of Summary Advertisement dated December 23, 1994.......
(a)(8) Text of Press Release dated December 19, 1994, issued by the
Company and Parent.........................................
(a)(9) Text of Press Release dated December 23, 1994, issued by the
Company and Parent.........................................
(b) None........................................................
(c)(1) Agreement and Plan of Merger dated as of December 19, 1994,
among Parent, the Purchaser and the Company................
(c)(2) Option Agreement dated as of December 19, 1994, among
Parent, the Purchaser and the Company......................
(c)(3) Form of Employment Agreement to be entered into between the
Company and Henry Gluck....................................
(c)(4) Form of Employment Agreement to be entered into between the
Company and J. Terrance Lanni..............................
(d) None........................................................
(e) Not applicable..............................................
(f) None........................................................
Page 8 of 8
Exhibit(a)(1)
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED JUNIOR PARTICIPATING PREFERRED STOCK PURCHASE RIGHTS)
OF
CAESARS WORLD, INC.
AT
$67.50 NET PER SHARE
BY
ITT FLORIDA ENTERPRISES, INC.
A WHOLLY OWNED SUBSIDIARY OF
ITT CORPORATION
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE
AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON TUESDAY,
JANUARY 24, 1995, UNLESS EXTENDED.
THE BOARD OF DIRECTORS OF CAESARS WORLD, INC. HAS, BY UNANIMOUS VOTE OF ALL
DIRECTORS, APPROVED THE OFFER AND THE MERGER REFERRED TO HEREIN AND DETERMINED
THAT THE TERMS OF THE OFFER AND THE MERGER ARE FAIR TO, AND IN THE BEST
INTERESTS OF, THE SHAREHOLDERS OF THE COMPANY AND RECOMMENDS THAT ALL
SHAREHOLDERS OF THE COMPANY ACCEPT THE OFFER AND TENDER THEIR SHARES.
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THE OFFER IS CONDITIONED UPON (i) THERE BEING VALIDLY TENDERED AND NOT
WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER THAT NUMBER OF SHARES WHICH
WOULD REPRESENT AT LEAST A MAJORITY OF ALL THEN OUTSTANDING SHARES ON A FULLY
DILUTED BASIS, (ii) THE GAMING CONDITION (AS DEFINED HEREIN), (iii) THE
EXPIRATION OR TERMINATION OF ALL WAITING PERIODS IMPOSED BY THE HART-SCOTT-
RODINO ANTITRUST IMPROVEMENTS ACT OF 1976, AS AMENDED, AND THE REGULATIONS
THEREUNDER AND (iv) THE OTHER CONDITIONS DESCRIBED HEREIN.
NONE OF THE GAMING AUTHORITIES (AS DEFINED HEREIN) HAS PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS OFFER TO PURCHASE OR THE MERITS OF THE OFFER AND
THE MERGER REFERRED TO HEREIN. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
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IMPORTANT
Any shareholder desiring to tender all or any portion of such shareholder's
Shares (as defined herein) should either (1) complete and sign the Letter of
Transmittal or a facsimile copy thereof in accordance with the instructions in
the Letter of Transmittal, have such shareholder's signature thereon guaranteed
if required by Instruction 1 to the Letter of Transmittal, mail or deliver the
Letter of Transmittal or such facsimile and any other required documents to the
Depositary and either deliver the certificates for such Shares to the
Depositary along with the Letter of Transmittal or facsimile or deliver such
Shares pursuant to the procedure for book-entry transfer set forth in Section 2
or (2) request such shareholder's broker, dealer, commercial bank, trust
company or other nominee to effect the transaction for such shareholder. A
shareholder having Shares registered in the name of a broker, dealer,
commercial bank, trust company or other nominee must contact such broker,
dealer, commercial bank, trust company or other nominee if such shareholder
desires to tender such Shares.
A shareholder who desires to tender Shares and whose certificates for such
Shares are not immediately available or who cannot comply in a timely manner
with the procedure for book-entry transfer, or who cannot deliver all required
documents to the Depositary prior to the expiration of the Offer, may tender
such Shares by following the procedure for guaranteed delivery set forth in
Section 2.
Questions and requests for assistance or for additional copies of this Offer
to Purchase, the Letter of Transmittal and the Notice of Guaranteed Delivery
may be directed to the Information Agent or to the Dealer Managers at their
respective addresses and telephone numbers set forth on the back cover of this
Offer to Purchase.
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THE DEALER MANAGERS FOR THE OFFER ARE:
BEAR, STEARNS & CO. INC. BT SECURITIES CORPORATION
December 23, 1994
TABLE OF CONTENTS
PAGE
----
Introduction.............................................................. 1
1. Terms of the Offer.................................................... 3
2. Procedure for Tendering Shares........................................ 5
3. Withdrawal Rights..................................................... 7
4. Acceptance for Payment and Payment.................................... 8
5. Certain Federal Income Tax Consequences............................... 10
6. Price Range of the Shares; Dividends on the Shares.................... 11
7. Effect of the Offer on the Market for the Shares, Stock Listing and
Exchange Act Registration............................................. 11
8. Certain Information Concerning the Company............................ 12
9. Certain Information Concerning the Purchaser and Parent............... 14
10. Source and Amount of Funds............................................ 16
11. Contacts with the Company; Background of the Offer.................... 16
12. Purpose of the Offer; The Merger Agreement; Other Agreements.......... 17
13. Dividends and Distributions........................................... 28
14. Certain Conditions of the Offer....................................... 28
15. Certain Legal Matters................................................. 30
16. Fees and Expenses..................................................... 35
17. Miscellaneous......................................................... 36
Schedule I--Directors and Executive Officers of Parent and the Purchaser.. 37
To the Holders of Common Stock
of Caesars World, Inc.:
INTRODUCTION
THE OFFER
ITT Florida Enterprises, Inc., a Florida corporation (the "Purchaser") and a
wholly owned subsidiary of ITT Corporation, a Delaware corporation ("Parent"),
hereby offers to purchase all outstanding shares of Common Stock (the "Common
Stock"), par value $.10 per share, of Caesars World, Inc., a Florida
corporation (the "Company"), together with the associated junior participating
preferred stock purchase rights (the "Rights") issued pursuant to the Rights
Agreement dated as of January 10, 1989 (the "Rights Agreement"), between the
Company and First Chicago Trust Company of New York, as Rights Agent (the
Common Stock, together with the associated Rights being herein referred to as
the "Shares"), at $67.50 per Share (the "Offer Price"), net to the seller in
cash, upon the terms and subject to the conditions set forth in this Offer to
Purchase and in the related Letter of Transmittal (which, together with any
amendments or supplements hereto or thereto, collectively constitute the
"Offer").
Tendering shareholders will not be obligated to pay brokerage fees or
commissions or, except as set forth in Instruction 6 of the Letter of
Transmittal, transfer taxes on the purchase of Shares pursuant to the Offer.
The Purchaser will pay all fees and expenses of Bear, Stearns & Co. Inc. and BT
Securities Corporation, who are acting as Dealer Managers (the "Dealer
Managers"), Bankers Trust Company, which is acting as the Depositary (the
"Depositary"), and Georgeson & Company Inc., which is acting as Information
Agent (the "Information Agent"), incurred in connection with the Offer. See
Section 16.
THE BOARD OF DIRECTORS OF THE COMPANY HAS, BY UNANIMOUS VOTE OF ALL
DIRECTORS, APPROVED THE OFFER AND THE MERGER (AS DEFINED BELOW) AND DETERMINED
THAT THE TERMS OF THE OFFER AND THE MERGER ARE FAIR TO, AND IN THE BEST
INTERESTS OF, THE SHAREHOLDERS OF THE COMPANY AND RECOMMENDS THAT SHAREHOLDERS
OF THE COMPANY ACCEPT THE OFFER AND TENDER THEIR SHARES.
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED, THE COMPANY'S FINANCIAL
ADVISOR, HAS DELIVERED TO THE BOARD OF DIRECTORS OF THE COMPANY ITS WRITTEN
OPINION THAT, BASED UPON CERTAIN CONSIDERATIONS AND ASSUMPTIONS, AS OF THE DATE
OF SUCH OPINION, THE PROPOSED CASH CONSIDERATION TO BE RECEIVED BY THE HOLDERS
OF SHARES IN THE OFFER AND THE MERGER IS FAIR TO SUCH SHAREHOLDERS FROM A
FINANCIAL POINT OF VIEW. SUCH OPINION IS SET FORTH IN FULL AS AN EXHIBIT TO THE
COMPANY'S SOLICITATION/RECOMMENDATION STATEMENT ON SCHEDULE 14D-9 (THE
"SCHEDULE 14D-9"), WHICH IS BEING MAILED TO SHAREHOLDERS OF THE COMPANY
TOGETHER WITH THIS OFFER TO PURCHASE.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE (AS DEFINED IN SECTION
1) THAT NUMBER OF SHARES (THE "MINIMUM NUMBER OF SHARES") WHICH WOULD REPRESENT
AT LEAST A MAJORITY OF ALL OUTSTANDING SHARES ON A FULLY DILUTED BASIS (THE
"MINIMUM CONDITION"). THE PURCHASER RESERVES THE RIGHT (SUBJECT TO OBTAINING
THE CONSENT OF THE COMPANY AND THE APPLICABLE RULES AND REGULATIONS OF THE
SECURITIES AND EXCHANGE COMMISSION (THE "COMMISSION")), WHICH IT PRESENTLY HAS
NO INTENTION OF EXERCISING, TO WAIVE OR REDUCE THE MINIMUM CONDITION AND TO
ELECT TO PURCHASE, PURSUANT TO THE OFFER, FEWER THAN THE MINIMUM NUMBER OF
SHARES. SEE SECTIONS 1 AND 14. IF THE PURCHASER PURCHASES THE MINIMUM NUMBER OF
SHARES IN THE OFFER, IT WILL BE ABLE TO EFFECT THE MERGER WITHOUT THE
AFFIRMATIVE VOTE OF ANY OTHER SHAREHOLDER OF THE COMPANY. SEE SECTION 12.
THE OFFER IS ALSO CONDITIONED, AS SET FORTH MORE SPECIFICALLY IN SECTION 14,
UPON ALL CONSENTS, APPROVALS, ORDERS OR AUTHORIZATIONS OF, OR REGISTRATIONS,
DECLARATIONS OR FILING WITH, ANY GOVERNMENTAL AUTHORITY (THE "GAMING
AUTHORITIES") WITH JURISDICTION IN RESPECT OF THE COMPANY'S ACTIVE GAMING
OPERATIONS REQUIRED OR NECESSARY IN CONNECTION WITH THE OFFER, THE MERGER AND
THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED BY THE MERGER AGREEMENT
(INCLUDING THE CHANGES IN THE COMPOSITION OF THE BOARD OF DIRECTORS
1
OF THE COMPANY) HAVING BEEN OBTAINED AND BEING IN FULL FORCE AND EFFECT AND, IN
THE CASE OF NEW JERSEY, THE NEW JERSEY CASINO CONTROL COMMISSION HAVING
APPROVED ALL ARRANGEMENTS WITH RESPECT TO A TRUST HOLDING SHARES (OR IF
APPROVED BY THE NEW JERSEY AUTHORITIES, SHARES OF A SUBSIDIARY OF THE COMPANY)
AND THE DIRECTORS OF THE PURCHASER HAVING BEEN QUALIFIED, ON A PERMANENT OR
TEMPORARY BASIS, TO SERVE AS DIRECTORS OF A COMPANY (INCLUDING THE COMPANY)
THAT EITHER DIRECTLY OR THROUGH ITS SUBSIDIARY HOLDS A NEW JERSEY CASINO
LICENSE (COLLECTIVELY, THE "GAMING CONDITION"). PARENT IS CURRENTLY REGISTERED
IN NEVADA AS A PUBLICLY TRADED CORPORATION AND HAS BEEN FOUND SUITABLE TO OWN
THE SHARES OF A SUBSIDIARY THAT HAS LICENSED GAMING FACILITIES IN NEVADA.
ACCORDINGLY, PARENT DOES NOT EXPECT SIGNIFICANT DELAYS IN OBTAINING NECESSARY
APPROVALS IN JANUARY 1995. HOWEVER, THERE CAN BE NO ASSURANCES THAT SUCH
APPROVALS WILL BE GRANTED OR WILL BE GRANTED WITHIN SUCH TIME. SEE SECTION 12,
SECTION 14 AND SECTION 15.
The Offer is also conditioned upon the expiration or termination of all
waiting periods imposed by the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and the regulations thereunder (the "HSR Act').
The Offer is being made pursuant to the Agreement and Plan of Merger dated as
of December 19, 1994 (the "Merger Agreement"), among Parent, the Purchaser and
the Company pursuant to which, following the consummation of the Offer and the
satisfaction or waiver of certain conditions, the Purchaser will be merged with
and into the Company, with the Company surviving the merger (as such, the
"Surviving Corporation") as a wholly owned subsidiary of Parent (the "Merger").
In the Merger, each outstanding Share (other than Shares held by the Company as
treasury stock or by any subsidiary of the Company, Parent, the Purchaser or
any other subsidiary of Parent or by shareholders, if any, who are entitled to
and who properly exercise dissenters' rights under Florida law) will be
converted into the right to receive the per Share price paid in the Offer in
cash, without interest (the "Merger Consideration"). See Section 12.
In connection with the execution of the Merger Agreement, Parent, the
Purchaser and the Company have entered into an Option Agreement dated as of
December 19, 1994 (the "Option Agreement"), pursuant to which the Company has
agreed to grant the Purchaser an irrevocable option (the "Option") to purchase
from the Company up to 5,000,000 newly issued shares of Common Stock plus all
Shares held in treasury (1,354,538 Shares at December 13, 1994), exercisable if
Shares are accepted for payment pursuant to the Offer at a price of $67.50 per
Share.
In connection with the Merger Agreement, the Board of Directors of the
Company adopted a resolution rendering the Rights Agreement inapplicable with
respect to the Offer, the Merger, the Option Agreement and the other
transactions contemplated by the Merger Agreement. Pursuant to the Merger
Agreement, the Company has also agreed that the Board of Directors of the
Company will take all further action reasonably requested by the Parent to
render the Rights inapplicable to the Offer, the Merger, the Option Agreement
and the other transactions contemplated by the Merger Agreement.
The Merger is subject to a number of conditions, including approval by
shareholders of the Company, if such approval is required by applicable law. In
the event the Purchaser acquires 80% or more of the outstanding Shares pursuant
to the Offer, exercise of the Option or otherwise, the Purchaser would be able
to effect the Merger pursuant to the short-form merger provisions of the
Florida Business Corporation Act (the "FBCA") without any action by any other
shareholder of the Company. Based upon the representations in the following
paragraph, if the Purchaser acquires at least 14,433,646 Shares pursuant to the
Offer, it could exercise the Option for a sufficient number of additional
Shares to result in the Purchaser owning at least 80% of the then outstanding
Shares. See Section 12.
The Company has represented to the Purchaser that as of December 13, 1994,
there were 25,120,963 Shares issued and outstanding, 774,926 Shares reserved
for issuance upon the exercise of outstanding stock options, 89,341 Shares
reserved for issuance in respect of contingent Shares and 250,000 shares of
preferred stock reserved for issuance in connection with the Rights. Based upon
the foregoing, the Purchaser believes that approximately 12,992,366 Shares
constitutes a majority of the outstanding Shares on a fully diluted basis.
Accordingly, the Minimum Condition will be satisfied if at least that number
Shares are validly tendered and
2
not withdrawn prior to the Expiration Date. If the Minimum Condition is
satisfied and the Purchaser accepts for payment Shares tendered pursuant to the
Offer, the Purchaser will be able to elect a majority of the members of the
Company's Board of Directors and to effect the Merger without the affirmative
vote of any other shareholder of the Company.
The Merger Agreement and the Option Agreement are more fully described in
Section 12. Certain Federal income tax consequences of the sale of Shares
pursuant to the Offer and the exchange of Shares for the Merger Consideration
pursuant to the Merger are described in Section 5.
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION WHICH SHOULD BE READ BEFORE ANY DECISION IS MADE WITH RESPECT TO
THE OFFER.
1. TERMS OF THE OFFER
Upon the terms and subject to the conditions of the Offer, the Purchaser will
accept for payment and pay for all Shares validly tendered prior to the
Expiration Date and not theretofore withdrawn in accordance with Section 3. The
term "Expiration Date" means 12:00 Midnight, New York City time, on Tuesday,
January 24, 1995, unless and until the Purchaser shall have extended the period
of time during which the Offer is open, in which event the term "Expiration
Date" shall mean the latest time and date at which the Offer, as so extended by
the Purchaser, shall expire.
Subject to the terms of the Merger Agreement and the applicable rules and
regulations of the Commission, the Purchaser expressly reserves the right, in
its sole discretion, at any time and from time to time, and regardless of
whether or not any of the events set forth in Section 14 hereof shall have
occurred or shall have been determined by the Purchaser to have occurred, to
(i) extend the period of time during which the Offer is open, and thereby delay
acceptance for payment of and the payment for any Shares, by giving oral or
written notice of such extension to the Depositary and (ii) amend the Offer in
any other respect by giving oral or written notice of such amendment to the
Depositary. THE PURCHASER SHALL NOT HAVE ANY OBLIGATION TO PAY INTEREST ON THE
PURCHASE PRICE FOR TENDERED SHARES, WHETHER OR NOT THE PURCHASER EXERCISES ITS
RIGHT TO EXTEND THE OFFER.
If by 12:00 Midnight, New York City time, on Tuesday, January 24, 1995 (or
any other date or time then set as the Expiration Date), any or all conditions
to the Offer have not been satisfied or waived, the Purchaser reserves the
right (but shall not be obligated), subject to the terms and conditions
contained in the Merger Agreement and to the applicable rules and regulations
of the Commission, to (i) terminate the Offer and not accept for payment any
Shares and return all tendered Shares to tendering shareholders, (ii) waive all
the unsatisfied conditions and, subject to complying with the terms of the
Merger Agreement and the applicable rules and regulations of the Commission,
accept for payment and pay for all Shares validly tendered prior to the
Expiration Date and not theretofore withdrawn, (iii) extend the Offer and,
subject to the right of shareholders to withdraw Shares until the Expiration
Date, retain the Shares that have been tendered during the period or periods
for which the Offer is extended or (iv) amend the Offer.
There can be no assurance that the Purchaser will exercise its right to
extend the Offer, although the Purchaser does expect to extend the Offer if
additional time is required to satisfy the Gaming Condition. See Section 15.
Any extension, waiver, amendment or termination will be followed as promptly as
practicable by public announcement. In the case of an extension, Rule 14e-1(d)
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
requires that the announcement be issued no later than 9:00 a.m., New York City
time, on the next business day after the previously scheduled Expiration Date
in accordance with the public announcement requirements of Rule 14d-4(c) under
the Exchange Act. Subject to applicable law (including Rules 14d-4(c) and 14d-
6(d) under the Exchange Act, which require that any material change in the
information published, sent or given to shareholders in connection with the
Offer be promptly disseminated to shareholders in a manner reasonably designed
to inform shareholders of such change), and
3
without limiting the manner in which the Purchaser may choose to make any
public announcement, the Purchaser will not have any obligation to publish,
advertise or otherwise communicate any such public announcement other than by
making a release to the Dow Jones News Service.
In the Merger Agreement the Purchaser has agreed that it will not, without
the prior consent of the Company, extend the Offer, except that, without the
consent of the Company, the Purchaser may extend the Offer (i) beyond any
scheduled Expiration Date for a period not to exceed 20 business days if at
such scheduled Expiration Date any of the conditions to the Purchaser's
obligation to accept Shares for payment are not satisfied or waived, until such
time as such conditions are satisfied or waived, (ii) for any period required
by any rule, regulation, interpretation or position of the Commission or the
staff thereof applicable to the Offer and (iii) for an aggregate period of not
more than 15 business days beyond the latest expiration date that would
otherwise be permitted under the terms of the Merger Agreement as described in
this sentence in the event that there shall not have been tendered sufficient
Shares so that the Merger could be effected as a "short-form" merger as
described in Section 12. As used in this Offer to Purchase, "business day" has
the meaning set forth in Rule 14d-1 under the Exchange Act.
In addition, the Purchaser has agreed in the Merger Agreement that it will
not, without the consent of the Company, (i) reduce the number of Shares
subject to the Offer, (ii) reduce the Offer Price, (iii) modify or add to the
conditions set forth in Section 14 of this Offer to Purchase, (iv) except as
provided in the preceding paragraph, extend the Offer, (v) change the form of
consideration payable in the Offer or (vi) otherwise amend the Offer in any
manner adverse to the Company's shareholders.
If the Purchaser extends the Offer or if the Purchaser (whether before or
after its acceptance for payment of Shares) is delayed in its acceptance for
payment of or payment for Shares or it is unable to pay for Shares pursuant to
the Offer for any reason, then, without prejudice to the Purchaser's rights
under the Offer, the Depositary may retain tendered Shares on behalf of the
Purchaser, and such Shares may not be withdrawn except to the extent tendering
shareholders are entitled to withdrawal rights as described in Section 3.
However, the ability of the Purchaser to delay the payment for Shares that the
Purchaser has accepted for payment is limited by Rule 14e-1 under the Exchange
Act, which requires that a bidder pay the consideration offered or return the
securities deposited by or on behalf of holders of securities promptly after
the termination or withdrawal of such bidder's offer.
If the Purchaser makes a material change in the terms of the Offer or the
information concerning the Offer or waives a material condition of the Offer
(including, with the Company's consent, a waiver of the Minimum Condition), the
Purchaser will disseminate additional tender offer materials and extend the
Offer to the extent required by Rules 14d-4(c), 14d-6(d) and 14e-1 under the
Exchange Act. The minimum period during which the Offer must remain open
following material changes in the terms of the Offer or information concerning
the Offer, other than a change in price or a change in the percentage of
securities sought, will depend upon the facts and circumstances then existing,
including the relative materiality of the changed terms or information. With
respect to a change in price or a change in the percentage of securities
sought, a minimum period of 10 business days is generally required to allow for
adequate dissemination to shareholders.
Consummation of the Offer is conditioned upon satisfaction of the Minimum
Condition, the Gaming Condition, the expiration or termination of all waiting
periods imposed by the HSR Act and the other conditions set forth in Section
14. Subject to the terms and conditions contained in the Merger Agreement, the
Purchaser reserves the right (but shall not be obligated) to waive any or all
such conditions. However, if the Purchaser (with the Company's consent) waives
or amends the Minimum Condition during the last five business days during which
the Offer is open, the Purchaser will be required to extend the Expiration Date
so that the Offer will remain open for at least five business days after the
announcement of such waiver or amendment is first published, sent or given to
holders of Shares and may also be required to extend the Offer if other
conditions are waived, depending upon the timing and materiality of the waiver.
The Company has provided the Purchaser with the Company's shareholder lists
and security position listings for the purpose of disseminating the Offer to
holders of the Shares. This Offer to Purchase, the related
4
Letter of Transmittal and other relevant materials will be mailed by the
Purchaser to record holders of Shares and will be furnished by the Purchaser to
brokers, dealers, commercial banks, trust companies and similar persons whose
names, or the names of whose nominees, appear on the shareholder lists or, if
applicable, who are listed as participants in a clearing agency's security
position listing, for subsequent transmittal to beneficial owners of Shares.
2. PROCEDURE FOR TENDERING SHARES
Valid Tender. For a shareholder validly to tender Shares pursuant to the
Offer, either (i) a properly completed and duly executed Letter of Transmittal
(or facsimile thereof), together with any required signature guarantees (or, in
the case of a book-entry transfer, an Agent's Message (as defined below)) and
any other documents required by the Letter of Transmittal, must be received by
the Depositary at one of its addresses set forth on the back cover of this
Offer to Purchase and either certificates for tendered Shares must be received
by the Depositary at one of such addresses or such Shares must be delivered
pursuant to the procedure for book-entry transfer set forth below (and a Book-
Entry Confirmation (as defined below) received by the Depositary), in each case
prior to the Expiration Date, or (ii) the tendering shareholder must comply
with the guaranteed delivery procedure set forth below.
The Depositary will establish an account with respect to the Shares at The
Depository Trust Company and the Midwest Securities Trust Company (the "Book-
Entry Transfer Facilities") for purposes of the Offer within two business days
after the date of this Offer to Purchase. Any financial institution that is a
participant in any of the Book-Entry Transfer Facilities' systems may make
book-entry delivery of Shares by causing a Book-Entry Transfer Facility to
transfer such Shares into the Depositary's account in accordance with such
Book-Entry Transfer Facility's procedures for such transfer. However, although
delivery of Shares may be effected through book-entry transfer into the
Depositary's account at a Book-Entry Transfer Facility, the Letter of
Transmittal (or facsimile thereof), properly completed and duly executed, with
any required signature guarantees (or an Agent's Message) and any other
required documents, must, in any case, be transmitted to, and received by, the
Depositary at one of its addresses set forth on the back cover of this Offer to
Purchase prior to the Expiration Date, or the tendering shareholder must comply
with the guaranteed delivery procedure described below. The confirmation of a
book-entry transfer of Shares into the Depositary's account at a Book-Entry
Transfer Facility as described above is referred to herein as a "Book-Entry
Confirmation". DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY IN
ACCORDANCE WITH SUCH BOOK-ENTRY TRANSFER FACILITY'S PROCEDURES DOES NOT
CONSTITUTE DELIVERY TO THE DEPOSITARY.
The term "Agent's Message" means a message transmitted by a Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of a
Book-Entry Confirmation, which states that such Book-Entry Transfer Facility
has received an express acknowledgement from the participant in such Book-Entry
Transfer Facility tendering the Shares that such participant has received and
agrees to be bound by the terms of the Letter of Transmittal and that the
Purchaser may enforce such agreement against the participant.
THE METHOD OF DELIVERY OF SHARES, THE LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER
FACILITY, IS AT THE ELECTION AND RISK OF THE TENDERING SHAREHOLDER. SHARES WILL
BE DEEMED DELIVERED ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY (INCLUDING,
IN THE CASE OF A BOOK-ENTRY TRANSFER, BY BOOK-ENTRY CONFIRMATION). IF DELIVERY
IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS
RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY
DELIVERY.
Signature Guarantees. No signature guarantee is required on the Letter of
Transmittal if (i) the Letter of Transmittal is signed by the registered holder
of Shares (which term, for purposes of this Section, includes any participant
in any of the Book-Entry Transfer Facilities' systems whose name appears on a
security position listing as the owner of the Shares) tendered therewith and
such registered holder has not completed either the box entitled "Special
Delivery Instructions" or the box entitled "Special Payment Instructions" on
the Letter of Transmittal or (ii) such Shares are tendered for the account of a
financial institution (including most commercial banks, savings and loan
associations and brokerage houses) that is a participant in the
5
Security Transfer Agents Medallion Program or the New York Stock Exchange
Medallion Signature Guarantee Program or the Stock Exchange Medallion Program
(an "Eligible Institution"). In all other cases, all signatures on the Letters
of Transmittal must be guaranteed by an Eligible Institution. See Instructions
1 and 5 to the Letter of Transmittal. If the certificates for Shares are
registered in the name of a person other than the signer of the Letter of
Transmittal, or if payment is to be made or certificates for Shares not
tendered or not accepted for payment are to be issued to a person other than
the registered holder of the certificates surrendered, the tendered
certificates must be endorsed or accompanied by appropriate stock powers, in
either case signed exactly as the name or names of the registered holders or
owners appear on the certificates, with the signatures on the certificates or
stock powers guaranteed as aforesaid. See Instruction 5 to the Letter of
Transmittal.
Guaranteed Delivery. If a shareholder desires to tender Shares pursuant to
the Offer and such shareholder's certificates for Shares are not immediately
available or the procedure for book-entry transfer cannot be completed on a
timely basis or time will not permit all required documents to reach the
Depositary prior to the Expiration Date, such shareholder's tender may be
effected if all the following conditions are met:
(i) such tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed Delivery
substantially in the form provided by the Purchaser is received by the
Depositary, as provided below, prior to the Expiration Date; and
(iii) the certificates for all tendered Shares, in proper form for
transfer (or a Book-Entry Confirmation with respect to such Shares),
together with a properly completed and duly executed Letter of Transmittal
(or facsimile thereof), with any required signature guarantees (or in the
case of book-entry transfer, an Agent's Message) and any other documents
required by the Letter of Transmittal, are received by the Depositary
within five trading days on the New York Stock Exchange (the "NYSE") after
the date of execution of such Notice of Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand to the Depositary
or transmitted by telegram, facsimile transmission or mail to the Depositary
and must include a guarantee by an Eligible Institution in the form set forth
in such Notice of Guaranteed Delivery.
Notwithstanding any other provision hereof, payment for Shares accepted for
payment pursuant to the Offer will in all cases be made only after timely
receipt by the Depositary of (i) certificates for (or a timely Book-Entry
Confirmation with respect to) such Shares, (ii) a Letter of Transmittal (or
facsimile thereof), properly completed and duly executed, with any required
signature guarantees (or, in the case of a book-entry transfer, an Agent's
Message) and (iii) any other documents required by the Letter of Transmittal.
Accordingly, tendering shareholders may be paid at different times depending
upon when certificates for Shares or Book-Entry Confirmations are actually
received by the Depositary. UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE
PURCHASE PRICE OF THE SHARES TO BE PAID BY THE PURCHASER, REGARDLESS OF ANY
EXTENSION OF THE OFFER OR ANY DELAY IN MAKING SUCH PAYMENT.
The valid tender of Shares pursuant to one of the procedures described above
will constitute a binding agreement between the tendering shareholder and the
Purchaser upon the terms and subject to the conditions of the Offer.
Appointment. By executing a Letter of Transmittal as set forth above, the
tendering shareholder will irrevocably appoint designees of the Purchaser as
such shareholder's attorneys-in-fact and proxies in the manner set forth in the
Letter of Transmittal, each with full power of substitution, to the full extent
of such shareholder's rights with respect to the Shares tendered by such
shareholder and accepted for payment by the Purchaser and with respect to any
and all other Shares or other securities or rights issued or issuable in
respect of such Shares on or after December 19, 1994. All such proxies shall be
considered coupled with an
6
interest in the tendered Shares and other securities or rights. Such
appointment will be effective when, and only to the extent that, the Purchaser
accepts for payment Shares tendered by such shareholder as provided herein.
Upon such acceptance for payment, all prior powers of attorney and proxies
given by such shareholder with respect to such Shares or other securities or
rights will, without further action, be revoked and no subsequent powers of
attorney and proxies may be given (and, if given, will not be deemed
effective). The designees of the Purchaser will thereby be empowered to
exercise all voting and other rights with respect to such Shares or other
securities or rights in respect of any annual, special or adjourned meeting of
the Company's shareholders, or otherwise, as they in their sole discretion deem
proper. The Purchaser reserves the right to require that, in order for Shares
to be deemed validly tendered, immediately upon the Purchaser's acceptance for
payment of such Shares, the Purchaser must be able to exercise full voting and
other rights with respect to such Shares and other securities or rights,
including voting at any meeting of shareholders then scheduled.
Determination of Validity. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance of any tender of Shares
will be determined by the Purchaser in its sole discretion, which determination
will be final and binding. The Purchaser reserves the absolute right to reject
any or all tenders determined by it not to be in proper form or the acceptance
for payment of or payment for which may, in the opinion of the Purchaser's
counsel, be unlawful. The Purchaser also reserves the absolute right to waive
any defect or irregularity in any tender with respect to any particular Shares,
whether or not similar defects or irregularities are waived in the case of
other Shares. No tender of Shares will be deemed to have been validly made
until all defects or irregularities relating thereto have been cured or waived.
None of the Purchaser, Parent, the Depositary, the Information Agent, either
Dealer Manager or any other person will be under any duty to give notification
of any defects or irregularities in tenders or incur any liability for failure
to give any such notification. The Purchaser's interpretation of the terms and
conditions of the Offer (including the Letter of Transmittal and the
instructions thereto) will be final and binding.
Backup Withholding. In order to avoid "backup withholding" of Federal income
tax on payments of cash pursuant to the Offer, a shareholder surrendering
Shares in the Offer must provide the Depositary with such shareholder's correct
taxpayer identification number ("TIN") on a Substitute Form W-9 and certify
under penalties of perjury that such TIN is correct and that such shareholder
is not subject to backup withholding. Certain shareholders (including, among
others, all corporations and certain foreign individuals and entities) are not
subject to backup withholding. If a shareholder does not provide its correct
TIN or fails to provide the certifications described above, the Internal
Revenue Service ("IRS") may impose a penalty on such shareholder and payment of
cash to such shareholder pursuant to the Offer may be subject to backup
withholding at a rate of 31%. All shareholders surrendering Shares pursuant to
the Offer should complete and sign the main signature form and the Substitute
Form W-9 included as part of the Letter of Transmittal to provide the
information and certification necessary to avoid backup withholding (unless an
applicable exemption exists and is proved in a manner satisfactory to the
Purchaser and the Depositary). Noncorporate foreign shareholders should
complete and sign the main signature form and a Form W-8, Certificate of
Foreign Status, a copy of which may be obtained from the Depositary, in order
to avoid backup withholding. See Instruction 9 to the Letter of Transmittal.
For other Federal income tax consequences, see Section 5.
3. WITHDRAWAL RIGHTS
Except as otherwise provided in this Section 3, tenders of Shares are
irrevocable. Shares tendered pursuant to the Offer may be withdrawn pursuant to
the procedures set forth below at any time prior to the Expiration Date and,
unless theretofore accepted for payment and paid for by the Purchaser pursuant
to the Offer, may also be withdrawn at any time after February 20, 1995.
For a withdrawal to be effective, a written, telegraphic or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
one of its addresses set forth on the back cover of this Offer to Purchase and
must specify the name of the person having tendered the Shares to be withdrawn,
the number of Shares to be withdrawn and the name of the registered holder of
the Shares to be withdrawn, if different
7
from the name of the person who tendered the Shares. If certificates for Shares
have been delivered or otherwise identified to the Depositary, then, prior to
the physical release of such certificates, the serial numbers shown on such
certificates must be submitted to the Depositary and, unless such Shares have
been tendered by an Eligible Institution, the signatures on the notice of
withdrawal must be guaranteed by an Eligible Institution. If Shares have been
delivered pursuant to the procedure for book-entry transfer as set forth in
Section 2, any notice of withdrawal must also specify the name and number of
the account at the appropriate Book-Entry Transfer Facility to be credited with
the withdrawn Shares and otherwise comply with such Book-Entry Transfer
Facility's procedures. Withdrawals of tenders of Shares may not be rescinded,
and any Shares properly withdrawn will thereafter be deemed not validly
tendered for any purposes of the Offer. However, withdrawn Shares may be
retendered by again following one of the procedures described in Section 2 at
any time prior to the Expiration Date.
All questions as to the form and validity (including time of receipt) of
notices of withdrawal will be determined by the Purchaser in its sole
discretion, which determination will be final and binding. None of the
Purchaser, Parent, the Depositary, the Information Agent, either Dealer
Manager, or any other person will be under any duty to give notification of any
defects or irregularities in any notice of withdrawal or incur any liability
for failure to give any such notification.
4. ACCEPTANCE FOR PAYMENT AND PAYMENT
Upon the terms and subject to the conditions of the Offer (including, if the
Offer is extended or amended, the terms and conditions of any such extension or
amendment), the Purchaser will accept for payment and will pay for all Shares
validly tendered prior to the Expiration Date and not properly withdrawn in
accordance with Section 3 promptly after the Expiration Date. Any determination
concerning the satisfaction of such terms and conditions will be within the
sole discretion of the Purchaser, and such determination will be final and
binding on all tendering shareholders. See Sections 1 and 14. The Purchaser
expressly reserves the right, in its sole discretion, to delay acceptance for
payment of or payment for Shares in order to comply in whole or in part with
any applicable law, including, without limitation, the HSR Act and applicable
Gaming Laws (as defined herein). Any such delays will be effected in compliance
with Rule 14e-1(c) under the Exchange Act (relating to the Purchaser's
obligation to pay for or return tendered Shares promptly after the termination
or withdrawal of the Offer).
Parent filed a Notification and Report Form with respect to the Offer under
the HSR Act on December 21, 1994. The waiting period under the HSR Act with
respect to the Offer will expire at 11:59 p.m., New York City time, on the 15th
day after the date such form was filed, unless early termination of the waiting
period is granted. In addition, the Antitrust Division of the Department of
Justice (the "Antitrust Division") or the Federal Trade Commission (the "FTC")
may extend the waiting period by requesting additional information or
documentary material from Parent. If such a request is made, such waiting
period will expire at 11:59 p.m., New York City time, on the 10th day after
substantial compliance by Parent with such request. See Section 15 hereof for
additional information concerning the HSR Act and the applicability of the
antitrust laws to the Offer.
Regulations of the Nevada Gaming Commission (the "Nevada Commission") provide
that control of a publicly traded corporation registered or licensed to
directly or indirectly own or operate casino gaming facilities in Nevada,
cannot be acquired without the prior approval of the Nevada Commission. Parent
and Purchaser have filed their applications for the necessary approvals of the
Nevada State Gaming Control Board (the "Nevada Board") and the Nevada
Commission, and, assuming favorable recommendations from the Nevada Board,
anticipate receiving the required approvals from the Nevada Commission in
January 1995. The Nevada Board reviews and investigates applications for such
approvals and makes recommendations on such applications to the Nevada
Commission for final action. According to the Nevada Gaming Control Act and the
regulations thereunder (the "Nevada Act"), the Nevada Commission is required to
use its best efforts to take final action upon an application for approval of
an acquisition of control by a person making a tender offer, within 60 days of
the date of filing such application and payment of the required fees. If the
Nevada
8
Commission cannot take final action within such period, the Nevada Commission
is required to provide the applicant with written notice of a time certain for
completion of the Nevada Board's investigation and final action by the Nevada
Commission. Parent is currently registered in Nevada as a publicly traded
corporation and has been found suitable to own the shares of a subsidiary that
has licensed gaming facilities in Nevada. Accordingly, Parent does not expect
significant delays in obtaining necessary approvals in January 1995. However,
there can be no assurances that such approvals will be granted or will be
granted within such time. Furthermore, any such approval, if granted, does not
constitute a finding, recommendation or approval by the Nevada Board or the
Nevada Commission as to the accuracy or adequacy of the Offer to Purchase or
the merits of the Offer and the Merger. Any representation to the contrary is
unlawful.
As a result of the transfer of Shares to the Purchaser pursuant to the Offer
and the Merger, Parent and the Purchaser will be required to timely file a
completed application with the New Jersey Casino Control Commission (the "CCC")
for qualification as a holding and intermediary company, respectively, of a New
Jersey casino licensee, which application must include a fully executed and
approved, but not operative, trust agreement. Such completed application will
require that the CCC render decisions with respect to the interim authorization
(within 120 days of its submission) and plenary qualification (within twelve
months of its decision with respect to interim authorization) of Parent and the
Purchaser as holding and intermediary companies respectively of a New Jersey
casino licensee. Although the Merger Agreement provides the Purchaser with the
option to either (i) seek regulatory approval of a trust covering all Shares
acquired pursuant to the Offer and the Merger or (ii) seek such approval with
respect to a trust covering all common stock of the Company's qualified New
Jersey intermediary company, Parent and the Purchaser do not intend to pursue
the latter option. Accordingly, Parent intends to prepare a trust agreement
that will provide for the deposit of tendered Shares in trust pending plenary
qualification by the CCC. The trustee may not exercise rights incident to the
ownership of the property unless the CCC orders that the trust agreement become
operative, which order may not be made unless the CCC denies interim
authorization; finds reasonable cause to believe that any person required to be
qualified may be found unqualified; or denies plenary qualification. The CCC
may also permit, upon written petition of the New Jersey casino licensee, a
proposed but not yet qualified new director of the Company or its qualified New
Jersey intermediary company to perform duties and exercise powers relating to
such position pending plenary qualification provided that such proposed
director timely files a completed application with the CCC. The Merger
Agreement provides that Parent shall use its reasonable efforts to cause the
foregoing trust arrangements to be in full force and effect as soon as
practicable after the date of the Merger Agreement. Accordingly, Parent intends
to cause appropriate applications to be made to the CCC as soon as practicable
and anticipates a decision from the CCC with respect to the trust arrangements,
Parent's trustee designate, interim authorization and proposed new directors of
the Company and its qualified New Jersey intermediary company during January
1995. There can be no assurance that a favorable decision will be granted or
will be granted within such time.
See Section 15 for further information concerning the need for approvals
under various Gaming Laws (as defined in the Merger Agreement) prior to the
purchase of Shares pursuant to the Offer.
In all cases, payment for Shares accepted for payment pursuant to the Offer
will be made only after timely receipt by the Depositary of (i) certificates
for such Shares (or timely Book-Entry Confirmation of a transfer of such Shares
as described in Section 2), (ii) a Letter of Transmittal (or facsimile
thereof), properly completed and duly executed, with any required signature
guarantees and (iii) any other documents required by the Letter of Transmittal.
The per Share consideration paid to any shareholder pursuant to the Offer will
be the highest per Share consideration paid to any other shareholder pursuant
to the Offer.
For purposes of the Offer, the Purchaser will be deemed to have accepted for
payment, and thereby purchased, Shares properly tendered to the Purchaser and
not withdrawn as, if and when the Purchaser gives oral or written notice to the
Depositary of the Purchaser's acceptance for payment of such Shares. Payment
for Shares accepted for payment pursuant to the Offer will be made by deposit
of the purchase price therefor with the Depositary, which will act as agent for
tendering shareholders for the purpose of receiving payment
9
from the Purchaser and transmitting payment to tendering shareholders. UNDER NO
CIRCUMSTANCES WILL INTEREST BE PAID ON THE PURCHASE PRICE OF THE SHARES TO BE
PAID BY THE PURCHASER, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN
MAKING SUCH PAYMENT.
If the Purchaser is delayed in its acceptance for payment of or payment for
Shares or is unable to accept for payment or pay for Shares pursuant to the
Offer for any reason, then, without prejudice to the Purchaser's rights under
the Offer (but subject to compliance with Rule 14e-1(c) under the Exchange Act,
which requires that a tender offeror pay the consideration offered or return
the tendered securities promptly after the termination or withdrawal of a
tender offer), the Depositary may, nevertheless, on behalf of the Purchaser,
retain tendered Shares, and any such Shares may not be withdrawn except to the
extent tendering shareholders are entitled to exercise, and duly exercise,
withdrawal rights as described in Section 3.
If any tendered Shares are not purchased pursuant to the Offer because of an
invalid tender or otherwise, certificates for any such Shares will be returned,
without expense to the tendering shareholder (or, in the case of Shares
delivered by book-entry transfer of such Shares into the Depositary's account
at a Book-Entry Transfer Facility pursuant to the procedure set forth in
Section 2, such Shares will be credited to an account maintained at the
appropriate Book-Entry Transfer Facility), as promptly as practicable after the
expiration or termination of the Offer.
The Purchaser reserves the right to transfer or assign, in whole or from time
to time in part, to Parent, or to one or more direct or indirect wholly owned
subsidiaries of Parent, the right to purchase Shares tendered pursuant to the
Offer, but any such transfer or assignment will not relieve the Purchaser of
its obligations under the Offer and will in no way prejudice the rights of
tendering shareholders to receive payment for Shares validly tendered and
accepted for payment pursuant to the Offer.
5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Sales of Shares pursuant to the Offer (and the receipt of the right to
receive cash by the shareholders of the Company pursuant to the Merger) will be
taxable transactions for Federal income tax purposes under the Internal Revenue
Code of 1986, as amended (the "Code"), and may also be taxable transactions
under applicable state, local, foreign and other tax laws. For Federal income
tax purposes, a tendering shareholder will generally recognize gain or loss
equal to the difference between the amount of cash received by the shareholder
pursuant to the Offer (or to be received pursuant to the Merger) and the
aggregate tax basis in the Shares tendered by the shareholder and purchased
pursuant to the Offer (or cancelled pursuant to the Merger). Gain or loss will
be calculated separately for each block of Shares tendered and purchased
pursuant to the Offer (or cancelled pursuant to the Merger).
If tendered Shares are held by a tendering shareholder as capital assets,
gain or loss recognized by the tendering shareholder will be capital gain or
loss, which will be long-term capital gain or loss if the tendering
shareholder's holding period for the Shares exceeds one year. Under present
law, long-term capital gains recognized by a tendering individual shareholder
will generally be taxed at a maximum Federal marginal tax rate of 28%, and
long-term capital gains recognized by a tendering corporate shareholder will be
taxed at a maximum Federal marginal tax rate of 35%.
A shareholder (other than certain exempt shareholders including, among
others, all corporations and certain foreign individuals) that tenders Shares
may be subject to 31% backup withholding unless the shareholder provides its
TIN and certifies that such number is correct or properly certifies that it is
awaiting a TIN. A shareholder that does not furnish its TIN may be subject to a
penalty imposed by the IRS. Each shareholder should complete and sign the
Substitute Form W-9 included as part of the Letter of Transmittal so as to
provide the information and certification necessary to avoid backup
withholding.
If backup withholding applies to a shareholder, the Depositary is required to
withhold 31% from payments to such shareholder. Backup withholding is not an
additional tax. Rather, the amount of the backup
10
withholding can be credited against the Federal income tax liability of the
person subject to the backup withholding, provided that the required
information is given to the IRS. If backup withholding results in an
overpayment of tax, a refund can be obtained by the shareholder upon filing an
income tax return.
THE FOREGOING DISCUSSION MAY NOT BE APPLICABLE WITH RESPECT TO SHARES
RECEIVED PURSUANT TO THE EXERCISE OF EMPLOYEE STOCK OPTIONS OR OTHERWISE AS
COMPENSATION OR WITH RESPECT TO HOLDERS OF SHARES WHO ARE SUBJECT TO SPECIAL
TAX TREATMENT UNDER THE CODE, SUCH AS NON-U.S. PERSONS, LIFE INSURANCE
COMPANIES, TAX-EXEMPT ORGANIZATIONS AND FINANCIAL INSTITUTIONS, AND MAY NOT
APPLY TO A HOLDER OF SHARES IN LIGHT OF ITS INDIVIDUAL CIRCUMSTANCES.
SHAREHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS TO DETERMINE THE
PARTICULAR TAX CONSEQUENCES TO THEM (INCLUDING THE APPLICATION AND EFFECT OF
ANY STATE, LOCAL OR FOREIGN INCOME AND OTHER TAX LAWS) OF THE OFFER AND THE
MERGER.
6. PRICE RANGE OF THE SHARES; DIVIDENDS ON THE SHARES
The Shares are traded on the NYSE and the Pacific Stock Exchange (the "PSE")
under the symbol "CAW". The following table sets forth, for each of the fiscal
quarters since August 1, 1992, the high and low sales prices per Share as
reported by the NYSE and the Dow Jones News Retrieval Service.
SALES PRICE
---------------
HIGH LOW
------- -------
1993
First Quarter (ended October 31, 1992)...................... $37 1/4 $29 1/4
Second Quarter (ended January 31, 1993)..................... 46 3/8 35 1/4
Third Quarter (ended April 30, 1993)........................ 48 1/8 37 5/8
Fourth Quarter (ended July 31, 1993)........................ 50 7/8 40 1/4
1994
First Quarter (ended October 31, 1993)...................... $51 1/4 $42 1/8
Second Quarter (ended January 31, 1994)..................... 56 1/2 41 1/2
Third Quarter (ended April 30, 1994)........................ 59 42 1/4
Fourth Quarter (ended July 31, 1994)........................ 45 3/4 35 3/4
1995
First Quarter (ended October 31, 1994)...................... 47 1/2 40 3/4
Second Quarter (through December 22, 1994).................. 66 1/2 39
On December 16, 1994, the last full day of trading before the public
announcement of the execution of the Merger Agreement, the reported closing
sale price of the Shares on the NYSE was $45 1/4 per Share. On December 22,
1994 the last full day of trading before the commencement of the Offer, the
reported closing sale price of the Shares on the NYSE was $66 1/2 per Share.
SHAREHOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR THE SHARES.
The Company paid no cash dividends in respect of the Shares during fiscal
1994 or 1993 nor during the portion of fiscal 1995 prior to the date of this
Offer to Purchase. According to the Company's Annual Report on Form 10-K for
the fiscal year ended July 31, 1994 (the "Form 10-K"), management of the
Company has no current plans for declaring any dividends.
7. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES, STOCK LISTING AND EXCHANGE
ACT REGISTRATION
The purchase of Shares pursuant to the Offer will reduce the number of
holders of Shares and the number of Shares that might otherwise trade publicly
and could adversely affect the liquidity and market value of the remaining
Shares held by the public.
Depending upon the number of Shares purchased pursuant to the Offer, the
Shares may no longer meet the requirements of the NYSE or the PSE for continued
listing. According to the NYSE's published
11
guidelines, the NYSE would consider delisting the Shares if, among other
things, the number of record holders of at least 100 Shares should fall below
1,200, the number of publicly held Shares exclusive of management or other
concentrated holdings should fall below 600,000 or the aggregate market value
of publicly held Shares should not exceed $5 million. According to the PSE's
published guidelines, the PSE would consider delisting the Shares if, among
other things, the number of beneficial holders of at least 100 Shares should
fall below 300, the number of beneficial holders should fall below 400, the
number of publicly held Shares (exclusive of any Shares held by directors,
officers or their immediate families and other concentrated holdings of 5% or
more of the total outstanding Shares) should fall below 200,000 or the
aggregate market value of such Shares should fall below $1 million. If as a
result of the purchase of Shares pursuant to the Offer, the Shares no longer
meet the requirements of the NYSE or the PSE for continued listing and the
listing of the Shares is discontinued on either exchange, the market for the
Shares could be adversely affected.
If the NYSE and the PSE were to delist the Shares, it is possible that the
Shares would continue to trade on other securities exchanges or in the over-
the-counter market and that price quotations would be reported by such
exchanges or through The Nasdaq Stock Market or other sources. The extent of
the public market for the Shares and the availability of such quotations would,
however, depend upon the number of shareholders remaining at such time, the
interest in maintaining a market in the Shares on the part of securities firms,
the possible termination of registration of the Shares under the Exchange Act,
as described below, and other factors.
The Shares are currently "margin securities" under the regulations of the
Board of Governors of the Federal Reserve System (the "Federal Reserve Board"),
which has the effect, among other things, of allowing brokers to extend credit
on the collateral of the Shares. Depending on factors similar to those
described above regarding listing and marketing quotations, it is possible
that, following the Offer, the Shares would no longer constitute "margin
securities" for purposes of the margin regulations of the Federal Reserve Board
and therefore could no longer be used as collateral for loans made by brokers.
The Shares are currently registered under the Exchange Act. Registration of
the Shares under the Exchange Act may be terminated upon application of the
Company to the Commission if the Shares are neither listed on a national
exchange nor held by 300 or more holders of record. Termination of registration
of the Shares under the Exchange Act would substantially reduce the information
required to be furnished by the Company to its shareholders and to the
Commission, and would make certain provisions of the Exchange Act no longer
applicable to the Company, such as the short-swing profit recovery provisions
of Section 16(b) of the Exchange Act, the requirement of furnishing a proxy
statement pursuant to Section 14(a) of the Exchange Act in connection with
shareholders' meetings and the related requirement of furnishing an annual
report to shareholders, and the requirements of Rule 13e-3 under the Exchange
Act with respect to going private transactions. Furthermore, the ability of
"affiliates" of the Company and persons holding "restricted securities" of the
Company to dispose of such securities pursuant to Rule 144 promulgated under
the Securities Act of 1933, as amended, may be impaired or eliminated. The
Purchaser reserves the right to seek to cause the Company to apply for
termination of registration of the Shares under the Exchange Act as soon as
possible after the completion of the Offer if the requirements for such
termination are met. If registration of Shares under the Exchange Act were
terminated, the Shares would no longer be "margin securities" or be eligible
for stock exchange listing or Nasdaq Stock Market reporting.
If registration of the Shares is not terminated prior to the Merger, then the
Shares will cease to be listed on the NYSE and the PSE and the registration of
the Shares under the Exchange Act will be terminated following the consummation
of the Merger.
8. CERTAIN INFORMATION CONCERNING THE COMPANY
The Company is a Florida corporation with its principal executive offices at
1801 Century Park East, Los Angeles, California 90067. According to the Form
10-K, the Company's principal line of business is the
12
provision of a broad range of entertainment, gaming and resort experiences to
domestic and international customers. The Company's wholly owned subsidiaries
operate three renowned destination gaming resorts: Caesars Palace in Las Vegas,
Nevada; Caesars Tahoe in Stateline, Nevada; and Caesars Atlantic City in
Atlantic City, New Jersey. A Company subsidiary carries on operations of a
small casino on a cruise ship in conjunction with the operator of the ship. The
Company also owns one-third of a management company that operates Casino
Windsor, a casino opened on May 17, 1994 in Windsor, Canada that is owned by
the Ontario government. Additionally, subsidiaries of the Company are seeking
gaming management opportunities in emerging gaming markets. The Company has
also entered into an agreement with a band of the Cahuilla Indian nation,
subject to certain conditions including the development of a facility,
regulatory approvals and financing from the Company, pursuant to which a
subsidiary of the Company will manage a limited gaming facility in Palm
Springs, California. The Company's subsidiaries also own and operate four non-
gaming resorts in the Pocono Mountains of Pennsylvania: Caesars Cove Haven,
Caesars Paradise Stream, Caesars Pocono Palace and Caesars Brookdale.
Set forth below is certain selected consolidated financial information with
respect to the Company and its subsidiaries excerpted or derived from the
information contained in the Form 10-K and the Company's Quarterly Report on
Form 10-Q for the quarter ended October 31, 1994 which is incorporated by
reference herein. More comprehensive financial information is included in such
reports and other documents filed by the Company with the Commission, and the
following summary is qualified in its entirety by reference to such report and
such other documents and all the financial information (including any related
notes) contained therein. Such report and other documents should be available
for inspection and copies thereof should be obtainable in the manner set forth
below under "Available Information".
CAESARS WORLD, INC.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
THREE MONTHS
ENDED OCTOBER 31, YEAR ENDED JULY 31,
----------------- ----------------------------
1994 1993 1994 1993 1992
-------- -------- ---------- -------- --------
(UNAUDITED)
STATEMENT OF EARNINGS DATA:
Revenue........................ $252,511 $269,083 $1,015,766 $983,459 $933,298
Operating income............... 40,859 50,602 144,505 159,111 159,889
Net income..................... 23,184 27,848 78,361 83,215 66,005*
Net income per share........... $0.94 $1.14 $3.19 $3.40 $2.73*
AT OCTOBER 31, AT JULY 31,
-------------- ----------------------------
1994 1994 1993 1992
-------------- ---------- -------- --------
(UNAUDITED)
BALANCE SHEET DATA:
Total current assets............... $ 290,948 $ 276,841 $241,135 $184,853
Total assets....................... 1,023,200 1,018,021 955,719 902,269
Total current liabilities.......... 173,657 179,301 165,459 182,731
Long-term debt, net of current
maturities........................ 198,667 212,556 243,024 258,466
Total shareholders' equity......... $ 581,914 $ 556,867 $472,890 384,648
- --------
* Includes an extraordinary loss of $6,703 or $.28 per share
Certain Company Projections. During the course of discussions between Parent
and the Company and following agreement on the $67.50 per Share consideration
(see Section 11), the Company provided Parent or its representatives with
certain non-public business and financial information about the Company. This
information was prepared in June 1994 as part of the Company's annual planning
and included forecasts for
13
the fiscal year ending July 31, 1995 of (i) revenues of $1,096,000,000, (ii)
operating income plus depreciation and amortization of $243,000,000 and (iii)
net income of $103,000,000. These forecasts have not been updated since June
1994. The Company does not as a matter of course make public any projections as
to future performance or earnings, and the projections set forth above are
included in this Offer to Purchase only because the information was provided to
Parent. The projections were not prepared with a view to public disclosure or
compliance with the published guidelines of the Commission or the guidelines
established by the American Institute of Certified Public Accountants regarding
projections or forecasts. The Company's internal operating projections are, in
general, prepared solely for internal use and capital budgeting and other
management decisions and are subjective in many respects and thus susceptible
to various interpretations and periodic revision based on actual experience and
business developments. The projections were based on a number of assumptions
(none of which were provided to Parent) that are beyond the control of the
Company, the Purchaser or Parent or their respective financial advisors,
including economic forecasting (both general and specific to the Company's
business), which is inherently uncertain and subjective. None of the Company,
the Purchaser or Parent or their respective financial advisors assumes any
responsibility for the accuracy of any of the projections. The inclusion of the
foregoing projections should not be regarded as an indication that the Company,
the Purchaser, Parent or any other person who received such information
considers it an accurate prediction of future events. Neither the Company nor
Parent intends to update, revise or correct such projections if they become
inaccurate (even in the short term).
Available Information. The Company is subject to the reporting requirements
of the Exchange Act and, in accordance therewith, is required to file reports
and other information with the Commission relating to its business, financial
condition and other matters. Information, as of particular dates, concerning
the Company's directors and officers, their remuneration, stock options and
other matters, the principal holders of the Company's securities and any
material interest of such persons in transactions with the Company is required
to be disclosed in proxy statements distributed to the Company's shareholders
and filed with the Commission. Such reports, proxy statements and other
information should be available for inspection at the public reference
facilities of the Commission located at 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the regional offices of the Commission located in the
Citicorp Center, 500 West Madison Street (Suite 1400), Chicago, Illinois 60661
and Seven World Trade Center, 13th Floor, New York, New York 10048. Copies
should be obtainable, by mail, upon payment of the Commission's customary
charges, by writing to the Commission's principal office at 450 Fifth Street,
N.W., Washington, D.C. 20549. Such information should also be available for
inspection at the library of the NYSE, 20 Broad Street, New York, New York
10005.
Except as otherwise stated in this Offer to Purchase, the information
concerning the Company contained herein has been taken from or based upon
publicly available documents on file with the Commission and other publicly
available information. Although the Purchaser and Parent do not have any
knowledge that any such information is untrue, neither the Purchaser nor Parent
takes any responsibility for the accuracy or completeness of such information
or for any failure by the Company to disclose events that may have occurred and
may affect the significance or accuracy of any such information.
9. CERTAIN INFORMATION CONCERNING THE PURCHASER AND PARENT
The Purchaser, a Florida corporation, is a wholly owned subsidiary of Parent.
It was organized to acquire the Shares and has not conducted any unrelated
activities since its organization. The principal offices of the Purchaser are
located at 1330 Avenue of the Americas, New York, New York 10019-5490. All
outstanding shares of capital stock of the Purchaser are owned by Parent.
Parent is a diversified, global enterprise engaged in three major business
areas: financial and business services, manufactured products and leisure and
entertainment. Parent, a Delaware corporation, is headquartered at 1330 Avenue
of the Americas, New York, New York 10019, (212) 258-1000.
Financial Information. Set forth below is certain selected consolidated
financial information relating to Parent and its subsidiaries excerpted or
derived from the information contained in Parent's Annual Report
14
on Form 10-K for the fiscal year ended December 31, 1993, as well as Parent's
Quarterly Reports on Form 10-Q for the quarter ended September 30, 1994, which
are incorporated by reference herein. More comprehensive financial information
is included in such reports and other documents filed by Parent with the
Commission, and the following summary is qualified in its entirety by reference
to such reports and such other documents and all the financial information
(including any related notes) contained therein. Such reports and other
documents should be available for inspection and copies thereof should be
obtainable in the manner set forth below under "Available Information".
ITT CORPORATION
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(IN MILLIONS, EXCEPT PER SHARE DATA)
NINE MONTHS
ENDED SEPTEMBER 30, YEAR ENDED DECEMBER 31,
------------------- -----------------------------
1994 1993 1993(/1/) 1992(/1/) 1991(/1/)
--------- --------- --------- --------- ---------
(UNAUDITED)
INCOME STATEMENT DATA:
Sales and revenues........... $ 16,884 $ 15,530 $21,129 $20,960 $19,510
Income from continuing
operations.................. 610 485 661 316 618
Net income (loss)............ 734 694 913 (885) 749
Net income (loss) per share
Primary.................... $ 6.02 $ 5.55 $ 7.32 $ (7.93) $ 5.84
Fully diluted.............. $ 5.65 $ 5.23 $ 6.90 $ (6.90) $ 5.49
AT DECEMBER 31,
AT SEPTEMBER 30, -----------------------------
1994 1993(/1/) 1992(/1/) 1991(/1/)
---------------- --------- --------- ---------
(UNAUDITED)
BALANCE SHEET DATA:
Total assets(/2/)............... 62,546 59,935 56,298 42,328
Policy liabilities and accruals. 43,758 40,884 27,210 23,396
Accounts payable and accrued
liabilities.................... 3,411 3,361 3,037 3,122
Other debt and liabilities...... 9,469 8,040 8,309 7,089
Total shareholders' equity...... $ 5,908 $7,650 $7,247 $8,721
- --------
(/1/) Restated, where applicable, to reflect ITT Financial as a discontinued
operation.
(/2/) Due to the nature and inclusion of assets and liabilities of Parent's
insurance segment, Parent does not classify its assets and liabilities as
current and non-current.
The name, business address, present principal occupation or employment, five-
year employment history and citizenship of each of the directors and executive
officers of Parent and the Purchaser are set forth in Schedule I hereto. In
addition to the Purchaser's right to acquire the Shares subject to the Option,
Parent beneficially owns 24,900 Shares, 20,000 of which are held by the ITT
Retirement Plan for Salaried Employees and 4,900 of which are held by an index
fund administered by ITT Hartford Group Inc. During the past 60 days the only
transaction in Shares effected by Parent or its subsidiaries or affiliates
occurred on November 17, 1994 when a mutual fund administered by ITT Hartford
Group Inc. sold 6,000 Shares in a market transaction at a price of $44.63 per
Share.
Except as described in this Offer to Purchase, neither of the Purchaser nor
Parent (together, the "Corporate Entities") or, to the best knowledge of the
Corporate Entities, any of the persons listed in Schedule I or any associate or
majority-owned subsidiary of the Corporate Entities or any of the persons so
listed, beneficially owns any equity security of the Company, and none of the
Corporate Entities or, to the
15
best knowledge of the Corporate Entities, any of the other persons referred to
above, or any of the respective directors, executive officers or subsidiaries
of any of the foregoing, has effected any transaction in any equity security of
the Company during the past 60 days.
Except as described in this Offer to Purchase, (i) there have not been any
contacts, transactions or negotiations between the Corporate Entities, any of
their respective subsidiaries or, to the best knowledge of the Corporate
Entities, any of the persons listed in Schedule I, on the one hand, and the
Company or any of its directors, officers or affiliates, on the other hand,
that are required to be disclosed pursuant to the rules and regulations of the
Commission and (ii) none of the Corporate Entities or, to the best knowledge of
the Corporate Entities, any of the persons listed in Schedule I has any
contract, arrangement, understanding or relationship with any person with
respect to any securities of the Company.
Except as described in this Offer to Purchase, during the last five years,
none of the Corporate Entities or, to the best knowledge of the Corporate
Entities, any of the persons listed in Schedule I (i) has been convicted in a
criminal proceeding (excluding traffic violations and similar misdemeanors) or
(ii) was a party to a civil proceeding of a judicial or administrative body of
competent jurisdiction and as a result of such proceeding was or is subject to
a judgment, decree or final order enjoining future violations of, or
prohibiting activities subject to, Federal or state securities laws or finding
any violation of such laws.
Available Information. Parent is subject to the informational filing
requirements of the Exchange Act and, in accordance therewith, is obligated to
file reports and other information with the Commission relating to its
business, financial condition and other matters. Information, as of particular
dates, concerning Parent's directors and officers, their remuneration, stock
options and other matters, the principal holders of Parent's securities and any
material interest of such persons in transactions with Parent is required to be
disclosed in proxy statements distributed to Parent's shareholders and filed
with the Commission. Such reports, proxy statements and other information
should be available for inspection at the Commission, and copies thereof should
be obtainable from the Commission, in the same manner as set forth with respect
to information concerning the Company in Section 8. Such material should also
be available for inspection at the library of the NYSE, 20 Broad Street, New
York, New York 10005.
10. SOURCE AND AMOUNT OF FUNDS
The total amount of funds required by the Purchaser to purchase all
outstanding Shares pursuant to the Offer and to pay fees and expenses related
to the Offer and the Merger is estimated to be approximately $1,750,000,000.
The Purchaser plans to obtain all funds needed for the Offer and the Merger
through a capital contribution that will be made by Parent to the Purchaser.
Parent plans to use funds it has available in its cash accounts, under
available lines of credit and pursuant to current commercial paper programs for
such capital contribution. Parent expects the principal source of funds to be
its commercial paper program for which Goldman Sachs Money Markets, L.P. and
Lehman Brothers Inc. act as placement agents. Such commercial paper is expected
to bear interest at prevailing market rates for such instruments at the time of
issuance and to have maturities not exceeding 270 days. The Purchaser has not
conditioned the Offer on obtaining financing.
Parent plans to service its additional borrowing through cash flow from
operations and believes that, if its lenders do not roll over any amounts
outstanding with respect to such commercial paper at maturity, Parent will have
sufficient alternative sources of financing, including bank credit facilities,
to repay such additional borrowing.
11. CONTACTS WITH THE COMPANY; BACKGROUND OF THE OFFER
Beginning in the spring of 1992, Parent from time to time expressed an
interest to the Company in a possible combination but the Company indicated its
belief that it should remain independent. In October 1994 Rand Araskog, the
Chairman and Chief Executive Officer of Parent arranged a meeting with Henry
16
Gluck, Chairman and Chief Executive Officer of the Company, to discuss more
specifically a transaction. Although no specific transaction was proposed at
that time, Mr. Gluck indicated that he might consider an offer from Parent. The
two arranged a subsequent meeting that took place on November 18, 1994. After
that meeting, Mr. Gluck and Mr. Araskog concluded that the matter was of
sufficient interest to retain financial and legal advisors and instruct them to
begin discussions. Over the course of the next several weeks financial and
legal advisors developed the framework of a mutually satisfactory agreement.
Mr. Araskog and Mr. Gluck met again on December 12, 1994, at which time they
tentatively agreed on acceptable financial terms, subject to completion of
negotiation on other matters and preparation of a definitive agreement.
Negotiations between the Company and Parent continued through the morning of
December 19, 1994, with the parties and their advisors conferencing by
telephone and meeting in New York City. The terms of the transaction were
presented to and authorized and adopted by the Board of Directors of the
Company on December 18, 1994 at a meeting in Los Angeles. Following approval by
the Board of Directors of the Company, the Merger Agreement and the Option
Agreement were executed and delivered, and the transaction was publicly
announced before the NYSE opened on Monday, December 19, 1994.
12. PURPOSE OF THE OFFER; THE MERGER AGREEMENT; OTHER AGREEMENTS
Purpose
The purpose of the Offer is to acquire control of and the entire equity
interest in the Company. Following the Offer, the Purchaser and Parent intend
to acquire any remaining equity interest in the Company not acquired in the
Offer by consummating the Merger. Following consummation of the Offer, Parent
expects a majority of the Company's Board of Directors to be comprised of
persons designated by Parent. Following the Merger, Parent expects the
Company's entire Board of Directors to be comprised of persons designated by
Parent, a majority of whom will be officers or employees of Parent or its
Subsidiaries (including the Company).
The Merger Agreement
The Merger Agreement provides that following the satisfaction or waiver of
the conditions described below under "Conditions to Each Party's Obligations to
Effect the Merger" and "Additional Condition to Obligations of Parent and the
Purchaser to Effect the Merger", the Purchaser will be merged with and into the
Company, and each then outstanding Share will be converted into the right to
receive an amount in cash equal to the price per Share paid pursuant to the
Offer.
Vote Required to Approve Merger. The Board of Directors of the Company has
unanimously authorized and approved the Merger and adopted the Merger Agreement
in accordance with Section 607.1101 of the FBCA. Depending upon the number of
Shares purchased by the Purchaser pursuant to the Offer, the Board may be
required to submit the Merger Agreement to the Company's shareholders for
approval at a shareholder's meeting convened for that purpose in accordance
with the FBCA. If shareholder approval is required, the Merger Agreement must
generally be approved by a majority of all votes entitled to be cast at such
meeting. As a result, if the Minimum Condition is satisfied, the Purchaser will
have sufficient voting power to approve the Merger Agreement at the
shareholders' meeting without the affirmative vote of any other shareholder.
If the Purchaser acquires 80% of the Shares, whether solely pursuant to the
Offer or in conjunction with the exercise of the Purchaser's rights under the
Option Agreement or otherwise, the Merger may be consummated without a
shareholders' meeting and without the approval of the Company's shareholders
under Section 607.1104 of the FBCA. That section provides that a corporation
may merge with and into a subsidiary of such corporation without the approval
of the shareholders of either entity so long as the articles of incorporation
of the surviving entity do not differ (except in certain limited ways) from the
articles of incorporation of the parent corporation in effect prior to the
merger. The Merger Agreement provides that the Purchaser (the parent
corporation) will be merged with and into the Company (the subsidiary
17
corporation) following the Offer, and that the articles of incorporation of the
Company will be the articles of incorporation of the Surviving Corporation
following the Merger.
Termination of the Merger Agreement. The Merger Agreement may be terminated
at any time prior to the effective time of the Merger (the "Effective Time"),
whether before or after approval of matters presented in connection with the
Merger by the shareholders of the Company:
(a) by mutual written consent of Parent and the Company;
(b) by either Parent or the Company if (i) as a result of the failure,
occurrence or existence of any of the conditions described in Section 14 of
this Offer to Purchase, the Offer shall have terminated or expired in
accordance with its terms without the Purchaser having accepted for payment
any Shares pursuant to the Offer or (ii) the Purchaser shall not have
accepted for payment any Shares pursuant to the Offer by June 19, 1995;
provided, however, that the right to terminate pursuant to the provisions
described in this subparagraph (b) shall not be available to either party
if its failure to perform any of its obligations under the Merger Agreement
results in the failure, occurrence or existence of any such condition;
(c) by either Parent or the Company if any Governmental Entity (as
defined below) shall have issued an order, decree or ruling or taken any
other action permanently enjoining, restraining or otherwise prohibiting
the acceptance for payment of, or payment for, the Shares pursuant to the
Offer or the Merger and such order, decree or ruling or other action shall
have become final and nonappealable;
(d) by Parent or the Purchaser prior to the purchase of the Shares
pursuant to the Offer in the event of a breach by the Company of any
representation, warranty, covenant or other agreement contained in the
Merger Agreement which (A) would give rise to the failure of a condition
described in paragraph (e) or (f) of Section 14 and (B) cannot be or has
not been cured within 20 days after the giving of written notice to the
Company;
(e) by Parent or the Purchaser if either Parent or the Purchaser is
entitled to terminate the Offer as a result of the occurrence of any event
set forth in paragraph (d) of Section 14;
(f) by the Company in connection with entering into a definitive
agreement in accordance with the provisions described in the second
paragraph under "Acquisition Proposals", provided it has complied with all
provisions thereof, including the notice provisions therein, and that it
makes simultaneous payment of the Expenses and the Termination Fee (as such
terms are defined below under "Fees and Expenses"); or
(g) by the Company, if the Purchaser or Parent shall have breached in any
material respect any of their respective representations, warranties,
covenants or other agreements contained in the Merger Agreement, which
failure to perform is incapable of being cured or has not been cured within
20 days after the giving of written notice to Parent or the Purchaser, as
applicable, except, in any case, such failures which are not reasonably
likely to affect adversely Parent's or the Purchaser's ability to complete
the Offer or the Merger.
Conduct of Business. During the term of the Merger Agreement, except as
specifically required by the Merger Agreement, the Company shall and shall
cause its subsidiaries to carry on their respective businesses in the ordinary
course and use all reasonable efforts consistent with good business judgment to
preserve intact their current business organizations, keep available the
services of their current officers and employees and preserve their
relationships consistent with past practice with desirable customers,
suppliers, licensors, licensees, distributors and others having business
dealings with them to the end that their goodwill and ongoing businesses shall
be unimpaired in all material respects at the Effective Time. Except for
transactions specifically disclosed in the SEC Documents (as defined in the
Merger Agreement), without limiting the generality of the foregoing, the
Company shall not, and shall not permit any of its subsidiaries to (without
Parent's prior written consent, which consent may not be unreasonably
withheld):
(i) (A) declare, set aside or pay any dividends on, or make any other
distributions in respect of, any of its capital stock, other than dividends
and distributions by any direct or indirect wholly owned
18
subsidiary of the Company to its parent, (B) split, combine or reclassify
any of its capital stock or issue or authorize the issuance of any other
securities in respect of, in lieu of or in substitution for shares of its
capital stock or (C) except as shall be required under currently existing
terms of any stock-based benefit plan, purchase, redeem or otherwise
acquire or amend (except in respect of the Rights as specifically permitted
in the Merger Agreement) any shares of capital stock of the Company or any
of its subsidiaries or any other securities thereof or any rights, warrants
or options to acquire any such shares or other securities (other than (x)
redemptions, purchases or other acquisitions required by applicable
provisions under Gaming Laws, (y) issuances or redemptions of capital stock
of wholly-owned subsidiaries occurring between the Company and any of its
wholly-owned subsidiaries or occurring between wholly-owned subsidiaries of
the Company and (z) issuances of capital stock or ownership interests in
connection with the organization of new entities for purposes of business
development and management activities as permitted by the Merger
Agreement);
(ii) issue, deliver, sell, pledge or otherwise encumber or amend any
shares of its capital stock, any other voting securities or any securities
convertible into, or any rights, warrants or options to acquire, any such
shares, voting securities or convertible securities (other than the
issuance of the Shares upon the exercise of employee stock options and
contingent incentive plans (including with respect to contingent shares of
the Shares) outstanding on the date of the Merger Agreement in accordance
with their present terms and other than the issuance of the Shares pursuant
to the Option Agreement);
(iii) amend its Amended and Restated Articles of Incorporation, By-laws
or other comparable charter or organizational documents;
(iv) acquire or agree to acquire (A) by merging or consolidating with, or
by purchasing a substantial portion of the assets of, or by any other
manner, any business or any corporation, partnership, joint venture,
association or other business organization or division thereof or (B) any
assets that are material, individually or in the aggregate, to the Company
and its subsidiaries taken as a whole, except (x) purchases of inventory,
furnishings and equipment in the ordinary course of business consistent
with past practice or (y) expenditures consistent with the Company's
current capital budget previously provided to Parent; provided that
transactions of the type referenced in this subparagraph (iv) by the
Company and its subsidiaries shall be permitted (a) to the extent required
under existing agreements or, with respect to projects in Windsor, Canada,
understandings (collectively, "Current Commitments") and (b) in addition to
what is otherwise permitted in this subparagraph (iv), the aggregate amount
that the Company and its subsidiaries may spend or commit to spend in
respect of such transactions (other than Current Commitments) without being
able to cancel or withdraw such commitments absent material penalty or cost
to the Company and its subsidiaries shall not exceed in the aggregate $35
million; and, provided further that any transaction specified by the
immediately preceding proviso shall not be so permitted if the Company
would not be able to enjoy the benefits in respect of the relevant assets,
business, corporation, partnership, joint venture, association or other
business organization or division after consummation of the Offer, the
Merger and the other transactions contemplated by the Merger Agreement and
the Option Agreement or there would be required any additional consents,
approvals, orders or authorizations of, or registrations or filings with,
any Governmental Entity which would delay in any material respect the
consummation of the transactions contemplated by the Merger Agreement and
the Option Agreement; and, provided further that, notwithstanding the
foregoing limitations, the Company may engage in any projects within that
state of the United States previously discussed by the parties after, to
the extent permitted by law, consultation between the Company and Parent;
(v) sell, lease, license, mortgage or otherwise encumber or subject to
any lien or otherwise dispose of any of its properties or assets, except
transactions in the ordinary course of business consistent with past
practice;
(vi) (A) other than (1) ordinary course working capital borrowings, (2)
Current Commitments, (3) projects approved prior to the date of the Merger
Agreement by the Board of Directors of the Company, (4) specific projects
referred to in the capital budget of the Company previously provided to
Parent and (5) other incurrences of indebtedness which, in the aggregate,
do not exceed $10 million, incur any
19
indebtedness for borrowed money or guarantee any such indebtedness of
another person, issue or sell any debt securities or warrants or other
rights to acquire any debt securities of the Company or any of its
subsidiaries, guarantee any debt securities of another person, enter into
any "keep well" or other agreement to maintain any financial statement
condition of another person or enter into any arrangement having the
economic effect of any of the foregoing or (B) other than (v) to the
Company or any direct or indirect wholly owned subsidiary of the Company,
(w) advances to employees, suppliers or customers in the ordinary course of
business consistent with past practice, (x) Current Commitments, (y)
projects approved prior to the date of the Merger Agreement by the Board of
Directors of the Company and (z) specific projects referred to in the
capital budget of the Company previously provided to Parent, make any
loans, advances or capital contributions to, or investments in, any other
person;
(vii) make any material tax election or settle or compromise any material
tax liability;
(viii) pay, discharge, settle or satisfy any material claims, liabilities
or obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge, settlement or satisfaction,
in the ordinary course of business consistent with past practice or in
accordance with their terms, of liabilities reflected or reserved against
in, the most recent consolidated financial statements (or the notes
thereto) of the Company included in the SEC Documents filed and publicly
available prior to the date of the Merger Agreement or incurred in the
ordinary course of business consistent with past practice, or, except in
the ordinary course of business consistent with past practice, waive the
benefits of, or agree to modify in any manner, any confidentiality,
standstill or similar agreement to which the Company or any of its
subsidiaries is a party;
(ix) except as required to comply with applicable law, (A) adopt, enter
into, terminate or amend any Benefit Plan (as defined in the Merger
Agreement) or other arrangement for the benefit or welfare of any director,
officer or current or former employee, except as expressly described in the
Merger Agreement and except to the extent necessary to coordinate any such
benefit plans with the terms of the Merger Agreement (including the
provisions of certain employment agreements expressly referenced in the
Merger Agreement), (B) increase in any manner the compensation or fringe
benefits of, or pay any bonus to, any director, officer or employee (except
for normal increases or bonuses in the ordinary course of business
consistent with past practice to employees other than directors, officers
or senior management personnel and that, in the aggregate, do not result in
a significant increase in benefits or compensation expense to the Company
and its subsidiaries relative to the level in effect prior to such action
(but in no event shall the aggregate amount of all such increases exceed 4%
of the aggregate annualized compensation expense of the Company and its
subsidiaries reported in the most recent audited financial statements of
the Company included in the SEC Documents)), (C) pay any benefit not
provided for under any Benefit Plan, (D) except as permitted in clause (B),
grant any awards under any bonus, incentive, performance or other
compensation plan or arrangement or Benefit Plan (including the grant of
stock options, stock appreciation rights, stock based or stock related
awards, performance units or restricted stock, or the removal of existing
restrictions in any Benefit Plans or agreements or awards made thereunder)
or (E) except for the funding of rabbi trusts for non-qualified retirement
benefits to the extent previously approved by the Board of Directors of the
Company or any committee thereof, prior to the date of the Merger
Agreement, take any action to fund or in any other way secure the payment
of compensation or benefits under any employee plan, agreement, contract or
arrangement or Benefit Plan other than in the ordinary course of business
consistent with past practice; provided, however, that the Company may take
any action described in (A), (C) and (D) above that does not involve the
five most senior officers of the Company and that, taken together, has an
aggregate economic cost to the Company of less than $7,500,000.
(x) make any new capital expenditure or expenditures, other than capital
expenditures not to exceed, in the aggregate, the amounts provided for
capital expenditures (x) in respect of Current Commitments, (y) in respect
of projects approved prior to the date of the Merger Agreement and (z) in
the capital budget of the Company provided to Parent;
(xi) except in the ordinary course of business and except as otherwise
permitted by the Merger Agreement, modify, amend or terminate any contract
or agreement set forth in the SEC Documents to
20
which the Company or any subsidiary is a party or waive, release or assign
any material rights or claims; or
(xii) authorize any of, or commit or agree to take any of, the foregoing
actions except as otherwise permitted by the Merger Agreement.
In addition, the Merger Agreement provides that the Company shall not, and
shall not permit any of its subsidiaries to, take any action that would result
in (i) any of its representations and warranties set forth in the Merger
Agreement that are qualified as to materiality becoming untrue, (ii) any of
such representations and warranties that are not so qualified becoming untrue
in any material respect or (iii) any of the conditions to the Offer described
in Section 14 of this Offer to Purchase not being satisfied (subject to the
Company's right to take action specifically permitted by the provisions
described under "Acquisition Proposals").
Acquisition Proposals. The Merger Agreement provides that the Company shall
not, nor shall it permit any of its subsidiaries to, nor shall it authorize or
permit any officer, director or employee of, or any investment banker, attorney
or other advisor or representative of, the Company or any of its subsidiaries
to, (i) solicit or initiate, or encourage the submission of, any takeover
proposal or (ii) participate in any discussions or negotiations regarding, or
furnish to any person any information with respect to, or take any other action
to facilitate the making of any proposal that constitutes, or may reasonably be
expected to lead to, any takeover proposal; provided, however, that, prior to
the acceptance for payment of the Shares pursuant to the Offer, if in the
opinion of the Board of Directors of the Company, after consultation with
counsel, such failure to act would be inconsistent with its fiduciary duties to
the Company's stockholders under applicable law, the Company may, in response
to an unsolicited takeover proposal, and subject to compliance with the
provisions described in the second succeeding paragraph, (A) furnish
information with respect to the Company to any person pursuant to a
confidentiality agreement and (B) participate in negotiations regarding such
takeover proposal. Without limiting the foregoing, it is understood that any
violation of the restrictions set forth in the preceding sentence by any
director or executive officer of the Company or any of its subsidiaries,
whether or not such person is purporting to act on behalf of the Company or any
of its subsidiaries or otherwise, shall be deemed to be a breach of the
provisions described in this paragraph by the Company. For purposes of the
Merger Agreement, "takeover proposal" means any proposal or offer from any
person relating to any direct or indirect acquisition or purchase of a material
amount of assets of the Company or any of its subsidiaries or of over 20% of
any class of equity securities (other than acquisitions of stock by
institutional investors in the ordinary course of business) of the Company or
any of its subsidiaries or any tender offer or exchange offer that if
consummated would result in any person beneficially owning 20% or more of any
class of equity securities of the Company or any of its subsidiaries or which
would require approval under any Gaming Law, or any merger, consolidation,
business combination, sale of substantially all assets, recapitalization,
liquidation, dissolution or similar transaction involving the Company or any of
its subsidiaries other than the transactions contemplated by the Merger
Agreement, or any other transaction the consummation of which would reasonably
be expected to impede, interfere with, prevent or materially delay the Offer or
the Merger or which would reasonably be expected to dilute materially the
benefits to Parent of the transactions contemplated hereby.
The Merger Agreement provides that, except as set forth in the provisions
described in this paragraph, neither the Board of Directors of the Company nor
any committee thereof shall (i) withdraw or modify, or propose to withdraw or
modify, in a manner adverse to Parent or the Purchaser, the approval or
recommendation by such Board of Directors or any such committee of the Offer,
the Merger Agreement or the Merger, (ii) approve or recommend, or propose to
approve or recommend, any takeover proposal or (iii) enter into any agreement
with respect to any takeover proposal. Notwithstanding the foregoing, in the
event prior to the time of acceptance for payment of the Shares in the Offer if
in the opinion of the Board of Directors of the Company after consultation with
counsel, failure to do so would be inconsistent with its fiduciary duties to
the Company's stockholders under applicable law, the Board of Directors of the
Company may (subject to the terms of this and the following sentences) withdraw
or modify its approval or recommendation of the Offer, the Merger Agreement or
the Merger, approve or recommend a competitive
21
proposal, or enter into an agreement with respect to a competitive proposal, in
each case at any time after the second business day following Parent's receipt
of written notice (a "Notice of Competitive Proposal") advising Parent that the
Board of Directors of the Company has received a competitive proposal,
specifying the material terms and conditions of such competitive proposal and
identifying the person making such competitive proposal; provided that the
Company shall not enter into an agreement with respect to a competitive
proposal unless the Company shall have furnished Parent with written notice no
later than 12:00 noon two business days in advance of any date that it intends
to enter into such agreement. In addition, if the Company proposes to enter
into an agreement with respect to any takeover proposal, it shall concurrently
with entering into such agreement pay, or cause to be paid, to Parent the
Expenses and the Termination Fee. For purposes of the Merger Agreement, a
"competitive proposal" means any bona fide take-over proposal to acquire,
directly or indirectly, for consideration consisting of cash and/or securities,
more than 50% of the Shares then outstanding or all or substantially all the
assets of the Company and otherwise on terms which the Board of Directors of
the Company determines in its good faith judgment to be more favorable to the
Company's stockholders than the Offer and the Merger (taking into account any
improvements to the Offer and the Merger proposed by Parent).
The Merger Agreement provides that in addition to the obligations of the
Company described in the immediately preceding paragraph, the Company shall
advise Parent of any request for information or of any takeover proposal, or
any proposal with respect to any takeover proposal, the material terms and
conditions of such request or takeover proposal, and the identity of the person
making any such takeover proposal or inquiry. The Company will keep Parent
fully informed of the status and details (including amendments or proposed
amendments) of any such request, takeover proposal or inquiry.
The Merger Agreement provides that, nothing contained in the provisions
described under "Acquisition Proposals" shall prohibit the Company from taking
and disclosing to its stockholders a position contemplated by Rule 14e-2(a)
promulgated under the Exchange Act or from making any disclosure to the
Company's stockholders if, in the opinion of the Board of Directors of the
Company, after consultation with counsel, failure to so disclose would be
inconsistent with its fiduciary duties to the Company's stockholders under
applicable law; provided that the Company does not, except as permitted by
provisions described in the second preceding paragraph, withdraw or modify, or
propose to withdraw or modify, its position with respect to the Offer or the
Merger or approve or recommend, or propose to approve or recommend, a takeover
proposal.
Conditions to Each Party's Obligation To Effect the Merger. The Merger
Agreement provides that the respective obligation of each party to effect the
Merger is subject to the satisfaction or waiver on or prior to the Closing Date
of the following conditions:
(a) If required by applicable law, the Merger Agreement shall have been
approved and adopted by the affirmative vote of the holders of a majority
of all Shares entitled to be cast in accordance with applicable law and the
Company's Amended and Restated Articles of Incorporation; provided that
Parent and the Purchaser shall vote all their Shares in favor of the
Merger.
(b) No statute, rule, regulation, executive order, decree, temporary
restraining order, preliminary or permanent injunction or other order
enacted, entered, promulgated, enforced or issued by any Governmental
Entity or other legal restraint or prohibition preventing the consummation
of the Merger or the transactions contemplated thereby shall be in effect;
provided, however, that, in the case of a decree, injunction or other
order, each of the parties shall have used reasonable efforts to prevent
the entry of any such injunction or other order and to appeal as promptly
as possible any decree, injunction or other order that may be entered.
(c) The Purchaser shall have previously accepted for payment and paid for
Shares pursuant to the Offer.
Additional Condition to Obligations of Parent and the Purchaser to Effect the
Merger. The Merger Agreement provides that the obligations of Parent and the
Purchaser to effect the Merger are further subject to the condition that all
stock options and stock appreciation rights shall have been cancelled.
22
Board of Directors. The Merger Agreement provides that promptly upon the
acceptance for payment of, and payment for, any Shares by the Purchaser
pursuant to the Offer, the Purchaser shall be entitled to designate such number
of directors on the Board of Directors of the Company as will give the
Purchaser, subject to compliance with Section 14(f) of the Exchange Act, such
number as will represent a majority of such directors, and the Company and its
Board of Directors shall, at such time, take any and all such action needed to
cause the Purchaser's designees to be appointed to the Company's Board of
Directors (including to cause directors to resign). Subject to applicable law,
the Company shall take all action requested by Parent which is reasonably
necessary to effect any such election, including mailing to its stockholders an
Information Statement containing the information required by Section 14(f) of
the Exchange Act and Rule 14f-1 promulgated thereunder, and the Company agrees
to make such mailing with the mailing of the Schedule 14D-9 so long as the
Purchaser shall have provided to the Company on a timely basis all information
required to be included in the Information Statement with respect to the
Purchaser's designees.
Fees and Expenses. The Merger Agreement provides that, except as provided
below, all fees and expenses incurred in connection with the Offer, the Merger,
the Merger Agreement and the transactions contemplated hereby shall be paid by
the party incurring such fees or expenses, whether or not the Offer or the
Merger is consummated.
The Merger Agreement provides that the Company shall pay, or cause to be
paid, in same day funds to Parent the sum of (x) all of Parent's reasonably
documented out-of-pocket expenses in an amount up to but not to exceed
$10,000,000 (the "Expenses") and (y) $50,000,000 (the "Termination Fee") upon
demand if (i) Parent or the Purchaser terminates this Agreement under the
provisions described in subparagraph (e) of "Termination of the Merger
Agreement", (ii) provided, however, that Parent shall be entitled to only the
Expenses where Parent or the Purchaser terminates the Merger Agreement under
the provisions described in subparagraph (e) of "Termination of the Merger
Agreement" as a result of the occurrence of any event described in clause (i)
of paragraph (d) of Section 14 of this Offer to Purchase or, as it relates to
clause (i) of paragraph (d) of Exhibit A, clause (iii) of such paragraph (d);
provided further, however, that, if the Agreement is terminated as contemplated
by the immediately preceding proviso and the Company subsequently consummates
or enters into an agreement relating to a competitive proposal within 12 months
of such termination, the Company shall also pay to Parent the Termination Fee,
(ii) the Company terminates the Merger Agreement pursuant to the provisions
described in subparagraph (e) of "Termination of the Merger Agreement" or (iii)
prior to any termination of the Merger Agreement, a takeover proposal shall
have been made and within 12 months of such termination, a transaction
constituting a takeover proposal is consummated or the Company enters into an
agreement with respect to, or approves or recommends a takeover proposal. The
amount of Expenses so payable shall be the amount set forth in an estimate
delivered by Parent, subject to upward or downward adjustment (not to be in
excess of the amount set forth in clause (x) above) upon delivery of reasonable
documentation therefor.
Indemnification and Insurance. The Merger Agreement provides that the
indemnification obligations set forth in the Company's Amended and Restated
Certificate of Incorporation and by-laws on the date of the Merger Agreement
shall survive the Merger and shall not be amended, repealed or otherwise
modified for a period of six years after the Effective Time in any manner that
would adversely affect the rights thereunder of individuals who on or prior to
the Effective Time were directors, officers, employees or agents of the Company
(the "Indemnified Parties").
The Merger Agreement provides that for six years from the Effective Time, the
Surviving Corporation shall, unless Parent agrees in writing to guarantee the
indemnification obligations described in the preceding paragraph, either (x)
maintain in effect the Company's current directors' and officers' liability
insurance covering those persons who are covered on the date of the Merger
Agreement by the Company's directors' and officers' liability insurance policy
(a copy of which has been heretofore delivered to Parent); provided, however,
that in no event shall the Surviving Corporation be required to expend in any
one year an amount in excess of 150% of the annual premiums currently paid by
the Company for such insurance which the
23
Company represents to be $795,000 for the twelve month period ended March 31,
1995; and, provided, further, that if the annual premiums of such insurance
coverage exceed such amount, the Surviving Corporation shall be obligated to
obtain a policy with the greatest coverage available for a cost not exceeding
such amount or (y) cause Parent's directors' and officers' liability insurance
then in effect to cover those persons who are covered on the date of the Merger
Agreement by the Company's directors' and officers' liability insurance policy
with respect to those matters covered by the Company's directors' and officers'
liability policy.
The Merger Agreement provides the indemnification obligations described above
shall survive the consummation of the Merger at the Effective Time, are
intended to benefit the Company, Parent, the Surviving Corporation and the
Indemnified Parties, and shall be binding on all successors and assigns of
Parent and the Surviving Corporation.
Employment Agreements. The Merger Agreement provides that prior to the
acquisition of Shares pursuant to the Offer, Parent and the Company will enter
into revised employment agreements with Mr. Gluck and Mr. Lanni comparable to
the agreements described below under "Employment Agreements".
Shareholder Meeting. The Merger Agreement provides that the Company will, as
soon as practicable following the acceptance for payment of, and payment for,
Shares by the Purchaser pursuant to the Offer, duly call, give notice of,
convene and hold a meeting of holders of Shares if such meeting is required by
applicable law for the purpose of approving the Merger Agreement. Subject to
the provisions described above under "Acquisition Proposals," the Merger
Agreement provides that the Company will through its Board of Directors
recommend approval of the Merger Agreement to its shareholders. Notwithstanding
the foregoing, if the Purchaser or any other subsidiary of Parent acquires at
least 80% of the outstanding Shares, the parties will, at the request of
Parent, take all necessary and appropriate action to cause the Merger to become
effective as soon as practicable after the expiration of the Offer without a
shareholder meeting in accordance with Section 607.1104 of the FBCA.
Representations and Warranties. The Merger Agreement contains standard
representations and warranties from the Company, Parent and the Purchaser.
Transfer Taxes. The Merger Agreement provides that all liability for transfer
or other similar taxes arising out of or related to the sale of Shares to the
Purchaser, or the consummation of any other transaction contemplated by the
Merger Agreement, and due to the property owned by the Company or any of its
subsidiaries or affiliates ("Transfer Taxes") will be borne by the Company, and
the Company will file or cause to be filed all returns relating to such
Transfer Taxes which are due, and, to the extent appropriate or required by
law, the shareholders of the Company will cooperate with respect to the filing
of such returns.
Enforceability, Illegality. To the extent any restriction on the activities
of the Company or its subsidiaries under the terms of the Merger Agreement,
including with respect to any negative pledge or other restriction on the
ability of the Company to dispose of stock of any Nevada subsidiary, requires
prior approval under any Gaming Law, such restriction is deemed to be of no
force or effect unless and until such approval is obtained. If any provision of
the Merger Agreement is illegal or unenforceable under any Gaming Law, such
provision is deemed to be void and of no force or effect.
Stock Options. Based upon information contained in the Company's
Solicitation/Recommendation Statement on Schedule 14D-9, the current directors
and executive officers of the Company as a group hold stock options granted
under the Option Plans (as defined in the Merger Agreement) to purchase an
aggregate of 180,125 Shares at exercise prices ranging from $13.25 to $51.13
per Share. In accordance with the terms of the Merger Agreement, the Company
shall use its best efforts to assure that (i) each stock option shall be
accelerated to be fully exercisable prior to the consummation of the Offer and
(ii) each holder of a stock option granted under the Option Plans which is
outstanding immediately prior to the consummation of the Offer will be
cancelled in exchange for an amount in cash equal to the product of (y) the
number of Shares
24
subject to such stock option immediately prior to the consummation of the Offer
and (z) the excess of the price per Share to be paid in the Offer over the per
Share price of such stock options; provided, however, that any such stock
option granted to a non-employee director of the Company as of December 8, 1994
shall be cancelled at the Effective Time. Since the only stock appreciation
rights ("SARs") held by the current directors and executive officers of the
Company were related to their stock options (although the executive officers
have tax withholding rights with respect to their contingent and restricted
Shares), no additional payments will be made with respect to any such SAR.
Benefit Plans. The Merger Agreement provides that, with certain limitations,
Parent shall cause the Surviving Corporation to take such actions as are
necessary so that, for a period of not less than one year after the Effective
Time, nonunion employees of the Company and its subsidiaries who continue their
employment after the Effective Time will be provided employee compensation and
other benefits which in the aggregate are at least generally comparable to
those provided to such employees as of the date hereof.
It is Parent's current intention that, following the first anniversary of the
Effective Time, Parent will provide employee compensation and other benefits
for employees of the Company and its subsidiaries which are at least generally
comparable in the aggregate to the employee compensation and other benefits for
other employees of Parent and its subsidiaries. Parent will cause the Surviving
Corporation to recognize all service credited to each such employee by the
Company through the Effective Time for purposes of eligibility (including for
enhanced vacation) and vesting under any employee benefit plan provided by the
Surviving Corporation for the benefit of such employees.
Regulatory Matters. The Merger Agreement provides that Parent will and will
cause its subsidiaries to (and will use its reasonable efforts to cause its
affiliates other than subsidiaries to) if it is necessary to obtain any
regulatory approval for the Merger Agreement, disassociate themselves from any
person or person deemed, or reasonably likely to be deemed, unacceptable by a
Governmental Entity with authority to administer Gaming Laws and, in the case
of any such person who is a nominee to serve as a director of Parent or any
subsidiary of Parent, Parent will and will cause the relevant subsidiary to
replace any such director nominee with a suitable substitute nominee. In that
connection, the Merger Agreement provides that Parent will use its reasonable
efforts to cause the trust arrangements described in the first paragraph of
Section 14 of this Offer to Purchase to be in full force and effect. As used in
this Offer to Purchase, the term "Governmental Entity" means any Federal, state
or local government or any court, administrative or regulatory agency, domestic
or foreign.
Option Agreement
In connection with the execution of the Merger Agreement, the Company, Parent
and the Purchaser have entered into an Option Agreement dated as of December
19, 1994 (the "Option Agreement"), pursuant to which the Company has agreed to
grant the Purchaser an irrevocable option (the "Option") to purchase from the
Company up to 5,000,000 Shares at a price of $67.50 per Share plus all treasury
Shares, exercisable in whole or in part at any time or from time to time, but
only if the Purchaser accepts Shares for payment pursuant to the Offer.
Employment Agreements
The Company has a renewable five-year employment agreement with Mr. Gluck and
a renewable three-year employment agreement with Mr. Lanni, providing, among
other things, for employment at current fiscal 1995 annual base salaries of
$887,843 for Mr. Gluck and $665,882 for Mr. Lanni, subject to annual cost of
living increases or decreases equivalent to two-thirds of the change in the
consumer price index during the life of the contracts and further subject to
discretionary increases by the Audit and Compensation Committee of the Board.
Both Mr. Gluck and Mr. Lanni received 1.8% salary increases effective August 1,
1994. Both employment agreements automatically extend on a daily basis so that
the outstanding term is always five-years or three-years, as the case may be,
subject to the continuing option by the Company or the employee to terminate
the continuing automatic extension provision at any time. In the event of a
wrongful termination by the Company, which includes a breach by the Company of
any of its obligations under the agreements, each of Mr. Gluck and Mr. Lanni
shall have the option of terminating his respective agreement and obtaining
25
benefits equal to at least the present value at that time (using a rate based
on five-year treasury notes) of unpaid salary and incentive compensation for
the then remaining term and shall continue to receive all other benefits for
the remaining term. Unless Mr. Gluck or Mr. Lanni agrees to a 10% reduction in
such payment, such person would have a mitigation obligation to the extent such
obligation is provided under California law. Upon termination in either
situation, all of the then outstanding unvested restricted or contingent stock
and any unexercisable stock options would vest or become exercisable. The
agreements also provide for incentive compensation based on or similar to the
Company's Incentive Compensation Plan; however, the Plan will apply unless the
employee elects to be goverened by the employment agreement. In the event of a
Change in Control (as defined in their respective employment agreements), Mr.
Gluck and Mr. Lanni each have a one-year option to terminate their respective
agreements and to collect a payment substantially equivalent to the amount
payable for wrongful termination prior to a Change in Control plus a lump-sum
amount equal to the Termination Benefit (as defined in the Executive Security
Plan) under the Executive Security Plan. Any such payment is subject to the
safe harbor limitation of 2.99 times the base amount established by the Deficit
Reduction Act of 1984 ("DEFRA") applicable to therein defined "parachute
payments" (the "DEFRA Limitation"). This limitation also applies to benefits
payable in the event of a wrongful termination following a Change in Control.
Under their employment agreements, Messrs. Gluck and Lanni are entitled upon
retirement to continuation of medical insurance coverage or the equivalent for
themselves (and their respective dependents) for their respective lives plus
one year, and the Company at July 31, 1994 had accrued $282,000 and $279,000,
respectively, for these benefits, subject to the condition that to the extent
either is employed by an employer offering such insurance or has medicare
coverage, the Company obligation shall be secondary.
The acquisition of Shares pursuant to the Offer will constitute a Change in
Control for purposes of these employment agreements. However, pursuant to the
Merger Agreement, Parent and the Company will offer an Amended and Restated
Employment Agreement ("Amended Agreement") to each of Messrs. Gluck and Lanni
which they each have indicated they will accept. The Amended Agreement will
differ from the respective existing Agreements primarily as follows: (1) Parent
will guarantee each Amended Agreement; (2) the term of each agreement will be a
fixed term of five years for Mr. Gluck and three years for Mr. Lanni instead of
an evergreen term; (3) Mr. Gluck will report to the Chief Executive Officer of
Parent; (4) the annual bonus under each Amended Agreement will be the higher of
the amount computed under the respective existing agreement or the amount
computed under Parent's annual bonus plan; (5) Messrs. Gluck and Lanni will
each receive an annual grant of a stock option for shares of Parent common
stock (35,000 shares for Mr. Gluck and 20,000 shares for Mr. Lanni), with an
exercise price equal to the fair market value of such shares on the date of
grant; (6) either Mr. Gluck or Mr. Lanni may be temporarily replaced if he is
unable to substantially perform his duties for 60 days and may be permanently
replaced (without such replacement being a breach of the agreement) if he is
unable to substantially perform his duties for a year; (7) payments and
benefits that may be treated as "parachute payments" under Section 280G of the
Internal Revenue Code of 1986, as amended, will be computed so that the
recipient receives the higher of the net amounts produced by (x) providing a
"safe harbor cap" for such payments or (y) making such payments without
imposing a safe harbor cap; and (8) the acquisition of Shares pursuant to the
Offer will constitute a Change in Control for purposes of the Amended
Agreement, granting Mr. Gluck and Mr. Lanni the option to terminate described
above, but no subsequent transaction or event will constitute a Change in
Control.
In addition, the Company has contingent severance agreements with all
Executive Officers which provide that if (i) a Change in Control (as defined
therein) occurs, and (ii) within three years after the Change in Control the
executive officer is discharged, other than for cause (as defined therein), or
resigns because of several stated reasons including but not limited to, a
reduction in compensation or responsibilities or because the Company's
principal offices are moved more than twelve miles, the executive officer will
be entitled to receive lump-sum payment equivalent to the amount of salary that
the covered person would have received (without considering reductions after
the Change in Control) during a period ending upon the later of two years after
the Change in Control or one year after the termination of such person's
employment and the
26
incentive compensation that would have been earned in the same period computed
by projecting and prorating the greater of the incentive compensation amount
actually payable for the full fiscal year preceding the year in which the
Change in Control takes place and the amount projected for the year in which
the
Change in Control takes place. In addition, under such contingent severance
agreements, and in some cases under provisions in the stock option and stock
bonus agreements, unvested stock options, stock appreciation rights, and
restricted or contingent stock grants under stock bonus plans will vest upon
such termination of employment. Certain other employment benefits will also
continue during such period. The severance agreements also provide for pension
benefits to the computed under the assumption that the termination of
employment occurred at the end of the two-year/one-year period described above
and that the five-year pension plan vesting period is not applicable. Under the
terms of such agreements, all such benefits are subject to the DEFRA Limitation
described above.
Although the foregoing summary of the Merger Agreement, the Option Agreement
and the Employment Agreements include all material terms of such agreements,
other terms are contained in such agreements. Copies of the Merger Agreement,
the Option Agreement and the Employment Agreements have been filed as exhibits
to the Schedule 14D-1 of which this Offer to Purchase is a part.
Dissenters' Rights
Holders of Shares do not have dissenters' rights as a result of the Offer. If
the Merger is effected with a vote of the Company's shareholders and if on the
record date fixed to determine the shareholders entitled to vote, the Shares
are listed on the NYSE or other national securities exchange, are designated as
a Nasdaq National Market security or are held of record by 2,000 or more of
such shareholders, then holders of Shares will not have dissenters' rights
under the FBCA. If, however, the Merger is consummated without the vote of the
Company's shareholders or with a vote but the Shares are not so listed or
designated or are not held of record by at least 2,000 shareholders, holders of
Shares will have certain rights pursuant to the provisions of Sections
607.1301, 607.1302 and 607.1320 of the FBCA to dissent and demand determination
of, and to receive payment in cash of the fair value of, their Shares. If the
statutory procedures were complied with, such rights could lead to a judicial
determination of the fair value required to be paid in cash to such dissenting
holders for their Shares. Any such judicial determination of the fair value of
Shares or the market value of the Shares could be more or less than the Offer
Price or the price provided for in the Merger Agreement. Section 607.1301(2) of
FBCA defines "fair value" as the value of the shares excluding any appreciation
or depreciation in anticipation of the transaction unless such exclusion would
be inequitable.
If any holder of Shares who asserts dissenters' rights under the FBCA fails
to perfect, or effectively withdraws or loses his dissenters' rights, as
provided in the FBCA, the Shares of such shareholder will be converted into the
right to receive the price provided for in the Merger Agreement in accordance
with the Merger Agreement. A shareholder may withdraw his notice of election to
dissent by delivery to Parent of a written withdrawal of his notice of election
to dissent and acceptance of the Merger.
FAILURE TO FOLLOW THE STEPS REQUIRED BY THE FBCA FOR PERFECTING DISSENTERS'
RIGHTS MAY RESULT IN THE LOSS OF SUCH RIGHTS.
Going Private Transactions
The Merger would have to comply with any applicable Federal law operative at
the time of its consummation. Rule 13e-3 under the Exchange Act is applicable
to certain "going private" transactions. The Purchaser does not believe that
Rule 13e-3 will be applicable to the Merger unless the Merger is consummated
more than one year after the termination of the Offer. If applicable, Rule 13e-
3 would require, among other things, that certain financial information
concerning the Company and certain information relating to the fairness of the
Merger and the consideration offered to minority shareholders be filed with the
Commission and disclosed to minority shareholders prior to consummation of the
Merger.
27
Other Matters
Parent intends to conduct a detailed review of the Company and its assets,
corporate structure, dividend policy, capitalization, operations, properties,
policies, management and personnel and to consider, subject to the terms of the
Merger Agreement, what, if any, changes would be desirable in light of the
circumstances then existing, and reserves the right to take such actions or
effect such changes as it deems desirable. Such changes could include changes
in the Company's business, corporate structure, capitalization, management or
dividend policy.
Except as otherwise described in this Offer to Purchase, the Purchaser and
Parent have no current plans or proposals that would relate to, or result in,
any extraordinary corporate transaction involving the Company, such as a
merger, reorganization or liquidation involving the Company or any of its
subsidiaries, a sale or transfer of a material amount of assets of the Company
or any of its subsidiaries, any changes in the Company's capitalization or
dividend policy or any other material change in the Company's business,
corporate structure or personnel.
13. DIVIDENDS AND DISTRIBUTIONS
Pursuant to the terms of the Merger Agreement, the Company is prohibited from
taking certain of the actions described in the two succeeding paragraphs, and
nothing herein shall constitute a waiver by the Purchaser or Parent of any of
its rights under the Merger Agreement or a limitation of remedies available to
the Purchaser or Parent for any breach of the Merger Agreement, including
termination thereof.
If on or after the date of the Merger Agreement, the Company should (i)
split, combine or otherwise change the Shares or its capitalization, (ii)
acquire currently outstanding Shares or otherwise cause a reduction in the
number of outstanding Shares or (iii) issue or sell additional Shares, shares
of any other class of capital stock, other voting securities or any securities
convertible into, or rights, warrants or options, conditional or otherwise, to
acquire, any of the foregoing, other than Shares issued pursuant to the
exercise of outstanding employee stock options, then subject to the provisions
of Section 14 below, the Purchaser, in its sole discretion, may make such
adjustments as it deems appropriate in the Offer Price and other terms of the
Offer, including, without limitation, the number or type of securities offered
to be purchased.
If, on or after the date of the Merger Agreement, the Company should declare
or pay any cash dividend on the Shares or other distribution on the Shares, or
issue with respect to the Shares any additional Shares, shares of any other
class of capital stock, other voting securities or any securities convertible
into, or rights, warrants or options, conditional or otherwise, to acquire, any
of the foregoing, payable or distributable to shareholders of record on a date
prior to the transfer of the Shares purchased pursuant to the Offer to the
Purchaser or its nominee or transferee on the Company's stock transfer records,
then, subject to the provisions of Section 14 below, (i) the Offer Price may,
in the sole discretion of the Purchaser, be reduced by the amount of any such
cash dividend or cash distribution and (ii) the whole of any such noncash
dividend, distribution or issuance to be received by the tendering shareholders
will (A) be received and held by the tendering shareholders for the account of
the Purchaser and will be required to be promptly remitted and transferred by
each tendering shareholder to the Depositary for the account of the Purchaser,
accompanied by appropriate documentation of transfer, or (B) at the direction
of the Purchaser, be exercised for the benefit of the Purchaser, in which case
the proceeds of such exercise will promptly be remitted to the Purchaser.
Pending such remittance and subject to applicable law, the Purchaser will be
entitled to all rights and privileges as owner of any such noncash dividend,
distribution, issuance or proceeds and may withhold the entire Offer Price or
deduct from the Offer Price the amount or value thereof, as determined by the
Purchaser in its sole discretion.
14. CERTAIN CONDITIONS OF THE OFFER
Notwithstanding any other term of the Offer or the Merger Agreement, the
Purchaser shall not be required to accept for payment or, subject to any
applicable rules and regulations of the Commission,
28
including Rule 14e-1(c) under the Exchange Act (relating to the Purchaser's
obligation to pay for or return tendered Shares after the termination or
withdrawal of the Offer), to pay for any Shares tendered pursuant to the Offer
unless, (i) the Minimum Condition shall have been satisfied, (ii) any waiting
period under the HSR Act applicable to the purchase of Shares pursuant to the
Offer shall have expired or been terminated and (iii) (A) all consents,
approvals, orders or authorizations of, or registrations, declarations or
filings with, any Governmental Entity with jurisdiction in respect of Gaming
Laws (other than New Jersey) required or necessary in connection with the
Offer, the Merger and the Merger Agreement and the transactions contemplated by
the Merger Agreement (including the changes in the composition of the Board of
Directors of the Company) shall have been obtained and shall be in full force
and effect and (B) in the case of the New Jersey Casino Control Act and the
rules and regulations promulgated thereunder (the "Casino Control Act"),
either, at the option of Parent, (x) all shares of Caesars New Jersey, Inc.
shall have been deposited in trust with a trustee qualified and otherwise
acceptable to the CCC and the related transactions and arrangements
contemplated by the Merger Agreement shall be in full force and effect and, as
a result, neither Parent nor the Purchaser will be required pursuant to the
requirements of the Casino Control Act and the rules and regulations
promulgated thereunder to deposit or place in trust any of the Shares currently
owned by Parent or its affiliates or to be acquired pursuant to the Offer or
(y) (1) the CCC shall have approved a form of trust agreement in form and
substance reasonably satisfactory to Parent (including in respect of control by
Parent of the Company and its subsidiaries) in respect of a trust arrangement
for the Shares to be acquired pursuant to the Offer and the Merger pending
final qualification of Parent to hold a casino license under the Casino Control
Act and the rules and regulations thereunder, (2) a trustee qualified and
otherwise acceptable to the CCC and Parent in respect of such trust arrangement
for the Shares to be acquired pursuant to the Offer and the Merger shall have
been appointed or designated and (3) the directors of the Purchaser shall have
been qualified on a permanent or temporary basis to serve as directors of a
company (including the Company) that either directly, or through its
subsidiaries, holds a casino license under the Casino Control Act and the rules
and regulations thereunder. Furthermore, notwithstanding any other term of the
Offer or the Merger Agreement, the Purchaser shall not be required to accept
for payment or, subject as aforesaid, to pay for any Shares not theretofore
accepted for payment or paid for, and may terminate the Offer if, at any time
on or after the date of the Merger Agreement and before the acceptance of such
shares for payment or the payment therefor, any of the following conditions
exists (other than as a result of any action or inaction of Parent or any of
its subsidiaries which constitutes a breach of the Merger Agreement):
(a) there shall be instituted or pending any suit, action or proceeding
(in the case of a suit, action or proceeding by a person other than a
Governmental Entity, such suit, action or proceeding having a substantial
likelihood of success or, in the case of a suit, action or proceeding by a
Governmental Entity, such suit, action or proceeding having a reasonable
likelihood of success), (i) challenging the acquisition by Parent or the
Purchaser of any Shares under the Offer, seeking to restrain or prohibit
the making or consummation of the Offer or the Merger, or seeking to obtain
from the Company, Parent or the Purchaser any damages that are material in
relation to the Company and its subsidiaries taken as whole, (ii) seeking
to prohibit or materially limit the ownership or operation by the Company,
Parent or any of their respective subsidiaries of a material portion of the
business or assets of the Company and its subsidiaries, taken as a whole,
or Parent and its subsidiaries, taken as a whole, or to compel the Company
or Parent to dispose of or hold separate any material portion of the
business or assets of the Company and its subsidiaries, taken as a whole,
or Parent and its subsidiaries, taken as a whole, as a result of the Offer
or any of the other transactions contemplated by the Merger Agreement,
(iii) seeking to impose material limitations on the ability of Parent or
the Purchaser to acquire or hold, or exercise full rights of ownership of,
any Shares accepted for payment pursuant to the Offer including, without
limitation, the right to vote such Shares on all matters properly presented
to the stockholders of the Company or (iv) seeking to prohibit Parent or
any of its subsidiaries from effectively controlling in any material
respect the business or operations of the Company and its subsidiaries,
taken as a whole;
(b) there shall be any statute, rule, regulation, judgment, order or
injunction enacted, entered, enforced, promulgated or deemed applicable to
the Offer or the Merger, or any other action shall be taken by any
Governmental Entity or court, other than the application to the Offer or
the Merger of
29
applicable waiting periods under the HSR Act, that is reasonably likely to
result, directly or indirectly, in any of the consequences referred to in
clauses (i) through (iv) of paragraph (a) above;
(c) there shall have occurred any material adverse change (or any
development that, insofar as reasonably can be foreseen, is reasonably
likely to result in any material adverse change) in the business,
properties, assets, financial condition or results of operations of the
Company and its subsidiaries, taken as a whole, except (i) fluctuations in
the earnings or financial condition of the Company during the period from
October 31, 1994 to consummation of the Offer that result from winnings by
high-wagering customers so long as the Company has been operating on a
basis consistent with its existing policies concerning extensions of credit
and setting of gambling limits and so long as aggregate levels of wagering
by high-wagering customers are consistent with the past experience of the
Company, (ii) any material adverse effect resulting, directly or
indirectly, from the prospective ownership of Shares by Parent or its
affiliates, or (iii) any change which adversely affects the gaming industry
in Nevada or the gaming industry in New Jersey, shall not be deemed to be a
material adverse change;
(d) (i) the Board of Directors of the Company or any committee thereof
shall have withdrawn or modified in a manner adverse to Parent or the
Purchaser its approval or recommendation of the Offer, the Merger or the
Merger Agreement, or approved or recommended any takeover proposal, (ii)
the Company shall have entered into any agreement with respect to any
competitive proposal in accordance with the provisions described in the
second paragraph in Section 12 under "Merger Agreement--Acquisition
Proposals" or (iii) the Board of Directors of the Company or any committee
thereof shall have resolved to take any of the foregoing actions;
(e) any of the representations and warranties of the Company set forth in
the Merger Agreement that are qualified as to materiality shall not be true
and correct and any such representations and warranties that are not so
qualified shall not be true and correct in any material respect, in each
case at the date of the Merger Agreement and at the scheduled expiration of
the Offer;
(f) the Company shall have failed to perform in any material respect any
material obligation or to comply in any material respect with any material
agreement or material covenant of the Company to be performed or complied
with by it under the Merger Agreement;
(g) there shall have occurred (i) any general suspension of trading in,
or limitation on prices for, securities (excluding any coordinated trading
halt triggered solely as a result of a specified decrease in a market
index), (ii) any decline in the New York Stock Exchange Composite Index by
an amount in excess of 33% measured from the close of business on December
16, 1994, (iii) a declaration of a banking moratorium or any suspension of
payments in respect of banks in the United States, (iv) any limitation
(whether or not mandatory) by any Governmental Entity on, or other event
that materially affects, the extension of credit by banks or other lending
institutions or (v) in case of any of the foregoing existing on the date of
the Merger Agreement, material acceleration or worsening thereof;
(h) the Merger Agreement shall have been terminated in accordance with
its terms.
The Merger Agreement provides that the foregoing conditions are for the sole
benefit of the Purchaser and Parent and may, subject to the terms of the
Merger Agreement, be waived by the Purchaser and Parent in whole or in part at
any time and from time to time in their sole discretion. The failure by Parent
or the Purchaser at any time to exercise any of the foregoing rights shall not
be deemed a waiver of any such right, the waiver of any such right with
respect to particular facts and circumstances shall not be deemed a waiver
with respect to any other facts and circumstances and each such right shall be
deemed an ongoing right that may be asserted at any time and from time to
time.
15. CERTAIN LEGAL MATTERS
Based on a review of publicly available filings made by the Company with the
Commission and other publicly available information concerning the Company and
the review of certain information furnished by the Company to Parent and
discussions of representatives of Parent with representatives of the Company
30
during Parent's investigation of the Company, except as otherwise described in
this Offer to Purchase, neither the Purchaser nor Parent is aware of any
license or regulatory permit that appears to be material to the business of
the Company and its subsidiaries, taken as a whole, that might be adversely
affected by the Purchaser's acquisition of Shares as contemplated herein or of
any approval or other action by any Governmental Entity that would be required
for the acquisition or ownership of Shares by the Purchaser as contemplated
herein. Should any such approval or other action be required, the Purchaser
and Parent currently contemplate that such approval or other action will be
sought, except as described below under "State-Takeover Laws". While, except
as otherwise expressly described in this Section 15, the Purchaser does not
presently intend to delay the acceptance for payment of or payment for Shares
tendered pursuant to the Offer pending the outcome of any such matter, there
can be no assurance that any such approval or other action, if needed, would
be obtained or would be obtained without substantial conditions or that
failure to obtain any such approval or other action might not result in
consequences adverse to the Company's business or that certain parts of the
Company's business might not have to be disposed of if such approvals were not
obtained or such other actions were not taken or in order to obtain any such
approval or other action. If certain types of adverse action are taken with
respect to the matters discussed below, the Purchaser could decline to accept
for payment or pay for any Shares tendered. See Section 14 for certain
conditions to the Offer.
Nevada Gaming Regulations. The ownership and operation of casino gaming
facilities in Nevada are subject to: (i) the Nevada Act; and (ii) various
local regulation. Parent's and the Company's respective gaming operations are
subject to the licensing and regulatory control of the Nevada Commission, the
Nevada Board, the Clark County Liquor and Gaming Licensing Board (the
"CCLGLB") and the Douglas County Commission. The Nevada Commission, the Nevada
Board, the CCLGLB and the Douglas County Commission are collectively referred
to as the "Nevada Gaming Authorities."
Regulations of the Nevada Commission provide that control of a registered
publicly traded corporation such as the Company cannot be acquired through a
tender offer, merger, consolidation, acquisition of assets, management or
consulting agreements or any form of takeover whatsoever without the prior
approval of the Nevada Commission. Parent and the Purchaser have filed their
applications for the necessary approvals with the Nevada Board and the Nevada
Commission, and, assuming favorable recommendations from the Nevada Board,
anticipate receiving the required approvals from the Nevada Commission in
January 1995. The Nevada Board reviews and investigates applications for such
approvals and makes recommendations on such applications to the Nevada
Commission for final action. Under the Nevada Act, the Nevada Commission is
required to use its best efforts to take final action upon an application for
approval of an acquisition of control by a person making a tender offer,
within 60 days of the date of filing such application and payment of the
required fees. If the Nevada Commission cannot take final action within such
period, the Nevada Commission is required to provide the applicant with
written notice of a time certain for completion of the Nevada Board's
investigation and final action by the Nevada Commission. Parent is currently
registered as a publicly traded corporation and has been found suitable to own
the shares of a subsidiary that has licensed gaming facilities in Nevada.
Accordingly, Parent does not expect significant delays in obtaining necessary
approvals in January 1995. However, there can be no assurances that such
approvals will be granted or will be granted within such time. Furthermore,
any such approval, if granted, does not constitute a finding, recommendation
or approval by the Nevada Board or the Nevada Commission as to the accuracy or
adequacy of the Offer to Purchase or the merits of the Offer and the Merger.
Any representation to the contrary is unlawful.
In seeking approval to acquire control of the Company, Parent and Purchaser
must satisfy the Nevada Commission as to a variety of stringent standards. The
Nevada Board and the Nevada Commission will consider all relevant material
facts in determining whether to grant such approval, and may consider not only
the effects of the Offer and the Merger but also any other facts that are
deemed relevant. Such facts may include, among others, (i) the business
history of the applicant, including its record of financial stability,
integrity, and success of its operations, as well as its current business
activities; and (ii) whether the Offer and the Merger will create a
significant risk that Parent, the Company or their subsidiaries will not
satisfy their
31
financial obligations as they become due or satisfy all financial and
regulatory requirements imposed by the Nevada Act.
The Nevada Commission must approve Parent and the Purchaser as controlling
stockholders of the Company, and register Purchaser as an intermediary company
prior to the Merger. Following receipt of the necessary approvals of the Nevada
Commission and consummation of the Merger, the Company will be registered by
the Nevada Commission as an intermediary company of Parent.
Certain officers, directors and key employees of Parent and the Purchaser
prior to the Merger, or the Company after the Merger, who will be actively and
directly involved in the Company's gaming activities, may also be required to
be found suitable or licensed by the Nevada Gaming Authorities. The Nevada
Gaming Authorities may deny an application for licensing or registration for
any cause that they deem reasonable. A finding of suitability is comparable to
licensing, and both require the submission of detailed personal and financial
information followed by a thorough investigation. All individuals required to
file applications for findings of suitability as such officers and directors of
Purchaser and the Company expect to have applications filed on their behalf for
the necessary approvals with the Nevada Board and the Nevada Commission by
December 24, 1994, and, assuming favorable recommendations from the Nevada
Board, anticipate receiving the required approvals from the Nevada Commission
in January 1995. However, there can be no assurances that such approvals will
be granted.
New Jersey Gaming Regulations. The Casino Control Act requires prior approval
from the CCC before control of a casino licensee can be transferred. However,
pursuant to an interim casino authorization, the Casino Control Act permits an
entity that obtains publicly-traded securities relating to a casino licensee to
acquire and own securities conferring control of such licensee prior to
obtaining approval from the CCC. During the period of interim authorization the
publicly traded securities of such licensee must be held in a trust pursuant to
the provisions of the Casino Control Act.
As a result of the transfer of Shares to the Purchaser pursuant to the Offer
and the Merger, Parent and the Purchaser will be required to timely file a
completed application with the CCC for qualification as a holding and
intermediary company, respectively, of a New Jersey casino licensee, which
application must include a fully executed and approved, but not operative,
trust agreement. Such completed application will require that the CCC render
decisions with respect to the interim authorization (within 120 days of its
submission) and plenary qualification (within twelve months of its decision
with respect to interim authorization) of Parent and the Purchaser as holding
and intermediary companies respectively of a New Jersey casino licensee.
Although the Merger Agreement provides the Purchaser with the option to either
(i) seek regulatory approval of a trust covering all Shares acquired pursuant
to the Offer and the Merger or (ii) seek such approval with respect to a trust
covering common stock of the Company's qualified New Jersey intermediary
company, Parent and the Purchaser do not intend to pursue the latter option.
Accordingly, Parent intends to prepare a trust agreement that will provide for
the deposit of the tendered Shares in trust pending plenary qualification by
the CCC. The trustee may not exercise rights incident to the ownership of the
property unless the CCC orders that the trust agreement become operative, which
order may not be made unless the CCC denies interim authorization; finds
reasonable cause to believe that any person required to be qualified may be
found unqualified; or denies plenary qualification. The CCC may grant interim
authorization where it finds by clear and convincing evidence that (1)
statements of compliance have been issued under the Casino Control Act; (2) the
casino hotel is an approved hotel in accordance with the Casino Control Act;
(3) the trustee satisfies qualification criteria applicable to casino key
employees except for residency and casino experience; and (4) interim operation
will best serve the interests of the public. The CCC may also permit, upon
written petition of the New Jersey casino licensee, a proposed but not yet
qualified new director of the Company or its qualified New Jersey intermediary
company to perform duties and exercise powers relating to such position pending
plenary qualification provided that such proposed director timely files a
completed application with the CCC. Accordingly, the CCC is authorized to (i)
approve the form of trust agreement in respect of a trust arrangement for the
Shares to be acquired pending plenary qualification of Parent and Purchaser;
(ii) approve a trustee of such trust agreement as satisfying the applicable
qualification criteria;
32
and (iii) permit proposed new directors of the Company or its qualified New
Jersey intermediary company to perform duties and exercise powers relating to
such position pending their plenary qualifications. The Merger Agreement
provides that Parent shall use its reasonable efforts to cause the foregoing
trust arrangements to be in full force and effect as soon as practicable after
the date of the Merger Agreement. Parent intends to cause appropriate
applications to be made to the CCC as soon as practicable and anticipates a
decision from the CCC with respect to the trust arrangements, Parent's trustee
designate, interim authorization and proposed new directors of the Company and
its qualified New Jersey intermediary company during January 1995. There can be
no assurance that a favorable decision will be granted or will be granted
within such time.
If a holder of publicly traded securities transfers such securities to a
trust in applying for interim casino authorization and the CCC thereafter, upon
denial of interim authorization or finding reasonable cause to believe that any
person required to be qualified may be found unqualified, orders that the trust
become operative, the applicant, during the time the trust is operative, may
not participate in the earnings of the casino hotel or receive any return on
its investment or debt security holdings. If the CCC thereafter denies
qualification, the trustee shall dispose of the trust property. In such event,
the proceeds distributed to the unqualified applicant may not exceed the lower
of the actual cost of the securities to the unqualified applicant or their
value calculated as if the investment has been made on the date the trust
became operative. Any excess remaining proceeds shall be paid to the Casino
Revenue Fund maintained in the New Jersey Department of the Treasury provided
by the Casino Control Act.
The qualification criteria with respect to the holder of a casino license
include its financial stability, integrity and responsibility, the integrity
and adequacy of its financial resources which bear any relation to the casino
project; its good character, honesty and integrity; and the sufficiency of its
business ability and casino experience to establish the likelihood of a
successful, efficient casino operation.
If the CCC finds that a holder of such securities is not qualified under the
Casino Control Act, it has the right to take any remedial action it may deem
appropriate including the right to force divesture by such qualified holder of
such securities. In the event that certain disqualified holders fail to divest
themselves of such securities, the CCC has the power to revoke or suspend the
casino license affiliated with the casino licensee which issued the securities.
If a holder is found unqualified, it is unlawful for the holder (i) to
exercise, directly or through any trustee or nominee, any right conferred by
such securities, or (ii) to receive any dividends or interest upon any such
securities or any remuneration, in any form, from its affiliated casino
licensee or services rendered or otherwise.
Ontario Gaming Regulations. Windsor Casino Limited, the Ontario corporation
which operates the Windsor, Ontario facility, of which the Company owns a one-
third interest, is licensed under the Gaming Control Act, 1992 (the "Ontario
Act"). Under the Ontario Act, the Registrar of the Gaming Control Commission
must approve any change in the directors or officers of Windsor Casino Limited.
No other prior approval or consent is required under the Ontario Act in respect
of the Offer or the Merger. However, under the Ontario Act, the Registrar of
the Gaming Control Commission may require information and material from any
person who has an interest in Windsor Casino Limited. As a result, Parent and
the Purchaser are currently preparing and will submit to the Registrar the
information required with respect to them. Under the Ontario Act, no person may
provide goods or services for a casino or any other business operated by, on
behalf of or under contract with the Ontario Casino Corporation unless, among
other things, the person is registered as a supplier under that Act. Windsor
Casino Limited is registered as a supplier under the Ontario Act. The Registrar
has the power, subject to the Ontario Act, to grant or renew registrations, or
suspend or revoke registrations. The Registrar is entitled to make such
inquiries and conduct such investigations as are necessary to determine that
applicants for registration meet the requirements of the Ontario Act, and to
require information or material from any person who is interested in an
applicant for registration or a registrant. The criteria to be considered in
connection with registration under the Ontario Act include financial
responsibility, integrity, honesty and the public interest. The Registrar may,
at any time, subject to the provisions of the Ontario Act, revoke or suspend
Windsor Casino Limited's registration under the Ontario
33
Act, or refuse to grant a renewal of its registration. Although Parent does not
anticipate unfavorable action by the Gaming Control Commission prior to the
consummation of the Offer or the Merger, in part because it has been found
suitable to own the shares of a subsidiary that has licensed gaming facilities
in Nevada, there can be no assurance that Windsor Casino Limited will not have
its registration revoked or suspended prior to the consummation of the Offer.
Other Local Gaming Regulations. The Company is in the process of securing
requisite approvals for proposed operations in Missouri, Indiana and the
Cahuilla Indian Nation in California. The relevant statutes governing those
operations will require that, upon consummation of the Offer and the Merger,
Parent independently qualify for the requisite approvals before the Company can
commence such operations. However, none of such statutes require prior approval
and, as a result, the Offer is not conditioned on approvals from regulators in
such jurisdictions. Upon consummation of the Merger, Parent intends to amend
all such applications to seek approval for itself in such jurisdictions.
State Takeover Laws. A number of states throughout the United States have
enacted takeover statutes that purport, in varying degrees, to be applicable to
attempts to acquire securities of corporations that are incorporated or have
assets, shareholders, executive offices or places of business in such states.
In Edgar v. MITE Corp., the Supreme Court of the United States held that the
Illinois Business Takeover Act, which involved state securities laws that made
the takeover of certain corporations more difficult, imposed a substantial
burden on interstate commerce and therefore was unconstitutional. In CTS Corp.
v. Dynamics Corp. of America, however, the Supreme Court of the United States
held that a state may, as a matter of corporate law and, in particular, those
laws concerning corporate governance, constitutionally disqualify a potential
acquiror from voting on the affairs of a target corporation without prior
approval of the remaining shareholders, provided that such laws were applicable
only under certain conditions.
Section 607.0901 of the FBCA purports to regulate certain business
combinations of a corporation organized under Florida law, such as the Company,
with a shareholder beneficially owning 10% or more of the voting stock of such
corporation after the date the relevant person or entity first becomes a 10%
shareholder. Section 607.0901 provides that the corporation shall not engage at
any time in any business combination with such a shareholder without approval
of the holders of two-thirds of the outstanding shares (other than the shares
owned by the 10% shareholder), with certain exceptions, including a business
combination approved by a majority of the disinterested directors of the
corporation. The Company's Board of Directors has unanimously approved the
Merger Agreement and the transactions contemplated thereby, including the
Merger, and, therefore, Section 607.0901 of the FBCA is inapplicable to the
Merger.
Section 607.0902 of the FBCA provides that an acquiror that acquires 20% or
more of the shares of a Florida corporation having certain contacts in Florida
may not vote such shares without the approval of a majority of the outstanding
shares not owned by the acquiror, officers of the corporation or employee
directors of the corporation subject to certain exceptions, including approval
of such acquisition by such corporation's board of directors. The Company's
Board of Directors has approved the acquisition of Shares pursuant to the
Merger Agreement (including the Offer and the Merger) and the Option Agreement
and, therefore, Section 607.0902 of the FBCA is inapplicable to such
acquisitions.
Based on information supplied by the Company, the Purchaser does not believe
that any other state takeover statutes purport to apply to the Offer. Neither
the Purchaser nor Parent has currently complied with any state takeover statute
or regulation. The Purchaser reserves the right to challenge the applicability
or validity of any state law purportedly applicable to the Offer or the Merger
and nothing in this Offer to Purchase or any action taken in connection with
the Offer or the Merger is intended as a waiver of such right. If it is
asserted that any state takeover statute is applicable to the Offer and an
appropriate court does not determine that it is inapplicable or invalid as
applied to the Offer, the Purchaser might be required to file certain
information with, or to receive approvals from, the relevant state authorities,
and the Purchaser might be unable to accept for payment or pay for Shares
tendered pursuant to the Offer, or be delayed in
34
consummating the Offer or the Merger. In such case, the Purchaser may not be
obliged to accept payment or pay for any Shares tendered pursuant to the Offer.
Antitrust. Parent filed a Notification and Report Form with respect to the
Offer under the HSR Act on December 21, 1994. The waiting period under the HSR
Act with respect to the Offer will expire at 11:59 p.m., New York City time, on
the 15th calendar day after the date such form is filed, unless early
termination of the waiting period is granted. In addition, the Antitrust
Division or the FTC may extend the waiting period by requesting additional
information or documentary material from Parent. If such request is made, such
waiting period will expire at 11:59 p.m., New York City time, on the 10th day
after substantial compliance by Parent with such request. Only one extension of
the waiting period pursuant to a request for additional information is
authorized by the HSR Act. Thereafter, such waiting period may be extended only
by court order or with the consent of Parent. In practice, complying with a
request for additional information or material can take a significant amount of
time. In addition, if the Antitrust Division or the FTC raises substantive
issues in connection with a proposed transaction, the parties frequently engage
in negotiations with the relevant governmental agency concerning possible means
of addressing those issues and may agree to delay consummation of the
transaction while such negotiations continue.
The Merger would not require an additional filing under the HSR Act if the
Purchaser owns 50% or more of the outstanding Shares at the time of the Merger
or if the Merger occurs within one year after the HSR Act waiting period
applicable to the Offer expires or is terminated.
The FTC and the Antitrust Division frequently scrutinize the legality under
the antitrust laws of transactions such as the Purchaser's proposed acquisition
of the Company. At any time before or after the Purchaser's purchase of Shares
pursuant to the Offer, the Antitrust Division or FTC could take such action
under the antitrust laws as it deems necessary or desirable in the public
interest, including seeking to enjoin the purchase of Shares pursuant to the
Offer or seeking the divestiture of Shares acquired by the Purchaser or the
divestiture of substantial assets of Parent or its subsidiaries, or the Company
or its subsidiaries. Private parties may also bring legal action under the
antitrust laws under certain circumstances. There can be no assurance that a
challenge to the Offer on antitrust grounds will not be made or, if such a
challenge is made, of the results thereof.
Litigation. On December 19, 1994, two complaints purporting to be class
actions were filed against the Company and certain of its officers and
directors. One complaint, entitled Fader, et al., v. Caesars World, et al.,
C.A. No. 9682 AE, was filed in the Circuit Court in the Fifteenth Judicial
Circuit for Palm Beach County, Florida. The other complaint, Gross et al., v.
Gluck et al., C.A. No. BC 118368, was filed in the Los Angeles Superior Court
of the State of California. The complaints generally allege that the defendants
breached their fiduciary duties by accepting the terms of the Offer and the
Merger at an unfair and inadequate price, by failing to effectively expose the
Company to the marketplace or create an active and open auction, by failing to
adequately evaluate the Company's worth by failing to act independently and by
not acting in the best interests of stockholders. The complaints seek
preliminary and permanent injunctions against consummation of the Merger,
damages, costs and attorneys' and accountants' fees.
16. FEES AND EXPENSES
Bear, Stearns & Co. Inc. and BT Securities Corporation are acting as Dealer
Managers in connection with the Offer and have provided certain financial
advisory services to Parent in connection with the Offer and the Merger. Bear,
Stearns & Co. Inc. will receive from Parent (i) a dealer manager fee of
$1,000,000 payable as a result of the commencement of the Offer, (ii) a
financial advisory fee of $8,100,000 payable if the transaction is consummated
and (iii) reimbursement of all reasonable out-of-pocket expenses. Parent has
agreed to negotiate with BT Securities Corporation upon consummation of the
Offer a mutually satisfactory fee as compensation for BT Securities
Corporation's services, including as Dealer Manager, and to reimburse BT
Securities Corporation's reasonable expenses. In addition, Parent has agreed to
indemnify the Dealer
35
Managers and certain related persons against certain liabilities and expenses,
including certain liabilities under the Federal securities laws.
The Purchaser has retained Georgeson & Company Inc. to act as the Information
Agent and Bankers Trust Company to serve as the Depositary in connection with
the Offer. The Information Agent and the Depositary each will receive
reasonable and customary compensation for their services, be reimbursed for
certain reasonable out-of-pocket expenses and be indemnified against certain
liabilities and expenses in connection therewith, including certain liabilities
under the Federal securities laws.
Neither the Purchaser nor Parent will pay any fees or commissions to any
broker or dealer or other person (other than the Dealer Managers and the
Information Agent) in connection with the solicitation of tenders of Shares
pursuant to the Offer. Brokers, dealers, banks and trust companies will be
reimbursed by the Purchaser upon request for customary mailing and handling
expenses incurred by them in forwarding material to their customers.
17. MISCELLANEOUS
The Offer is not being made to (nor will tenders be accepted from or on
behalf of) holders of Shares in any jurisdiction in which the making of the
Offer or the acceptance thereof would not be in compliance with the laws of
such jurisdiction. Neither the Purchaser nor Parent is aware of any
jurisdiction in which the making of the Offer or the tender of Shares in
connection therewith would not be in compliance with the laws of such
jurisdiction. To the extent the Purchaser or Parent becomes aware of any state
law that would limit the class of offerees in the Offer, the Purchaser will
amend the Offer and, depending on the timing of such amendment, if any, will
extend the Offer to provide adequate dissemination of such information to
holders of Shares prior to the expiration of the Offer. In any jurisdiction the
securities, blue sky or other laws of which require the Offer to be made by a
licensed broker or dealer, the Offer is being made on behalf of the Purchaser
by the Dealer Managers or one or more registered brokers or dealers licensed
under the laws of such jurisdiction.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION ON BEHALF OF THE PURCHASER OR PARENT NOT CONTAINED HEREIN OR IN
THE LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED.
The Purchaser or Parent has filed with the Commission the Schedule 14D-1
pursuant to Rule 14d-3 under the Exchange Act, furnishing certain additional
information with respect to the Offer. In addition, the Company has filed with
the Commission the Schedule 14D-9 pursuant to Rule 14d-9 under the Exchange
Act, setting forth its recommendation with respect to the Offer and the reasons
for such recommendation and furnishing certain additional related information.
Such Schedules and any amendments thereto, including exhibits, should be
available for inspection and copies should be obtainable in the manner set
forth in Sections 8 and 9 (except that they will not be available at the
regional offices of the Commission).
ITT Florida Enterprises, Inc.
December 23, 1994
36
SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS OF PARENT AND THE PURCHASER
1. DIRECTORS AND EXECUTIVE OFFICERS OF PARENT. The name, business address,
present principal occupation or employment and five-year employment history of
each of the directors and executive officers of Parent are set forth below.
Unless otherwise indicated below, the business address of each such director
and each such executive officer is 1330 Avenue of the Americas, New York, New
York 10019-5490. Unless otherwise indicated below, each occupation set forth
opposite an individual's name refers to employment with Parent. All such
directors and executive officers listed below, except Mr. David-Weill, who is a
citizen of France, are citizens of the United States.
POSITION WITH PARENT; PRINCIPAL OCCUPATION
NAME AND BUSINESS ADDRESS OR 5-YEAR EMPLOYMENT HISTORY
- ------------------------- -------------------------------------------
Bette B. Anderson Mrs. Anderson was elected President of Kelly, Anderson
Kelly, Anderson & & Associates, Inc., a Washington-based management firm,
Associates, Inc. in 1990. She had previously been executive vice presi-
1020 19th Street, N.W. dent of the firm. Mrs. Anderson was formerly a partner
(Suite 800) in the public affairs company of Anderson, Benjamin,
Washington, D.C. 20036 Read & Haney. Mrs. Anderson is a director of Riverwood
International Corporation, ITT Educational Services,
Inc., a subsidiary of Parent, ITT Financial Corpora-
tion, a subsidiary of Parent, and Manville Corporation.
Rand V. Araskog Mr. Araskog joined Parent in 1966. He has been chief
executive since 1979 and chairman since 1980. In March
1991, he assumed the title of president. Mr. Araskog is
a director of Hartford Fire Insurance Company and ITT
Sheraton Corporation, subsidiaries of Parent. He is a
director of Alcatel Alsthom of France, in which Parent
holds a seven percent interest. He is a director of Dow
Jones & Company, Inc., Dayton-Hudson Corporation,
Rayonier Inc. and Shell Oil Company.
Nolan D. Archibald Mr. Archibald joined Black & Decker in 1985 as presi-
The Black & Decker dent and chief operating officer, and since that time
Corporation has been elected chief executive officer and chairman.
701 East Joppa Road
Towson, MD 21204
Robert A. Burnett Mr. Burnett served as chairman of Meredith Corporation
Meredith Corporation from 1988 until his retirement in 1992. He served as
1716 Locust Street president and chief executive officer from 1977 and re-
Des Moines, IA 50309 linquished the latter office in 1989. He is a director
of Hartford Fire Insurance Company, a subsidiary of
Parent. Mr. Burnett is a director of Dayton-Hudson Cor-
poration, Meredith Corporation, Whirlpool Corporation,
and Midwest Resources Inc.
Michel David-Weill Mr. David-Weill is Senior Partner of Lazard Freres &
Lazard Freres & Co. Co., a position he has held since 1977. Mr. David-Weill
One Rockefeller Plaza is a director of BSM Gervais Danon in France, Fiat
New York, NY 10020 S.p.A. in Italy, Pearson plc in England, and The Dannon
Company, Inc. in the United States, as well as other
companies of which Lazard Freres & Cie., Paris, or one
of its affiliates, is the principal shareholder.
S. Parker Gilbert Mr. Gilbert retired in 1990 from Morgan Stanley Group
Morgan Stanley Group Inc., where he served as chairman from 1984 until he
Inc. retired. Mr. Gilbert is a director of Morgan Stanley
1251 Avenue of the Group Inc., Burlington Resources Inc., and Taubman Cen-
Americas ters, Inc.
(23rd Floor)
New York, NY 10020
37
POSITION WITH PARENT; PRINCIPAL OCCUPATION
NAME AND BUSINESS ADDRESS OR 5-YEAR EMPLOYMENT HISTORY
- ------------------------- -------------------------------------------
Paul G. Kirk, Jr. Mr. Kirk became a partner in the law firm of Sullivan &
Sullivan & Worcester Worcester in 1977 and is presently of Counsel to the
One Post Office Square firm. Following his resignation in 1989 as chairman of
Boston, MA 02109 the Democratic National Committee, he returned to Sul-
livan & Worcester as a partner in general corporate
practice at the firm's Boston and Washington offices.
Mr. Kirk is a director of Kirk-Sheppard & Co., of which
he is also chairman and treasurer. He is a trustee of
the Bradley Real Estate Trust, and a director of Hart-
ford Fire Insurance Company, a subsidiary of Parent,
and Rayonier Inc.
Edward C. Meyer General Meyer has been an international consultant
Cilluffo Associates, since 1985. He is the Chairman of GRC International and
L.P. Managing Partner of Cilluffo Associates, an investment
551 Madison Avenue group. He is a member of the supervisory board of Com-
New York, NY 10022 pagnie Financiere Alcatel. He is a director of FMC Cor-
poration, its joint venture company in Turkey, Savunma
Sanyii A.S., United Defense Group and the Brown Group.
General Meyer also serves as a director of ITT Finan-
cial Corporation, a subsidiary of ITT.
Benjamin F. Payton Dr. Payton has been president of Tuskegee University in
Tuskegee University Alabama since 1981. Dr. Payton is a director of ITT
Kresge Center Sheraton Corporation, a subsidiary of ITT. He is a di-
(Third Floor) rector of Amsouth Bancorporation, Amsouth Bank, the
Tuskegee, AL 36083 Liberty Corporation, Praxair Corporation, Sonat Inc.,
Morrisons, Inc. and the Southern Regional Council.
Margita E. White Mrs. White joined the Association for Maximum Service
The Association for Television, Inc. as president in 1987 after serving as
Maximum Service an independent consultant and coordinator of the Tele-
Television, Inc. vision Operators Caucus, Inc. She is a director of ITT
1776 Massachusetts Sheraton Corporation, a subsidiary of ITT, ITT Educa-
Avenue, N.W. tional Services, Inc., a subsidiary of Parent, Leitch
(Suite 310) Technology Corporation, The Growth Fund of Washington,
Washington, D.C. and Washington Mutual Investors Fund.
Robert A. Bowman Mr. Bowman has been Executive Vice President and Chief
Financial Officer since September 1992. From July to
September 1992, Mr. Bowman served as Executive Vice
President and Chief Financial Officer of ITT Sheraton
Corporation. From April 1991 to July 1992, Mr. Bowman
served as Senior Vice President and Chief Financial Of-
ficer of ITT Sheraton Corporation. From January to
April 1991, Mr. Bowman was an economics commentator on
an American Broadcasting Company affiliated television
station in Detroit. Mr. Bowman was Treasurer of the
State of Michigan from 1983 until December 1990.
Juan C. Cappello Mr. Cappello has been Senior Vice President and Direc-
tor of Corporate Relations since 1984.
Dale R. Comey Mr. Comey has been Executive Vice President since May
1990. Prior to that he served as President and Chief
Operating Officer--Property/Casualty of Hartford Fire
Insurance Company.
38
POSITION WITH PARENT; PRINCIPAL OCCUPATION
NAME AND BUSINESS ADDRESS OR 5-YEAR EMPLOYMENT HISTORY
- ------------------------- -------------------------------------------
Gerald C. Crotty Mr. Crotty has been Senior Vice President of Parent
since October 1994 and Chairman, President and Chief
Executive Officer of ITT Communications and Information
Services, Inc. from October 1993 to the present. He
served as Vice President of Parent from August 1991 un-
til September 1994, and also served as President and
Chief Operating Officer of ITT Consumer Financial Cor-
poration from February 1992 until September 1993. Mr.
Crotty served for several years as Secretary to the
Governor of the State of New York ending in July 1991.
Jon F. Danski Mr. Danski has been Senior Vice President and Control-
ler of Parent since October 1993. Prior to that Mr.
Danski served as Vice President and General Auditor of
RJR Nabisco Corporation from August 1989 until October
1993.
D. Travis Engen Mr. Engen has been Executive Vice President of Parent
since January 1991. Prior to that he served as Senior
Vice President of Parent and Chief Executive Officer of
ITT Defense, Inc. from 1987 until January 1991.
Louis J. Giuliano Mr. Giuliano has been Senior Vice President of Parent
and Chief Executive Officer of ITT Defense & Electron-
ics, Inc. from June 1991 to the present. Prior to that
Mr. Giuliano served as Vice President of Parent and
Vice President/Director-Defense Operations of ITT De-
fense, Inc. from 1988 until June 1991.
Timothy D. Leuliette Mr. Leuliette has been Senior Vice President of Parent
and President and Chief Executive Officer of ITT Auto-
motive, Inc. since September 1991. Prior to that Mr.
Leuliette served as President and Chief Executive of
Siemens Automotive and Vice President of Siemens A.G.
from 1988 to September 1991.
Daniel F. Lundy Mr. Lundy has been Senior Vice President and Director
of Taxes of Parent since 1982.
Bertil T. Nilsson Mr. Nilsson has been Senior Vice President of Parent
and President and Chief Executive Officer of ITT Fluid
Technology Corporation from September 1992 to the pres-
ent. He served as Vice President of Parent between 1987
and September 1992, and as President and Chief Operat-
ing Officer of ITT Fluid Technology Corporation from
October 1991 to August 1992.
Ralph W. Pausig Mr. Pausig has been Senior Vice President and Director
of Human Resources of Parent since 1987.
Ann N. Reese Ms. Reese has been Senior Vice President and Treasurer
of Parent since September 1992. Ms. Reese served as
Vice President and Assistant Treasurer of Parent from
January 1989 to August 1992.
Frank J. Schultz Mr. Schultz has been Senior Vice President of Parent
and Chairman, President and Chief Executive Officer of
ITT Financial Corporation from June 1992 to the pres-
ent. Mr. Schultz served as Executive Vice President of
BankAmerica Corp. from 1987 to June 1992.
39
POSITION WITH PARENT; PRINCIPAL OCCUPATION
NAME AND BUSINESS ADDRESS OR 5-YEAR EMPLOYMENT HISTORY
- ------------------------- -------------------------------------------
Samuel L. Simmons Mr. Simmons has been Senior Vice President of Parent
since 1987.
Richard S. Ward Mr. Ward has been Executive Vice President and General
Counsel of Parent since May 1994. Prior to that Mr.
Ward served as Senior Vice President and General Coun-
sel of Parent from September 1992 to May 1994 and as
Vice President and Associate General Counsel of Parent
from 1984 to August 1992.
2. DIRECTORS AND EXECUTIVE OFFICERS OF THE PURCHASER. The name, business
address, present principal occupation or employment and five-year employment
history of each of the directors and executive officers of the Purchaser are
set forth below. The business address of each such director and executive
officer is ITT Florida Enterprises, Inc., c/o ITT Corporation, 1330 Avenue of
the Americas, New York, New York 10019-5490. Unless otherwise indicated below,
each occupation set forth opposite an individual's name refers to employment
with Purchaser. All such directors and executive officers listed below are
citizens of the United States.
POSITION WITH THE PURCHASER;
PRINCIPAL OCCUPATION OR EMPLOYMENT;
NAME OF DIRECTOR/EXECUTIVE OFFICER 5-YEAR EMPLOYMENT HISTORY
- ---------------------------------- -----------------------------------
Rand V. Araskog Chairman of the Board of Directors, President and Chief
Executive Officer of the Purchaser. Mr. Araskog has
been Chairman of the Board of Directors, President and
Chief Executive of Parent during the past five years.
Robert A. Bowman Director, Executive Vice President, Chief Financial Of-
ficer, Controller, Treasurer and Secretary. Mr. Bowman
has been Executive Vice President and Chief Financial
Officer of Parent since September 1992. From July to
September 1992, Mr. Bowman served as Executive Vice
President and Chief Financial Officer of ITT Sheraton
Corporation. From April 1991 to July 1992, Mr. Bowman
served as Senior Vice President and Chief Financial Of-
ficer of ITT Sheraton Corporation. From January to
April 1991, Mr. Bowman was an economics commentator on
an American Broadcasting Company affiliated television
station in Detroit. He was Treasurer of the State of
Michigan from 1983 until December 1990.
Richard S. Ward Director, Executive Vice President and General Counsel.
Mr. Ward has been Executive Vice President and General
Counsel of Parent since May 1994. Prior to that time,
Mr. Ward served as Senior Vice President and General
Counsel of Parent from September 1992 to May 1994 and
as Vice President and Associate General Counsel of Par-
ent from 1984 to August 1992.
Walter F. Diehl Vice President and Assistant Secretary. Mr. Diehl has
been Vice President and Associate General Counsel of
Parent during the past five years.
Ann N. Reese Senior Vice President and Assistant Treasurer. Ms.
Reese has been Senior Vice President and Treasurer of
Parent since September 1992. She served as Vice Presi-
dent and Assistant Treasurer of Parent from January
1989 to August 1992.
40
POSITION WITH THE PURCHASER;
PRINCIPAL OCCUPATION OR EMPLOYMENT;
NAME OF DIRECTOR/EXECUTIVE OFFICER 5-YEAR EMPLOYMENT HISTORY
- ---------------------------------- -----------------------------------
Jon F. Danski Senior Vice President and Assistant Controller. Mr.
Danski has been Vice President and Controller of Parent
since October 1993. Prior to that time, Mr. Danski
served as Vice President and General Auditor of RJR Na-
bisco Corporation from August 1989 until October 1993.
James P. Whitson Assistant Treasurer. Mr. Whitson has been Vice Presi-
dent and Director of Tax Administration of Parent since
July 1991. Prior to that he served as Director of Tax
Administration of Parent.
Richard F. Irwin Assistant Secretary. Mr. Irwin has been Vice President
and General Tax Counsel of Parent since July 1991.
Prior to that he served as General Tax Counsel of Par-
ent.
41
Manually signed facsimile copies of the Letter of Transmittal will be
accepted. The Letter of Transmittal, certificates for Shares and any other
required documents should be sent or delivered by each shareholder of the
Company or such shareholder's broker, dealer, commercial bank, trust company or
other nominee to the Depositary at one of its addresses set forth below.
The Depositary for the Offer is:
BANKERS TRUST COMPANY
By Hand/Overnight Courier: By Mail: Facsimile Transmission
Bankers Trust Company Bankers Trust Company (for Eligible
Corporate Trust & Agency Corporate Trust & Agency Group Institutions only):
Group Reorganization Dept. (212) 250-6275/3290
Receipt & Delivery P.O. Box 1458
Window Church Street Station
123 Washington Street, New York, NY 10008-1458
1st Floor
New York, NY 10006
Confirm Receipt of Notice of Guaranteed Delivery by Telephone:
(212) 250-6270
Questions and requests for assistance or for additional copies of this Offer
to Purchase, the Letter of Transmittal and the Notice of Guaranteed Delivery
may be directed to the Information Agent or the Dealer Managers at their
respective telephone numbers and locations listed below. You may also contact
your broker, dealer, commercial bank, trust company or other nominee for
assistance concerning the Offer.
The Information Agent for the Offer is:
GEORGESON & COMPANY INC.
Wall Street Plaza
New York, NY 10005
Call Collect: (212) 509-6240
Call Toll-Free: (800) 223-2064
BANKS AND BROKERS CALL COLLECT (212) 440-9800
The Dealer Managers for the Offer are:
BEAR, STEARNS & CO. INC. BT SECURITIES CORPORATION
245 Park Avenue 130 Liberty Street
New York, NY 10167 New York, NY 10006
(800) 791-2327 (212) 250-8719 (Call Collect)
Exhibit(a)(2)
LETTER OF TRANSMITTAL
TO TENDER SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED JUNIOR PARTICIPATING PREFERRED STOCK PURCHASE RIGHTS)
OF
CAESARS WORLD, INC.
AT
$67.50 NET PER SHARE
PURSUANT TO THE OFFER TO PURCHASE DATED DECEMBER 23, 1994
BY
ITT FLORIDA ENTERPRISES, INC.
A WHOLLY OWNED SUBSIDIARY OF
ITT CORPORATION
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON TUESDAY, JANUARY 24, 1995, UNLESS THE OFFER IS EXTENDED.
The Depositary for the Offer is:
BANKERS TRUST COMPANY
By Mail: By Hand/Overnight Delivery:
BANKERS TRUST COMPANY BANKERS TRUST COMPANY
CORPORATE TRUST & AGENCY GROUP CORPORATE TRUST & AGENCY GROUP
REORGANIZATION DEPT. RECEIPT & DELIVERY WINDOW
P.O. BOX 1458 123 WASHINGTON STREET, 1ST FLOOR
CHURCH STREET STATION NEW YORK, NY 10006
NEW YORK, NY 10008-1458
By Facsimile Transmission:
(212) 250-6275/3290
(FOR ELIGIBLE INSTITUTIONS ONLY)
Confirm by Telephone:
(212) 250-6270
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION VIA A FACSIMILE TRANSMISSION TO A NUMBER OTHER THAN AS
SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
THE INSTRUCTIONS SET FORTH IN THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
This Letter of Transmittal is to be used either if certificates are to be
forwarded herewith or if delivery of Shares (as defined below) is to be made by
book-entry transfer to an account maintained by the Depositary at The
Depository Trust Company or the Midwest Securities Trust Company (each, a
"Book-Entry Transfer Facility") pursuant to the procedures set forth in Section
2 of the Offer to Purchase. Shareholders who deliver Shares by book-entry
transfer are referred to herein as "Book-Entry Shareholders" and other
shareholders who deliver shares are referred to herein as "Certificate
Shareholders". Shareholders whose certificates for Shares are not immediately
available or who cannot deliver either the certificates for, or a Book-Entry
Confirmation (as defined in Section 2 of the Offer to Purchase) with respect
to, their Shares and all other documents required hereby to the Depositary
prior to the Expiration Date (as defined in Section 1 of the Offer to Purchase)
must tender their Shares in accordance with the guaranteed delivery procedures
set forth in Section 2 of the Offer to Purchase. See Instruction 2.
[_]CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO AN ACCOUNT MAINTAINED BY THE DEPOSITARY WITH A BOOK-ENTRY TRANSFER
FACILITY AND COMPLETE THE FOLLOWING (ONLY PARTICIPANTS IN A BOOK-ENTRY
TRANSFER FACILITY MAY DELIVER SHARES BY BOOK-ENTRY TRANSFER):
Name of Tendering Institution ______________________________________________
Check Box of Book-Entry Transfer Facility:
[_]The Depository Trust Company [_]Midwest Securities Trust Company
Account Number ___________________ Transaction Code Number ________________
[_]CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE
FOLLOWING:
Name(s) of Registered Owner(s) _____________________________________________
Window Ticket Number (if any) ______________________________________________
Date of Execution of Notice of Guaranteed Delivery _________________________
Name of Institution that Guaranteed Delivery _______________________________
IF DELIVERED BY BOOK-ENTRY TRANSFER, CHECK BOX OF BOOK-ENTRY TRANSFER
FACILITY:
[_]The Depository Trust Company [_]Midwest Securities Trust Company
Account Number ___________________ Transaction Code Number ________________
- --------------------------------------------------------------------------------
DESCRIPTION OF SHARES TENDERED
- --------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF
REGISTERED HOLDER(S)
(PLEASE FILL IN, IF BLANK,
EXACTLY AS NAME(S) SHARES TENDERED
APPEAR(S) ON CERTIFICATE(S)) (ATTACH ADDITIONAL SIGNED LIST IF NECESSARY)
- --------------------------------------------------------------------------------
TOTAL NUMBER OF
SHARES REPRESENTED NUMBER
CERTIFICATE BY OF SHARES
NUMBER(S)(1) CERTIFICATE(S)(1) TENDERED(2)
-------------------------------------------------
-------------------------------------------------
-------------------------------------------------
-------------------------------------------------
-------------------------------------------------
-------------------------------------------------
TOTAL SHARES
- --------------------------------------------------------------------------------
(1) Need not be completed by Book-Entry Shareholders.
(2) Unless otherwise indicated, it will be assumed that all Shares
described above are being tendered. See Instruction 4.
- --------------------------------------------------------------------------------
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
The undersigned hereby tenders to ITT Florida Enterprises, Inc., a Florida
corporation (the "Purchaser") and a wholly owned subsidiary of ITT Corporation,
a Delaware corporation, the above-described shares of Common Stock (the "Common
Stock"), par value $0.10 per share, of Caesars World, Inc., a Florida
corporation (the "Company"), together with the associated junior participating
preferred stock purchase rights (the "Rights") issued pursuant to the Rights
Agreement dated as of January 10, 1989, as amended (the "Rights Agreement"),
between the Company and First Chicago Trust Company of New York, as Rights
Agent (the Common Stock, together with the Rights, being herein referred to as
the "Shares"), pursuant to the Purchaser's offer to purchase all outstanding
Shares at the price set forth in the Offer to Purchase dated December 23, 1994
(the "Offer to Purchase"), net to the seller in cash, in accordance with the
terms and conditions of the Offer to Purchase and this Letter of Transmittal
(which, together with any amendments or supplements thereto or hereto,
collectively constitute the "Offer"), receipt of which is hereby acknowledged.
Upon the terms of the Offer (including if the Offer is extended or amended,
the terms or conditions of any such extension or amendment), the undersigned
hereby sells, assigns and transfers to, or upon the order of, the Purchaser all
right, title and interest in and to all the Shares that are being tendered
hereby and that are accepted for payment, and paid for by the Purchaser (and
any and all other Shares or other securities or rights issued in respect
thereof on or after December 19, 1994) and irrevocably constitutes and appoints
the Depositary the true and lawful agent and attorney-in-fact of the
undersigned with respect to such Shares (and any such other Shares or
securities or rights), with full power of substitution (such power of attorney
being deemed to be an irrevocable power coupled with an interest), to (a)
deliver certificates for such Shares (and any such other Shares or securities
or rights) or transfer ownership of such Shares (and any such other Shares or
securities or rights) on the account books maintained by a Book-Entry Transfer
Facility together, in any such case, with all accompanying evidences of
transfer and authenticity to, or upon the order of, the Purchaser, (b) present
such Shares (and any such other Shares or securities or rights) for transfer on
the Company's books and (c) receive all benefits and otherwise exercise all
rights of beneficial ownership of such Shares (and any such other Shares or
securities or rights), all in accordance with the terms of the Offer.
The undersigned hereby represents and warrants that the undersigned has full
power and authority to tender, sell, assign and transfer the tendered Shares
(and any and all other Shares or other securities or rights issued in respect
thereof on or after December 19, 1994), the tender of the tendered Shares
complies with Rule 14e-4 under the Securities Exchange Act of 1934, as amended,
and, when the same are accepted for payment by the Purchaser, the Purchaser
will acquire good title thereto, free and clear of all liens, restrictions,
claims and encumbrances. The undersigned will, upon request, execute any
additional documents deemed by the Depositary or the Purchaser to be necessary
or desirable to complete the sale, assignment and transfer of the tendered
Shares (and any such other Shares or other securities or rights).
All authority conferred or agreed to be conferred pursuant to this Letter of
Transmittal shall be binding upon the successors, assigns, heirs, executors,
administrators, trustees in bankruptcy and legal representatives of the
undersigned and shall not be affected by, and shall survive, the death or
incapacity of the undersigned. Except as stated in the Offer to Purchase, this
tender is irrevocable.
The undersigned hereby irrevocably appoints Rand V. Araskog, Robert A. Bowman
and Richard S. Ward, in their respective capacities as officers of the
Purchaser, and any individual who shall hereafter succeed to any such office of
the Purchaser, and each of them, and any other designees of the Purchaser, the
attorneys-in-fact and proxies of the undersigned, each with full power of
substitution, to vote at any annual, special or adjourned meeting of the
Company's shareholders or otherwise in such manner as each such attorney and
proxy or his substitute shall in his sole discretion deem proper with respect
to, to execute any written consent concerning any matter as each such attorney
and proxy or his substitute shall in his sole discretion deem proper with
respect to, and to otherwise act as each such attorney and proxy or his
substitute shall in his sole discretion deem proper with respect to, all the
Shares tendered hereby (and any and all other Shares or other securities or
rights issued in respect thereof on or after December 19, 1994) that have been
accepted for payment by the Purchaser prior to the time any such action is
taken and with respect to which the undersigned is entitled to vote. This
appointment is effective when, and only to the extent that, the Purchaser
accepts for payment such Shares as provided in the Offer to Purchase. This
power of attorney and proxy are irrevocable and are granted in consideration of
the acceptance for payment of such Shares in accordance with the terms of the
Offer. Such acceptance for payment shall, without further action, revoke all
prior powers of attorney and proxies appointed by the undersigned at any time
with respect to such Shares (and any such other Shares or securities or rights)
and no subsequent powers of attorney or proxies will be appointed by the
undersigned, or be effective, with respect thereto.
The undersigned understands that the valid tender of Shares pursuant to any
one of the procedures described in Section 2 of the Offer to Purchase and in
the Instructions hereto will constitute a binding agreement between the
undersigned and the Purchaser upon the terms and subject to the conditions of
the Offer (including if the Offer is
extended or amended, the terms or conditions of any such extension or
amendment). Without limiting the foregoing, if the price to be paid in the
Offer is amended in accordance with the Offer, the price to be paid to the
undersigned will be the amended price notwithstanding the fact that a different
price is stated in this Letter of Transmittal.
Unless otherwise indicated herein under "Special Payment Instructions",
please issue the check for the purchase price and/or any certificates for
Shares not tendered or accepted for payment in the name(s) of the registered
holder(s) appearing under "Description of Shares Tendered". Similarly, unless
otherwise indicated under "Special Delivery Instructions", please mail the
check for the purchase price and/or any certificates for Shares not tendered or
accepted for payment (and accompanying documents, as appropriate) to the
address(es) of the registered holder(s) appearing under "Description of Shares
Tendered". In the event that both the Special Delivery Instructions and the
Special Payment Instructions are completed, please issue the check for the
purchase price and/or any certificates for Shares not accepted for payment (and
any accompanying documents, as appropriate) in the name of, and deliver such
check and deliver or return such certificates (and any accompanying documents,
as appropriate) to, the person or persons so indicated. The undersigned
recognizes that the Purchaser has no obligation pursuant to the Special Payment
Instructions to transfer any Shares from the name of the registered holder
thereof if the Purchaser does not accept for payment any of the Shares so
tendered.
- ----------------------------------- -----------------------------------
SPECIAL PAYMENT INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7) (SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if certifi- To be completed ONLY if certifi-
cates for Shares are not tendered cates for Shares are not tendered
or not accepted for payment or not accepted for payment
and/or the check for the purchase and/or the check for the purchase
price of Shares accepted for pay- price of Shares accepted for pay-
ment is to be issued in the name ment is to be sent to someone
of someone other than the under- other than the undersigned or to
signed, or if Shares delivered by the undersigned at an address
book-entry transfer that are not other than that indicated above.
accepted for payment are to be
returned by credit to an account Mail [_] Check [_] Certificates
maintained at a Book-Entry Trans- to:
fer Facility other than the ac-
count indicated above. Name _____________________________
(PLEASE PRINT)
Issue [_] Check [_] Certificates
to: Address __________________________
__________________________________
Name _____________________________
(PLEASE PRINT) __________________________________
(INCLUDE ZIP CODE)
Address __________________________
__________________________________
__________________________________
(INCLUDE ZIP CODE)
__________________________________
(TAXPAYER IDENTIFICATION OR
SOCIAL SECURITY NUMBER)
Credit unpurchased Shares by
book-entry transfer to the Book-
Entry Transfer Facility account
set forth below.
[_] The Depository Trust Company
[_] Midwest Securities Trust Com-
pany
__________________________________
(ACCOUNT NUMBER)
- ----------------------------------- -----------------------------------
SIGN HERE
(ALSO COMPLETE SUBSTITUTE FORM W-9 BELOW)
____________________________________________________________________________
____________________________________________________________________________
(SIGNATURE(S) OF SHAREHOLDER(S))
Dated: _________, 199
(Must be signed by registered holder(s) as name(s) appear(s) on the
certificate(s) for the Shares or on a security position listing or by
person(s) authorized to become registered holder(s) by certificates and
documents transmitted herewith. If signature is by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of corporations or
others acting in a fiduciary or representative capacity, please provide the
following information and see Instruction 5.)
Name(s): ___________________________________________________________________
(PLEASE PRINT)
Name of Firm: ______________________________________________________________
Capacity (full title): _____________________________________________________
Address: ___________________________________________________________________
____________________________________________________________________________
(INCLUDE ZIP CODE)
Area Code and Telephone No.: _______________________________________________
Taxpayer Identification or Social Security No.: ____________________________
(ALSO COMPLETE SUBSTITUTE FORM W-9 BELOW)
GUARANTEE OF SIGNATURE(S)
(IF REQUIRED--SEE INSTRUCTIONS 1 AND 5)
Authorized Signature: ______________________________________________________
Name: ______________________________________________________________________
(PLEASE PRINT)
Name of Firm: ______________________________________________________________
Address: ___________________________________________________________________
____________________________________________________________________________
(INCLUDE ZIP CODE)
Area Code and Telephone No.: _______________________________________________
Dated: _______________________________________________________________, 199
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES. Except as otherwise provided below, all
signatures on this Letter of Transmittal must be guaranteed by a financial
institution (including most commercial banks, savings and loan associations and
brokerage houses) that is a participant in the Security Transfer Agents
Medallion Program or the New York Stock Exchange Medallion Signature Guarantee
Program or the Stock Exchange Medallion Program (an "Eligible Institution"). No
signature guarantee is required on this Letter of Transmittal (a) if this
Letter of Transmittal is signed by the registered holder(s) (which term, for
purposes of this document, shall include any participant in a Book-Entry
Transfer Facility whose name appears on a security position listing as the
owner of Shares) of Shares tendered herewith, unless such holder(s) has
completed either the box entitled "Special Delivery Instructions" or the box
entitled "Special Payment Instructions" on the reverse hereof, or (b) if such
Shares are tendered for the account of an Eligible Institution. See Instruction
5.
2. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES. This Letter of
Transmittal is to be completed by shareholders either if certificates are to be
forwarded herewith or, unless an Agent's Message (as defined below) is
utilized, if delivery of Shares is to be made pursuant to the procedures for
book-entry transfer set forth in Section 2 of the Offer to Purchase. For a
shareholder validly to tender Shares pursuant to the Offer, either (a) a
properly completed and duly executed Letter of Transmittal (or facsimile
thereof), together with any required signature guarantees or an Agent's Message
(in connection with book-entry transfer) and any other required documents, must
be received by the Depositary at one of its addresses set forth herein prior to
the Expiration Date and either (i) certificates for tendered Shares must be
received by the Depositary at one of such addresses prior to the Expiration
Date or (ii) Shares must be delivered pursuant to the procedures for book-entry
transfer set forth herein and a Book-Entry Confirmation must be received by the
Depositary prior to the Expiration Date or (b) the tendering shareholder must
comply with the guaranteed delivery procedures set forth below and in Section 2
of the Offer to Purchase.
Shareholders whose certificates for Shares are not immediately available or
who cannot deliver their certificates and all other required documents to the
Depositary or complete the procedures for book-entry transfer prior to the
Expiration Date may tender their Shares by properly completing and duly
executing the Notice of Guaranteed Delivery pursuant to the guaranteed delivery
procedures set forth in Section 2 of the Offer to Purchase.
Pursuant to such procedures, (a) such tender must be made by or through an
Eligible Institution, (b) a properly completed and duly executed Notice of
Guaranteed Delivery substantially in the form provided by the Purchaser must be
received by the Depositary prior to the Expiration Date and (c) the
certificates for all physically delivered Shares or a Book-Entry Confirmation
with respect to all tendered Shares, as well as a properly completed and duly
executed Letter of Transmittal (or facsimile thereof) with any required
signature guarantees (or, in the case of book-entry transfer, an Agent's
Message) and any other documents required by this Letter of Transmittal, must
be received by the Depositary within five trading days on the New York Stock
Exchange after the date of execution of the Notice of Guaranteed Delivery.
The term "Agent's Message" means a message, transmitted by a Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of a
Book-Entry Confirmation, which states that such Book-Entry Transfer Facility
has received an express acknowledgement from the participant in such Book-Entry
Transfer Facility tendering the Shares, that such participant has received and
agrees to be bound by the terms of the Letter of Transmittal and that the
Purchaser may enforce such agreement against the participant.
THE METHOD OF DELIVERY OF SHARES, THIS LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER
FACILITY, IS AT THE ELECTION AND RISK OF THE TENDERING SHAREHOLDER. SHARES WILL
BE DEEMED DELIVERED ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF DELIVERY
IS BY MAIL, REGISTERED MAIL, WITH RETURN RECEIPT REQUESTED AND PROPERLY
INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO
ENSURE TIMELY DELIVERY.
No alternative, conditional or contingent tenders will be accepted and no
fractional Shares will be purchased. All tendering shareholders, by execution
of this Letter of Transmittal (or facsimile thereof), waive any right to
receive any notice of the acceptance of their Shares for payment.
3. INADEQUATE SPACE. If the space provided herein is inadequate, the
certificate numbers and/or the number of Shares should be listed on a separate
schedule attached hereto.
4. PARTIAL TENDERS (APPLICABLE TO CERTIFICATE SHAREHOLDERS ONLY). If fewer
than all the Shares evidenced by any certificate submitted are to be tendered,
fill in the number of Shares that are to be tendered in the box entitled
"Number of Shares Tendered". In any such case, new certificate(s) for the
remainder of the Shares that were evidenced by the old certificate(s) will be
sent to the registered holder, unless otherwise provided in the appropriate box
on this Letter of Transmittal as soon as practicable after the expiration of
the Offer. All Shares represented by certificates delivered to the Depositary
will be deemed to have been tendered unless otherwise indicated.
5. SIGNATURES ON LETTERS OF TRANSMITTAL; STOCK POWERS AND ENDORSEMENTS. If
this Letter of Transmittal is signed by the registered holder of the Shares
tendered hereby, the signature must correspond with the name as written on the
face of the certificate(s) without any change whatsoever.
If any of the Shares tendered hereby are owned of record by two or more joint
owners, all such owners must sign this Letter of Transmittal.
If any tendered Shares are registered in different names on several
certificates, it will be necessary to complete, sign and submit as many
separate Letters of Transmittal as there are different registrations of
certificates.
If this Letter of Transmittal or any certificates or stock powers are signed
by trustees, executors, administrators, guardians, attorneys-in-fact, officers
of corporations or others acting in a fiduciary or representative capacity,
such persons should so indicate when signing, and proper evidence satisfactory
to the Purchaser of their authority so to act must be submitted.
When this Letter of Transmittal is signed by the registered holder(s) of the
Shares listed transmitted hereby, no endorsements of certificates or separate
stock powers are required unless payment is to be made to or certificates for
Shares not tendered or accepted for payment are to be issued to a person other
than the registered holder(s). Signatures on such certificates or stock powers
must be guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the registered
holder(s) of certificates listed, the certificates must be endorsed or
accompanied by appropriate stock powers, in either case signed exactly as the
name or names of the registered owner or owners appear on the certificates.
Signatures on such certificates or stock powers must be guaranteed by an
Eligible Institution.
6. STOCK TRANSFER TAXES. The Purchaser will pay any stock transfer taxes with
respect to the transfer and sale of Shares to it or its order pursuant to the
Offer. If, however, payment of the purchase price is to be made to, or if
certificates for Shares not tendered or accepted for payment are to be
registered in the name of, any persons other than the registered holder(s), or
if tendered certificates are registered in the name of any person other than
the person(s) signing this Letter of Transmittal, the amount of any stock
transfer taxes (whether imposed on the registered holder(s) or such person)
payable on account of the transfer to such person will be deducted from the
purchase price unless satisfactory evidence of the payment of such taxes or
exemption therefrom is submitted.
EXCEPT AS PROVIDED IN THIS INSTRUCTION 6, IT WILL NOT BE NECESSARY FOR
TRANSFER TAX STAMPS TO BE AFFIXED TO THE CERTIFICATES LISTED IN THIS LETTER OF
TRANSMITTAL.
7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If a check is to be issued in
the name of and/or certificates for Shares not tendered or not accepted for
payment are to be returned to, a person other than the signer of this Letter of
Transmittal or if a check is to be sent and/or such certificates are to be
returned to a person other than the signer of this Letter of Transmittal or to
an address other than that shown above, the appropriate boxes on this Letter of
Transmittal should be completed. Any shareholder(s) delivering Shares by book-
entry transfer may request that Shares not accepted for payment be credited to
such account maintained at a Book-Entry Transfer Facility as such
shareholder(s) may designate.
8. WAIVER OF CONDITIONS. Subject to the terms of the Offer, the Purchaser
reserves the right to waive any of the specified conditions of the Offer, in
whole or in part, in the case of any Shares tendered, except that the Purchaser
shall not waive the Minimum Condition (as defined in the Offer to Purchase)
without the Company's consent.
9. 31% BACKUP WITHHOLDING. Under U.S. Federal income tax law, a shareholder
whose tendered Shares are accepted for payment is required to provide the
Depositary with such shareholder's correct taxpayer identification number
("TIN") (i.e., social security number or employer identification number) on
Substitute Form W-9 below. If the Depositary is not provided with the correct
TIN, the Internal Revenue Service may subject the shareholder or other payee to
a $50 penalty. In addition, payments that are made to such shareholder or other
payee with respect to Shares purchased pursuant to the Offer may be subject to
a 31% backup withholding.
Certain shareholders (including, among others, all corporations and certain
foreign individuals) are not subject to these backup withholding and reporting
requirements. In order for a foreign individual to qualify as an exempt
recipient, the shareholder must submit a Form W-8, signed under penalties of
perjury, attesting to that individual's exempt status. A Form W-8 can be
obtained from the Depositary. See the enclosed "Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9" for more instructions.
If backup withholding applies, the Depositary is required to withhold 31% of
any such payments made to the shareholder or other payee. Backup withholding is
not an additional tax. Rather, the tax liability of persons subject to backup
withholding will be reduced by the amount of tax withheld, provided that the
required information is given to the Internal Revenue Service. If withholding
results in an overpayment of taxes, a refund may be obtained from the Internal
Revenue Service.
The box in Part 3 of the Substitute Form W-9 may be checked if the tendering
shareholder has not been issued a TIN and has applied for a TIN or intends to
apply for a TIN in the near future. If the box in Part 3 is checked, the
shareholder or other payee must also complete the Certificate of Awaiting
Taxpayer Identification Number below in order to avoid backup withholding.
Notwithstanding that the box in Part 3 is checked and the Certificate of
Awaiting Taxpayer Identification Number is completed, the Depositary will
withhold 31% on all payments made prior to the time a properly certified TIN is
provided to the Depositary. However, such amounts will be refunded to such
shareholder if a TIN is provided to the Depositary within 60 days.
The shareholder is required to give the Depositary the TIN (i.e., social
security number or employer identification number) of the record owner of the
Shares. If the Shares are in more than one name or are not in the name of the
actual owner, consult the enclosed "Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9" for additional guidance on which
number to report.
10. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Requests for additional
copies of the Offer to Purchase, this Letter of Transmittal, the Notice of
Guaranteed Delivery and the Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9 should be directed to the
Information Agent at its address set forth below. Questions or requests for
assistance may be directed to the Information Agent.
IMPORTANT: THIS LETTER OF TRANSMITTAL OR A FACSIMILE COPY THEREOF (TOGETHER
WITH CERTIFICATES FOR, OR A BOOK-ENTRY CONFIRMATION WITH RESPECT TO, TENDERED
SHARES WITH ANY REQUIRED SIGNATURE GUARANTEES AND ALL OTHER REQUIRED DOCUMENTS)
MUST BE RECEIVED BY THE DEPOSITARY, OR THE NOTICE OF GUARANTEED DELIVERY MUST
BE RECEIVED BY THE DEPOSITARY, PRIOR TO THE EXPIRATION DATE.
- --------------------------------------------------------------------------------
PAYER'S NAME: BANKERS TRUST COMPANY
- --------------------------------------------------------------------------------
PART 1--PLEASE PROVIDE YOUR Social Security Number
TIN IN THE BOX AT RIGHT AND Employer Identification
CERTIFY BY SIGNING AND Number
SUBSTITUTE DATING BELOW.
OR ____________________
--------------------------------------------------------
FORM W-9 PART 2--CERTIFICATES--Under penalties of perjury, I
certify that:
DEPARTMENT OF (1) The number shown on this form is my correct
THE TREASURY Taxpayer Identification Number (or I am waiting
INTERNAL for a number to be issued for me) and
REVENUE (2) I am not subject to backup withholding either
SERVICE because: (a) I am exempt from backup withholding,
or (b) I have not been notified by the Internal
Revenue Service (the "IRS") that I am subject to
backup withholding as a result of a failure to
report all interest or dividends, or (c) the IRS
has notified me that I am no longer subject to
backup withholding.
CERTIFICATION INSTRUCTIONS--You must cross out item
(2) above if you have been notified by the IRS that
PAYER'S REQUEST you are currently subject to backup withholding be-
FOR TAXPAYER cause of underreporting interest or dividends on your
IDENTIFICATION tax return. However, if after being notified by the
NUMBER (TIN) IRS that you are subject to backup withholding, you
received another notification from the IRS that you
are no longer subject to backup withholding, do not
cross out such item (2).
--------------------------------------------------------
PART 3 --
SIGNATURE ______________ DATE _______ Awaiting
TIN [_]
- --------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW
THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN
PART 3 OF SUBSTITUTE FORM W-9.
- --------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a Taxpayer Identification
Number has not been issued to me, and either (1) I have mailed or delivered
an application to receive a Taxpayer Identification Number to the
appropriate Internal Revenue Service Center or Social Security
Administration Officer or (2) I intend to mail or deliver an application in
the near future. I understand that if I do not provide a Taxpayer
Identification Number by the time of payment, 31% of all reportable
payments made to me will be withheld, but that such amounts will be
refunded to me if I then provide the Depositary a Taxpayer Identification
Number within sixty (60) days.
Signature ______________________________________________ Date ______________
- --------------------------------------------------------------------------------
Questions and requests for assistance or additional copies of the Offer to
Purchase, this Letter of Transmittal and all other tender offer materials may
be directed to the Information Agent or the Dealer Managers, as set forth
below, and copies will be furnished promptly at the Purchaser's expense.
The Information Agent for the Offer is:
GEORGESON & COMPANY INC.
Wall Street Plaza
New York, NY 10005
Call Collect: (212) 509-6240
Banks and Brokers Call Collect (212) 440-9800
Call Toll Free: 1-800-223-2064
The Dealer Managers for the Offer are:
BEAR, STEARNS & CO. INC. BT SECURITIES CORPORATION
245 Park Avenue 130 Liberty Street
New York, NY 10167 New York, NY 10006
(800) 791-2327 (212) 250-8719 (Call Collect)
Exhibit(a)(3)
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED JUNIOR PARTICIPATING PREFERRED STOCK PURCHASE RIGHTS)
OF
CAESARS WORLD, INC.
TO
ITT FLORIDA ENTERPRISES, INC.
A WHOLLY OWNED SUBSIDIARY OF
ITT CORPORATION
(NOT TO BE USED FOR SIGNATURE GUARANTEES)
This Notice of Guaranteed Delivery or one substantially in the form hereof
must be used to accept the Offer (as defined below) if (i) certificates ("Share
Certificates") representing shares of Common Stock, par value $0.10 per share
(the "Shares"), of Caesars World, Inc., a Florida corporation (the "Company"),
are not immediately available, (ii) time will not permit all required documents
to reach Bankers Trust Company, as Depositary (the "Depositary"), prior to the
Expiration Date (as defined in Section 1 of the Offer to Purchase (as defined
below)) or (iii) the procedure for delivery by book-entry transfer cannot be
completed on a timely basis. This Notice of Guaranteed Delivery may be
delivered by hand or mail or transmitted by telegram or facsimile transmission
to the Depositary. See Section 2 of the Offer to Purchase.
The Depositary for the Offer is:
BANKERS TRUST COMPANY
By Mail: By Hand/Overnight Delivery:
Bankers Trust Company Bankers Trust Company
Corporate Trust & Agency Group Corporate Trust & Agency Group
Reorganization Dept. Receipt & Delivery Window
P.O. Box 1458 123 Washington Street, 1st Floor
Church Street Station New York, NY 10006
New York, NY 10008-1458
By Facsimile Transmission:
(212) 250-6275/3290
(For Eligible Institutions only)
Confirm by Telephone:
(212) 250-6270
----------------
THIS FORM IS NOT TO BE USED TO GUARANTEE SIGNATURES. IF A SIGNATURE ON A
LETTER OF TRANSMITTAL IS REQUIRED TO BE GUARANTEED BY AN "ELIGIBLE INSTITUTION"
UNDER THE INSTRUCTIONS THERETO, SUCH SIGNATURE GUARANTEE MUST APPEAR IN THE
APPLICABLE SPACE PROVIDED IN THE SIGNATURE BOX ON THE LETTER OF TRANSMITTAL.
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE TRANSMISSION
OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
Ladies and Gentlemen:
The undersigned hereby tenders to ITT Florida Enterprises, Inc., a Florida
corporation (the "Purchaser") and a wholly owned subsidiary of ITT
Corporation, a Delaware corporation ("Parent"), upon the terms and subject to
the conditions set forth in the Purchaser's Offer to Purchase dated December
23, 1994 (the "Offer to Purchase"), and in the related Letter of Transmittal
(which together constitute the "Offer"), receipt of which is hereby
acknowledged, Shares pursuant to the guaranteed delivery procedures set forth
in Section 2 of the Offer to Purchase.
Number of Shares:__________________________ Name(s) of Record Holder(s):
Certificate Nos. (if available):___________ ________________________________
___________________________________________ ________________________________
(Please Print)
(Check one box if Shares will be
tendered by book-entry transfer) Address(es):____________________
[_] The Depository Trust Company ________________________________
[_] Midwest Securities Trust Company (Zip Code)
[_] _____________________________________ Area Code and Tel. No.:__________
Account Number:____________________________ Signature(s):____________________
Dated:_____________________________________ _________________________________
GUARANTEE
(Not to be Used for Signature Guarantee)
The undersigned, a participant in the Security Transfer Agent's Medallion
Program or the New York Stock Exchange Medallion Signature Guarantee Program
or the Stock Exchange Medallion Program hereby (a) represents that the tender
of Shares effected hereby complies with Rule 14e-4 under the Securities
Exchange Act of 1934, as amended, and (b) guarantees to deliver to the
Depositary either the certificates representing the Shares tendered hereby, in
proper form for transfer, or a Book-Entry Confirmation (as defined in Section
2 of the Offer to Purchase) of a transfer of such Shares, in any such case
together with a properly completed and duly executed Letter of Transmittal, or
a manually signed facsimile thereof, with any required signature guarantees,
or an Agent's Message (as defined in the Offer to Purchase) and any other
documents required by the Letter of Transmittal within five trading days on
the New York Stock Exchange after the date hereof.
The Eligible Institution that completes this form must communicate the
guarantee to the Depositary and must deliver the Letter of Transmittal and
certificates for Shares to the Depositary within the time period shown herein.
Failure to do so could result in a financial loss to such Eligible
Institution.
Name of Firm:______________________________ _________________________________
Authorized Signature
Address:___________________________________
___________________________________ Title:___________________________
(Zip Code)
Area Code and Tel. No.:____________________ Dated:___________________________
NOTE: DO NOT SEND CERTIFICATES FOR SHARES WITH THIS NOTICE, SHARE CERTIFICATES
SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL.
2
Exhibit(a)(4)
Bear, Stearns & Co. Inc. BT Securities
245 Park Avenue Corporation
New York, NY 10167 130 Liberty Street
(800) 791-2327 New York, NY 10005
(212) 250-8719
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED JUNIOR PARTICIPATING PREFERRED STOCK PURCHASE RIGHTS)
OF
CAESARS WORLD, INC.
AT
$67.50 NET PER SHARE
BY
ITT FLORIDA ENTERPRISES, INC.
A WHOLLY OWNED SUBSIDIARY OF
ITT CORPORATION
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON TUESDAY, JANUARY 24, 1995,
UNLESS THE OFFER IS EXTENDED.
December 23, 1994
To Brokers, Dealers, Commercial
Banks, Trust Companies and Other
Nominees:
We have been engaged by ITT Florida Enterprises, Inc., a Florida corporation
(the "Purchaser") and a wholly owned subsidiary of ITT Corporation, a Delaware
corporation ("Parent"), to act as Dealer Managers in connection with the
Purchaser's offer to purchase all outstanding shares of Common Stock (the
"Common Stock"), par value $0.10 per share, of Caesars World, Inc., a Florida
corporation (the "Company"), together with the associated junior participating
preferred stock purchase rights (the "Rights") issued pursuant to the Rights
Agreement dated as of January 10, 1989, as amended (the "Rights Agreement"),
between the Company and First Chicago Trust Company of New York, as Rights
Agent (the Common Stock, together with the Rights, being herein referred to as
the "Shares"), at $67.50 per Share, net to the seller in cash, upon the terms
and subject to the conditions set forth in the Purchaser's Offer to Purchase
dated December 23, 1994 (the "Offer to Purchase"), and the related Letter of
Transmittal (which, together with any supplements or amendments thereto,
collectively constitute the "Offer") enclosed herewith.
THE OFFER IS CONDITIONED UPON (I) THERE BEING VALIDLY TENDERED AND NOT
WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER THAT NUMBER OF SHARES WHICH
WOULD REPRESENT AT LEAST A MAJORITY OF ALL THEN OUTSTANDING SHARES ON A FULLY
DILUTED BASIS, (II) THE GAMING CONDITION (AS DEFINED IN THE OFFER TO PURCHASE),
(III) THE EXPIRATION OR TERMINATION OF ALL WAITING PERIODS IMPOSED BY THE
HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976, AS AMENDED, AND THE
REGULATIONS THEREUNDER AND (IV) THE OTHER CONDITIONS DESCRIBED IN THE OFFER TO
PURCHASE.
For your information and for forwarding to your clients for whom you hold
Shares registered in your name or in the name of your nominee, or who hold
Shares registered in their own names, we are enclosing the following documents:
1. Offer to Purchase;
2. Letter of Transmittal to be used by holders of Shares in accepting the
Offer and tendering Shares;
3. The Letter to Stockholders of the Company from both the Chairman and
Chief Executive Officer and the President and Chief Operating Officer of
the Company accompanied by the Company's Solicitation/Recommendation
Statement on Schedule 14D-9;
4. A letter that may be sent to your clients for whose account you hold
Shares registered in your name or in the name of your nominees, with space
provided for obtaining such clients' instructions with regard to the Offer;
5. Notice of Guaranteed Delivery to be used to accept the Offer if
certificates for Shares are not immediately available or time will not
permit all required documents to reach the Depositary by the Expiration
Date (as defined in the Offer to Purchase) or if the procedure for book-
entry transfer cannot be completed on a timely basis;
6. Guidelines of the Internal Revenue Service for Certification of
Taxpayer Identification Number on Substitute Form W-9; and
7. Return envelope addressed to the Depositary.
The Board of Directors of the Company has unanimously approved the Merger
Agreement and the transactions contemplated thereby and unanimously recommends
that all shareholders of the Company accept the Offer and tender their Shares.
Upon the terms and subject to the conditions of the Offer (including, if the
Offer is extended or amended, the terms and conditions of any such extension or
amendment), the Purchaser will accept for payment and pay for all outstanding
Shares validly tendered prior to the Expiration Date and not theretofore
properly withdrawn. Payment for Shares purchased pursuant to the Offer will in
all cases be made only after timely receipt by the Depositary of certificates
for such Shares, or timely confirmation of a book-entry transfer of such Shares
into the Depositary's account at The Depository Trust Company or the Midwest
Securities Trust Company pursuant to the procedures described in Section 2 of
the Offer to Purchase, a properly completed and duly executed Letter of
Transmittal (or manually signed facsimile thereof) or an Agent's Message in
connection with a book-entry transfer, and all other documents required by the
Letter of Transmittal.
The Purchaser will not pay any fees or commissions to any broker or dealer or
other person (other than the Dealer Managers) in connection with the
solicitation of tenders of Shares pursuant to the Offer. The Purchaser will,
however, upon request, reimburse you for customary mailing and handling
expenses incurred by you in forwarding the enclosed materials to your clients.
The Purchaser will pay or cause to be paid any transfer taxes payable on the
transfer of Shares to it, except as otherwise provided in Instruction 6 of the
enclosed Letter of Transmittal.
YOUR PROMPT ACTION IS REQUESTED. WE URGE YOU TO CONTACT YOUR CLIENTS AS
PROMPTLY AS POSSIBLE. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00
MIDNIGHT, NEW YORK CITY TIME, ON TUESDAY, JANUARY 24, 1995, UNLESS THE OFFER IS
EXTENDED.
In order to take advantage of the Offer, a duly executed and properly
completed Letter of Transmittal (or facsimile thereof), with any required
signature guarantees, or an Agent's Message (as defined in the Offer to
Purchase) in connection with a book-entry delivery of Shares, and any other
required documents, should
be sent to the Depositary, and certificates representing the tendered Shares
should be delivered or such Shares should be tendered by book-entry transfer,
all in accordance with the Instructions set forth in the Letter of Transmittal
and the Offer to Purchase.
If holders of Shares wish to tender, but it is impracticable for them to
forward their certificates or other required documents prior to the expiration
of the Offer, a tender may be effected by following the guaranteed delivery
procedures specified under Section 2, "Procedure for Tendering Shares" in the
Offer to Purchase.
Any inquiries you may have with respect to the Offer should be addressed to
the Dealer Managers or the Information Agent at their respective addresses and
telephone numbers set forth on the back cover page of the Offer to Purchase.
Additional copies of the enclosed materials may be obtained from the
undersigned, at Bear, Stearns & Co. Inc., telephone (800) 791-2327 and BT
Securities Corporation, telephone (212) 250-8719 (Call Collect) or by calling
the Information Agent, Georgeson & Company Inc., at (800) 223-2064.
Very truly yours,
Bear, Stearns & Co. Inc.
BT Securities Corporation
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR
ANY PERSON AS AN AGENT OF THE PURCHASER, PARENT, THE DEPOSITARY, THE
INFORMATION AGENT OR THE DEALER MANAGERS, OR ANY AFFILIATE OF ANY OF THE
FOREGOING, OR AUTHORIZE YOU OR ANY OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY
STATEMENT ON BEHALF OF ANY OF THEM IN CONNECTION WITH THE OFFER OTHER THAN THE
DOCUMENTS ENCLOSED AND THE STATEMENTS CONTAINED THEREIN.
EXHIBIT (a) (5)
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED JUNIOR PARTICIPATING PREFERRED STOCK PURCHASE RIGHTS)
OF
CAESARS WORLD, INC.
AT
$67.50 NET PER SHARE
BY
ITT FLORIDA ENTERPRISES, INC.
A WHOLLY OWNED SUBSIDIARY OF
ITT CORPORATION
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON TUESDAY, JANUARY 24, 1995,
UNLESS THE OFFER IS EXTENDED.
To Our Clients:
Enclosed for your consideration is an Offer to Purchase dated December 23,
1994 (the "Offer to Purchase") and a related Letter of Transmittal (which,
together with any amendments or supplements thereto, collectively constitute
the "Offer") relating to an offer by ITT Florida Enterprises, Inc., a Florida
corporation (the "Purchaser") and a wholly owned subsidiary of ITT Corporation,
a Delaware corporation ("Parent"), to purchase all outstanding shares of Common
Stock (the "Common Stock"), par value $0.10 per share, of Caesars World, Inc.,
a Florida corporation (the "Company"), together with the associated junior
participating preferred stock purchase rights (the "Rights") issued pursuant to
the Rights Agreement dated as of January 10, 1989, as amended, between the
Company and First Chicago Trust Company of New York, as Rights Agent (the
Common Stock, together with the Rights, being herein referred to as the
"Shares"), at $67.50 per Share, net to the seller in cash, upon the terms and
subject to the conditions set forth in the Offer. Also enclosed is the Letter
to Stockholders of the Company from both the Chairman and Chief Executive
Officer and the President and Chief Operating Officer of the Company
accompanied by the Company's Solicitation/Recommendation Statement on Schedule
14D-9. We are the holder of record of Shares held by us for your account. A
tender of such Shares can be made only by us as the holder of record and
pursuant to your instructions. The Letter of Transmittal is furnished to you
for your information only and cannot be used to tender Shares held by us for
your account.
We request instructions as to whether you wish to tender any or all of such
Shares held by us for your account, pursuant to the terms and conditions set
forth in the Offer.
Your attention is invited to the following:
1. The tender price is $67.50 per Share, net to the seller in cash.
2. The Board of Directors of the Company has, by unanimous vote of all
Directors, approved the Offer, the Merger (as described in the Offer to
Purchase) and the other transactions described in the Offer to Purchase and
determined that the terms of the Offer, the Merger and such other
transactions, taken together, are fair to, and in the best interest of, the
shareholders of the Company and recommends that all shareholders of the
Company accept the Offer and tender their Shares.
3. The Offer is being made for all outstanding Shares.
4. The Offer is being made pursuant to the Merger Agreement.
5. The Offer is conditioned upon (i) there being validly tendered and not
withdrawn prior to the expiration of the Offer at least a majority of the
then outstanding Shares on a fully diluted basis, (ii) the Gaming Condition
(as defined in the Offer to Purchase), (iii) the expiration or termination
of all waiting periods imposed by the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the regulations thereunder and
(iv) the conditions described in the Offer to Purchase.
6. The Offer and withdrawal rights will expire at 12:00 Midnight, New
York City time, on Tuesday, January 24, 1995, unless the Offer is extended.
7. Shareholders who tender Shares will not be obligated to pay brokerage
commissions, solicitation fees or, except as set forth in Instruction 6 of
the Letter of Transmittal, transfer taxes on the purchase of Shares by the
Purchaser pursuant to the Offer.
The Purchaser is not aware of any state in which the making of the Offer is
prohibited by administrative or judicial action pursuant to any valid state
statute. If the Purchaser becomes aware of any valid state statute prohibiting
the making of the Offer or the acceptance of Shares pursuant thereto, the
Purchaser will make a good faith effort to comply with any such state statute.
If, after such good faith effort, the Purchaser cannot comply with any such
state statute, the Offer will not be made to (nor will tenders be accepted from
or on behalf of) the holders of Shares in such state. In any jurisdiction in
which the securities, blue sky or other laws require the Offer to be made by a
licensed broker or dealer, the Offer will be deemed to be made on behalf of the
Purchaser by the Dealer Managers or one or more registered brokers or dealers
licensed under the laws of such jurisdiction.
If you wish to have us tender any or all of your Shares, please complete,
sign and return to us the form enclosed herewith. An envelope to return your
instructions to us is enclosed. Your instructions to us should be forwarded in
ample time to permit us to submit a tender on your behalf prior to the
expiration of the Offer. If you authorize the tender of your Shares, all such
Shares will be tendered unless otherwise specified on the instruction form
enclosed herewith.
INSTRUCTIONS WITH RESPECT TO THE OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK OF CAESARS WORLD, INC.
(AND THE ASSOCIATED JUNIOR PARTICIPATING
PREFERRED STOCK PURCHASE RIGHTS)
The undersigned acknowledge(s) receipt of your letter and the enclosed Offer
to Purchase dated December 23, 1994, and the related Letter of Transmittal
(which, together with any amendments or supplements thereto, constitute the
"Offer") relating to the offer by ITT Florida Enterprises, Inc. (the
"Purchaser"), a Florida corporation and a wholly owned subsidiary of ITT
Corporation, a Delaware corporation, to purchase shares of Common Stock, par
value $0.10 per share (the "Common Stock"), of Caesars World, Inc., a Florida
corporation, together with the associated junior participating preferred stock
purchase rights (the "Rights") issued pursuant to the Rights Agreement dated as
of January 10, 1989, as amended (the "Rights Agreement"), between the Company
and First Chicago Trust Company of New York, as Rights Agent (the Common Stock,
together with the Rights, being herein referred to as the "Shares").
This will instruct you to tender to the Purchaser the number of Shares
indicated below (or if no number is indicated below, all Shares) held by you
for the account of the undersigned, on the terms and subject to the conditions
set forth in the Offer.
Dated: ______________________________
Number of Shares to be Tendered* _____________________________________
_____________________________________ _____________________________________
(SIGNATURE(S))
_____________________________________
_____________________________________
(PLEASE PRINT NAME(S))
_____________________________________
Address _____________________________
_____________________________________
(INCLUDE ZIP CODE)
Area Code and
Telephone No. ( )
--------------------------
Taxpayer Identification
or Social Security No. ______________
- --------
* Unless otherwise indicated, it will be assumed that all your Shares are to be
tendered.
Exhibit(a)(6)
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE PAYER.
Social Security numbers have nine digits separated by two hyphens: i.e., 000-
00-0000. Employer identification numbers have nine digits separated by only one
hyphen: i.e., 00-0000000. The table below will help determine the number to
give the payer.
- ---------------------------------------------- -----------------------------------------------
GIVE THE GIVE THE EMPLOYER
FOR THIS TYPE OF ACCOUNT: SOCIAL SECURITY FOR THIS TYPE OF ACCOUNT: IDENTIFICATION
NUMBER OF-- NUMBER OF--
- ---------------------------------------------- -----------------------------------------------
1. An individual's account The individual 8. Sole proprietorship The owner(4)
2. Two or more individuals The actual owner account
(joint account) of the account or, 9. A valid trust, estate The legal entity
if combined funds, or pension trust (Do not furnish
any one of the the identifying
individuals(1) number of the
3. Husband and wife (joint The actual owner personal
account) of the account or, representative or
if joint funds, trustee unless the
either person(1) legal entity
4. Custodian account of a The minor(2) itself is not
minor (Uniform Gift to designated in the
Minors Act) account title.)(5)
5. Adult and minor (joint The adult, or if 10. Corporate account The corporation
account) the minor is the 11. Religious, charitable, The organization
only contributor, or educational
the minor(1) organization account
6. Account in the name of The ward, minor, 12. Partnership account The partnership
guardian or committee or incompetent held in the name of the
for a designated ward, person(3) business
minor, or incompetent 13. Association, club, or The organization
person other tax-exempt
7. a. The usual revocable The grantor- organization
savings trust account trustee(1) 14. A broker or registered The broker or
(grantor is also nominee nominee
trustee)
b. So-called trust The actual 15. Account with the The public entity
account that is not owner(4) Department of
a legal or valid Agriculture in the name
trust under state law of a public entity
(such as a state or
local government,
school district, or
prison) that receives
agricultural program
payments
- ---------------------------------------------- -----------------------------------------------
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) Show the name of the owner.
(5) List first and circle the name of the legal trust, estate, or pension
trust.
NOTE: IF NO NAME IS CIRCLED WHEN THERE IS MORE THAN ONE NAME, THE NUMBER WILL
BE CONSIDERED TO BE THAT OF THE FIRST NAME LISTED.
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your num-
ber, obtain Form SS-5, Application for a Social Security Number Card, or Form
SS-4, Application for Employer Identification Number, at the local office of
the Social Security Administration or the Internal Revenue Service and apply
for a number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments include
the following:
. A corporation.
. A financial institution.
. An organization exempt from tax under section 501(a), or an individual
retirement plan.
. The United States or any agency or instrumentality thereof.
. A state, the District of Columbia, a possession of the United States, or
any subdivision or instrumentality thereof.
. A foreign government, a political subdivision of a foreign government, or
any agency or instrumentality thereof.
. An international organization or any agency or instrumentality thereof.
. A registered dealer in securities or commodities registered in the U.S.
or a possession of the U.S.
. A real estate investment trust.
. A common trust fund operated by a bank under section 584(a).
. An exempt charitable remainder trust, or a nonexempt trust described in
section 4947(a)(1).
. An entity registered at all times under the Investment Company Act of
1940.
. A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
. Payments to nonresident aliens subject to withholding under section 1441.
. Payments to partnerships not engaged in a trade or business in the U.S.
and which have at least one nonresident partner.
. Payments of patronage dividends where the amount received is not paid in
money.
. Payments made by certain foreign organizations.
Payments of interest not generally subject to backup withholding include the
following:
. Payments of interest on obligations issued by individuals. Note: You may
be subject to backup withholding if this interest is $600 or more and is
paid in the course of the payer's trade or business and you have not pro-
vided your correct taxpayer identification number to the payer.
. Payments of tax-exempt interest (including exempt-interest dividends un-
der section 852).
. Payments described in section 6049(b)(5) to nonresident aliens.
. Payments on tax-free covenant bonds under section 1451.
. Payments made by certain foreign organizations.
. Payments made to a nominee.
EXEMPT PAYEES DESCRIBED ABOVE MUST STILL COMPLETE THE SUBSTITUTE FORM W-9 TO
AVOID POSSIBLE ERRONEOUS BACKUP WITHHOLDING. FILE SUBSTITUTE FORM W-9 WITH THE
PAYER, FURNISH YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE
OF THE FORM, AND RETURN IT TO THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVI-
DENDS, OR PATRONAGE DIVIDENDS, ALSO SIGN AND DATE THE FORM.
Certain payments other than interest, dividends, and patronage dividends,
that are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041A(a),
6045 and 6050A.
PRIVACY ACT NOTICE. Section 6109 requires most recipients of dividends, inter-
est, or other payments to give taxpayer identification numbers to payers who
must report the payments to IRS. IRS uses the numbers for identification pur-
poses. Payers must be given the numbers whether or not recipients are required
to file tax returns. Payers must generally withhold 31% of taxable interest,
dividends, and certain other payments to a payee who does not furnish a tax-
payer identification number to a payer. Certain penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER. If you fail
to furnish your taxpayer identification number to a payer, you are subject to
a penalty of $50 for each such failure unless your failure is due to reason-
able cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING. If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION. Falsifying certifications or
affirmations may subject you to criminal penalties including fines and/or im-
prisonment.
(4) FAILURE TO REPORT CERTAIN DIVIDEND AND INTEREST PAYMENTS. If you fail to
include any portion of an includible payment for interest, dividends or pat-
ronage dividends in gross income and such failure is due to negligence, a pen-
alty of 20% is imposed on any portion of any underpayment attributable to the
failure.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE.
Exhibit(a)(7)
This announcement is neither an offer to purchase nor a solicitation of an
offer to sell Shares. The Offer is made solely by the Offer to Purchase dated
December 23, 1994 and the related Letter of Transmittal and is being made to
all holders of Shares. The Offer is not being made to (nor will tenders be
accepted from or on behalf of) holders of Shares in any jurisdiction in which
the making of the Offer or the acceptance thereof would not be in compliance
with the laws of such jurisdiction. In those jurisdictions where the
securities, blue sky or other laws require the Offer to be made by a licensed
broker or dealer, the Offer shall be deemed to be made on behalf of ITT Florida
Enterprises, Inc. by Bear, Stearns & Co. Inc., BT Securities Corporation or one
or more registered brokers or dealers under the laws of such jurisdiction.
NOTICE OF OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED JUNIOR PARTICIPATING PREFERRED STOCK PURCHASE RIGHTS)
OF
CAESARS WORLD, INC.
AT
$67.50 NET PER SHARE
BY
ITT FLORIDA ENTERPRISES, INC.
A WHOLLY OWNED SUBSIDIARY OF
ITT CORPORATION
ITT Florida Enterprises, Inc., a Florida corporation (the "Purchaser") and a
wholly owned subsidiary of ITT Corporation, a Delaware corporation ("Parent"),
is offering to purchase all outstanding shares of Common Stock, par value $0.10
per share (the "Common Stock"), of Caesars World, Inc., a Florida corporation
(the "Company"), together with the Rights (as defined in the Offer to Purchase
dated December 23, 1994 (the "Offer to Purchase")) (the Common Stock, together
with the Rights, the "Shares") at $67.50 per Share, net to the seller in cash,
upon the terms and subject to the conditions set forth in the Offer to Purchase
and in the related Letter of Transmittal (which, together with any amendments
or supplements thereto, collectively constitute the "Offer").
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON TUESDAY, JANUARY 24, 1995, UNLESS EXTENDED.
THE OFFER IS CONDITIONED UPON (I) THERE BEING VALIDLY TENDERED AND NOT
WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER THAT NUMBER OF SHARES WHICH
WOULD REPRESENT AT LEAST A MAJORITY OF ALL OUTSTANDING SHARES ON A FULLY
DILUTED BASIS (THE "MINIMUM CONDITION"), (II) THE GAMING CONDITION (AS DEFINED
IN THE OFFER TO PURCHASE), (III) THE EXPIRATION OR TERMINATION OF ALL WAITING
PERIODS IMPOSED BY THE HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976, AS
AMENDED, AND THE REGULATIONS THEREUNDER AND (IV) THE OTHER CONDITIONS DESCRIBED
IN THE OFFER TO PURCHASE.
The Offer is being made pursuant to an Agreement and Plan of Merger dated as
of December 19, 1994 (the "Merger Agreement"), among Parent, the Purchaser and
the Company pursuant to which, following the consummation of the Offer, the
Purchaser will be merged with and into the Company (the "Merger"). On the
effective date of the Merger, each outstanding Share will be converted into the
right to receive $67.50 in cash, without interest.
THE BOARD OF DIRECTORS OF THE COMPANY HAS BY UNANIMOUS VOTE OF ALL DIRECTORS
APPROVED THE OFFER AND THE MERGER AND DETERMINED THAT THE TERMS OF THE OFFER
AND THE MERGER ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE SHAREHOLDERS OF
THE COMPANY, AND RECOMMENDS THAT SHAREHOLDERS OF THE COMPANY ACCEPT THE OFFER
AND TENDER THEIR SHARES.
For purposes of the Offer, the Purchaser shall be deemed to have accepted for
payment, and thereby purchased, Shares properly tendered to the Purchaser and
not withdrawn as, if and when the Purchaser gives oral or written notice to
Bankers Trust Company, as Depositary (the "Depositary"), of the Purchaser's
acceptance for payment of such Shares. Upon the terms and subject to the
conditions of the Offer, payment for Shares accepted for payment pursuant to
the Offer will be made by deposit of the purchase price therefor with the
Depositary, which will act as agent for tendering shareholders for the purpose
of receiving payment from the Purchaser and transmitting payment to tendering
shareholders. In all cases, payment for Shares accepted for payment pursuant to
the Offer will be made only after timely receipt by the Depositary of (a)
certificates for such Shares or timely confirmation of book-entry transfer of
such Shares into the Depositary's account at a Book-Entry Transfer Facility (as
defined in the Offer to Purchase) as described in Section 2 of the Offer to
Purchase, (b) a properly completed and duly executed Letter of Transmittal (or
facsimile thereof) with any required signature guarantees or, in the case of a
book-entry transfer, an Agent's Message (as defined in the Offer to Purchase)
and (c) any other documents required by the Letter of Transmittal. UNDER NO
CIRCUMSTANCES WILL INTEREST BE PAID BY THE PURCHASER ON THE PURCHASE PRICE OF
THE SHARES, REGARDLESS OF ANY EXTENSION OF THE OFFER OR DELAY IN MAKING SUCH
PAYMENT.
The term "Expiration Date" means 12:00 Midnight, New York City time, on
Tuesday, January 24, 1995, unless and until the Purchaser, in its sole
discretion (but subject to the terms of the Merger Agreement), shall have
extended the period of time during which the Offer is open, in which event the
term "Expiration Date" shall mean the latest time and date on which the Offer,
as so extended by the Purchaser, shall expire. Subject to the terms of the
Merger Agreement and the applicable rules and regulations of the Securities and
Exchange Commission, the Purchaser expressly reserves the right, in its sole
discretion, at any time or from time to time, and regardless of whether or not
any of the events set forth in Section 14 of the Offer to Purchase shall have
occurred, to extend the period of time during which the Offer is open, and
thereby delay acceptance for payment of, and the payment for, any Shares, by
giving oral or written notice of such extension to the Depositary. There can be
no assurance that the Purchaser will exercise its right to extend the Offer.
Any such extension will be followed by a public announcement thereof no later
than 9:00 a.m., New York City time, on the next business day after the
previously scheduled Expiration Date. During any such extension, all Shares
previously tendered and not withdrawn will remain subject to the Offer, subject
to the right of a tendering shareholder to withdraw such shareholder's Shares
as provided in the Offer.
Except as otherwise provided below, tenders of Shares are irrevocable. Shares
tendered pursuant to the Offer may be withdrawn at any time prior to the
Expiration Date or, if the Purchaser shall have extended the period of time
during which the Offer is open, the latest time and date at which the Offer, as
so extended by the Purchaser, shall expire and, unless theretofore accepted for
payment and paid for pursuant to the Offer, may also be withdrawn at any time
after February 20, 1995. For a withdrawal to be effective, a written,
telegraphic or facsimile transmission notice of withdrawal must be timely
received by the Depositary at one of its addresses set forth on the back cover
of the Offer to Purchase and must specify the name of the person having
tendered the Shares to be withdrawn, the number of Shares to be withdrawn and
the name of the registered holder of the Shares to be withdrawn, if different
from the name of the person who tendered the Shares. If certificates for Shares
have been delivered or otherwise identified to the Depositary, then, prior to
the physical release of such certificates, the serial numbers shown on such
certificates must be submitted to the Depositary and, unless such Shares have
been tendered by an Eligible Institution (as defined in Section 2 of the Offer
to Purchase), the signatures on the notice of withdrawal must be guaranteed by
an Eligible Institution. If Shares have been delivered pursuant to the
procedures for book-entry transfer as set forth in Section 2 of the Offer to
Purchase, any notice of withdrawal must also specify the name and number of the
account at the appropriate Book-Entry Transfer Facility to be credited with the
withdrawn Shares and
otherwise comply with such Book-Entry Transfer Facility's procedures.
Withdrawals of tenders of Shares may not be rescinded, and any Shares properly
withdrawn will thereafter be deemed not validly tendered for any purposes of
the Offer. However, withdrawn Shares may be retendered by again following one
of the procedures described in Section 2 of the Offer to Purchase at any time
prior to the Expiration Date. All questions as to the form and validity
(including time of receipt) of notice of withdrawal will be determined by the
Purchaser, in its sole discretion, whose determination will be final and
binding.
The Offer to Purchase and the related Letter of Transmittal and other
relevant materials will be mailed to record holders of Shares and furnished to
brokers, dealers, commercial banks, trust companies and similar persons whose
names, or the names of whose nominees, appear on the shareholder lists or, if
applicable, who are listed as participants in a clearing agency's security
position listing, for subsequent transmittal to beneficial owners of Shares.
The information required to be disclosed by Rule 14d-6(e)(1)(vii) under the
Securities Exchange Act of 1934, as amended, is contained in the Offer to
Purchase and is incorporated herein by reference.
THE OFFER TO PURCHASE AND THE LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION THAT SHOULD BE READ BEFORE MAKING ANY DECISION WITH RESPECT TO THE
OFFER.
Requests for copies of the Offer to Purchase, the Letter of Transmittal and
all other tender offer materials may be directed to the Information Agent or
the Dealer Managers as set forth below, and copies will be furnished promptly
at the Purchaser's expense.
The Information Agent for the Offer is:
GEORGESON & COMPANY INC.
Wall Street Plaza
New York, New York 10005
(212) 509-6240 (collect)
Banks and Brokers call collect (212) 440-9800
CALL TOLL-FREE: 1-800-223-2064
The Dealer Managers for the Offer are:
BEAR, STEARNS & CO. INC. BT SECURITIES CORPORATION
245 Park Avenue 130 Liberty Street
New York, New York 10167 New York, NY 10006
(800) 791-2327 (212) 250-8719 (Call Collect)
December 23, 1994
Exhibit (a)(8)
CONTACTS: For ITT Corporation FOR IMMEDIATE RELEASE
Jim Gallagher December 19, 1994
(212) 258-1261
For Caesars World
Jack Leene
(310) 552-2711 Ext. 363
ITT WILL ACQUIRE CAESARS WORLD, INC.
NEW YORK, NY -- ITT Corporation (NYSE/ITT) and Caesars World, Inc.
(NYSE/CAW) jointly announced today the signing of a definitive agreement
providing for ITT to acquire Caesars World at $67.50 per share, or approximately
$1.7 billion.
The first step of the acquisition is a cash tender for all outstanding
shares which will commence by Friday, December 23, 1994. Although the offer is
subject to certain regulatory approvals and other customary conditions, it is
expected to be completed during the first quarter in 1995. ITT will acquire all
Caesars' shares not purchased in the offer in a subsequent cash merger at the
same $67.50 per share price. Caesars World currently has approximately 25.1
million common shares outstanding.
The acquisition of Caesars World, Inc., one of the world's most recognized
names in gaming, combined with ITT Sheraton's leading international position
will create one of the world's strongest hotel and gaming businesses.
-more-
Caesars World owns and operates three hotel/casinos in Las Vegas, Atlantic
City and Lake Tahoe. In conjunction with two other partners, Caesars World
manages a casino owned by the Ontario government in Windsor, Canada, across the
river from Detroit, Michigan.
"Caesars World represents a tremendous opportunity for ITT," Rand V.
Araskog, chairman, president and chief executive, said. "Caesars is one of the
great names in the gaming industry," Mr. Araskog continued. "The acquisition
helps ITT create one of the premier hospitality, gaming and entertainment
companies in the world, and adds positive financial and business impact to the
recent agreement to acquire Madison Square Garden properties and the acquisition
of 70.2 percent of the CIGA Hotel Corporation, with its 31 major luxury hotels
throughout Europe," the chairman said.
In addition to the world-renowned Caesars Palace in Las Vegas, this
acquisition provides an entry into the other most important U.S. gaming
destination -- Atlantic City. The combination of Caesars World's and ITT's
strong international business and marketing structures will provide the emerging
company with additional competitive strength.
-more-
The transaction is expected to be non-dilutive and to contribute to
earnings in the first year. Moreover, ITT expects to take advantage of
substantial synergies in the near term. With the acquisition of Caesars World,
ITT no longer plans to construct The Desert Kingdom in Las Vegas.
Henry Gluck, chairman and chief executive officer of Caesars World, will
retain his current titles, report directly to Mr. Araskog and become a member of
the ITT Board. "Henry Gluck is a major presence in the gaming industry and one
of the most innovative and long standing leaders in gaming and entertainment. I
am personally looking forward to working with him on this great opportunity for
both our companies," Mr. Araskog said.
Following ITT's decision not to build the Desert Kingdom, which would have
cost $750 million to $1 billion, Mr. Araskog called Mr. Gluck in mid-October to
arrange a meeting at which time he proposed ITT's acquisition of Caesars World.
Since that time the two executives have had several discussions leading to
today's announcement.
Mr. Gluck said, "For quite some time now Mr.Araskog and I have discussed
the potential synergies of our respective companies. I anticipate a close
working relationship between management and employees of both companies directed
at maximizing the value of our great franchise and providing expanded
opportunities to the many loyal people who have helped build Caesars World."
Combined with the pending sale of ITT Financial Corporation, this
acquisition continues ITT's focus on three global companies, each leaders in its
respective industries -- ITT Hartford Insurance, with sales in excess of $10
billion; ITT Industries, with manufacturing sales of about $8 billion; and, the
hotel gaming and entertainment group, anchored by ITT Sheraton. With the
addition of Caesars World and Madison Square Garden, this group will have sales
of over $6 billion.
The Caesars World properties, all involved in the transaction, include:
- Caesars Palace, a 1,500-room casino resort located on an 80-acre site on
the Las Vegas Strip. Opened in 1966, the resort has undergone extensive
expansion and renovations through the years and currently has 118,000
square feet of casino space with 2,000 slot machines, some 125 table
games, 10 restaurants, a 1,100-seat showroom, 100,000 square feet of
convention space, a 18,000-seat outdoor stadium and an "Omnimax"
theater. Caesars Palace is currently in the process of developing a
themed dining and entertainment complex, "Caesars Magical Empire,"
scheduled for completion in 1995.
-more-
- Caesars Tahoe, a 440-room resort, is situated on 24 acres on the South
Shore of the world renowned Lake Tahoe in northern Nevada. Opened in
1990, the resort has a 40,000-square-foot casino with about 960 slots
and 75 table games, six restaurants, a 1,550-seat showroom, a Roman
themed nightclub, and 25,000 square feet of convention space. In recent
years, all of the property's rooms have been renovated and the casino
space has been remodeled to better reflect the company's Roman theme.
- Caesars Atlantic City, opened in 1979, is located on a premier site on
the boardwalk in Atlantic City, New Jersey. The 641-room facility
includes 74,000 square feet of casino space with more than 2,000 slot
machines and about 125 table games, 12 restaurants and bars, a 1,100-
seat showroom and a transportation center for 2,500 cars. Since 1989
Caesars has invested more than $150 million in capital expenditures at
the Atlantic City property.
-more-
- Casino Windsor, an interim casino in Windsor, Ontario, opened in May
1994. The facility is managed by a joint-venture between Caesars World,
Circus Circus Enterprises and Hilton Hotels Corporation and is owned by
the Government of Ontario. It includes 50,000 square feet of casino
space with 1,700 slot machines and 65 table games. A permanent casino is
scheduled to be completed in 1997 and will be located on 13 acres in
Windsor's central business district, immediately across the river from
Detroit, Michigan. It will include a 75,000-square-foot casino, 2,400
slots, 125 table games, a 1,000-seat showroom, three dining areas, an
entertainment component and a 300-room hotel.
- Caesars World operates Caesars Palace at Sea, a casino aboard the
Crystal Harmony, a luxury cruise ship owned by Crystal Cruises. Plans
call for Caesars to operate another Caesars Palace at Sea casino on
board a sister ship -- the Crystal Symphony -- scheduled to launch
operations in 1998.
-more-
- Caesars World also has four non-gaming resorts in the Pocono Mountains
of Pennsylvania. These include Caesars Cove Haven, Caesars Pocono
Palace, Caesars Paradise Stream and Caesars Brookdale. Combined, they
feature more than 750 rooms and suites and a full complement of
recreational and other destination resort amenities.
####
Exhibit (a)(9)
[LETTERHEAD OF ITT CORPORATION APPEARS HERE]
DATE: December 23, 1994
CONTACT: Jim Gallagher
TELEPHONE: 212-258-1261
FOR IMMEDIATE RELEASE
ITT COMMENCES TENDER OFFER FOR CAESARS WORLD, INC.
NEW YORK, NY, December 23, 1994 -- ITT Corporation announced that it
commenced today its previously announced tender offer at $67.50 per share for
all the outstanding shares of Caesars World, Inc. The offer is scheduled to
expire in 20 business days, on Tuesday, January 24, 1995, unless extended. The
offer is conditioned upon certain regulatory approvals and other customary
conditions, but is not subject to obtaining financing.
While the company expects to receive these approvals in January, 1995,
there can be no assurance that such approvals will be received or received
within such time.
- ITT -
JPG 0122194
pr5594
EXHIBIT (c)(1)
CONFORMED COPY
================================================================================
AGREEMENT AND PLAN OF MERGER
Dated as of December 19, 1994
Among
ITT CORPORATION,
ITT FLORIDA ENTERPRISES INC.
And
CAESARS WORLD, INC.
================================================================================
TABLE OF CONTENTS
PAGE
----
Parties and Recitals ........................................... 1
ARTICLE I
THE OFFER
---------
SECTION 1.01. The Offer ...................................... 2
SECTION 1.02. Company Actions ............................... 4
ARTICLE II
THE MERGER
----------
SECTION 2.01. The Merger...................................... 6
SECTION 2.02. Closing......................................... 6
SECTION 2.03. Effective Time.................................. 6
SECTION 2.04. Effects of the Merger........................... 7
SECTION 2.05. Articles of Incorporation and
By-laws....................................... 7
SECTION 2.06. Directors....................................... 7
SECTION 2.07. Officers........................................ 7
ARTICLE III
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
------------------------------------------------
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
--------------------------------------------------
SECTION 3.01. Effect on Capital Stock......................... 7
SECTION 3.02. Exchange of Certificates........................ 9
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
------------------------------
SECTION 4.01. Representations and Warranties of
the Company................................... 11
SECTION 4.02. Representations and Warranties of
Parent and Sub................................ 31
2
PAGE
----
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
-----------------------------------------
SECTION 5.01. Conduct of Business............................. 35
SECTION 5.02. No Solicitation................................. 40
SECTION 5.03. New Jersey Trust................................ 43
ARTICLE VI
ADDITIONAL AGREEMENTS
---------------------
SECTION 6.01. Stockholder Meeting; Preparation of
the Proxy Statement........................... 44
SECTION 6.02. Access to Information;
Confidentiality............................... 45
SECTION 6.03. Reasonable Efforts; Notification................ 46
SECTION 6.04. Stock Options Plans............................. 48
SECTION 6.05. Indemnification and Insurance................... 49
SECTION 6.06. Directors....................................... 50
SECTION 6.07. Fees and Expenses............................... 51
SECTION 6.08. Public Announcements............................ 51
SECTION 6.09. Rights Agreements............................... 52
SECTION 6.10. Benefit Plans................................... 52
SECTION 6.11. Title Policies.................................. 54
SECTION 6.12. Transfer Taxes.................................. 54
SECTION 6.13. Regulatory Matters.............................. 55
ARTICLE VII
CONDITIONS PRECEDENT
--------------------
SECTION 7.01. Conditions to Each Party's
Obligation to Effect the Merger............... 55
SECTION 7.02. Conditions to Obligations of Parent
and Sub....................................... 56
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
---------------------------------
SECTION 8.01. Termination..................................... 56
SECTION 8.02. Effect of Termination........................... 57
SECTION 8.03. Amendment....................................... 58
SECTION 8.04. Extension; Waiver............................... 58
3
PAGE
----
SECTION 8.05. Procedure for Termination,
Amendment, Extension or Waiver................ 58
ARTICLE IX
GENERAL PROVISIONS
------------------
SECTION 9.01. Nonsurvival of Representations.................. 59
SECTION 9.02. Notices......................................... 59
SECTION 9.03. Definitions..................................... 60
SECTION 9.04. Interpretation.................................. 63
SECTION 9.05. Counterparts.................................... 63
SECTION 9.06. Entire Agreement; No Third-Party
Beneficiaries................................. 63
SECTION 9.07. Governing Law................................... 64
SECTION 9.08. Assignment...................................... 64
SECTION 9.09. Enforcement..................................... 64
EXHIBIT A Conditions of the Offer
EXHIBIT (C)(1)
AGREEMENT AND PLAN OF MERGER dated as of December 19, 1994,
among ITT CORPORATION, a Delaware corporation ("Parent"), ITT
FLORIDA ENTERPRISES INC., a Florida corporation ("Sub") and a
wholly owned subsidiary of Parent, and CAESARS WORLD, INC., a
Florida corporation (the "Company").
WHEREAS the respective Boards of Directors of Parent, Sub and the
Company have approved the acquisition of the Company by Parent on the terms and
subject to the conditions set forth in this Agreement;
WHEREAS in furtherance of such acquisition, Parent will cause Sub to
make a tender offer (as it may be amended from time to time as permitted under
this Agreement, the "Offer") to purchase all the issued and outstanding shares
of Common Stock, par value $.10 per share, of the Company (together with any
associated Rights (as hereinafter defined), the "Company Common Stock"), at a
price per share of Company Common Stock of $67.50 net to the seller in cash
(such price, the "Offer Price"), upon the terms and subject to the conditions
set forth in this Agreement; and the Board of Directors of the Company has
approved the Offer and is recommending that the Company's stockholders accept
the Offer;
WHEREAS the respective Boards of Directors of Parent, Sub and the
Company have approved the Offer and the Merger of Sub into the Company, as set
forth below (the "Merger"), upon the terms and subject to the conditions set
forth in this Agreement, whereby each issued and outstanding share of Company
Common Stock, other than shares owned directly or indirectly by Parent or the
Company and Dissenting Shares (as defined in Section 3.01(d)), will be converted
into the right to receive the price per share paid in the Offer;
WHEREAS Parent and Sub are unwilling to enter into this Agreement
unless the Company, contemporaneously with the execution and delivery of this
Agreement, enters into an Option Agreement (the "Option Agreement") among
Parent, Sub and the Company providing for, among other things, the grant by the
Company to Parent of the option under certain circumstances to purchase up to
5,000,000 newly issued shares of Company Common Stock, plus all shares of
Company Common Stock held in treasury; and the Board of Directors of
2
the Company has approved the execution and delivery of the Option Agreement
which is being executed contemporaneously with the execution hereof; and
WHEREAS Parent, Sub and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Offer and the Merger and also to prescribe various conditions to the Offer and
the Merger.
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement, the parties agree as
follows:
ARTICLE I
THE OFFER
---------
SECTION 1.01. The Offer. (a) Subject to the provisions of this
----------
Agreement, as promptly as practicable, but in no event later than five business
days after the public announcement of the Offer, Sub shall, and Parent shall
cause Sub to, commence the Offer. The obligation of Sub to, and of Parent to
cause Sub to, commence the Offer and accept for payment, and pay for, any shares
of Company Common Stock tendered pursuant to the Offer shall be subject to the
conditions set forth in Exhibit A (any of which may be waived in whole or in
part by Sub in its sole discretion) and to the terms and conditions of this
Agreement; provided, however, that Sub shall not, without the Company's consent,
-------- -------
waive the Minimum Condition (as defined in Exhibit A). Sub expressly reserves
the right to modify the terms of the Offer, except that, without the consent of
the Company, Sub shall not (i) reduce the number of shares of Company Common
Stock to be purchased in the Offer, (ii) reduce the Offer Price, (iii) modify or
add to the conditions set forth in Exhibit A, (iv) except as provided in the
next sentence, extend the Offer, (v) change the form of consideration payable in
the Offer or (vi) amend any other term of the Offer in a manner adverse to the
holders of Company Common Stock. Notwithstanding the foregoing, Sub may,
without the consent of the Company, (i) extend the Offer beyond any scheduled
expiration date (the initial scheduled expiration date being 20 business days
following commencement of the Offer) for a period not to exceed 20 business
days, if at any scheduled expiration date of the Offer, any of the conditions to
Sub's obligation to accept for payment, and pay for, shares of
3
Company Common Stock shall not be satisfied or waived, until such time as such
conditions are satisfied or waived, (ii) extend the Offer for any period
required by any rule, regulation, interpretation or position of the Securities
and Exchange Commission (the "SEC") or the staff thereof applicable to the Offer
and (iii) extend the Offer for an aggregate period of not more than 15 business
days beyond the latest expiration date that would otherwise be permitted under
clause (i) or (ii) of this sentence if there shall not have been tendered
sufficient shares of Company Common Stock so that the Merger could be effected
as provided in the last sentence of Section 6.01(a). Subject to the terms and
conditions of the Offer and this Agreement, Sub shall, and Parent shall cause
Sub to, accept for payment, and pay for, all shares of Company Common Stock
validly tendered and not withdrawn pursuant to the Offer that Sub becomes
obligated to accept for payment, and pay for, pursuant to the Offer as soon as
practicable after expiration of the Offer.
(b) On the date of commencement of the Offer, Parent and Sub shall
file with the SEC a Tender Offer Statement on Schedule 14D-1 with respect to the
Offer, which shall contain an offer to purchase and a related letter of
transmittal and summary advertisement (such Schedule 14D-1 and the documents
included therein pursuant to which the Offer will be made, together with any
supplements or amendments thereto, the "Offer Documents"). Parent and Sub agree
that the Offer Documents shall comply as to form in all material respects with
the Securities Exchange Act of 1934, as amended (the "Exchange Act") and the
rules and regulations promulgated thereunder and, on the date first published,
sent or given to the Company's stockholders, shall not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading, except that no
representation is made by Parent or Sub with respect to information supplied by
the Company for inclusion or incorporation by reference in the Offer Documents.
Each of Parent, Sub and the Company agrees promptly to correct any information
provided by it for use in the Offer Documents if and to the extent that such
information shall have become false or misleading in any material respect, and
each of Parent and Sub further agrees to take all steps necessary to amend or
supplement the Offer Documents and to cause the Offer Documents as so amended or
supplemented to be filed with the SEC and to be disseminated to the Company's
stockholders, in each case as and to the
4
extent required by applicable Federal securities laws. The Company and its
counsel shall be given a reasonable opportunity to review and comment upon the
Offer Documents and all amendments and supplements thereto prior to their filing
with the SEC or dissemination to stockholders of the Company. Parent and Sub
agree to provide the Company and its counsel any comments Parent, Sub or their
counsel may receive from the SEC or its staff with respect to the Offer
Documents promptly after the receipt of such comments and shall provide the
Company and its counsel an opportunity to participate, including by way of
discussion with the SEC or its staff, in the response of Parent and/or Sub to
such comments.
(c) Parent shall provide or cause to be provided to Sub on a timely
basis the funds necessary to accept for payment, and pay for, any shares of
Company Common Stock that Sub accepts for payment, and becomes obligated to pay
for, pursuant to the Offer.
SECTION 1.02. Company Actions. (a) The Company hereby approves of
----------------
and consents to the Offer and represents that the Board of Directors of the
Company, at a meeting duly called and held, duly and unanimously by vote of all
directors adopted resolutions approving this Agreement, the Offer, the Merger
and the Option Agreement, determining that the terms of the Offer and the Merger
are fair to, and in the best interests of, the Company's stockholders and
recommending that the Company's stockholders approve and adopt this Agreement,
and accept the Offer and tender their shares pursuant to the Offer. The Company
has been advised by each of its directors and by each executive officer who as
of the date hereof is aware of the transactions contemplated hereby, that each
such person either intends to tender pursuant to the Offer all shares of Company
Common Stock owned by such person or vote all shares of Company Common Stock
owned by such person in favor of the Merger, provided that any director or
--------
executive officer shall be permitted to sell shares of Company Common Stock in
compliance with applicable law.
(b) Not later than the date the Offer Documents are filed with the
SEC or as shortly thereafter as is practicable, the Company shall file with the
SEC a Solicitation/ Recommendation Statement on Schedule 14D-9 with respect to
the Offer (such Schedule 14D-9, as amended from time to time, the "Schedule 14D-
9") containing the recommendation described in Section 1.02(a) and shall mail
the
5
Schedule 14D-9 to the stockholders of the Company. The Schedule 14D-9 shall
comply as to form in all material respects with the Exchange Act and the rules
and regulations promulgated thereunder and, on the date filed with the SEC and
on the date first published, sent or given to the Company's stockholders, shall
not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading, except that no representation is made by the Company with
respect to information supplied by Parent or Sub for inclusion or incorporation
by reference in the Schedule 14D-9. Each of the Company, Parent and Sub agrees
promptly to correct any information provided by it for use in the Schedule 14D-9
if and to the extent that such information shall have become false or misleading
in any material respect, and the Company further agrees to take all steps
necessary to amend or supplement the Schedule 14D-9 and to cause the Schedule
14D-9 as so amended or supplemented to be filed with the SEC and disseminated to
the Company's stockholders, in each case as and to the extent required by
applicable Federal securities laws. Parent and its counsel shall be given a
reasonable opportunity to review and comment upon the Schedule 14D-9 and all
amendments and supplements thereto prior to their filing with the SEC or
dissemination to stockholders of the Company. The Company agrees to provide
Parent and its counsel with any comments the Company or its counsel may receive
from the SEC or its staff with respect to the Schedule 14D-9 promptly after the
receipt of such comments and shall provide Parent and its counsel an opportunity
to participate, including by way of discussions with the SEC or its staff, in
the response of the Company to such comments.
(c) In connection with the Offer, the Company shall cause its
transfer agent to furnish Sub promptly with mailing labels containing the names
and addresses of the record holders of Company Common Stock as of a recent date
and of those persons becoming record holders subsequent to such date, together
with copies of all lists of stockholders, security position listings and
computer files and all other information in the Company's possession or control
regarding the beneficial owners of Company Common Stock, and shall furnish to
Sub such information and assistance (including updated lists of stockholders,
security position listings and computer files) as Parent may reasonably request
in communicating the Offer to the Company's stock-
6
holders. Subject to the requirements of applicable law, and except for such
steps as are necessary to disseminate the Offer Documents and any other
documents necessary to consummate the Merger, Parent and Sub and their agents
shall hold in confidence the information contained in any such labels, listings
and files, will use such information only in connection with the Offer and the
Merger and, if this Agreement shall be terminated, will, upon request, deliver,
and will use their best efforts to cause their agents to deliver, to the Company
all copies of such information then in their possession or control.
ARTICLE II
THE MERGER
----------
SECTION 2.01. The Merger. Upon the terms and subject to the
-----------
conditions set forth in this Agreement, and in accordance with the Florida
Business Corporation Act (the "FBCA"), Sub shall be merged with and into the
Company at the Effective Time (as hereinafter defined). Following the Merger,
the separate corporate existence of Sub shall cease and the Company shall
continue as the surviving corporation (the "Surviving Corporation") and shall
succeed to and assume all the rights and obligations of the Company in
accordance with the FBCA. At the election of Parent, any direct or indirect
wholly owned subsidiary (as defined in Section 9.03) of Parent may be
substituted for Sub as a constituent corporation in the Merger. In such event,
the parties agree to execute an appropriate amendment to this Agreement in order
to reflect the foregoing.
SECTION 2.02. Closing. The closing of the Merger will take place at
--------
10:00 a.m. on a date to be specified by the Parent or Sub, which may be on, but
shall be no later than the third business day after, the day on which there
shall have been satisfaction or waiver of the conditions set forth in Article
VII (the "Closing Date"), at the offices of Cravath, Swaine & Moore, Worldwide
Plaza, 825 Eighth Avenue, New York, N.Y. 10019, unless another date or place is
agreed to in writing by the parties hereto.
SECTION 2.03. Effective Time. On the Closing Date, or as soon as
---------------
practicable thereafter, the parties shall file articles of merger or other
appropriate documents (in any such case, the "Articles of Merger") executed in
accordance with the relevant provisions of the FBCA and
7
shall make all other filings or recordings required under the FBCA. The Merger
shall become effective at such time as the Articles of Merger are duly filed
with the Florida Department of State, or at such other later time as Sub and the
Company shall agree and specify in the Articles of Merger (the time the Merger
becomes effective being the "Effective Time").
SECTION 2.04. Effects of the Merger. The Merger shall have the
----------------------
effects set forth in Section 607.1106 of the FBCA.
SECTION 2.05. Articles of Incorporation and By-laws. (a) The
--------------------------------------
Articles of Incorporation of the Company, as in effect immediately prior to the
Effective Time of the Merger, shall become the Articles of Incorporation of the
Surviving Corporation after the Effective Time, and thereafter may be amended in
accordance with its terms and as provided by law and this Agreement.
(b) The By-laws of the Company as in effect on the Effective Time
shall become the By-laws of the Surviving Corporation.
SECTION 2.06. Directors. The directors of Sub immediately prior to
----------
the Effective Time shall become the directors of the Surviving Corporation,
until the earlier of their resignation or removal or until their respective
successors are duly elected and qualified, as the case may be.
SECTION 2.07. Officers. The officers of the Company immediately
---------
prior to the Effective Time shall become the officers of the Surviving
Corporation, until the earlier of their resignation or removal or until their
respective successors are duly elected and qualified, as the case may be.
ARTICLE III
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
------------------------------------------------
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
--------------------------------------------------
SECTION 3.01. Effect on Capital Stock. As of the Effective Time, by
------------------------
virtue of the Merger and without any
8
action on the part of the holder of any shares of Company Common Stock or any
shares of capital stock of Sub:
(a) Capital Stock of Sub. Each share of the capital stock of Sub
---------------------
issued and outstanding immediately prior to the Effective Time shall be
converted into and become one fully paid and nonassessable share of Common
Stock, par value $.10 per share, of the Surviving Corporation.
(b) Cancellation of Treasury Stock and Parent Owned Stock. Each
------------------------------------------------------
share of Company Common Stock that is owned by the Company or by any
subsidiary of the Company and each share of Company Common Stock that is
owned by Parent, Sub or any other subsidiary of Parent shall automatically
be canceled and retired and shall cease to exist, and no consideration
shall be delivered in exchange therefor.
(c) Conversion of Common Stock. Subject to Section 3.01(d), each
---------------------------
issued and outstanding share of Company Common Stock (other than shares to
be canceled in accordance with Section 3.01(b)) shall be converted into the
right to receive from the Surviving Corporation in cash, without interest,
the price paid for each share of Company Common Stock in the Offer (the
"Merger Consideration"). As of the Effective Time, all such shares of
Company Common Stock shall no longer be outstanding and shall automatically
be canceled and retired and shall cease to exist, and each holder of a
certificate representing any such shares of Company Common Stock shall
cease to have any rights with respect thereto, except the right to receive
the Merger Consideration, without interest.
(d) Shares of Dissenting Stockholders. Notwithstanding anything in
----------------------------------
this Agreement to the contrary, any issued and outstanding shares of
Company Common Stock held by a person (a "Dissenting Stockholder") who
objects to the Merger and complies with all the provisions of Florida law
concerning the right of holders of Company Common Stock to dissent from the
Merger and require appraisal of their shares of Company Common Stock
("Dissenting Shares") shall not be converted as described in Section
3.01(c) but shall become the right to receive such consideration as may be
determined to be due to such Dissenting Stockholder pursuant to the laws of
the State of Florida. If, after the Effective
9
Time, such Dissenting Stockholder withdraws his demand for appraisal or
fails to perfect or otherwise loses his right of appraisal, in any case
pursuant to the FBCA, his shares of Company Common Stock shall be deemed to
be converted as of the Effective Time into the right to receive the Merger
Consideration, without interest. The Company shall give Parent (i) prompt
notice of any demands for appraisal of shares of Company Common Stock
received by the Company and (ii) the opportunity to participate in and
direct all negotiations and proceedings with respect to any such demands.
The Company shall not, without the prior written consent of Parent, make
any payment with respect to, or settle, offer to settle or otherwise
negotiate, any such demands.
SECTION 3.02. Exchange of Certificates. (a) Paying Agent. Prior to
------------------------- -------------
the Effective Time, Parent shall designate a bank or trust company to act as
paying agent in the Merger (the "Paying Agent"), and, from time to time on,
prior to or after the Effective Time, Parent shall make available, or cause the
Surviving Corporation to make available, to the Paying Agent immediately
available funds in amounts and at the times necessary for the payment of the
Merger Consideration upon surrender of certificates representing Company Common
Stock as part of the Merger pursuant to Section 3.01, it being understood that
any and all interest earned on funds made available to the Paying Agent pursuant
to this Agreement shall be turned over to Parent.
(b) Exchange Procedure. As soon as reasonably practicable after the
-------------------
Effective Time, the Paying Agent shall mail to each holder of record of a
certificate or certificates which immediately prior to the Effective Time
represented outstanding shares of Company Common Stock (the "Certificates")
whose shares were converted into the right to receive the Merger Consideration
pursuant to Section 3.01, (i) a letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates shall
pass, only upon delivery of the Certificates to the Paying Agent and shall be in
such form and have such other provisions as Parent may reasonably specify) and
(ii) instructions for use in effecting the surrender of the Certificates in
exchange for the Merger Consideration. Upon surrender of a Certificate for
cancellation to the Paying Agent or to such other agent or agents as may be
appointed by the Parent, together with such letter of transmittal, duly
executed, and such other docu-
10
ments as may reasonably be required by the Paying Agent, the holder of such
Certificate shall be entitled to receive in exchange therefor the amount of cash
into which the shares of Company Common Stock theretofore represented by such
Certificate shall have been converted pursuant to Section 3.01, and the
Certificate so surrendered shall forthwith be cancelled. In the event of a
transfer of ownership of Company Common Stock which is not registered in the
transfer records of the Company, payment may be made to a person other than the
person in whose name the Certificate so surrendered is registered, if such
Certificate shall be properly endorsed or otherwise be in proper form for
transfer and the person requesting such payment shall pay any transfer or other
taxes required by reason of the payment to a person other than the registered
holder of such Certificate or establish to the satisfaction of Parent that such
tax has been paid or is not applicable. Until surrendered as contemplated by
this Section 3.02, each Certificate shall be deemed at any time after the
Effective Time to represent only the right to receive upon such surrender the
amount of cash, without interest, into which the shares of Company Common Stock
theretofore represented by such Certificate shall have been converted pursuant
to Section 3.01. No interest will be paid or will accrue on the cash payable
upon the surrender of any Certificate.
(c) No Further Ownership Rights in Company Common Stock. All cash
----------------------------------------------------
paid upon the surrender of Certificates in accordance with the terms of this
Article III shall be deemed to have been paid in full satisfaction of all rights
pertaining to the shares of Company Common Stock theretofore represented by such
Certificates, and there shall be no further registration of transfers on the
stock transfer books of the Surviving Corporation of the shares of Company
Common Stock which were outstanding immediately prior to the Effective Time.
If, after the Effective Time, Certificates are presented to the Surviving
Corporation or the Paying Agent for any reason, they shall be cancelled and
exchanged as provided in this Article III, except as otherwise provided by law.
(d) No Liability. None of Parent, Sub, the Company or the Paying
-------------
Agent shall be liable to any person in respect of any cash delivered to a public
official pursuant to any applicable abandoned property, escheat or similar law.
11
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
------------------------------
SECTION 4.01. Representations and Warranties of the Company. The
----------------------------------------------
Company represents and warrants to Parent and Sub as follows:
(a) Organization, Standing and Corporate Power. Each of the Company
-------------------------------------------
and each of its Significant Subsidiaries is a corporation or partnership
duly organized, validly existing and in good standing under the laws of the
jurisdiction in which it is organized and has the requisite corporate or
partnership power and authority to carry on its business as now being
conducted. Each of the Company and its subsidiaries is duly qualified or
licensed to do business and is in good standing in each jurisdiction in
which the nature of its business or the ownership or leasing of its
properties makes such qualification or licensing necessary, other than in
such jurisdictions where the failure to be so qualified or licensed
(individually or in the aggregate) would not have a material adverse effect
on the Company. The Company has made available to Parent complete and
correct copies of the Amended and Restated Articles of Incorporation and
by-laws of the Corporation, in each case as amended to the date of this
Agreement, and will make available immediately following the date of this
Agreement the certificates of incorporation and by-laws or other
organizational documents of its subsidiaries, in each case as amended to
the date of this Agreement. The respective certificates of incorporation
and by-laws or other organizational documents of the subsidiaries of the
Company do not contain any provision limiting or otherwise restricting the
ability of the Company to control such subsidiaries. For purposes of this
Agreement, a "Significant Subsidiary" means any subsidiary of the Company
that (x) constitutes a significant subsidiary within the meaning of Rule 1-
02 of Regulation S-X of the SEC or (y) the acquisition of which would
require regulatory approval under any Gaming Law.
(b) Subsidiaries. The list of subsidiaries of the Company filed by
-------------
the Company with its most recent Report on Form 10-K is a true and accurate
list of all the subsidiaries of the Company which are required to
12
be set forth therein. All the outstanding shares of capital stock of each
Significant Subsidiary are owned by the Company, by another wholly owned
subsidiary of the Company or by the Company and another wholly owned
subsidiary of the Company, free and clear of all liens.
(c) Capital Structure. The authorized capital stock of the Company
------------------
consists of 50,000,000 shares of Company Common Stock and 1,000,000 shares
of preferred stock, par value $.10 per share ("Company Preferred Stock").
At the close of business on December 13, 1994, (i) 25,120,963 shares of
Company Common Stock and no shares of Company Preferred Stock were issued
and outstanding, (ii) 1,354,538 shares of Company Common Stock were held by
the Company in its treasury, (iii) 774,926 shares of Company Common Stock
were reserved for issuance upon exercise of outstanding Stock Options (as
defined in Section 6.04), (iv) 89,341 shares of Company Common Stock were
reserved for issuance in respect of contingent shares of Company Common
Stock and (v) no shares of Company Common Stock and 250,000 shares of
Company Preferred Stock were reserved for issuance in connection with the
rights (the "Rights") to purchase shares of Company capital stock issued
pursuant to the Rights Agreement dated as of January 10, 1989 (as amended
from time to time, the "Rights Agreement"), between the Company and First
Chicago Trust Company of New York, as Rights Agent (the "Rights Agent").
Except as set forth above, as of the date of this Agreement, no shares of
capital stock or other voting securities of the Company were issued,
reserved for issuance or outstanding. There are no outstanding stock
appreciation rights which were not granted in tandem with a related Stock
Option, restricted stock grant or contingent stock grant and, other than as
may be contained in employee benefit plans, employment agreements,
merchandising incentive agreements, stock options and similar plans,
agreements and instruments, there are no other outstanding contractual
rights to which the Company is a party (other than Benefit Plans) the value
of which is derived from the financial performance of the Company or the
value of shares of Company Common Stock. All outstanding shares of capital
stock of the Company are, and all shares which may be issued will be, when
issued, duly authorized, validly issued, fully paid and nonassessable and
not subject to preemptive rights. There are no bonds, debentures, notes or
other
13
indebtedness of the Company having the right to vote (or convertible into,
or exchangeable for, securities having the right to vote) on any matters on
which stockholders of the Company may vote. Except as set forth above, as
of the date of this Agreement, there are no outstanding securities,
options, warrants, calls, rights, commitments, agreements, arrangements or
undertakings of any kind to which the Company or any of its subsidiaries is
a party or by which any of them is bound obligating the Company or any of
its subsidiaries to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of capital stock or other voting
securities of the Company or of any of its subsidiaries or obligating the
Company or any of its subsidiaries to issue, grant, extend or enter into
any such security, option, warrant, call, right, commitment, agreement,
arrangement or undertaking. Except to the extent Paragraph 12 of Article
III of the Company's Amended and Restated Articles of Incorporation or a
provision comparable to such Paragraph 12 under any Gaming Law could be
construed as a contractual obligation or any Stock Options contain a
provision comparable to such Paragraph 12, or as may be required by any
restricted stock arrangement, stock appreciation rights, tax withholding
with respect to restricted and contingent stock, and stock options, payment
for the exercise of which is made in capital stock of the Company, there
are not any outstanding contractual obligations of the Company or any of
its subsidiaries to repurchase, redeem or otherwise acquire any shares of
capital stock of the Company or any of its subsidiaries.
(d) Authority; Noncontravention. The Company has the requisite
----------------------------
corporate power and authority to enter into this Agreement and, subject to
approval of this Agreement by the holders of a majority of the outstanding
shares of Company Common Stock, to consummate the transactions contemplated
by this Agreement. The execution and delivery of this Agreement by the
Company and the consummation by the Company of the transactions
contemplated by this Agreement have been duly authorized by all necessary
corporate action on the part of the Company, subject, in the case of this
Agreement, to approval of this Agreement by the holders of a majority of
the outstanding shares of Company Common Stock. This Agreement has been
duly executed and delivered by the Company and, assuming this Agreement
constitutes
14
the valid and binding obligation of Parent and Sub, constitutes the valid
and binding obligation of the Company, enforceable against the Company in
accordance with its terms, except that (i) such enforcement may be subject
to the matters set forth in the last sentence of Section 9.04 and to
bankruptcy, insolvency, reorganization, moratorium or other similar laws
now or hereafter in effect relating to creditors' rights generally and (ii)
the remedy of specific performance and injunctive relief may be subject to
equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought. The execution and delivery of this
Agreement do not, and the consummation of the transactions contemplated by
this Agreement (including the changes in the composition of the Board of
Directors of the Company) and compliance with the provisions of this
Agreement will not, conflict with, or result in any violation of, or
default (with or without notice or lapse of time, or both) under, or give
rise to a right of termination, cancellation or acceleration of any
obligation or to loss of a material benefit under, or result in the
creation of any lien upon any of the properties or assets of the Company or
any of its subsidiaries under, (i) the Amended and Restated Articles of
Incorporation or by-laws of the Company or the comparable charter or
organizational documents of any of its subsidiaries, (ii) other than
contingent severance agreements, severance plans, employment agreements,
tax withholding rights, stock options and stock grant agreements and
subject to the governmental filings and other matters referred to in the
following sentence, any loan or credit agreement (except the Loan Agreement
dated as of August 21, 1992, among the Company, the banks named therein and
Bank of America National Trust and Savings Association, as Agent, as
amended), note, bond, mortgage, indenture (except the Senior Subordinated
Indenture dated August 15, 1992, between the Company and First Trust
National Association), lease or other agreement (other than understandings
and business arrangements relating to projects in Missouri and Windsor,
Canada), instrument, permit, concession, franchise or license applicable to
the Company or any of its subsidiaries or their respective properties or
assets (including all agreements described pursuant to Section 4.01(v)) or
(iii) subject to the governmental filings and other matters referred to in
the following sentence, any judgment, order, decree, statute, law,
15
ordinance, rule or regulation applicable to the Company or any of its
subsidiaries or their respective properties or assets, other than, in the
case of clauses (ii) or (iii), any such conflicts, violations, defaults,
rights or liens that individually or in the aggregate would not (x) have a
material adverse effect on the Company, (y) impair in any material respect
the ability of the Company to perform its obligations under this Agreement
or (z) prevent or impede, in any material respect, the consummation of any
of the transactions contemplated by this Agreement. To the knowledge of
the Company, no consent, approval, order or authorization of, or
registration, declaration or filing with, any Federal, state or local
government or any court, administrative or regulatory agency or commission
or other governmental authority or agency, domestic or foreign (a
"Governmental Entity"), is required by the Company or any of its
subsidiaries in connection with the execution and delivery of this
Agreement by the Company or the consummation by the Company of the
transactions contemplated by this Agreement, except for (i) the filing of a
premerger notification and report form by the Company under the Hart-Scott-
Rodino Antitrust Improvements Act of 1976 (the "HSR Act"), (ii) the filing
with the SEC of (x) the Schedule 14D-9, (y) a proxy statement relating to
any required approval by the Company's stockholders of this Agreement (as
amended or supplemented from time to time, the "Proxy Statement") and (z)
such reports under Section 13(a) of the Exchange Act as may be required in
connection with this Agreement and the transactions contemplated by this
Agreement, (iii) the filing of the Articles of Merger with the Florida
Department of State and appropriate documents with the relevant authorities
of other states in which the Company is qualified to do business, (iv) the
approval by (A) the New Jersey Casino Control Commission under the New
Jersey Casino Control Act and the rules and regulations promulgated
thereunder, (B) the Nevada State Gaming Control Board and the Nevada Gaming
Commission under the Nevada Gaming Control Act and the rules and
regulations promulgated thereunder, (C) the Clark County Liquor and Gaming
Licensing Board pursuant to the Clark County, Nevada Code and the rules and
regulations promulgated thereunder, (D) the National Indian Gaming
Commission under the Indian Gaming Regulatory Act and the rules and
regulations promulgated thereunder, (E) the Ontario Gaming Control
Commission under the Ontario Gaming
16
Control Act, 1992 and the rules and regulations promulgated thereunder, (F)
the Indiana Gaming Commission under Article 33, Title IV of the Official
Indiana Code, (G) the Missouri Gaming Commission under Mo. Rev. Stat. (S)
313.800-850 and the rules and regulations promulgated thereunder and (H)
the Agua Caliente Tribal Council, (v) as may be required by any applicable
state securities or "blue sky" laws, (vi) in connection with any state or
local tax which is attributable to the beneficial ownership of real
property of the Company or its subsidiaries, (vii) such immaterial filings
and consents as may be required under any environmental, health or safety
law or regulation pertaining to any notification, disclosure or required
approval triggered by the Offer, the Merger or the transactions
contemplated by this Agreement, (viii) such immaterial filings, consents,
approvals, orders, registrations and declarations as may be required under
the laws of any foreign country in which the Company or any of its
subsidiaries conducts any business or owns any assets, and (ix) such other
consents, approvals, orders, authorizations, registrations, declarations
and filings the failure of which to be obtained or made would not,
individually or in the aggregate, (x) have a material adverse effect on the
Company, (y) impair, in any material respect, the ability of the Company to
perform its obligations under this Agreement or (z) prevent or
significantly delay the consummation of the transactions contemplated by
this Agreement.
(e) SEC Documents; Financial Statements. The Company has filed all
------------------------------------
required reports, proxy statements, forms, and other documents with the SEC
since July 31, 1993 (the "SEC Documents"). As of their respective dates,
(i) the SEC Documents complied in all material respects with the
requirements of the Securities Act of 1933 (the "Securities Act"), or the
Exchange Act, as the case may be, and the rules and regulations of the SEC
promulgated thereunder applicable to such SEC Documents, and (ii) none of
the SEC Documents contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. Except to the extent that
information contained in any SEC Document has been revised or superseded by
a later-
17
filed SEC Document filed and publicly available prior to the date of this
Agreement, none of the SEC Documents contains any untrue statement of a
material fact or omits 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 were made, not misleading. The
financial statements of the Company included in the SEC Documents comply as
to form in all material respects with applicable accounting requirements
and the published rules and regulations of the SEC with respect thereto,
have been prepared in accordance with generally accepted accounting
principles (except, in the case of unaudited statements, as permitted by
Form 10-Q of the SEC) applied on a consistent basis during the periods
involved (except as may be indicated in the notes thereto) and fairly
present the consolidated financial position of the Company and its
consolidated subsidiaries as of the dates thereof and the consolidated
results of their operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments). Except as set forth in the SEC Documents filed and publicly
available prior to the date of this Agreement, and except for liabilities
and obligations incurred in the ordinary course of business consistent with
past practice since the date of the most recent consolidated balance sheet
included in the SEC Documents filed and publicly available prior to the
date of this Agreement, neither the Company nor any of its subsidiaries has
any liabilities or obligations of any nature (whether accrued, absolute,
contingent or otherwise) required by generally accepted accounting
principles to be set forth on a consolidated balance sheet of the Company
and its consolidated subsidiaries or in the notes thereto.
(f) Information Supplied. None of the information supplied or to be
---------------------
supplied by the Company expressly for inclusion or incorporation by
reference in (i) the Offer Documents or (ii) the information to be filed by
the Company in connection with the Offer pursuant to Rule 14f-1 promulgated
under the Exchange Act (the "Information Statement"), will, at the
respective times the Offer Documents and the Information Statement are
filed with the SEC and first published, sent or given to the Company's
stockholders, contain any untrue statement of a material fact or omit
18
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. The Information Statement will comply
as to form in all material respects with the Exchange Act and the rules and
regulations thereunder, except that no representation or warranty is made
by the Company with respect to statements made or incorporated by reference
therein based on information supplied by Parent or Sub for inclusion or
incorporation by reference therein.
(g) Absence of Certain Changes or Events. Except as disclosed in the
-------------------------------------
SEC Documents filed and publicly available prior to the date of this
Agreement or as set forth in Schedule 4.01(g), since July 31, 1994, the
Company and its subsidiaries have conducted their respective businesses
only in the ordinary course, and there has not been (i) any material
adverse change in the Company, (ii) any declaration, setting aside or
payment of any dividend or other distribution with respect to its capital
stock, (iii) any split, combination or reclassification of any of its
capital stock or any issuance or the authorization of any issuance of any
other securities in respect of, in lieu of or in substitution for shares of
its capital stock, (iv) (x) any granting by the Company or any of its
subsidiaries to any officer of the Company or any of its subsidiaries of
any increase in compensation, except in the ordinary course of business
(including in connection with promotions) consistent with prior practice or
as was required under employment agreements in effect as of the date of the
most recent audited financial statements included in the SEC Documents
filed and publicly available prior to the date of this Agreement, (y) any
granting by the Company or any of its subsidiaries to any such officer of
any increase in severance or termination pay, except as part of a standard
employment package to any person promoted or hired (but not including the
five most senior officers), or as was required under employment, severance
or termination agreements in effect as of the date of the most recent
audited financial statements included in the SEC Documents filed and
publicly available prior to the date of this Agreement or as disclosed in
Schedule 4.01(g) or (z) except termination arrangements in the ordinary
course of business consistent with past practice with employees other than
19
any executive officer of the Company and except for the two employment
agreements referred to in Section 6.10(a), any entry by the Company or any
of its subsidiaries into any employment, severance or termination agreement
with any such officer, (v) any damage, destruction or loss, whether or not
covered by insurance, that has or reasonably could be expected to have a
material adverse effect on the Company or (vi) any change in accounting
methods, principles or practices by the Company materially affecting its
assets, liabilities or business, except insofar as may have been required
by a change in generally accepted accounting principles.
(h) Litigation. Except as disclosed in the SEC Documents, there is
-----------
no suit, action or proceeding pending or, to the knowledge of the Company,
threatened against the Company or any of its subsidiaries that,
individually or in the aggregate, could reasonably be expected to have a
material adverse effect on the Company, nor is there any judgment, decree,
injunction, rule or order of any Governmental Entity or arbitrator
outstanding against the Company or any of its subsidiaries that,
individually or in the aggregate, could reasonably be expected to have such
an effect; it being understood that this representation shall not include
any litigation of the nature described in paragraph (a) of Exhibit A.
(i) Absence of Changes in Benefit Plans. Except as disclosed in
------------------------------------
Schedule 4.01(i), Schedules 4.01(j)(i), (ii) or (iii), in the SEC Documents
or as otherwise expressly permitted hereunder, there has not been any
adoption or amendment in any material respect by the Company or any of its
subsidiaries of any Benefit Plan (as defined in Section 4.01(j) hereof)
since July 31, 1994. All employment, consulting, severance, termination or
indemnification agreements, arrangements or understandings between the
Company or any of its subsidiaries and any current or former officer or
director of the Company or any of its subsidiaries which are required to be
disclosed in the SEC Documents have been disclosed therein.
(j) ERISA Compliance. (i) As soon as practicable after the signing
-----------------
of this Agreement, the Company will make available all "employee pension
benefit plans" (as defined in Section 3(2) of the
20
Employee Retirement Income Security Act of 1974, as amended ("ERISA"))
(sometimes referred to herein as "Pension Plans"), "employee welfare
benefit plans" (as defined in Section 3(1) of ERISA) and all other plans,
arrangements or policies relating to stock options, stock purchases,
compensation, deferred compensation, severance, fringe benefits and other
employee benefits, in each case maintained, or contributed to, or required
to be maintained or contributed to, by the Company, any of its subsidiaries
or any other person or entity that, together with the Company, is treated
as a single employer under Section 414(b), (c), (m) or (o) of the Code
(each a "Commonly Controlled Entity") for the benefit of any current or
former employees, officers or directors (or any beneficiaries thereof) of
the Company or any of its subsidiaries (collectively, "Benefit Plans").
Certain Benefit Plans affecting officers and directors which are sponsored
by the Company are disclosed in Schedule 4.01(j)(i).
(ii) Each Benefit Plan sponsored by the Company or any subsidiary (a
"Company Benefit Plan") has been administered in all material respects in
accordance with its terms. Except as disclosed in Schedule 4.01(j)(ii),
the Company and all the Company Benefit Plans are all in compliance in all
material respects with applicable provisions of ERISA and the Code and all
other applicable laws. The most recent Form 5500 and summary plan
description for each Company Benefit Plan for which such documents are
required was complete and correct in all material respects. There are (or,
in the case of Benefit Plans that are multiemployer plans (as defined in
Section 4001(a)(3) of ERISA) (each, a "Multiemployer Plan"), there are to
the knowledge of the Company) no investigations by any governmental agency,
termination proceedings or other claims (except claims for benefits payable
in the normal operation of the Benefit Plans), suits or proceedings against
or involving any Benefit Plan or asserting any rights to or claims for
benefits under any Benefit Plan that could give rise to any material
liability, and, to the knowledge of the Company, there are not any facts
that could reasonably be expected to give rise to any material liability in
the event of any such investigation, claim, suit or proceeding. No
"prohibited transaction" (as defined in Section 4975 of the Code or Section
406 of ERISA) has occurred in respect of any Company Benefit Plan and, to
the
21
knowledge of the Company, no such transaction has occurred between the
Company or any employee, officer or director thereof and any Multiemployer
Plan. The Company does not maintain any defined benefit pension plan
except the two Executive Security Plans. The Executive Security Plans are
not subject to the funding requirements of ERISA or the Code and are not
tax-qualified plans.
(iii) Schedule 4.01(j)(iii) lists the Multiemployer Plans covering
employees of the Company or its subsidiaries and sets forth a list, for
each location at which such employees are or were covered by a
Multiemployer Plan, (y) of the number of covered employees, contribution
rate and hours from 1987 to the date hereof, in the case of New Jersey, and
(z) of the number of covered employees and aggregate pension expense from
1990 to the date hereof and aggregate pension expense for 1988 and 1989, in
the case of Nevada. The aggregate amount of withdrawal liability (as
defined in Section 4201 of ERISA) if each Commonly Controlled Entity were
to withdraw from each Multiemployer Plan would not exceed $25,000,000. To
the knowledge of the Company, no Commonly Controlled Entity has engaged in
a transaction described in Section 4069 of ERISA that could subject the
Company to liability at any time after the date hereof. To the knowledge
of the Company, no Commonly Controlled Entity has acted in a manner that
could, or failed to act so as to, result in fines, penalties, taxes or
related charges under (x) Section 502(c), (i) or (1) of ERISA, (y) Section
4071 of ERISA or (z) Chapter 43 of the Code.
(iv) To the knowledge of the Company, and except for collective
bargaining agreements during the respective terms thereof, and for the
Company's contingent severance agreements, employment agreements or
severance pay plan for corporate officers and corporate staff, there are no
understandings, agreements or undertakings, except pursuant to Section 6.10
hereof, that would prevent any Benefit Plan that is an employee welfare
benefit plan (including any such Benefit Plan covering retirees) from being
amended or terminated, on or at any time after the consummation of the
Offer, without such amendment or termination causing material liability to
the Company or any of its subsidiaries over that which is already accrued.
22
(v) To the knowledge of the Company, no Commonly Controlled Entity has
incurred any material liability, and no event has occurred that would
result in any material liability, to a pension plan subject to the funding
requirements of ERISA and the Code (other than for contributions not yet
due) or to the Pension Benefit Guaranty Corporation (other than for payment
of premiums not yet due) that has not been fully paid as of the date
hereof, provided that the foregoing has no application to Multiemployer
Plans.
(vi) The information supplied to the actuary for use in preparing the
actuarial reports or valuations for the trusts under the Caesars World,
Inc. and Subsidiaries Benefit Trust Agreement and the Boardwalk Regency
Corporation Benefit Trust Agreement was complete and accurate in all
material respects. The Company has no reason to believe that any
conclusions expressed in those reports or valuations are incorrect. The
Company and certain of its subsidiaries have contributed to such trusts the
amounts required by the most recent actuarial calculation of liabilities
thereunder. As of July 31, 1994, the aggregate amount in such trusts was
$12,756,000.
(vii) Except as provided in the Company's severance pay plan, the two
employment agreements with Messrs. Gluck and Lanni, the contingent
severance agreements, and except for the vesting and accelerated
exercisability with respect to contingent or restricted stock agreements,
stock options and stock appreciation rights, no employee of the Company or
any of its subsidiaries will be entitled to any additional benefits or any
acceleration of the time of payment or vesting of any benefits under any
Benefit Plan as a result of the transactions contemplated by this
Agreement.
(viii) The only "postemployment benefits" (other than disability-
related benefits), as defined in Statement of Financial Accounting
Standards No. 112, and the only "postretirement benefits", as defined in
Statement of Financial Accounting Standards No. 106, which the Company is
obligated to provide are those described in its two employment agreements
and any such benefits which may be required by the Consolidated Ommibus
Budget Reconciliation Act ("COBRA").
23
(k) Taxes. (i) Each of the Company and each of its subsidiaries has
------
filed all Federal income tax returns and all other material tax returns and
reports required to be filed by it. To the knowledge of the Company, all
such returns are complete and correct in all material respects. To the
knowledge of the Company, each of the Company and each of its subsidiaries
has paid (or the Company has paid on its subsidiaries' behalf) all taxes
shown as due on such returns and all material taxes for which no return was
required to be filed, and the most recent financial statements contained in
the SEC Documents 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, except in respect of certain
possible industry-wide issues pertaining to deductibility of
complimentaries and the treatment of certain discounts and customer bad
debts, which issues are the subject of pending IRS technical advice
submissions.
(ii) Except with respect to the industry-wide issues specified in the
last sentence of Section 4.01(k)(i), no material deficiencies for any taxes
have been proposed, asserted or assessed against the Company or any of its
subsidiaries, which are not reserved for. The Federal income tax returns
of the Company and each of its subsidiaries consolidated in such returns
have been examined by and settled with the Internal Revenue Service for all
years through 1988 and all returns after 1988 are open and subject to
examination.
(iii) As used in this Agreement, "taxes" shall include all Federal,
state, local and foreign income, property, sales, excise and other taxes,
tariffs or governmental charges of any nature whatsoever.
(l) No Excess Parachute Payments. To the knowledge of the Company,
-----------------------------
any amount that could be received (whether in cash or property or the
vesting of property) as a result of any of the transactions contemplated by
this Agreement by any employee, officer or director of the Company or any
of its affiliates who is a "disqualified individual" (as such term is
defined in proposed Treasury Regulation Section 1.280G-1) under any
employment, severance or termination agreement, other compensation
arrangement or Benefit Plan
24
currently in effect should not be characterized as an "excess parachute
payment" (as such term is defined in Section 280G(b)(1) of the Code and the
proposed regulations thereunder).
(m) Compliance with Applicable Laws. (i) To the knowledge of the
--------------------------------
Company, each of the Company and its subsidiaries has in effect all
Federal, state, local and foreign governmental approvals, authorizations,
certificates, filings, franchises, licenses, notices, permits and rights,
including all authorizations under Environmental Laws and Gaming Laws
("Permits"), necessary for it to own, lease or operate its properties and
assets and to carry on its business as now conducted other than such
Permits the absence of which would not, individually or in the aggregate,
have a material adverse effect on the Company, and there has occurred no
default under any such Permit other than such defaults which, individually
or in the aggregate, would not have a material adverse effect on the
Company. To the knowledge of the Company, except as disclosed in the SEC
Documents filed and publicly available prior to the date of this Agreement,
the Company and its Subsidiaries are in compliance with all applicable
statutes, laws, ordinances, rules, orders and regulations of any
Governmental Entity, except for possible noncompliance which individually
or in the aggregate would not have a material adverse effect on the
Company. The preceding sentence of this Section 4.01(m)(i) does not apply
to matters specifically covered by Sections 4.01(j), 4.01(k) or 4.01(m)(ii)
through 4.01(m)(viii).
(ii) To the knowledge of the Company, each of the Company and its
subsidiaries is in compliance with all applicable Gaming Laws, except for
possible noncompliance which individually or in the aggregate would not
have a material adverse effect on the Company. The term "Gaming Laws"
-----------
means any Federal, state, local or foreign statute, ordinance, rule,
regulation, permit, consent, approval, license, judgment, order, decree,
injunction or other authorization governing or relating to the current or
contemplated casino and gaming activities and operations of the Company,
including the New Jersey Casino Control Act and the rules and regulations
promulgated thereunder, the Nevada Gaming Control Act and the rules and
regulations promulgated thereunder,
25
the Clark County, Nevada Code and the rules and regulations promulgated
thereunder, Article 33 of Title IV of the Official Indiana Code and the
rules and regulations promulgated thereunder, the Indian Gaming Regulatory
Act and the rules and regulations promulgated thereunder, Mo. Rev. Stat.
(S)(S) 313.800-.850 and the rules and regulations promulgated thereunder
and the Ontario Gaming Control Act, 1992 and the rules and regulations
promulgated thereunder.
(iii) To the knowledge of the Company, neither the Company nor any
Significant Subsidiary of the Company nor any director or officer of the
Company or any Significant Subsidiary of the Company has received any
written claim, demand, notice, complaint, court order or administrative
order from any Governmental Entity in the past three years, asserting that
a license of it or them, as applicable, under any Gaming Laws should be
revoked or suspended other than in respect of a former marketing executive
of Boardwalk Regency whose license was revoked.
(iv) To the knowledge of the Company, each of the Company and its
subsidiaries is, and has been, and each of the Company's former
subsidiaries, while a subsidiary of the Company, was in compliance with all
applicable Environmental Laws, except for possible noncompliance which
individually or in the aggregate would not have a material adverse effect
on the Company. The term "Environmental Laws" means any Federal, state,
------------------
local or foreign statute, ordinance, rule, regulation, permit, consent,
approval, license, judgment, order, decree, injunction or other
authorization, relating to: (A) Releases (as defined in 42 U.S.C. (S)
9601(22)) or threatened Releases of Hazardous Material (as hereinafter
defined) into the environment or (B) the generation, treatment, storage,
disposal, use, handling, manufacturing, transportation or shipment of, or
exposure to, a Hazardous Material.
(v) To the knowledge of the Company, neither the Company nor any
subsidiary of the Company has received any written claim, demand, notice,
complaint, court order, administrative order or request for information
from any Governmental Entity or private party in the past three years,
alleging violation of, or asserting any noncompliance with or liability
under or potential liability under, any Environmental Laws which
26
individually or in the aggregate would reasonably be expected to have a
material adverse effect on the Company.
(vi) To the knowledge of the Company, during the period of ownership
or operation by the Company and its subsidiaries of any of their respective
current or previously owned or leased properties, there have been no
Releases of Hazardous Material in, on, under or affecting such properties
and none of the Company or its subsidiaries have disposed of any Hazardous
Material or any other substance in a manner that has led, or could
reasonably be anticipated to lead to a Release except in each case for
those which individually or in the aggregate are not reasonably likely to
have a material adverse effect on the Company. Prior to the period of
ownership or operation by the Company and its subsidiaries of any of their
respective current or previously owned or leased properties, to the
knowledge of the Company no Hazardous Material was generated, treated,
stored, disposed of, used, handled or manufactured at, or transported
shipped or disposed of from, such current or previously owned or leased
properties, and there were no Releases of Hazardous Material in, on, under
or affecting any such property or any surrounding site, except in each case
for those which individually or in the aggregate would not be reasonably
likely to have a material adverse effect on the Company. The term
"Hazardous Material" means (1) hazardous substances (as defined in 42
-------------------
U.S.C. (S) 9601(14)), (2) petroleum, including crude oil and any fractions
thereof, (3) natural gas, synthetic gas and any mixtures thereof, (4)
asbestos and/or asbestos-containing material, (5) PCBs, or materials
containing PCBs in excess of 50 ppm, and any material regulated as a
medical waste or infectious waste.
(vii) Schedule 4.01(m)(vii) identifies all environmental audits,
assessments or studies within the possession of the Company or any
Significant Subsidiary of the Company with respect to the facilities or
real property owned, leased or operated by the Company or any Significant
Subsidiary of the Company, which were conducted within the last five years.
As soon as practicable after the date of this Agreement, the Company will
furnish to Parent complete and correct copies of all such audits,
assessments and studies.
27
(viii) The transactions contemplated by this Agreement will not require
compliance with the New Jersey Industrial Site Recovery Act or any similar
state transfer law.
(n) State Takeover Statutes; Charter Provisions. The Board of
--------------------------------------------
Directors of the Company has approved the Offer, the Merger, this Agreement
and the Option Agreement and such approval is sufficient to render
inapplicable to the Offer, the Merger, this Agreement and the Option
Agreement and the other transactions contemplated by this Agreement and the
Option Agreement, the provisions of Section 607.0901 of the FBCA, the
provisions of Section 607.0902 of the FBCA and the provisions of Paragraph
A of Article XI of the Company's Amended and Restated Articles of
Incorporation.
(o) Voting Requirements. The affirmative vote of the holders of a
--------------------
majority of all the shares of Company Common Stock entitled to be cast
approving this Agreement is the only vote of the holders of any class or
series of the Company's capital stock necessary to approve this Agreement
and the transactions contemplated by this Agreement.
(p) Rights Agreement. The Company and the Board of Directors of the
-----------------
Company have taken and will maintain in effect all necessary action to (i)
render the Rights Agreement inapplicable with respect to the Offer, the
Merger, the Option Agreement and the other transactions contemplated by
this Agreement and (ii) ensure that (y) neither Parent nor Sub nor any of
their Affiliates (as defined in the Rights Agreement) or Associates (as
defined in the Rights Agreement) is considered to be an Acquiring Person
(as defined in the Rights Agreement) or an Adverse Person (as defined in
the Rights Agreement) or an Unqualified Gaming Person (as defined in the
Rights Agreement) and (z) a Distribution Date (as defined in the Rights
Agreement) does not and shall not occur by reason of the announcement or
consummation of the Offer, the Merger, the Option Agreement or the
consummation of any of the other transactions contemplated by this
Agreement. The Company has delivered to Parent a complete and correct copy
of the Rights Agreement as amended and supplemented to the date of this
Agreement.
28
(q) Brokers. No broker, investment banker, financial advisor or
--------
other person, other than Merrill Lynch & Co., the fees and expenses of
which will be paid by the Company, is entitled to any broker's, finder's,
financial advisor's or other similar fee or commission in connection with
the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of the Company. The Company has provided Parent true
and correct copies of all agreements between Company and Merrill Lynch &
Co.
(r) Opinion of Financial Advisor. The Company has received the
-----------------------------
opinion of Merrill Lynch & Co., to the effect that, as of the date of this
Agreement, the consideration to be received in the Offer and the Merger by
the Company's stockholders is fair to the Company's stockholders from a
financial point of view, and a complete and correct signed copy of such
opinion has been, or promptly upon receipt thereof will be, delivered to
Parent.
(s) Trademarks, etc. To the knowledge of the Company, the material
----------------
patents, trademarks (registered or unregistered), trade names, service
marks and copyrights and applications therefor owned, used or filed by or
licensed to the Company and its subsidiaries (collectively, "Intellectual
Property Rights") are sufficient to allow each of the Company and each of
its Significant Subsidiaries to conduct, and continue to conduct, its
business as currently conducted or as the Company proposes to conduct such
business. To the knowledge of the Company, each of the Company and each of
its Significant Subsidiaries owns or has sufficient unrestricted right to
use the Intellectual Property Rights in order to allow it to conduct, and
continue to conduct, its business as currently conducted or as the Company
proposes to conduct such business, and the consummation of the transactions
contemplated hereby will not alter or impair such ability in any respect
which individually or in the aggregate would be reasonably likely to have a
material adverse effect on the Company. To the knowledge of the Company,
neither the Company nor any of its Significant Subsidiaries has received
any oral or written notice from any other person pertaining to or
challenging the right of the Company or any of its Significant Subsidiaries
to use any of the Intellectual Property Rights, which challenge or other
assertion, if
29
upheld or successful, individually or in the aggregate would be reasonably
likely to have a material adverse effect on the Company. To the knowledge
of the Company, no claims are pending by any person with respect to the
ownership, validity, enforceability or use of any such Intellectual
Property Rights challenging or questioning the validity or effectiveness of
any of the foregoing which claims would reasonably be expected to have a
material adverse effect on the Company. To the knowledge of the Company,
neither the Company nor any of its Significant Subsidiaries has made any
claim of a violation or infringement by others of its rights to or in
connection with the Intellectual Property Rights in any such case where
such claims (individually or in the aggregate) would reasonably be expected
to have a material adverse effect on the Company.
(t) Title to Properties. To the knowledge of the Company, each of
--------------------
the Company and each of its Significant Subsidiaries has sufficiently good
and valid title to, or an adequate leasehold interest in, its material
tangible properties and assets in order to allow it to conduct, and
continue to conduct, its business as currently conducted or as the Company
proposes to conduct such business. Such material tangible assets and
properties are sufficiently free of liens to allow each of the Company and
each of its subsidiaries to conduct, and continue to conduct, its business
as currently conducted, or as the Company proposes to conduct such business
and, to the knowledge of the Company, the consummation of the transactions
contemplated by this Agreement will not alter or impair such ability in any
respect which individually or in the aggregate would be reasonably likely
to have a material adverse effect on the Company. To the knowledge of the
Company, each of the Company and each of its subsidiaries enjoys peaceful
and undisturbed possession under all material leases, except for such
breaches of the right to peaceful and undisturbed possession that do not
materially interfere with the ability of the Company and its subsidiaries
to conduct its business as currently conducted. Schedule 4.01(t) sets
forth a complete list of all material real property and material interests
in real property owned in fee by the Company or one of its subsidiaries and
sets forth all material real property and interests in
30
real property leased by the Company or one of its subsidiaries as of the
date hereof.
(u) Insurance. To the knowledge of the Company, the Company and its
----------
Significant Subsidiaries have obtained and maintained in full force and
effect insurance with responsible and reputable insurance companies or
associations in such amounts, on such terms and covering such risks,
including fire and other risks insured against by extended coverage, as is
reasonably prudent, and each has maintained in full force and effect public
liability insurance, insurance against claims for personal injury or death
or property damage occurring in connection with any of activities of the
Company or its Significant Subsidiaries or any of any properties owned,
occupied or controlled by the Company or its Significant Subsidiaries, in
such amount as reasonably deemed necessary by the Company or its
Significant Subsidiaries.
(v) Contracts; Debt Instruments. Except as set forth in the SEC
----------------------------
Documents and as set forth in Schedule 4.01(v), there are no (i) agreements
of the Company or any of its subsidiaries containing an unexpired covenant
not to compete or similar restriction applying to the Company or any of its
subsidiaries, (ii) interest rate, currency or commodity hedging, swap or
similar derivative transactions to which the Company is a party or (iii)
other contracts or amendments thereto that would be required to be filed as
an exhibit to a Form 10-K filed by the Company with the SEC as of the date
of this Agreement. To the knowledge of the Company, each of the agreements
listed in Schedule 4.01(v) and the SEC Documents is a valid and binding
obligation of the Company or its subsidiary, as the case may be, and, to
the Company's knowledge, of each other party thereto, and each such
agreement is in full force and effect and is enforceable by the Company or
its subsidiary in accordance with its terms, except that (i) such
enforcement may be subject to bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights generally and (ii) the remedy of specific performance and
injunctive relief may be subject to equitable defenses and to the
discretion of the court before which any proceeding therefor may be brought
and except to the extent any covenant not to compete contained
31
therein may be unenforceable. To the knowledge of the Company, there are
no existing defaults (or circumstances or events that, with the giving of
notice or lapse of time or both would become defaults) of the Company or
any of its subsidiaries (or, to the knowledge of the Company, any other
party thereto) under any of the agreements set forth in the SEC Documents
or agreements listed in Schedule 4.01(v) except for defaults that have not
and would not, individually or in the aggregate, have a material adverse
effect on the Company.
(w) Labor Relations. Except as disclosed in the SEC Documents, no
----------------
strike or other labor dispute involving the Company or any of its
subsidiaries is pending or, to the knowledge of the Company, threatened,
and, to the knowledge of the Company, there is no activity involving any
unorganized employees of the Company or any of its subsidiaries seeking to
certify a collective bargaining unit or engaging in any other organization
activity. Except as set forth in Schedule 4.01(w) and as disclosed in the
SEC Documents, since July 31, 1994, there has not been any adoption or
amendment in any material respect by the Company or any of its subsidiaries
of any collective bargaining agreement. Other than those filed as exhibits
to the SEC Documents, Schedule 4.01(w) lists all collective bargaining
agreements of the Company or any of its subsidiaries.
SECTION 4.02. Representations and Warranties of Parent and Sub.
-------------------------------------------------
Parent and Sub represent and warrant to the Company as follows:
(a) Organization, Standing and Corporate Power. Each of Parent and
-------------------------------------------
each of its significant subsidiaries (as such term is defined in Rule 1-02
of Regulation S-X of the SEC) and Sub is a corporation or partnership duly
organized, validly existing and in good standing under the laws of the
jurisdiction in which each is incorporated and has the requisite corporate
or partnership power and authority to carry on its business as now being
conducted. Each of Parent and Sub is duly qualified or licensed to do
business and is in good standing in each jurisdiction in which the nature
of its business or the ownership or leasing of its properties makes such
qualification or licensing necessary, other than in such jurisdictions
where the
32
failure to be so qualified or licensed (individually or in the aggregate)
would not have a material adverse effect on Parent. Parent will make
available to the Company complete and correct copies of its certificate of
incorporation and by-laws and the articles of incorporation and by-laws of
Sub, in each case as amended to the date of this Agreement.
(b) Authority; Noncontravention. Parent and Sub have the requisite
----------------------------
corporate power and authority to enter into this Agreement and to
consummate the transactions contemplated by this Agreement. The execution
and delivery of this Agreement by Parent and Sub and the consummation by
Parent and Sub of the transactions contemplated by this Agreement have been
duly authorized by all necessary corporate action on the part of Parent and
Sub, as applicable. This Agreement has been duly executed and delivered by
Parent and Sub and, assuming this Agreement constitutes the valid and
binding obligation of the Company, constitutes a valid and binding
obligation of each such party, enforceable against each such party in
accordance with its terms, except that (i) such enforcement may be subject
to bankruptcy, insolvency, reorganization, moratorium or other similar laws
now or hereafter in effect relating to creditors' rights generally and (ii)
the remedy of specific performance and injunctive relief may be subject to
equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought. The execution and delivery of this
Agreement do not, and the consummation of the transactions contemplated by
this Agreement will not, conflict with, or result in any violation of, or
default (with or without notice or lapse of time, or both) under, or give
rise to a right of termination, cancellation or acceleration of any
obligation or to loss of a material benefit under, or result in the
creation of any lien upon any of the properties or assets of Parent under,
(i) the certificate of incorporation or by-laws of Parent or Sub, (ii)
subject to the governmental filings and other matters referred to in the
following sentence, any loan or credit agreement, note, bond, mortgage,
indenture, lease or other agreement, instrument, permit, concession,
franchise or license applicable to Parent or (iii) subject to the
governmental filings and other matters referred to in the following
sentence, any judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to Parent or
33
Sub or their respective properties or assets, other than, in the case of
clauses (ii) or (iii), any such conflicts, violations, defaults, rights or
liens that individually or in the aggregate would not (x) have a material
adverse effect on Parent, (y) impair in any material respect the ability of
Parent and Sub to perform their respective obligations under this Agreement
or (z) prevent or impede the consummation of any of the transactions
contemplated by this Agreement. No consent, approval, order or
authorization of, or registration, declaration or filing with, any
Governmental Entity is required by Parent or Sub in connection with the
execution and delivery of this Agreement or the consummation by Parent or
Sub, as the case may be, of any of the transactions contemplated by this
Agreement, except for (i) the filing of a premerger notification and report
form under the HSR Act, (ii) the filing with the SEC of (x) the Offer
Documents and (y) such reports under the Exchange Act as may be required in
connection with this Agreement and the transactions contemplated by this
Agreement, (iii) the filing of the Articles of Merger with the Florida
Department of State and appropriate documents with the relevant authorities
of other states in which the Company is qualified to do business, (iv) the
approval by (A) the New Jersey Casino Control Commission under the New
Jersey Casino Control Act and the regulations promulgated thereunder, (B)
the Nevada State Gaming Control Board and the Nevada Gaming Commission
under the Nevada Gaming Control Act and the regulations promulgated
thereunder, (C) the Clark County Liquor and Gaming Licensing Board pursuant
to the Clark County, Nevada Code and the rules and regulations promulgated
thereunder, (D) the National Indian Gaming Commission under the Indian
Gaming Regulatory Act and the rules and regulations promulgated thereunder,
(E) the Ontario Gaming Control Commission under the Ontario Gaming Control
Act, 1992 and the rules and regulations promulgated thereunder, (F) the
Indiana Gaming Commission under Article 33, Title IV of the Official
Indiana Code, (G) the Missouri Gaming Commission under Mo. Rev. Stat.
(S)(S) 313.800-850 and the rules and regulations promulgated thereunder and
(H) the Agua Caliente Tribal Council, (v) as may be required by an
applicable state securities or "blue sky" laws, (vi) in connection with any
state or local tax which is attributable in respect of the beneficial
ownership of real property of the Company or its subsidiaries, (vii)
34
such immaterial filings and immaterial consents as may be required under
any environmental, health or safety law or regulation pertaining to
any notification, disclosure or required approval triggered by the Offer,
the Merger or the transactions contemplated by this Agreement, (viii) such
immaterial filings, consents, approvals, orders, registrations and
declarations as may be required under the laws of any foreign country in
which the Parent or any of its subsidiaries or the Company or any of its
subsidiaries conducts any business or owns any assets, and (ix) such other
consents, approvals, orders, authorizations, registrations, declarations
and filings the failure of which to be obtained or made would not,
individually or in the aggregate, (x) have a material adverse effect on
Parent, (y) impair, in any material respect, the ability of Parent to
perform its obligations under this Agreement or (z) prevent or
significantly delay the consummation of the transactions contemplated by
this Agreement.
(c) Information Supplied. None of the information supplied or to be
---------------------
supplied by Parent or Sub expressly for inclusion or incorporation by
reference in the Schedule 14D-9, the Information Statement or the Proxy
Statement will, in the case of the Schedule 14D-9 and the Information
Statement, at the respective times the Schedule 14D-9 and the Information
Statement are filed with the SEC and first published, sent or given to the
Company's stockholders or, in the case of the Proxy Statement, on the date
the Proxy Statement is first mailed to the Company's stockholders and at
the time of the meeting of the Company's stockholders held to vote on
approval and adoption of this Agreement, 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.
(d) Brokers. No broker, investment banker, financial advisor or
--------
other person, other than Bear, Stearns & Co. Inc. or a co-dealer manager
other than Bear, Stearns & Co. Inc., the fees and expenses of which will be
paid by Parent, is entitled to any broker's, finder's, financial advisor's
or other similar fee or commission in connection with the transac-
35
tions contemplated by this Agreement based upon arrangements made by or on
behalf of Parent or Sub.
(e) Financing. Parent has sufficient funds available to purchase all
----------
the outstanding shares on a fully diluted basis of Company Common Stock
pursuant to the Offer and the Merger and to pay all fees and expenses
related to the transactions contemplated by this Agreement.
(f) Interim Operations of Sub. Sub was formed solely for the purpose
--------------------------
of engaging in the transactions contemplated hereby and has not engaged in
any business activities or conducted any operations other than in
connection with the transactions contemplated hereby.
(g) Ownership of Company Common Stock. To the actual knowledge of
----------------------------------
Parent, neither Parent nor any of its affiliates is the record owner of, or
has any beneficial interest in, any shares of Company Common Stock. This
Section 4.02(g) does not apply to any pension plan of Parent or any of its
affiliates and does not apply in respect of the general account at ITT
Hartford.
(h) Permits. To the actual knowledge of Parent, there is no fact or
--------
circumstance which would reasonably be expected to prevent or materially
delay the obtaining of any consent or approval by Parent which is required
to be obtained by Parent in connection with this Agreement.
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
-----------------------------------------
SECTION 5.01. (a) Conduct of Business. During the term of this
--------------------
Agreement, except as specifically required by this Agreement, the Company shall
and shall cause its subsidiaries to carry on their respective businesses in the
ordinary course and use all reasonable efforts consistent with good business
judgment to preserve intact their current business organizations, keep available
the services of their current officers and employees and preserve their
relationships consistent with past practice with desirable customers, suppliers,
licensors, licensees, distributors and others having business dealings with them
to the end that
36
their goodwill and ongoing businesses shall be unimpaired in all material
respects at the Effective Time. Except for transactions specifically disclosed
in the SEC Documents, without limiting the generality of the foregoing, the
Company shall not, and shall not permit any of its subsidiaries to (without
Parent's prior written consent, which consent may not be unreasonably withheld):
(i) (A) declare, set aside or pay any dividends on, or make any other
distributions in respect of, any of its capital stock, other than dividends
and distributions by any direct or indirect wholly owned subsidiary of the
Company to its parent, (B) split, combine or reclassify any of its capital
stock or issue or authorize the issuance of any other securities in respect
of, in lieu of or in substitution for shares of its capital stock or (C)
except as shall be required under currently existing terms of any stock-
based benefit plan, purchase, redeem or otherwise acquire or amend (except
in respect of the Rights as contemplated by Sections 4.01(p) and 6.09) any
shares of capital stock of the Company or any of its subsidiaries or any
other securities thereof or any rights, warrants or options to acquire any
such shares or other securities (other than (x) redemptions, purchases or
other acquisitions required by applicable provisions under Gaming Laws, (y)
issuances or redemptions of capital stock of wholly-owned subsidiaries
occurring between the Company and any of its wholly-owned subsidiaries or
occurring between wholly-owned subsidiaries of the Company and (z)
issuances of capital stock or ownership interests in connection with the
organization of new entities for purposes of business development and
management activities as permitted by this Agreement);
(ii) issue, deliver, sell, pledge or otherwise encumber or amend any
shares of its capital stock, any other voting securities or any securities
convertible into, or any rights, warrants or options to acquire, any such
shares, voting securities or convertible securities (other than the
issuance of Company Common Stock upon the exercise of employee stock
options and contingent incentive plans (including with respect to
contingent shares of Company Common Stock) outstanding on the date of this
Agreement in accordance with their present terms and other than the
issuance of Company Common Stock pursuant to the Option Agreement);
37
(iii) amend its Amended and Restated Articles of Incorporation, By-
laws or other comparable charter or organizational documents;
(iv) acquire or agree to acquire (A) by merging or consolidating with,
or by purchasing a substantial portion of the assets of, or by any other
manner, any business or any corporation, partnership, joint venture,
association or other business organization or division thereof or (B) any
assets that are material, individually or in the aggregate, to the Company
and its subsidiaries taken as a whole, except (x) purchases of inventory,
furnishings and equipment in the ordinary course of business consistent
with past practice or (y) expenditures consistent with the Company's
current capital budget previously provided to Parent; provided that
--------
transactions of the type referenced in this subparagraph (iv) by the
Company and its subsidiaries shall be permitted (a) to the extent required
under existing agreements or, with respect to projects in Windsor, Canada,
understandings (collectively, "Current Commitments") and (b) in addition to
what is otherwise permitted in this subparagraph (iv), the aggregate amount
that the Company and its subsidiaries may spend or commit to spend in
respect of such transactions (other than Current Commitments) without being
able to cancel or withdraw such commitments absent material penalty or cost
to the Company and its subsidiaries shall not exceed in the aggregate $35
million; and, provided further that any transaction specified by the
-------- -------
immediately preceding proviso shall not be so permitted if the Company
would not be able to enjoy the benefits in respect of the relevant assets,
business, corporation, partnership, joint venture, association or other
business organization or division after consummation of the Offer, the
Merger and the other transactions contemplated by this Agreement and the
Option Agreement or there would be required any additional consents,
approvals, orders or authorizations of, or registrations or filings with,
any Governmental Entity which would delay in any material respect the
consummation of the transactions contemplated by this Agreement and the
Option Agreement; and, provided further that, notwithstanding the foregoing
----------------
limitations, the Company may engage in any projects within that state of
the United States previously discussed by the parties after, to the
38
extent permitted by law, consultation between the Company and Parent;
(v) sell, lease, license, mortgage or otherwise encumber or subject to
any lien or otherwise dispose of any of its properties or assets, except
transactions in the ordinary course of business consistent with past
practice;
(vi) (A) other than (1) ordinary course working capital borrowings,
(2) Current Commitments, (3) projects approved prior to the date of this
Agreement by the Board of Directors of the Company, (4) specific projects
referred to in the capital budget of the Company previously provided to
Parent and (5) other incurrences of indebtedness which, in the aggregate,
do not exceed $10 million, incur any indebtedness for borrowed money or
guarantee any such indebtedness of another person, issue or sell any debt
securities or warrants or other rights to acquire any debt securities of
the Company or any of its subsidiaries, guarantee any debt securities of
another person, enter into any "keep well" or other agreement to maintain
any financial statement condition of another person or enter into any
arrangement having the economic effect of any of the foregoing or (B) other
than (v) to the Company or any direct or indirect wholly owned subsidiary
of the Company, (w) advances to employees, suppliers or customers in the
ordinary course of business consistent with past practice, (x) Current
Commitments, (y) projects approved prior to the date of this Agreement by
the Board of Directors of the Company and (z) specific projects referred to
in the capital budget of the Company previously provided to Parent, make
any loans, advances or capital contributions to, or investments in, any
other person;
(vii) make any material tax election or settle or compromise any
material tax liability;
(viii) pay, discharge, settle or satisfy any material claims,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge, settlement or
satisfaction, in the ordinary course of business consistent with past
practice or in accordance with their terms, of liabilities reflected or
reserved against in, the most recent consolidated financial statements (or
the
39
notes thereto) of the Company included in the SEC Documents filed and
publicly available prior to the date of this Agreement or incurred in the
ordinary course of business consistent with past practice, or, except in
the ordinary course of business consistent with past practice, waive the
benefits of, or agree to modify in any manner, any confidentiality,
standstill or similar agreement to which the Company or any of its
subsidiaries is a party;
(ix) except as required to comply with applicable law, (A) adopt,
enter into, terminate or amend any Benefit Plan or other arrangement for
the benefit or welfare of any director, officer or current or former
employee, except as described in Section 6.10(e) hereof and except to the
extent necessary to coordinate any such benefit plans with the terms of
this Agreement (including the provisions of the employment agreements
referenced in the last sentence of Section 6.10(a)), (B) increase in any
manner the compensation or fringe benefits of, or pay any bonus to, any
director, officer or employee (except for normal increases or bonuses in
the ordinary course of business consistent with past practice to employees
other than directors, officers or senior management personnel and that, in
the aggregate, do not result in a significant increase in benefits or
compensation expense to the Company and its subsidiaries relative to the
level in effect prior to such action (but in no event shall the aggregate
amount of all such increases exceed 4% of the aggregate annualized
compensation expense of the Company and its subsidiaries reported in the
most recent audited financial statements of the Company included in the SEC
Documents)), (C) pay any benefit not provided for under any Benefit Plan,
(D) except as permitted in clause (B), grant any awards under any bonus,
incentive, performance or other compensation plan or arrangement or Benefit
Plan (including the grant of stock options, stock appreciation rights,
stock based or stock related awards, performance units or restricted stock,
or the removal of existing restrictions in any Benefit Plans or agreements
or awards made thereunder) or (E) except for the funding of rabbi trusts
for non-qualified retirement benefits to the extent previously approved by
the Board of Directors of the Company or any committee thereof, prior to
the date of this Agreement, take any action to fund or in any other way
secure the payment of
40
compensation or benefits under any employee plan, agreement, contract or
arrangement or Benefit Plan other than in the ordinary course of business
consistent with past practice; provided, however, that the Company may take
-------- -------
any action described in (A), (C) and (D) above that does not involve the
five most senior officers of the Company and that, taken together, has an
aggregate economic cost to the Company of less than $7,500,000.
(x) make any new capital expenditure or expenditures, other than
capital expenditures not to exceed, in the aggregate, the amounts provided
for capital expenditures (x) in respect of Current Commitments, (y) in
respect of projects approved prior to the date of this Agreement and (z) in
the capital budget of the Company provided to Parent;
(xi) except in the ordinary course of business and except as otherwise
permitted by this Agreement, modify, amend or terminate any contract or
agreement set forth in the SEC Documents to which the Company or any
subsidiary is a party or waive, release or assign any material rights or
claims; or
(xii) authorize any of, or commit or agree to take any of, the
foregoing actions except as otherwise permitted by this Agreement.
(b) Other Actions. The Company shall not, and shall not permit any
--------------
of its subsidiaries to, take any action that would result in (i) any of its
representations and warranties set forth in this Agreement that are qualified as
to materiality becoming untrue, (ii) any of such representations and warranties
that are not so qualified becoming untrue in any material respect or (iii) any
of the conditions to the Offer set forth in Exhibit A not being satisfied
(subject to the Company's right to take action specifically permitted by Section
5.02).
SECTION 5.02. No Solicitation. (a) The Company shall not, nor shall
----------------
it permit any of its subsidiaries to, nor shall it authorize or permit any
officer, director or employee of, or any investment banker, attorney or other
advisor or representative of, the Company or any of its subsidiaries to, (i)
solicit or initiate, or encourage the submission of, any takeover proposal or
(ii) participate in any discussions or negotiations regarding, or furnish to any
41
person any information with respect to, or take any other action to facilitate
the making of any proposal that constitutes, or may reasonably be expected to
lead to, any takeover proposal; provided, however, that, prior to the
-------- -------
acceptance for payment of shares of Company Common Stock pursuant to the Offer,
if in the opinion of the Board of Directors, after consultation with counsel,
such failure to act would be inconsistent with its fiduciary duties to the
Company's stockholders under applicable law, the Company may, in response to an
unsolicited takeover proposal, and subject to compliance with Section 5.02(c),
(A) furnish information with respect to the Company to any person pursuant to a
confidentiality agreement and (B) participate in negotiations regarding such
takeover proposal. Without limiting the foregoing, it is understood that any
violation of the restrictions set forth in the preceding sentence by any
director or executive officer of the Company or any of its subsidiaries, whether
or not such person is purporting to act on behalf of the Company or any of its
subsidiaries or otherwise, shall be deemed to be a breach of this Section
5.02(a) by the Company. For purposes of this Agreement, "takeover proposal"
means any proposal or offer from any person relating to any direct or indirect
acquisition or purchase of a material amount of assets of the Company or any of
its subsidiaries or of over 20% of any class of equity securities (other than
acquisitions of stock by institutional investors in the ordinary course of
business) of the Company or any of its subsidiaries or any tender offer or
exchange offer that if consummated would result in any person beneficially
owning 20% or more of any class of equity securities of the Company or any of
its subsidiaries or which would require approval under any Gaming Law, or any
merger, consolidation, business combination, sale of substantially all assets,
recapitalization, liquidation, dissolution or similar transaction involving the
Company or any of its subsidiaries other than the transactions contemplated by
this Agreement, or any other transaction the consummation of which would
reasonably be expected to impede, interfere with, prevent or materially delay
the Offer or the Merger or which would reasonably be expected to dilute
materially the benefits to Parent of the transactions contemplated hereby.
(b) Except as set forth in this Section 5.02(b), neither the Board of
Directors of the Company nor any committee thereof shall (i) withdraw or modify,
or propose to withdraw or modify, in a manner adverse to Parent or Sub, the
approval or recommendation by such Board of Directors or any such committee of
the Offer, this Agreement or the
42
Merger, (ii) approve or recommend, or propose to approve or recommend, any
takeover proposal or (iii) enter into any agreement with respect to any takeover
proposal. Notwithstanding the foregoing, in the event prior to the time of
acceptance for payment of shares of Company Common Stock in the Offer if in the
opinion of the Board of Directors, after consultation with counsel, failure to
do so would be inconsistent with its fiduciary duties to the Company's
stockholders under applicable law, the Board of Directors may (subject to the
terms of this and the following sentences) withdraw or modify its approval or
recommendation of the Offer, this Agreement or the Merger, approve or recommend
a competitive proposal, or enter into an agreement with respect to a competitive
proposal, in each case at any time after the second business day following
Parent's receipt of written notice (a "Notice of Competitive Proposal") advising
Parent that the Board of Directors has received a competitive proposal,
specifying the material terms and conditions of such competitive proposal and
identifying the person making such competitive proposal; provided that the
--------
Company shall not enter into an agreement with respect to a competitive proposal
unless the Company shall have furnished Parent with written notice no later than
12:00 noon two business days in advance of any date that it intends to enter
into such agreement. In addition, if the Company proposes to enter into an
agreement with respect to any takeover proposal, it shall concurrently with
entering into such agreement pay, or cause to be paid, to Parent the Expenses
(as defined in Section 6.07(b)) and the Termination Fee (as defined in Section
6.07(b)). For purposes of this Agreement, a "competitive proposal" means any
bona fide take-over proposal to acquire, directly or indirectly, for
consideration consisting of cash and/or securities, more than 50% of the shares
of Company Common Stock then outstanding or all or substantially all the assets
of the Company and otherwise on terms which the Board of Directors of the
Company determines in its good faith judgment to be more favorable to the
Company's stockholders than the Offer and the Merger (taking into account any
improvements to the Offer and the Merger proposed by Parent).
(c) In addition to the obligations of the Company set forth in
paragraph (b), the Company shall advise Parent of any request for information or
of any takeover proposal, or any proposal with respect to any takeover proposal,
the material terms and conditions of such request or takeover proposal, and the
identity of the person making any such
43
takeover proposal or inquiry. The Company will keep Parent fully informed of
the status and details (including amendments or proposed amendments) of any such
request, takeover proposal or inquiry.
(d) Nothing contained in this Section 5.02 shall prohibit the Company
from taking and disclosing to its stockholders a position contemplated by Rule
14e-2(a) promulgated under the Exchange Act or from making any disclosure to the
Company's stockholders if, in the opinion of the Board of Directors of the
Company, after consultation with counsel, failure to so disclose would be
inconsistent with its fiduciary duties to the Company's stockholders under
applicable law; provided that the Company does not, except as permitted by
--------
Section 5.02(b) withdraw or modify, or propose to withdraw or modify, its
position with respect to the Offer or the Merger or approve or recommend, or
propose to approve or recommend, a takeover proposal.
SECTION 5.03. New Jersey Trust. In connection with the application
-----------------
for qualification and licensing by Parent with the New Jersey Casino Control
Commission pursuant to the New Jersey Casino Control Act and the rules and
regulations promulgated thereunder, if requested by Parent, the Company shall
execute and deliver a trust agreement prepared by Parent and reasonably
acceptable to the Company and the New Jersey Casino Control Commission and
complying with the requirements of the New Jersey Casino Control Act and the
rules and regulations promulgated thereunder. Not later than the Expiration
Date of the Offer, if requested by Parent, the Company shall deposit all shares
of Caesars New Jersey, Inc. in trust with a trustee qualified by and otherwise
acceptable to the New Jersey Casino Control Commission pursuant to such trust
agreement, all for the purpose of permitting Parent and Sub to hold directly
(and not in trust) the shares of Company Common Stock currently owned by Parent
or its affiliates to be acquired pursuant to the Offer, the Option or the Merger
while Parent's application for qualification and licensing is pending with the
New Jersey Casino Control Commission.
44
ARTICLE VI
ADDITIONAL AGREEMENTS
---------------------
SECTION 6.01. Stockholder Meeting; Preparation of the Proxy
---------------------------------------------
Statement. (a) The Company will, as soon as practicable following the
- ----------
acceptance for payment of, and payment for, shares of Company Common Stock by
Sub pursuant to the Offer, duly call, give notice of, convene and hold a meeting
of the holders of the Company Common Stock (the "Stockholders Meeting") if such
meeting is required by applicable law for the purpose of approving this
Agreement and the transactions contemplated by this Agreement. Subject to the
provisions of Section 5.02(b), the Company will, through its Board of Directors,
recommend to its stockholders approval of this Agreement, the Merger and the
other transactions contemplated by this Agreement. At the Stockholders Meeting,
Parent shall cause all of the shares of Company Common Stock then actually or
beneficially owned by Parent, Sub or any of their subsidiaries to be voted in
favor of the Merger. Notwithstanding the foregoing, if Sub or any other
subsidiary of Parent shall acquire at least 80% of the outstanding shares of
Company Common Stock, the parties shall, at the request of Parent, take all
necessary and appropriate action to cause the Merger to become effective as soon
as practicable after the expiration of the Offer without a Stockholders Meeting
in accordance with Section 607.1104 and other applicable provisions of the FBCA.
(b) The Company will, at Parent's request, as soon as practicable
following the expiration of the Offer, prepare and file a preliminary Proxy
Statement with the SEC and will use its best efforts to respond to any comments
of the SEC or its staff and to cause the Proxy Statement to be mailed to the
Company's stockholders as promptly as practicable after responding to all such
comments to the satisfaction of the staff. The Proxy Statement shall comply as
to form in all material respects with the Exchange Act and the rules and
regulations promulgated thereunder and the Proxy Statement, on the date first
mailed to the Company's stockholders and at the time of the Stockholders Meeting
held to vote on approval and adoption of this Agreement, shall not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading, except
that no representation is made
45
by the Company with respect to information supplied by Parent or Sub for
inclusion or incorporation by reference in the Proxy Statement. The Company
will notify Parent promptly of the receipt of any comments from the SEC or its
staff and of any request by the SEC or its staff for amendments or supplements
to the Proxy Statement or for additional information and will supply Parent with
copies of all correspondence between the Company or any of its representatives,
on the one hand, and the SEC or its staff, on the other hand, with respect to
the Proxy Statement or the Merger. If at any time prior to the Stockholders
Meeting there shall occur any event that should be set forth in an amendment or
supplement to the Proxy Statement, the Company will promptly prepare and mail to
its stockholders such an amendment or supplement. The Company will not file or
mail any Proxy Statement, or any amendment or supplement thereto, to which
Parent reasonably objects.
SECTION 6.02. Access to Information; Confidentiality. Subject to
---------------------------------------
legal and contractual confidentiality obligations and the attorney-client
privilege, the Company shall afford to Parent, and to Parent's officers,
employees, accountants, counsel, financial advisers and other representatives,
reasonable access during normal business hours during the period prior to the
Effective Time to all the properties, books, contracts, commitments and records
of the Company and its subsidiaries and, during such period, the Company shall
furnish promptly to Parent (a) a copy of each report, schedule, registration
statement and other document filed by it or its subsidiaries during such period
pursuant to the requirements of Federal or state securities laws and (b) all
other information concerning its or its subsidiaries' business, properties and
personnel as Parent may reasonably request. Except as otherwise agreed to by
the Company, unless and until Parent and Sub shall have purchased at least a
majority of the outstanding shares of Company Common Stock pursuant to the
Offer, and notwithstanding termination of this Agreement, Parent will keep, and
will cause its officers, employees, accountants, counsel, financial advisers and
other representatives and affiliates to keep, all Confidential Information (as
defined below) confidential and not to disclose any Confidential Information to
any person other than Parent's or Sub's directors, officers, employees,
affiliates or agents, and then only on a confidential basis; provided, however,
-------- -------
that Parent or Sub may disclose Confidential Information (i) as required by law,
rule, regulation or judicial process, including as required to be disclosed in
connection with the
46
Offer and the Merger, (ii) to its attorneys, accountants and financial advisors
or (iii) as requested or required by any Governmental Entity. For purposes of
this Agreement, "Confidential Information" shall include all information about
the Company which has been furnished by the Company to Parent or Sub; provided,
--------
however, that Confidential Information does not include information which (x) is
- -------
or becomes generally available to the public other than as a result of a
disclosure by Parent or Sub not permitted by this Agreement, (y) was available
to Parent or Sub on a non-confidential basis prior to its disclosure to Parent
or Sub by the Company or (z) becomes available to Parent or Sub on a non-
confidential basis from a person other than the Company who, to the knowledge of
Parent or Sub, as the case may be, is not otherwise bound by a confidentiality
agreement with the Company or is not otherwise prohibited from transmitting the
relevant information to Parent or Sub. Neither Parent nor any of its affiliates
will use any Confidential Information in any manner detrimental to the Company
or the shareholders of the Company and, in the event of termination of this
Agreement for any reason, Parent shall, and shall cause Sub to, promptly return
all Confidential Information to the Company. Until Parent and Sub shall have
purchased at least a majority of the outstanding shares of Company Common Stock,
the first sentence of this Section 6.02 shall not obligate the Company to afford
to Parent or Parent's officers, employees, accountants, counsel, financial
advisers and other representatives access to (i) personnel of the Company's
subsidiaries and (ii) competitively sensitive information that could assist
Parent in diverting business opportunities from the Company, including customer
information and identities, representatives lists, customer solicitation methods
and other similar information.
SECTION 6.03. Reasonable Efforts; Notification. (a) Upon the terms
---------------------------------
and subject to the conditions set forth in this Agreement, each of the parties
agrees to use all reasonable efforts to take, or cause to be taken, all actions,
and to do, or cause to be done, and to assist and cooperate with the other
parties in doing, all things necessary, proper or advisable to consummate and
make effective, in the most expeditious manner practicable, the Offer and the
Merger, and the other transactions contemplated by this Agreement, including (i)
the obtaining of all necessary actions or nonactions, waivers, consents and
approvals from Governmental Entities and the making of all necessary
registrations and filings (including filings with Governmental
47
Entities, if any) and the taking of all reasonable steps as may be necessary to
obtain an approval or waiver from, or to avoid an action or proceeding by, any
Governmental Entity (including in respect of any Gaming Law), (ii) the obtaining
of all necessary consents, approvals or waivers from third parties, (iii) the
defending of any lawsuits or other legal proceedings, whether judicial or
administrative, challenging this Agreement or the consummation of any of the
transactions contemplated by this Agreement, including seeking to have any stay
or temporary restraining order entered by any court or other Governmental Entity
vacated or reversed and (iv) the execution and delivery of any additional
instruments necessary to consummate the transactions contemplated by, and to
fully carry out the purposes of, this Agreement. In connection with and without
limiting the foregoing, the Company and its Board of Directors shall (i) take
all action necessary to ensure that no state takeover statute or similar statute
or regulation is or becomes applicable to the Offer, the Merger, this Agreement
or any of the other transactions contemplated by this Agreement and (ii) if any
state takeover statute or similar statute or regulation becomes applicable to
the Offer, the Merger, this Agreement or the Option Agreement or any other
transaction contemplated by this Agreement or the Option Agreement, take all
action necessary to ensure that the Offer, the Merger and the other transactions
contemplated by this Agreement or the Option Agreement may be consummated as
promptly as practicable on the terms contemplated by this Agreement and the
Option Agreement and otherwise to minimize the effect of such statute or
regulation on the Offer, the Merger, this Agreement, the Option Agreement and
the other transactions contemplated by this Agreement and the Option Agreement.
(b) The Company shall give prompt notice to Parent of (i) any
representation or warranty made by it contained in this Agreement that is
qualified as to materiality becoming untrue or inaccurate in any respect
(including in the case of representations or warranties by the Company, the
Company or Parent receiving knowledge of any fact, event or circumstance which
may cause any representation qualified as to the knowledge of the Company to be
or become untrue or inaccurate in any respect) or (ii) the failure by it to
comply with or satisfy in any material respect any covenant, condition or
agreement to be complied with or satisfied by it under this Agreement; provided,
--------
however, that no such notification shall affect the representations, warranties,
- -------
covenants or agreements of the parties or the conditions to the obligations of
the parties under this Agreement. The
48
Company acknowledges that if after the date of this Agreement the Company or
Parent receives knowledge of any fact, event or circumstance that would cause
any representation or warranty that is conditioned as to the knowledge of the
Company to be or become untrue or inaccurate in any respect, the receipt of such
knowledge shall constitute a breach of the representation or warranty that is so
conditioned as of the date of such receipt.
SECTION 6.04. Stock Option Plans. (a) As soon as practicable
-------------------
following the date of this Agreement, the Board of Directors of the Company (or,
if appropriate, any committee administering the Stock Option Plans (as defined
below)) shall adopt such resolutions or use its best efforts to take such other
actions as are required to provide that (i) each outstanding stock option to
purchase shares of Company Common Stock (a "Stock Option") heretofore granted
under any stock option, stock appreciation rights or stock purchase plan,
program or arrangement or other option agreement or contingent stock grant plan
of the Company (collectively, the "Stock Option Plans") outstanding shall be
accelerated to be fully exercisable prior to the consummation of the Offer, and
the Company shall use its best efforts to assure that any such Stock Options
outstanding immediately prior to the consummation of the Offer (except options
granted to non-employee directors of the Company as of December 8, 1994) shall
be cancelled immediately prior to the consummation of the Offer in exchange for
an amount in cash, payable at the time of such cancellation, equal to the
product of (y) the number of shares of Company Common Stock subject to such
Stock Option immediately prior to the consummation of the Offer and (z) the
excess of the price per share to be paid in the Offer over the per share
exercise price of such Stock Option, (ii) each stock appreciation right ("SAR")
granted under the Stock Option Plans outstanding immediately prior to the
consummation of the Offer shall be cancelled immediately prior to the
consummation of the Offer in exchange for an amount of cash, payable at the time
of such cancellation, equal to the product of (y) the number of shares of
Company Common Stock covered by such SAR and (z) the excess of the price per
share to be paid in the Offer over the appreciation base per share of such SAR;
provided, however, that no such cash payment shall be made with respect to any
- -------- -------
SAR which is related to a Stock Option with respect to which such a cash payment
has been made and (iii) each share of Company Common Stock previously issued in
the form of grants of restricted stock or grants of
49
contingent shares shall fully vest in accordance with their respective terms.
Any Stock Option or SAR not cancelled in accordance with this paragraph (a)
immediately prior to the consummation of the Offer, shall be cancelled at the
Effective Time in exchange for an amount in cash, payable at the Effective Time,
equal to the amount which would have been paid had such Stock Option or SAR been
cancelled immediately prior to the consummation of the Offer. A listing of all
outstanding Stock Options as of December 16, 1994, showing what portions of such
Stock Options are exercisable as of such date, the dates upon which such Stock
Options expire, and the exercise price of such Stock Options, is set forth in
Schedule 6.04.
(b) All Stock Option Plans shall terminate as of the Effective Time
and the provisions in any other Benefit Plan providing for the issuance,
transfer or grant of any capital stock of the Company or any interest in respect
of any capital stock of the Company shall be deleted as of the Effective Time,
and the Company shall use its best efforts to ensure that following the
Effective Time no holder of a Stock Option or any participant in any Stock
Option Plan shall have any right thereunder to acquire any capital stock of the
Company, Parent or the Surviving Corporation, except as provided in Section
6.04(a).
(c) Parent and Sub agree that the Company, in its sole discretion,
may defer the lapsing of restrictions on some or all of the restricted shares of
Company Common Stock granted under the Company's employee stock plans which
might otherwise occur upon the consummation of the Offer to the day immediately
following the consummation of the Offer or to accelerate such restricted stock
to provide sufficient time for the tender thereof into the Offer.
SECTION 6.05. Indemnification and Insurance. (a) The
------------------------------
indemnification obligations set forth in the Company's Amended and Restated
Articles of Incorporation and by-laws on the date of this Agreement shall
survive the Merger and shall not be amended, repealed or otherwise modified for
a period of six years after the Effective Time in any manner that would
adversely affect the rights thereunder of individuals who on or prior to the
Effective Time were directors, officers, employees or agents of the Company (the
"Indemnified Parties").
(b) For six years from the Effective Time, the Surviving Corporation
shall, unless Parent agrees in writing
50
to guarantee the indemnification obligations set forth in Section 6.05(a),
either (x) maintain in effect the Company's current directors' and officers'
liability insurance covering those persons who are covered on the date of this
Agreement by the Company's directors' and officers' liability insurance policy
(a copy of which will be made available to Parent); provided, however, that in
-------- -------
no event shall the Surviving Corporation be required to expend in any one year
an amount in excess of 150% of the annual premiums currently paid by the Company
for such insurance which the Company represents to be $795,000 for the twelve-
month period ended March 17, 1995; and, provided, further, that if the annual
-------- -------
premiums of such insurance coverage exceed such amount, the Surviving
Corporation shall be obligated to obtain a policy with the greatest coverage
available for a cost not exceeding such amount or (y) cause the Parent's
directors' and officers' liability insurance then in effect to cover those
persons who are covered on the date of this Agreement by the Company's
directors' and officers' liability insurance policy with respect to those
matters covered by the Company's directors' and officers' liability policy.
(c) This Section 6.05 shall survive the consummation of the Merger at
the Effective Time, is intended to benefit the Company, Parent, the Surviving
Corporation and the Indemnified Parties, and shall be binding on all successors
and assigns of Parent and the Surviving Corporation.
SECTION 6.06. Directors. Promptly upon the acceptance for payment
----------
of, and payment for, any shares of Company Common Stock by Sub pursuant to the
Offer, Sub shall be entitled to designate such number of directors on the Board
of Directors of the Company as will give Sub, subject to compliance with Section
14(f) of the Exchange Act, control of a majority of such directors, and the
Company and its Board of Directors shall, at such time, take any and all such
action needed to cause Sub's designees to be appointed to the Company's Board of
Directors (including to cause directors to resign). Subject to applicable law,
the Company shall take all action requested by Parent which is reasonably
necessary to effect any such election, including mailing to its stockholders the
Information Statement containing the information required by Section 14(f) of
the Exchange Act and Rule 14f-1 promulgated thereunder, and the Company agrees
to make such mailing with the mailing of the Schedule 14D-9 so long as Sub shall
have provided to the
51
Company on a timely basis all information required to be included in the
Information Statement with respect to Sub's designees.
SECTION 6.07. Fees and Expenses. (a) Except as provided below, all
------------------
fees and expenses incurred in connection with the Offer, the Merger, this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such fees or expenses, whether or not the Offer or the Merger is
consummated.
(b) The Company shall pay, or cause to be paid, in same day funds to
Parent the sum of (x) all of Parent's reasonably documented out-of-pocket
expenses in an amount up to but not to exceed $10,000,000 (the "Expenses") and
(y) $50,000,000 (the "Termination Fee") upon demand if (i) Parent or Sub
terminates this Agreement under Section 8.01(e); provided, however, that Parent
-------- -------
shall be entitled to only the Expenses where Parent or Sub terminates this
Agreement under Section 8.01(e) as a result of the occurrence of any event set
forth in clause (i) of paragraph (d) of Exhibit A or, as it relates to clause
(i) of paragraph (d) of Exhibit A, clause (iii) of such paragraph (d); provided
--------
further, however, that, if the Agreement is terminated as contemplated by the
- ------- -------
immediately preceding proviso and the Company subsequently consummates or enters
into an agreement relating to a competitive proposal within 12 months of such
termination, the Company shall also pay to Parent the Termination Fee, (ii) the
Company terminates this Agreement pursuant to Section 8.01(f) or (iii) prior to
any termination of this Agreement, a takeover proposal shall have been made and
within 12 months of such termination, a transaction constituting a takeover
proposal is consummated or the Company enters into an agreement with respect to,
or approves or recommends a takeover proposal. The amount of Expenses so
payable shall be the amount set forth in an estimate delivered by Parent,
subject to upward or downward adjustment (not to be in excess of the amount set
forth in clause (x) above) upon delivery of reasonable documentation therefor.
SECTION 6.08. Public Announcements. Parent and Sub, on the one hand,
---------------------
and the Company, on the other hand, will consult with each other before issuing,
and provide each other the opportunity to review and comment upon, any press
release or other public statements with respect to the transactions contemplated
by this Agreement, including the
52
Offer and 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
applicable law, court process or by obligations pursuant to any listing
agreement with any national securities exchange or national securities quotation
system. The parties agree that the initial press release to be issued with
respect to the transactions contemplated by this Agreement shall be in the form
heretofore agreed to by the parties.
SECTION 6.09. Rights Agreement. The Board of Directors of the
-----------------
Company shall take all further action (in addition to that referred to in
Section 4.01(p)) reasonably requested in writing by Parent in order to render
the Rights or any similar instrument inapplicable to the Offer, the Merger, the
Option Agreement and the other transactions contemplated by this Agreement.
Except as requested in writing by Parent, during the term of this Agreement, the
Board of Directors of the Company shall not (i) amend the Rights Agreement or
(ii) take any action with respect to, or make any determination under, the
Rights Agreement (including a redemption of the Rights) including any action to
facilitate a takeover proposal; provided that any of such actions may be taken
--------
simultaneously with entering into an agreement pursuant to Section 5.02(b).
SECTION 6.10. Benefit Plans. (a) Parent shall cause the Surviving
--------------
Corporation to take such actions as are necessary so that, for a period of not
less than one year after the Effective Time, nonunion employees of the Company
and its subsidiaries who continue their employment after the Effective Time will
be provided employee compensation and other benefits which in the aggregate are
at least generally comparable to those provided to such employees as of the date
hereof; provided, that it is understood that after the Effective Time, subject
--------
to the provisions of Section 6.10(d), (e) and (f) hereof and to the last
sentence of this Section 6.10(a), (x) neither Parent nor the Surviving
Corporation will have any obligation to issue or adopt any plans or arrangements
to provide for the issuance of shares of capital stock, warrants, options, stock
appreciation rights or other rights in respect of any shares of capital stock of
any entity or any securities convertible or exchangeable into such shares
pursuant to any such plan or program, (y) nothing herein shall require the
Surviving Corporation to maintain any particular plan or arrangement and (z)
nothing herein shall prevent or preclude the Surviving Corporation from
continuing any requirements for
53
employee contributions under any employee benefit plans in the same proportions
as the employee-paid portion under such plans constituted prior to the Effective
Time. Parent, Sub and the Company agree that, prior to the acquisition of
shares of Company Common Stock pursuant to the Offer, Parent and the Company
will enter into revised employment agreements with the Chief Executive Officer
and President of the Company in the respective forms of agreements set forth in
Schedule 6.10(a) hereto.
(b) It is Parent's current intention that, following the first
anniversary of the Effective Time, Parent will provide employee compensation and
other benefits for employees of the Company and its subsidiaries which are at
least generally comparable in the aggregate to the employee compensation and
other benefits for other employees of Parent and its subsidiaries.
(c) Parent will cause the Surviving Corporation to recognize all
service credited to each such employee by the Company through the Effective Time
for purposes of eligibility (including for enhanced vacation) and vesting under
any employee benefit plan provided by the Surviving Corporation for the benefit
of such employees.
(d) Nothing in this Section 6.10 is intended to cancel or modify any
obligations of the Company which by their terms and applicable law extend beyond
the Effective Time. It is understood, however, that Stock Options, stock
appreciation rights and restricted and contingent stock will be dealt with in
accordance with Section 3.01(c) hereof and Section 6.04 hereof.
(e) The Company's two Executive Security Plans shall remain in effect
until one year after the Effective Time (for all purposes, including, without
limitation, benefit accrual), but there shall be no obligation on the Parent,
Sub or the Surviving Corporation to add new participants to such plans following
the Effective Time. It is understood that the 1985 Executive Security Plan
provides an offset for the actuarial equivalent of amounts received from any
other pension plan adopted by the Company (which would include the Parent's tax-
qualified pension plan if it were adopted by the Company). It is agreed among
the parties that the Company may, in its discretion, amend such offset so that
it does not apply to the Company's 401(k) Retirement Savings Plan. This Section
6.10(e) shall not be
54
deemed to require any duplication of benefits provided by such Executive
Security Plans and any other pension plans.
(f) In calculating the annual bonus under the Company's Senior
Officers Combined Incentive Plan and Corporate Officers and Key Corporate
Personnel Plan for the current fiscal year of the Company, charges or equity
adjustments related to or arising from the transactions contemplated by this
Agreement, including with respect to the lapsing of restrictions on restricted
shares of Company Common Stock, shall not be taken into account in computing
"Plan Income" and "Plan Net Worth", as defined in such plans. This Section
6.10(f) shall not be deemed to indicate any commitment to continuing such plans
beyond the Effective Time. The principles stated in the immediately preceding
sentence shall be applied equitably, as between the Company and the Parent, with
respect to both Plan Income and Plan Net Worth.
SECTION 6.11. Title Policies. The Company agrees that, prior to the
---------------
consummation of the Offer, it will use its reasonable efforts to cause such
officers of the Company and its Significant Subsidiaries, as Parent's or Sub's
Title Insurer may reasonably require, to execute such reasonable and customary
affidavits as shall permit such Title Insurer to issue an endorsement to its
title insurance policies insuring title to the real properties owned or leased
by the Company or any of its Significant Subsidiaries to the effect that the
Title Insurer will not claim as a defense under any such policy failure of
insured to disclose to the Title Insurer prior to the date of the relevant
policy any defects, liens, encumbrances or adverse claims not shown by public
records and known to the insured (but not known to Parent or Sub) prior to the
Effective Time.
SECTION 6.12. Transfer Taxes. All liability for transfer or other
---------------
similar taxes arising out of or related to the sale of the Company Common Stock
to the Sub, or the consummation of any other transaction contemplated by this
Agreement, and due to the property owned by the Company or any of its
subsidiaries or affiliates ("Transfer Taxes") shall be borne by the Company, and
the Company shall file or cause to be filed all returns relating to such
Transfer Taxes which are due, and, to the extent appropriate or required by law,
the stockholders of the Company shall cooperate with respect to the filing of
such returns.
55
SECTION 6.13. Regulatory Matters. In connection with subsection (i)
-------------------
of the first sentence of Section 6.03(a), Parent shall, and shall cause its
subsidiaries to (and shall use its reasonable efforts to cause its affiliates
other than subsidiaries to), if it is necessary to obtain any regulatory
approval for this Agreement, disassociate themselves from any person or persons
deemed, or reasonably likely to be deemed, unacceptable by a Governmental Entity
with authority to administer Gaming Laws and, in the case of any such person who
is a nominee to serve as a director of Parent or any subsidiary of Parent,
Parent shall, and shall cause the relevant subsidiary or subsidiaries to,
replace any such director nominee with a suitable substitute nominee. In
connection with subsection (i) of the first sentence of Section 6.03(a), Parent
agrees that it shall use its reasonable efforts to cause the trust arrangements
described in either clause (iii)(B)(x) or (iii)(B)(y) of the first paragraph of
Exhibit A to be in full force and effect and further agrees that, if the
requisite approvals are obtained from the New Jersey Casino Control Commission,
it will place shares of Company Common Stock or shares of common stock of
Caesars New Jersey, Inc., as applicable, in trust as contemplated by such
clauses.
ARTICLE VII
CONDITIONS PRECEDENT
--------------------
SECTION 7.01. Conditions to Each Party's Obligation To Effect the
---------------------------------------------------
Merger. The respective obligation of each party to effect the Merger is subject
- -------
to the satisfaction or waiver on or prior to the Closing Date of the following
conditions:
(a) Stockholder Approval. If required by applicable law, this
---------------------
Agreement shall have been approved and adopted by the affirmative vote of
the holders of a majority of all shares of Company Common Stock entitled to
be cast in accordance with applicable law and the Company's Amended and
Restated Articles of Incorporation; provided that Parent and Sub shall vote
--------
all their shares of Company Common Stock in favor of the Merger.
(b) No Injunctions or Restraints. No statute, rule, regulation,
-----------------------------
executive order, decree, temporary
56
restraining order, preliminary or permanent injunction or other order
enacted, entered, promulgated, enforced or issued by any Governmental
Entity or other legal restraint or prohibition preventing the consummation
of the Merger or the transactions contemplated thereby shall be in effect;
provided, however, that, in the case of a decree, injunction or other
-------- -------
order, each of the parties shall have used reasonable efforts to prevent
the entry of any such injunction or other order and to appeal as promptly
as possible any decree, injunction or other order that may be entered.
(c) Purchase of Shares of Company Common Stock. Sub shall have
-------------------------------------------
previously accepted for payment and paid for shares of Company Common Stock
pursuant to the Offer.
SECTION 7.02. Condition to Obligations of Parent and Sub. The
-------------------------------------------
obligations of Parent and Sub to effect the Merger are further subject to the
condition that all Stock Options and all SARs shall have been cancelled.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
---------------------------------
SECTION 8.01. Termination. This Agreement may be terminated at any
------------
time prior to the Effective Time, whether before or after approval of matters
presented in connection with the Merger by the stockholders of the Company:
(a) by mutual written consent of Parent and the Company;
(b) by either Parent or the Company if (i) as a result of the failure,
occurrence or existence of any of the conditions set forth in Exhibit A to
this Agreement the Offer shall have terminated or expired in accordance
with its terms without Sub having accepted for payment any shares of
Company Common Stock pursuant to the Offer or (ii) Sub shall not have
accepted for payment any shares of Company Common Stock pursuant to the
Offer by June 19, 1995; provided, however, that the right to terminate this
-------- -------
Agreement pursuant to this Section 8.01(b) shall not be available to either
party if its failure to perform any of its obligations under
57
this Agreement results in the failure, occurrence or existence of any such
condition;
(c) by either Parent or the Company if any Governmental Entity shall
have issued an order, decree or ruling or taken any other action
permanently enjoining, restraining or otherwise prohibiting the acceptance
for payment of, or payment for, shares of Company Common Stock pursuant to
the Offer or the Merger and such order, decree or ruling or other action
shall have become final and nonappealable;
(d) by Parent or Sub prior to the purchase of shares of Company Common
Stock pursuant to the Offer in the event of a breach by the Company of any
representation, warranty, covenant or other agreement contained in this
Agreement which (A) would give rise to the failure of a condition set forth
in paragraph (e) or (f) of Exhibit A and (B) cannot be or has not been
cured within 20 days after the giving of written notice to the Company;
(e) by Parent or Sub if either Parent or Sub is entitled to terminate
the Offer as a result of the occurrence of any event set forth in paragraph
(d) of Exhibit A to this Agreement;
(f) by the Company in connection with entering into a definitive
agreement in accordance with Section 5.02(b), provided it has complied with
all provisions thereof, including the notice provisions therein, and that
it makes simultaneous payment of the Expenses and the Termination Fee; or
(g) by the Company, if Sub or Parent shall have breached in any
material respect any of their respective representations, warranties,
covenants or other agreements contained in this Agreement, which failure to
perform is incapable of being cured or has not been cured within 20 days
after the giving of written notice to Parent or Sub, as applicable, except,
in any case, such failures which are not reasonably likely to affect
adversely Parent's or Sub's ability to complete the Offer or the Merger.
SECTION 8.02. Effect of Termination. In the event of termination of
----------------------
this Agreement by either the Company or Parent as provided in Section 8.01, this
Agreement shall
58
forthwith become void and have no effect, without any liability or obligation on
the part of Parent, Sub or the Company, other than the provisions of Section
4.01(q), Section 4.02(d), the last four sentences of Section 6.02, Section 6.07,
this Section 8.02 and Article IX and except to the extent that such termination
results from the wilful and material breach by a party of any of its
representations, warranties, covenants or agreements set forth in this
Agreement.
SECTION 8.03. Amendment. This Agreement may be amended by the
----------
parties at any time before or after any required approval of matters presented
in connection with the Merger by the stockholders of the Company; provided,
--------
however, that after any such approval, there shall not be made any amendment
- -------
that by law requires further approval by such stockholders without the further
approval of such stockholders. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties.
SECTION 8.04. Extension; Waiver. At any time prior to the Effective
------------------
Time, the parties may (a) extend the time for the performance of any of the
obligations or other acts of the other parties, (b) waive any inaccuracies in
the representations and warranties contained in this Agreement or in any
document delivered pursuant to this Agreement or (c) subject to the proviso of
Section 8.03, waive compliance with any of the agreements or conditions
contained in this Agreement. Any agreement on the part of a party to any such
extension or waiver shall be valid only if set forth in an instrument in writing
signed on behalf of such party. The failure of any party to this Agreement to
assert any of its rights under this Agreement or otherwise shall not constitute
a waiver of those rights.
SECTION 8.05. Procedure for Termination, Amendment, Extension or
--------------------------------------------------
Waiver. A termination of this Agreement pursuant to Section 8.01, an amendment
- -------
of this Agreement pursuant to Section 8.03 or an extension or waiver pursuant to
Section 8.04 shall, in order to be effective, require in the case of Parent, Sub
or the Company, action by its Board of Directors or the duly authorized designee
of its Board of Directors; provided, however, that in the event that Sub's
-------- -------
designees are appointed or elected to the Board of Directors of the Company as
provided in Section 6.06, after the acceptance for payment of shares of Company
Common Stock pursuant to the Offer and prior to the Effective Time, the
59
affirmative vote of a majority of the directors of the Company that were not
designated by Parent or Sub shall be required by the Company to (i) amend or
terminate this Agreement by the Company, (ii) exercise or waive any of the
Company's rights or remedies under this Agreement, (iii) extend the time for
performance of Parent's and Sub's respective obligations under this Agreement or
(iv) take any action to amend or otherwise modify the Company's Amended and
Restated Articles of Incorporation or By-laws.
ARTICLE IX
GENERAL PROVISIONS
------------------
SECTION 9.01. Nonsurvival of Representations. None of the
-------------------------------
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive the Effective Time or, in the case of
the Company, shall survive the acceptance for payment of, and payment for,
shares of Company Common Stock by Sub pursuant to the Offer. This Section 9.01
shall not limit any covenant or agreement of the parties which by its terms
contemplates performance after the Effective Time of the Merger.
SECTION 9.02. Notices. All notices, requests, claims, demands and
--------
other communications under this Agreement shall be in writing and shall be
deemed given if delivered personally or sent by overnight courier (providing
proof of delivery) to the parties at the following addresses
(or at such other address for a party as shall be specified by like notice):
(a) if to Parent or Sub, to:
ITT Corporation
1330 Avenue of the Americas
New York, NY 10019
Facsimile: (212) 258-1037
Attention: Richard S. Ward, Esq.
60
with copies to:
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, NY 10019
Facsimile: (212) 765-1072
Attention: Philip A. Gelston, Esq.
(b) if to the Company, to
Caesars World, Inc.
1801 Century Park East
Los Angeles, California 90067
Facsimile: (310) 552-9254
Attention: Philip L. Ball, Esq.
with copies to:
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, NY 10022
Facsimile: (212) 735-2000
Attention: Morris J. Kramer, Esq.
SECTION 9.03. Definitions. For purposes of this Agreement:
------------
(a) an "affiliate" of any person means another person that directly or
indirectly, through one or more intermediaries, controls, is controlled by,
or is under common control with, such first person;
(b) "competitive proposal" has the meaning assigned thereto in
Section 5.02(b);
(c) "indebtedness" means, with respect to any person, without
duplication, (A) all obligations of such person for borrowed money, or with
respect to deposits or advances of any kind, (B) all obligations of such
person evidenced by bonds, debentures, notes or similar instruments, (C)
all obligations of such person upon which interest charges are customarily
paid (other than trade payables incurred in the ordinary course of
61
business), (D) all obligations of such person under conditional sale or
other title retention agreements relating to property purchased by such
person, (E) all obligations of such person issued or assumed as the
deferred purchase price of property or services (excluding obligations of
such person to creditors for raw materials, inventory, services and
supplies incurred in the ordinary course of such person's business), (F)
all lease obligations of such person capitalized on the books and records
of such person, (G) all obligations of others secured by any lien on
property or assets owned or acquired by such person, whether or not the
obligations secured thereby have been assumed, (H) all obligations of such
person under interest rate, or currency or commodity hedging, swap or
similar derivative transactions (valued at the termination value thereof),
(I) all letters of credit issued for the account of such person (excluding
letters of credit issued for the benefit of suppliers or lessors to support
accounts payable to suppliers incurred in the ordinary course of business)
and (J) all guarantees and arrangements having the economic effect of a
guarantee of such person of any indebtedness of any other person.
(d) "knowledge" of the Company means, in each case in this Agreement,
any Schedule hereto or any certificate delivered pursuant hereto in which
the Company makes a representation or warranty based on the "knowledge" of
the Company, the Company represents and warrants only as to the actual
knowledge of the Chairman of the Board, the Chief Financial Officer, the
General Counsel and the President of the Company.
(e) "lien" means any conditional sale agreement, default of title,
easement, encroachment, encumbrance, hypothecation, infringement, lien,
mortgage, pledge, reservation, restriction, security interest, title
retention or other security arrangement, or any adverse right or interest,
charge or claim of any nature whatsoever of, on, or with respect to any
asset, property or property interest; provided, however, that the term
-------- -------
"lien" shall not include (i) liens for water and sewer charges and current
taxes not yet due and payable or being contested in good faith, (ii)
mechanics', carriers', workers', repairers', materialmens', warehousemens'
and other similar liens arising or incurred in the ordinary course of
business
62
or (iii) all liens approved in writing by the other party hereto.
(f) "material adverse change" or "material adverse effect" means, when
used in connection with the Company or Parent, any change or effect (or any
development that, insofar as can reasonably be foreseen, is likely to
result in any change or effect) that is materially adverse to the business,
properties, assets, financial condition or results of operations of such
party and its subsidiaries, taken as a whole, except that (i) fluctuations
in the earnings or financial condition of the Company during the period
from October 31, 1994 to consummation of the Offer that result from
winnings by high-wagering customers so long as the Company has been
operating on a basis consistent with its existing policies concerning
extensions of credit and setting of gambling limits and so long as the
aggregate levels of wagering by high-wagering customers are consistent with
the past experience of the Company, (ii) any material adverse effect
resulting, directly or indirectly, from the prospective ownership of
Company Common Stock by Parent or its affiliates, or (iii) any change which
adversely affects the gaming industry in Nevada or the gaming industry in
New Jersey, shall not be deemed to be a "material adverse change" or a
"material adverse effect";
(g) "ordinary course of business", when used with respect to the
Company, in addition to its usual and customary meaning, shall be deemed to
include transactions in the ordinary course of business consistent with
prior practice pertaining to currently ongoing business development and
managerial activities, including activities conducted or proposed to be
conducted in the jurisdictions set forth in Schedule 9.03(g), so long as
the scope and nature of such business development and managerial activities
are consistent with the Company's past practice.
(h) "person" means an individual, corporation, partnership, joint
venture, association, trust, unincorporated organization or other entity;
(i) a "subsidiary" of any person means another person, an amount of
the voting securities, other voting ownership or voting partnership
interests of which is sufficient to elect at least a majority of its
63
Board of Directors or other governing body (or, if there are no such voting
interests, 50% or more of the equity interests of which) is owned directly
or indirectly by such first person; and
(j) "takeover proposal" has the meaning assigned thereto in Section
5.02(a).
SECTION 9.04. Interpretation. When a reference is made in this
---------------
Agreement to a Section, Exhibit or Schedule, such reference shall be to a
Section of, or an Exhibit or Schedule to, this Agreement unless otherwise
indicated. The table of contents and headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the words "include", "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation". The Option Agreement and the consummation of
the transactions contemplated by such Option Agreement are transactions
contemplated by this Agreement. To the extent any restriction on the activities
of the Company or its subsidiaries under the terms of this Agreement, including
with respect to any negative pledge or other restriction on the ability of the
Company to dispose of stock of any Nevada subsidiary, requires prior approval
under any Gaming Law, such restriction shall be of no force or effect unless and
until such approval is obtained. If any provision of this Agreement is illegal
or unenforceable under any Gaming Law, such provision shall be void and of no
force or effect.
SECTION 9.05. 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 9.06. Entire Agreement; No Third-Party Beneficiaries. This
-----------------------------------------------
Agreement and the Option Agreement constitute the entire agreements, and
supersede all prior agreements and understandings, both written and oral, among
the parties with respect to the subject matter of these agreements and, except
for the provisions of Article III, the last sentence of Section 6.10(a) and
Sections 6.04 and 6.05, are not intended to confer upon any person other than
the parties any rights or remedies hereunder.
64
SECTION 9.07. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY,
--------------
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT
REGARD TO ANY APPLICABLE CONFLICTS OF LAW, EXCEPT TO THE EXTENT THE FBCA SHALL
BE HELD TO GOVERN THE TERMS OF THE MERGER.
SECTION 9.08. Assignment. Neither this Agreement nor any of the
-----------
rights, interests or obligations under this Agreement shall be assigned, in
whole or in part, by operation of law or otherwise by any of the parties without
the prior written consent of the other parties, except that Sub may assign, in
its sole discretion, any of or all its rights, interests and obligations under
this Agreement to Parent or to any direct or indirect wholly owned subsidiary of
Parent, but no such assignment shall relieve Sub of any of its obligations under
this Agreement. Subject to the preceding sentence, this Agreement will be
binding upon, inure to the benefit of, and be enforceable by, the parties and
their respective successors and assigns.
SECTION 9.09. Enforcement. The parties agree that irreparable damage
------------
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached.
It is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any court of the United States
located in the State of New York or California or in New York or California
state court, this being in addition to any other remedy to which they are
entitled at law or in equity. In addition, each of the parties hereto (a)
consents to submit itself to the personal jurisdiction of any Federal court
located in the State of New York or California or any New York or California
state court in the event any dispute arises out of this Agreement or any of the
transactions contemplated by this Agreement, (b) agrees that it will not attempt
to deny or defeat such personal jurisdiction by motion or other request for
leave from any such court and (c) agrees that it will not bring any action
relating to this Agreement or any of the transactions
65
contemplated by this Agreement in any court other than a Federal or state court
sitting in the State of New York or California.
IN WITNESS WHEREOF, Parent, Sub and the Company have caused this
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the date first written above.
ITT CORPORATION,
by
/s/ Richard S. Ward
------------------------------
Name: Richard S. Ward
Title: Executive V.P.,
General Counsel
ITT FLORIDA ENTERPRISES INC.,
by
/s/ Richard S. Ward
------------------------------
Name: Richard S. Ward
Title: Executive V.P.,
General Counsel
CAESARS WORLD, INC.,
by
/s/ Roger Lee
-------------------------------
Name: Roger Lee
Title: Senior Vice
President, Finance
& Administration
EXHIBIT A
CONDITIONS OF THE OFFER
-----------------------
Notwithstanding any other term of the Offer or this Agreement, Sub
shall not be required to accept for payment or, subject to any applicable rules
and regulations of the SEC, including Rule 14e-1(c) under the Exchange Act
(relating to Sub's obligation to pay for or return tendered shares of Company
Common Stock after the termination or withdrawal of the Offer), to pay for any
shares of Company Common Stock tendered pursuant to the Offer unless, (i) there
shall have been validly tendered and not withdrawn prior to the expiration of
the Offer such number of shares of Company Common Stock which would constitute a
majority of the outstanding shares (determined on a fully diluted basis) of
Company Common Stock (the "Minimum Condition"), (ii) any waiting period under
the HSR Act applicable to the purchase of shares of Company Common Stock
pursuant to the Offer shall have expired or been terminated and (iii) (A) all
consents, approvals, orders or authorizations of, or registrations, declarations
or filings with, any Governmental Entity with jurisdiction in respect of Gaming
Laws (other than New Jersey) required or necessary in connection with the Offer,
the Merger and this Agreement and the transactions contemplated by this
Agreement (including the changes in the composition of the Board of Directors of
the Company) shall have been obtained and shall be in full force and effect and
(B) in the case of the New Jersey Casino Control Act and the rules and
regulations promulgated thereunder, either, at the option of Parent, (x) as
contemplated by Section 5.03, all shares of Caesars New Jersey, Inc. shall have
been deposited in trust with a trustee qualified and otherwise acceptable to the
New Jersey Casino Control Commission and the transactions and arrangements
contemplated by Section 5.03 shall be in full force and effect and, as a result,
neither Parent nor Sub will be required pursuant to the requirements of the New
Jersey Casino Control Act and the rules and regulations promulgated thereunder
to deposit or place in trust any of the shares of Company Common Stock currently
owned by Parent or its affiliates or to be acquired pursuant to the Offer or (y)
(1) the New Jersey Casino Control Commission shall have approved a form of trust
agreement in form and substance reasonably satisfactory to Parent (including in
respect of control by Parent of the Company and its subsidiaries) in respect of
a trust arrangement for the shares of Company Common Stock to be acquired
pursuant to the Offer and the Merger pending final qualification of Parent to
hold a casino license under the New Jersey Casino Control Act and
the rules and regulations thereunder, (2) a trustee qualified and otherwise
acceptable to the New Jersey Casino Control Commission and Parent in respect of
such trust arrangement for the shares of Company Common Stock to be acquired
pursuant to the Offer and the Merger shall have been appointed or designated and
(3) the directors of Sub shall have been qualified on a permanent or temporary
basis to serve as directors of a company (including the Company) that either
directly, or through its subsidiaries, holds a casino license under the New
Jersey Casino Control Act and the rules and regulations thereunder.
Furthermore, notwithstanding any other term of the Offer or this Agreement, Sub
shall not be required to accept for payment or, subject as aforesaid, to pay for
any shares of Company Common Stock not theretofore accepted for payment or paid
for, and may terminate the Offer if, at any time on or after the date of this
Agreement and before the acceptance of such shares for payment or the payment
therefor, any of the following conditions exists (other than as a result of any
action or inaction of Parent or any of its subsidiaries which constitutes a
breach of this Agreement):
(a) there shall be instituted or pending any suit, action or
proceeding (in the case of a suit, action or proceeding by a person other
than a Governmental Entity, such suit, action or proceeding having a
substantial likelihood of success or, in the case of a suit, action or
proceeding by a Governmental Entity, such suit, action or proceeding having
a reasonable likelihood of success), (i) challenging the acquisition by
Parent or Sub of any shares of Company Common Stock under the Offer,
seeking to restrain or prohibit the making or consummation of the Offer or
the Merger, or seeking to obtain from the Company, Parent or Sub any
damages that are material in relation to the Company and its subsidiaries
taken as whole, (ii) seeking to prohibit or materially limit the ownership
or operation by the Company, Parent or any of their respective subsidiaries
of a material portion of the business or assets of the Company and its
subsidiaries, taken as a whole, or Parent and its subsidiaries, taken as a
whole, or to compel the Company or Parent to dispose of or hold separate
any material portion of the business or assets of the Company and its
subsidiaries, taken as a whole, or Parent and its subsidiaries, taken as a
whole, as a result of the Offer or any of the other transactions
contemplated by this Agreement, (iii) seeking to impose material
limitations on the
ability of Parent or Sub to acquire or hold, or exercise full rights of
ownership of, any shares of Company Common Stock accepted for payment
pursuant to the Offer including, without limitation, the right to vote such
Company Common Stock on all matters properly presented to the stockholders
of the Company or (iv) seeking to prohibit Parent or any of its
subsidiaries from effectively controlling in any material respect the
business or operations of the Company and its subsidiaries, taken as a
whole;
(b) there shall be any statute, rule, regulation, judgment, order or
injunction enacted, entered, enforced, promulgated or deemed applicable to
the Offer or the Merger, or any other action shall be taken by any
Governmental Entity or court, other than the application to the Offer or
the Merger of applicable waiting periods under the HSR Act, that is
reasonably likely to result, directly or indirectly, in any of the
consequences referred to in clauses (i) through (iv) of paragraph (a)
above;
(c) there shall have occurred any material adverse change (or any
development that, insofar as reasonably can be foreseen, is reasonably
likely to result in any material adverse change) in the business,
properties, assets, financial condition or results of operations of the
Company and its subsidiaries, taken as a whole, except that (i)
fluctuations in the earnings or financial condition of the Company during
the period from October 31, 1994 to consummation of the Offer that result
from winnings by high-wagering customers so long as the Company has been
operating on a basis consistent with its existing policies concerning
extensions of credit and setting of gambling limits and so long as
aggregate levels of wagering by high-wagering customers are consistent with
the past experience of the Company, (ii) any material adverse effect
resulting, directly or indirectly, from the prospective ownership of
Company Common Stock by Parent or its affiliates, or (iii) any change which
adversely affects the gaming industry in Nevada or the gaming industry in
New Jersey, shall not be deemed to be a material adverse change;
(d) (i) the Board of Directors of the Company or any committee thereof
shall have withdrawn or modified in a manner adverse to Parent or Sub its
approval or recommendation of the Offer, the Merger or this
Agreement, or approved or recommended any takeover proposal, (ii) the
Company shall have entered into any agreement with respect to any
competitive proposal in accordance with Section 5.02(b) of this Agreement
or (iii) the Board of Directors of the Company or any committee thereof
shall have resolved to take any of the foregoing actions;
(e) any of the representations and warranties of the Company set forth
in this Agreement that are qualified as to materiality shall not be true
and correct and any such representations and warranties that are not so
qualified shall not be true and correct in any material respect, in each
case at the date of this Agreement and at the scheduled expiration of the
Offer;
(f) the Company shall have failed to perform in any material respect
any material obligation or to comply in any material respect with any
material agreement or material covenant of the Company to be performed or
complied with by it under this Agreement;
(g) there shall have occurred (i) any general suspension of trading
in, or limitation on prices for, securities (excluding any coordinated
trading halt triggered solely as a result of a specified decrease in a
market index), (ii) any decline in the New York Stock Exchange Composite
Index by an amount in excess of 33% measured from the close of business on
December 16, 1994, (iii) a declaration of a banking moratorium or any
suspension of payments in respect of banks in the United States, (iv) any
limitation (whether or not mandatory) by any Governmental Entity on, or
other event that materially affects, the extension of credit by banks or
other lending institutions or (v) in case of any of the foregoing existing
on the date of this Agreement, material acceleration or worsening thereof;
(h) the Agreement shall have been terminated in accordance with its
terms.
The foregoing conditions are for the sole benefit of Sub and Parent
and may, subject to the terms of the Agreement, be waived by Sub and Parent in
whole or in part at any time and from time to time in their sole discretion. The
failure by Parent or Sub at any time to exercise any of the foregoing rights
shall not be deemed a waiver of any such right, the waiver of any such right
with respect to particular facts and circumstances shall not be deemed a waiver
with respect to any other facts and circumstances and
each such right shall be deemed an ongoing right that may be asserted at any
time and from time to time.
EXHIBIT (c)(2)
CONFORMED COPY
OPTION AGREEMENT dated as of December 19, 1994, by and among
ITT CORPORATION, a Delaware corporation ("Parent"), ITT FLORIDA
ENTERPRISES INC., a Florida corporation and a wholly owned
subsidiary of Parent ("Sub"), and CAESARS WORLD, INC., a Florida
corporation (the "Company").
WHEREAS Parent, Sub and the Company propose to enter into an Agreement
and Plan of Merger of even date herewith (the "Merger Agreement") providing for
the making of a cash tender offer (the "Offer") by the Sub for shares of Common
Stock, par value $.10 per share, of the Company (the "Common Stock") and the
merger of the Company and Sub; and
WHEREAS as a condition to their willingness to enter into the Merger
Agreement, Parent and Sub wish to have the option set forth herein to purchase,
under certain circumstances, shares of Common Stock from the Company.
NOW, THEREFORE, to implement the foregoing and in consideration of the
mutual agreements contained herein and for other consideration, the sufficiency
and receipt of which are hereby acknowledged, the parties hereto hereby agree as
follows:
ARTICLE I
DEFINITIONS
-----------
SECTION 1.01. Definitions. As used in this Agreement, the following
------------
terms shall have the following meanings:
"Affiliate" has the meaning assigned to the term "affiliate" in the
---------
Merger Agreement.
"Closing Date" has the meaning assigned to such term in the Merger
------------
Agreement.
"Common Stock" has the meaning assigned to such term above.
------------
2
"Exercise Closing" has the meaning assigned to such term in Section
----------------
2.02(b).
"Expiration Date" means the earliest of (i) the Closing Date and (ii)
---------------
the date the Merger Agreement is validly terminated by the Company pursuant to
Section 8.01(g) of the Merger Agreement due to a material breach by Parent or
Sub of their respective representations, warranties, covenants or other
agreements under the Merger Agreement.
"lien" has the meaning assigned to such term in the Merger Agreement.
----
"Merger Agreement" has the meaning assigned to such term above.
----------------
"Offer" has the meaning assigned to such term in the Merger Agreement.
-----
"Option" has the meaning set forth in Section 2.01.
------
"Option Exercise Period" means the period commencing with the first
----------------------
occurrence of a Trigger Event and ending with the Expiration Date.
"person" has the meaning assigned to the term "person" in the Merger
------
Agreement.
"Shares" has the meaning set forth in Section 2.01.
------
"Subsidiary" has the meaning assigned to the term "subsidiary" in the
----------
Merger Agreement.
"Trigger Event" means Parent, Sub or any other Affiliate of Parent
-------------
shall have accepted Shares for payment pursuant to the Offer.
SECTION 1.02. Interpretation. The rules of interpretation set forth
--------------
in Section 9.04 of the Merger Agreement shall apply to this Agreement, and the
provisions thereof shall be deemed to be incorporated by reference herein.
3
ARTICLE II
THE OPTION
----------
SECTION 2.01. Grant of Option. The Company hereby grants to Sub an
---------------
irrevocable option (the "Option") to purchase, on the terms and subject to the
conditions set forth herein, up to 5,000,000 newly issued shares of Common
Stock, plus all shares of Common Stock held in treasury (collectively, the
"Shares"). All of such Shares will be duly authorized, validly issued, fully
paid and non-assessable and not subject to preemptive rights.
SECTION 2.02. Exercise of Option. (a) The Option may be exercised
------------------
by Sub (or its designee, which designee must be Parent or a direct or indirect
wholly owned Subsidiary of Parent), in whole or in part, at any time, or from
time to time, during the Option Exercise Period.
(b) In order for Sub to exercise the Option, Sub shall give written
notice to the Company of such exercise, specifying the number of Shares to be
purchased (and the denominations of the share certificate or certificates to be
issued), whether Sub and/or a designee of Sub will be purchasing the Shares and
the place, time and date of the closing of such purchase (the "Exercise
Closing"), which date shall not be less than one business day nor more than ten
business days from the date on which such notice is delivered.
(c) At each Exercise Closing, the Company shall deliver to Sub (or
its designee) all of the Shares to be purchased by delivery of a certificate or
certificates evidencing such Shares in the denominations designated by Sub in
the notice required under Section 2.02(b).
SECTION 2.03. Purchase Price; Payment. In the event Sub exercises
------------------------
the Option, Sub (or, at Sub's option, its designee) shall, at the related
Exercise Closing, deliver by wire transfer to an account designated at least one
business day in advance of such Exercise Closing an amount equal to the product
of (x) $67.50 and (y) the number of Shares purchased at such closing.
SECTION 2.04. Reservation of Shares. The Company has reserved, and
---------------------
will keep reserved, for issuance (in the case of newly issued Shares) and
delivery (in the case of treasury Shares) hereunder the maximum number of Shares
that
4
would be issuable and deliverable, as the case may be, from time to time if the
Option were exercised in full, in each case free and clear of all liens.
SECTION 2.05. Adjustment Upon Changes in Capitalization. In the
-----------------------------------------
event of any change in the number (or conversion or exchange) of issued and
outstanding shares of Common Stock by reason of any stock dividend, split-up,
merger, recapitalization, combination, exchange of shares, spin-off or other
change in the corporate or capital structure of the Company which could have the
effect of diluting or otherwise diminishing Sub's rights hereunder (including
any issuance of Common Stock or other equity security of the Company at a price
below the fair value thereof), the number and kind of Shares subject to the
Option shall be appropriately adjusted so that Sub shall receive upon exercise
(or, if such a change occurs between exercise and the related Exercise Closing,
upon such Exercise Closing) of the Option the number and kind of Shares or other
securities or property that Sub would have received in respect of the Shares
that Sub is entitled to purchase upon exercise of the Option if the Option had
been exercised (or the purchase thereunder had been consummated, as the case may
be) immediately prior to such event. The rights of Sub under this Section shall
be in addition to, and shall in no way limit, its rights against the Company for
breach of the Merger Agreement.
ARTICLE III
GENERAL PROVISIONS
------------------
SECTION 3.01. Further Assurances. From time to time, at any of the
-------------------
other parties' request and without further consideration, each party hereto
shall execute and deliver such additional documents, transfers, assignments,
endorsements, consents and other instruments and take all such further action as
may be necessary or desirable to consummate the transactions contemplated by
this Agreement, including to vest in Sub (or its designee hereunder) thereof
good title to any Shares purchased hereunder. Upon the terms and subject to the
conditions set forth in this Agreement, each of the parties agrees to use
reasonable efforts to take, or cause to be taken, all actions, and to do, or
cause to be done, and to assist and cooperate with the other parties in doing,
all things necessary, proper or advisable to consummate and make effective, in
the most
5
expeditious manner practicable, the Option, and the transactions contemplated by
this Agreement.
SECTION 3.02. Notices. All notices, requests, claims, demands and
--------
other communications under this Agreement shall be in writing and shall be
deemed given if delivered personally or sent by overnight courier (providing
proof of delivery) to the parties at the following addresses (or at such other
address for a party and shall be specified by like notice):
(a) If to Parent or Sub, to:
ITT Corporation
1330 Avenue of the Americas
New York, New York 10019-5049
Facsimile: (212) 258-1037
Attention: Richard S. Ward, Esq.
with copies to:
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, New York 10019
Facsimile: (212) 474-3700
Attention: Philip A. Gelston, Esq.
(b) If to the Company, to:
Caesars World, Inc.
1801 Century Park East
Los Angeles, California 90067
Facsimile: (310) 552-9254
Attention: Philip L. Ball, Esq.
with copies to:
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, NY 10022
Facsimile: (212) 735-2000
Attention: Morris J. Kramer, Esq.
SECTION 3.03. Amendments; Waivers. (a) No provision of this
--------------------
Agreement may be amended or waived unless such amendment or waiver is in writing
and signed, in the case of an amendment, by the parties hereto, or in the case
6
of a waiver, by the party against whom the waiver is to be effective.
(b) No failure or delay by any party in exercising any right, power
or privilege hereunder shall operate as waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
SECTION 3.04. Counterparts. This Agreement may be executed in one or
-------------
more counterparts, all of which shall be considered one and the same agreement
and shall become effective when one or more counterparts have been signed by
each of the parties and delivered to the other parties.
SECTION 3.05. Entire Agreement; No Third Party Beneficiaries. This
-----------------------------------------------
Agreement, the Merger Agreement and the agreements contemplated hereby and
thereby, constitute the entire agreement and supersede all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter of these agreements and, except for the provisions of Article III
of the Merger Agreement, the last sentence of Section 6.10(a) of the Merger
Agreement and Sections 6.04 and 6.05 of the Merger Agreement, are not intended
to confer upon any person other than the parties any rights or remedies
hereunder.
SECTION 3.06. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY,
--------------
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT
REGARD TO ANY APPLICABLE CONFLICTS OF LAW.
SECTION 3.07. Assignment. Except as specifically provided herein
-----------
with respect to any designee of Sub exercising the Option, neither this
Agreement nor any of the rights, interests or obligations under this Agreement
shall be assigned, in whole or in part, by operation of law or otherwise by any
of the parties without the prior written consent of the other parties, except
that Sub may assign, in its sole discretion, any of or all its rights, interests
and obligations under this Agreement to Parent or to any direct or indirect
wholly owned Subsidiary of Parent, but no such assignment shall relieve Sub of
any of its obligations under this Agreement. Subject to the preceding sentence,
this Agreement will be binding upon, inure to the benefit of, and
7
be enforceable by, the parties and their respective successors and assigns.
SECTION 3.08. Enforcement. The parties agree that irreparable damage
------------
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached.
It is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any court of the United States
located in the State of New York or California or in New York or California
state court, this being in addition to any other remedy to which they are
entitled at law or in equity. In addition, each of the parties hereto (a)
consents to submit itself to the personal jurisdiction of any Federal court
located in the State of New York or California or any New York or California
state court in the event any dispute arises out of this Agreement or any of the
transactions contemplated by this Agreement, (b) agrees that it will not attempt
to deny or defeat such personal jurisdiction by motion or other request for
leave from any such court and (c) agrees that it will not bring any action
relating to this Agreement or any of the transactions
8
contemplated by this Agreement in any court other than a Federal or state court
sitting for the State of New York or California.
IN WITNESS WHEREOF, the Company, Parent and Sub have caused this
Agreement to be duly executed as of the day and year first above written.
ITT CORPORATION,
by
/s/ Richard S. Ward
-----------------------
Name: Richard S. Ward
Title: Executive V.P.,
General Counsel
ITT FLORIDA ENTERPRISES INC.,
by
/s/ Richard S. Ward
--------------------
Name: Richard S. Ward
Title: Executive V.P.,
General Counsel
CAESARS WORLD, INC.,
by
/s/ Roger Lee
--------------
Name: Roger Lee
Title: Senior Vice
President, Finance
& Administration
EXHIBIT (c)(3)
AMENDED AND RESTATED
--------------------
EMPLOYMENT AGREEMENT
--------------------
This is an amendment and restatement signed this ____ day of December,
1994, of the Employment Agreement made as of August 1, 1991, by and between
CAESARS WORLD, INC. (the "Company"), a Florida corporation, and Henry Gluck (the
"Employee"), as previously amended as of August 1, 1992 and October 4, 1994,
with ITT Corporation ("ITT") being added as a party hereto (such amendment and
restatement being hereinafter called the "Agreement").
FACT RECITALS
-------------
A. Employee is presently employed under the employment agreement, as
amended, described above; and
B. During the course of Employee's employment with the Company, Employee
has performed outstanding services for the Company and has obtained a superior
reputation in the industry, with regulatory agencies, and with various
institutional holders and members of the financial constituency of the Company;
and
C. It is deemed by the Company to be in the best interests of the Company
and its shareholders to assure continuation of Employee's employment to the
employees of the Company and to the other interested
parties described in B above; and
D. The Company recognizes that the nature and character of the Company and
its present Board of Directors and Employee's present position, duties,
responsibilities and status within this structure are indispensable factors
which have caused Employee to remain in the employ of the Company and to enhance
the value of Employee's services to the Company; and
E. Employee desires assurance of a long-term future with the Company and
is willing to enter into a long-term agreement with the Company; and
F. Pursuant to an Agreement and Plan of Merger, dated as of
December 19, 1994, among the Company, ITT Corporation and ITT Florida
Enterprises Inc. (the "Merger Agreement"). This Agreement is being executed
prior to the acquisition of shares of the Company's common stock pursuant to the
Offer, as defined in the Merger Agreement. The effective date of this Agreement
shall be the date of the acquisition of shares of the Company's common stock
pursuant to the Offer.
1. TERM OF EMPLOYMENT.
------------------
Unless earlier terminated as herein provided, the term of Employee's
employment with the Company hereunder shall commence at the effective date and
shall end on the fifth anniversary date of the effective date. Employee's
employment hereunder shall not be affected by
2
his age. For purposes of this Agreement, the "Term" of this Agreement shall mean
the full five-year term of the Agreement, plus any extensions which may be
mutually agreed upon by all three parties hereto in writing. For purposes of
this Agreement, the "Employment Period" (which in no event shall extend beyond
the Term) shall mean the period during which Employee has an obligation to
render services hereunder, as described in Paragraph 2, taking into account any
notice of termination which may be given by either the Company or the Employee.
It is understood that there are certain circumstances of termination under which
the Employment Period (and Employee's obligation to render services) will end
before the Term (and certain of the Company's obligations will end). Various
provisions of this Agreement are intended to survive the expiration or
termination of the Term or the Employment Period, including, without limitation,
the provisions of Paragraphs 6.c., 6.d., 7 and 9 through 14, inclusive.
2. DUTIES AND AUTHORITY OF EMPLOYEE.
--------------------------------
During the Employment Period, the Employee shall be Chief Executive Officer
and Chairman of the Board of Directors of the Company (hereinafter "the
Board") and shall devote his efforts to rendering servic-
3
es to the Company and its affiliates in such capacities. As Chairman of the
Board, the Employee shall have those powers and duties set forth in Article VII,
Section 4, of the Company's By-laws, as amended, and all powers exercised by
Employee in behalf of the Company in such positions prior to the date of this
Agreement. As Chief Executive Officer, the Employee shall be the principal
officer of the Company, and shall have full power to conduct the Company's
business, and responsibility for active management, control and supervising of
the business and affairs of the Company subject only to the supervision and
control of the Chief Executive Officer of ITT and all powers exercised by
Employee on behalf of the Company prior to the date of this Agreement, subject
to such supervision and control. The Employee shall report only to the Chief
Executive Officer of ITT. Employee's powers and authority shall be superior to
those of any officer or employee of the Company or of any subsidiary thereof.
Employee shall not be required without his consent to undertake responsibilities
not commensurate with his position nor shall the Company limit or restrict his
authority or responsibility in the performance of those duties. Employee shall
comply with ITT's Code of
4
Conduct, as set forth in the so-called "red book" as of the date hereof.
3. DIRECTORSHIP.
------------
At each election during the Employment Period, ITT shall cause Employee to
be one of management's candidates for election to, and Employee agrees to serve
(if elected) on, the Board of Directors of ITT. It is understood that service
as a director of ITT must terminate when a director attains the age of seventy-
two (72) years.
4. PLACE AND FACILITIES OF EMPLOYMENT.
----------------------------------
During the Employment Period, Employee's place of employment will be in the
West Los Angeles area. Employee shall not be required to render any services
hereunder outside of the West Los Angeles area except for business travel
reasonably necessary in connection with the Company's business and with his
service as a director of ITT. During the Employment Period, Employee shall be
furnished by the Company a private office consistent with his status and a
private secretary of Employee's choice in the West Los Angeles area. The West
Los Angeles area means an area bordered by Washington Boulevard on the south, La
Brea Avenue on the east, Sunset Boulevard on the north, and Pacific Ocean on the
west.
5
5. EXCLUSIVITY.
-----------
It is understood that the Employee's employment during the Employment
Period shall be on an executive basis, except that the Employee may, subject to
the provisions of Paragraph 10 hereof, undertake or continue to conduct other
business, civic, or charitable activities during the Employment Period if such
activities do not materially interfere, directly or indirectly, with the duties
of the Employee hereunder, or compete with any business of the Company;
provided, however, that no additional outside business activities shall be
undertaken without the prior consent of the Board. The Company agrees that the
Employee may, at the Employee's Option, hold outside directorships subject to
approval by the Board of the identity of the entity, during the Employment
Period. It is believed that such service will be in the best interests of the
Company because it will expose Employee to the continual flow of ideas and
contacts which could be useful to the Company. Employee may retain all
compensation from such board service. Notwithstanding the foregoing, nothing
contained in this Employment Agreement shall be deemed to preclude Employee from
owning not more than the
6
lesser of one percent (1%) or $250,000 in market value of the publicly traded
capital stock of an entity whether or not in competition with the business of
the Company or its subsidiaries or affiliates or from carrying on activities
normally incident to managing passive investments. Employee shall be deemed to
be engaged in or concerned with a duty or pursuit which is contrary to any
provision of this Agreement only if he has received written notice to such
effect, setting forth with reasonable specificity the basis of such claim, from
the Company and has not, within sixty (60) days from the date of his receipt of
any such written notice, initiated steps to eliminate his engagement in or
concern with such duties or pursuits as are specified in such notice as being
contrary to this Agreement.
6. COMPENSATION.
------------
a. Salary.
------
(i) During the Employment Period, the Employee shall be paid a salary
(herein "Salary"), which may be increased from time to time at the election of
the Board or any committee of the Board to which such power has been delegated
by the Board. Employee shall be entitled to annual salary reviews. As of the
date of
7
this Agreement, the annual rate of Employee's Salary shall be $890,000.
(ii) On each August 1, beginning August 1, 1995, the Salary then
effective shall be adjusted in accordance with two-thirds of the increase or
decrease of the Consumer Price Index - United States City Average, All Urban
Consumers, All Items, published by the Bureau of Labor Statistics, U.S.
Department of Labor (herein "CPI"), on such date with respect to the CPI for the
preceding August 1. This "CPI Adjustment" shall be equal to two-thirds of the
increase or decrease in the CPI as of a given August 1 with respect to the CPI
for the preceding August 1, divided by the amount of the CPI on the preceding
August 1, multiplied by the Salary as of such preceding August 1. The Salary for
the ensuing fiscal year shall be the salary as of the previous August 1 (A) plus
the CPI adjustment, in the case of an increase in the CPI since the previous
August 1, and (B) minus the CPI Adjustment, in the case of a decrease in the CPI
since the previous August 1. If at the time of any such adjustment such CPI
shall no longer be published, the parties shall agree on an appropriate measure
of the increase in cost of living. As of August 1 of any fiscal year, the Salary
as adjusted pursuant to the foregoing
8
provisions or by the Board at its election shall thereafter be the Salary under
this Agreement.
(iii) The Employee's Salary shall be paid in the same installments which
prevail for other Senior Corporate Officers of the Company (in no event less
frequently than monthly) or such other installments as are agreed upon between
the Employee and the Company.
a. Bonus and Incentive Compensation.
--------------------------------
During the Employment Period, for each fiscal year the Employee shall be
paid the greater of (x) the annual bonus amount calculated pursuant to Paragraph
6.b.(i)-(viii) or (y) the annual bonus amount calculated pursuant to Paragraph
6.b.(ix).
(i) During the Employment Period, upon sign-off by the Company's
auditors, Employee shall be paid incentive compensation (herein "Incentive
Compensation") as provided in Paragraph 6.b.(viii) hereof, or, if Employee
elects pursuant to Paragraph 6.b.(viii) hereof, Employee shall be paid Incentive
Compensation for each fiscal year of the Company equivalent to one percent (1%)
of the Incentive Income (as defined below) of the Company but not more than one
hundred percent (100%) of Employee's Salary earned during such fiscal year.
9
(ii) For this purpose, "Incentive Income" shall mean the Consolidated
Net Income of Caesars World, Inc. and subsidiaries for a particular fiscal year
as certified by the Company's independent auditors for purposes of the Company's
annual report to shareholders for such fiscal year (provided that, after the
consummation of the Offer pursuant to the Merger Agreement, the Incentive Income
and the Incentive Net Worth, as defined below, shall be calculated based on the
Company's continuing operations which existed immediately prior to such
consummation and as if the transactions contemplated by the Merger Agreement had
never taken place), after the following adjustments:
A. Add back all amounts charged against Consolidated Net Income in respect
of the following:
I. The minority interest in earnings of any consolidated subsidiary,
and taxes based upon or measured, in whole or in part, by income of the Company
and its subsidiaries;
II. The aggregate of net expense charges for all awards in the nature
of incentive compensation and bonuses for all officers and assistant officers of
the Company which were accrued for such fiscal year; and
10
an amount equal to twelve percent (12%) of any deficit of Incentive Net Worth
(as defined in (iii) below);
III. All items characterized as Extraordinary Losses on the
consolidated statement of income;
IV. All charges against such income of any kind whatsoever resulting
from either a write-up of Company assets as a result of a reorganization of the
Company or a revaluation of the Company assets as a result of an acquisition of
the Company in a transaction constituting a "purchase transaction" under
generally accepted accounting principles and any and all interest charges
imposed upon the Company as a result of the use of Company assets or credit to
finance any purchase by an outsider of the assets of the Company or of a
majority or more of the stock of the Company; and
V. All charges against income for items constituting unusual items
under generally accepted accounting principles which are treated as "one-line"
items for financial statement presentation purposes and which pertain to or
arise out of a tender or exchange offer for Company stock, a consolidation or
merger of the Company, or which pertain to or arise out of a recapitalization
transaction or other corporate restructuring initiated by the Company.
11
B. Subtract all amounts included in Consolidated Net Income in respect of
the following:
I. All amounts characterized as Extraordinary Gains on consolidated
statements of income for the Company and its subsidiaries;
II. An amount equal to twelve percent (12%) of Incentive Net Worth (as
defined in (iii) below); and
III. All increases in such income of any kind whatsoever resulting from
a write-down of Company assets as a result of a reorganization of the Company or
a revaluation of Company assets as a result of an acquisition of the Company in
a transaction constituting a "purchase transaction" under generally accepted
accounting principles.
(iii) For this purpose, Incentive Net Worth shall mean, as applied to a
particular fiscal year, the total Shareholders' Equity shown on the consolidated
balance sheet for the Company and its subsidiaries as of the end of the
preceding fiscal year, plus or minus the amount of any increase or decrease
during a fiscal year, from the issue or the purchase of common or preferred
stock or any distributions with respect to the Company's common or preferred
stock. As to increases or decreases
12
during a given year, the increase or decrease shall be appropriately adjusted by
a proportion based on the number of days in the year prior to or after the
increase or decrease, as the case may be. Increases in Shareholders' Equity
during the year (or period of computation in the event of termination of
Employee during a fiscal year) resulting from the issuance or vesting of stock
bonus awards or the issuance of stock pursuant to the exercise of employee stock
options or stock appreciation rights should not be taken into account in the
computation for that year.
(iv) Notwithstanding the foregoing, in the event that any incentive
plan for Senior Corporate Officers (i.e., those officers of the corporation
----
subject to the jurisdiction of the Audit and Compensation Committee) uses a
lower percentage of net worth than twelve percent (12%) or a more favorable
definition of Incentive Income or Net Worth, or the equivalent, Employee's
Incentive Compensation shall be calculated using such more favorable
definitions.
(v) In the event the Employment Period or the Term expires or
terminates before the end of a given fiscal year for any reason whatsoever or
Employee becomes subject to a Disability during a given fiscal
13
year of the Employment Period, the Incentive Compensation for such fiscal year
shall be computed based on the actual operating results of the Company to the
end of the month preceding the effective day of termination or the date of
Disability (the "Computation Period") and the twelve percent (12%) item in
Paragraph 6.b.(ii)B. above (or any substituted rate) shall be reduced by one
percent (1%) (or 1/12 of such rate if the then effective rate shall be less than
twelve percent (12%)) for each month less than twelve (12) in the Computation
Period. Incentive Compensation shall vest monthly as earned even though
calculation by the Company's auditors may not be completed until a later date
and payment is not made until after such calculations can be completed.
(vi) In the event of any acquisitions by the Company during the
Employment Period, the Company and Employee will renegotiate the provisions of
this Paragraph 6.b. so as to modify the applicable formula to produce a
reasonable and fair result consistent with the previous formula but taking into
account the acquisition.
(vii) Notwithstanding the foregoing, in computing "Incentive Income" and
"Incentive Net Worth", as defined herein, charges or equity adjustments related
to or arising from the transactions contemplated by the
14
Merger Agreement, including, without limitation, with respect to deferred
compensation or the lapsing of restrictions on restricted shares of the
Company's common stock, shall not be taken into account.
(viii) As to any particular fiscal year of the Company, unless Employee
elects in writing, prior to the later to occur of (x) August 31 of such fiscal
year or (y) the tenth business day following his receipt of notice of the
Company's adoption of the Senior Corporate Executive Incentive Plan (or its
successor) for such fiscal year, to make this Paragraph 6.b. applicable for such
year, Employee shall instead automatically participate in the Senior Corporate
Executive Incentive Plan of the Company, or any successor plan thereto, and this
Paragraph 6.b. shall not apply for such year. Such an election as to any
particular year will only be applicable to that year and, absent a similar
agreement for any later year, this Paragraph 6.b. shall not apply to such later
year.
(ix) During the Employment Period, the Employee shall be paid an annual
bonus for each fiscal year of the Company based on an $800,000 target bonus,
with a pay-out varying between 0% and 150% of the target bonus. The percentage
pay-out shall be determined by the degree
15
to which pre-established performance goals based on the Company's budgeted
operating cash flow and improvements thereto are attained.
c. Other Benefits.
--------------
(i) After the consummation of the Offer pursuant to the Merger Agreement
and throughout the rest of the Employment Period, ITT will recommend to the
committee administering the 1994 ITT Corporation Incentive Stock Plan (the "ITT
Plan") that the Employee shall receive an annual grant of a stock option for
35,000 shares of common stock ($1 par value) of ITT pursuant to the ITT Plan.
The first such grant shall be made as of the day immediately following such
consummation. The options shall have an exercise price per ITT share equal to
the fair market value of an ITT share on the date of grant. The options shall
become exercisable as to two-thirds (2/3's) of the underlying ITT shares when
the trading price of an ITT share equals or exceeds a dollar amount which is
twenty-five percent (25%) over the exercise price per ITT share for ten
consecutive trading days and shall become fully exercisable at the earlier of
(x) the date when the trading price of an ITT share equals or exceeds a dollar
amount which is forty percent (40%) over the exercise price per ITT share for
ten consecutive
16
trading days or (y) the earlier of the fifth (5th) anniversary of the date of
grant or the "Wrongful Termination" of the Employee's employment, as defined in
this Agreement. The term of the options shall be nine years. If the Employee
voluntarily terminates his employment hereunder within the first year after the
effective date hereof, he shall have 30 days after such termination to exercise
his options which are exercisable at the time of such termination and his
options which are unexercisable at the time of such termination shall be
forfeited. After such first year of employment hereunder, if the Employee is
eligible to receive immediate retirement benefits under either an Executive
Security Plan of the Company or an ITT pension plan, any termination of
employment (except a termination for "cause" as defined in this Agreement) shall
be treated as a retirement under the ITT Plan which entitles him, whether or not
his options are exercisable on the date of such termination, to exercise all of
his options within five years of such termination (or within their original
term, whichever is shorter) and such options shall continue to vest after such
termination in accordance with their terms. After such first year of employment
hereunder, if the Employee's employment is terminated for "cause" as defined
17
in this Agreement, he shall have 30 days after such termination to
exercise his options which are exercisable at the time of such termination and
his options which are unexercisable at the time of such termination shall be
forfeited.
(ii) The Employee shall, to the extent deemed appropriate by the Board
(or any applicable committee of the Board), participate at a level consistent
with his rank in profit sharing, stock appreciation right, stock bonus, stock
option, deferred compensation, and other similar benefits which are made
available to executives employed by the Company during the Employment Period.
Also, during the Employment Period, Employee shall continue to participate in
all fringe benefits and perquisites now furnished Employee and (subject to the
terms of any such plan) in the Executive Security Plan and Individual Retirement
Plan, and shall participate consistent with his rank in any retirement plan or
other fringe benefits or perquisites hereafter adopted by the Company and made
applicable to its officers. Further, during the Employment Period, the Company
will provide, at its expense, life, business travel, disability, medical, dental
and hospitalization insurance for the Employee and
18
his dependents in amounts and on terms as favorable as those provided for any
other officer of the Company.
d. Retirement Benefits.
-------------------
(i) Supplemental Retirement.
-----------------------
In addition to any retirement benefits which the Company shall provide
to Employee under the terms of any retirement plan currently existing or which
the Company shall adopt during the Employment Period, the Company shall pay
Employee (or Employee's beneficiaries) an annual retirement benefit equal to the
product of (A) two percent (2%) times the number of years of Continuous
Employment (as defined in the Executive Security Plan of the Company as of the
date hereof) after July 31, 1985 (but not more than the aggregate of sixty
percent (60%)) and (B) the average Incentive Compensation accruing to Employee
for all years of Continuous Employment beginning after July 31, 1985 (i.e.,
----
beginning with the Incentive Compensation paid for the fiscal year ended July
31, 1986). Payment of the annual retirement benefit under this Paragraph 6.d.(i)
shall commence on the first day of the first month following Employee's sixty-
fifth birthday or upon Employee's retirement from employment with the Company,
whichever shall occur later. The annual retirement benefit shall be payable in
monthly installments for
19
the life of Employee but not less than ten (10) years in any event; and if
Employee shall die before the expiration of such ten (10) year period, the
remaining payments shall be paid to the Beneficiary of Employee as designated
under the Executive Security Plan of the Company. If Incentive Compensation for
any given fiscal year is taken into account in computing retirement benefits for
Employee under any retirement plan of the Company (other than pursuant to this
Paragraph 6.d.(i)), the amount of the accrual under this Paragraph 6.d.(i) shall
be reduced on the basis of actuarial equivalence by the benefit given to, or
contribution in behalf of, Employee under such other plan based on the Incentive
Compensation of Employee for that fiscal year.
(ii) Trust Fund Protection.
---------------------
At any time (a) that the consolidated shareholder equity of the Company
shall be below $150 million, (b) within thirty (30) days preceding the end of
the Term or at any time thereafter or (c) at any time within thirty (30) days
preceding the date Employee ceases to be the Chief Executive Officer and
Chairman of the Board of Directors of the Company or at any time thereafter,
Employee by notice to the Company may require that the Company establish a trust
account with a bank or
20
financial institution (the "Trustee") mutually acceptable to Employee and the
Company and that the Company deposit in such account an amount necessary to pay
all retirement benefits of Employee and Employee's beneficiaries provided under
this Agreement and the Executive Security Plan of the Company (or any other
unfunded retirement plan of the Company (or any other unfunded retirement plan
hereafter adopted by the Company). The Company shall continue to make
additional payments to the Trustee on an annual basis during the Term of this
Agreement to the extent required in order to maintain in the account sufficient
funds to cover the anticipated benefits to Employee and Employee's
beneficiaries. Under the terms of the trust agreement, the trust fund and the
required retirement benefit payments to Employee and his beneficiaries in behalf
of the Company shall be subject to the claims of the Company's creditors. To
the extent that the trust fund is insufficient to make the full payment that
Employee or Employee's beneficiaries are entitled to under this Agreement and
any other retirement plan of the Company, the Company shall pay the difference
from its general assets. Any excess funds remaining in the trust fund upon
termination of all of the Company's obligations to Employee and any of his
beneficiaries under this
21
Paragraph 6.d. and any other retirement plan of the Company in which Employee
participates shall revert to the Company. To the extent that implementation of
this subparagraph will adversely affect the deferral of taxation of Employee
with respect to the accrual of retirement benefits on behalf of Employee, this
Paragraph 6.d.(ii) shall be deemed void.
(iii) Upon the first to occur of (x) the expiration of the Term or (y)
termination of the Term or the Employment Period other than under Paragraph
9.a., and continuing until one year after the death of Employee, the Company
will provide Employee and his dependents with medical, dental and
hospitalization insurance equivalent to that provided Senior Corporate Officers
of the Company or any parent corporation of the Company, provided Employee has
at the time of expiration or termination attained the age when Employee would be
first eligible for early retirement under the Executive Security Plan assuming
all other requirements under such plan were fulfilled at such time. Such
insurance shall be provided through the plans of the Company or, if this is not
practical, the Company shall directly pay all such expenses on the same basis as
if Employee had been included in such plans. To the extent Employee obtains
other
22
employment (and Employee shall be under no obligation to do so under this
Paragraph 6.d.(iii)), insurance obtained as a result of such other employment
shall be the first line of insurance and insurance provided under this provision
shall only be supplementary. Also, to the extent Employee is entitled to
insurance under Medicare or its equivalent, the insurance under this provision
shall be only supplementary or second line to the extent allowed by law.
e. Withholding.
-----------
All compensation shall be subject to normal required withholdings.
7. VACATIONS.
---------
Employee shall accrue vacation time at the rate of one and two thirds
(1 2/3) days per month of service during the Employment Period, provided,
however, at no time shall more than sixty (60) days be accrued and during any
period that the cumulative accrual is at this sixty (60) day level, no
additional vacation time shall accrue. At Employee's option, vacation may be
taken, either in whole or in part, consecutively or not, in the year that
Employee's entitlement to that vacation accrues or, if unused during such year,
such vacation time shall be carried over (subject to the sixty (60) day maximum
23
accrual) and may be used in any subsequent year during the Employment Period,
provided that no more than sixty (60) days of vacation may be taken in any
calendar year. Upon termination of Employee's employment with the Company for
any reason whatsoever, Employee shall be paid his Salary or all unused then
accrued vacation at the Salary rate then existing up to the maximum accrual of
sixty (60) days.
8. EXPENSES.
--------
The Company will reimburse Employee for all expenses reasonably incurred by
Employee in the performance of his duties under this Agreement. Reimbursement
shall be made in accordance with the practices and requirements generally
applied by the Company in connection with reimbursement of expenses incurred by
its employees. It is understood that the Company will pay to Employee an
automobile allowance providing the equivalent of availability to Employee of a
car of comparable level of quality as presently being operated by Employee under
an automobile allowance from the Company. The Company also will pay for the
insurance, operating, maintenance and repair of such car (including gasoline and
oil) or a car used by Employee in lieu of a furnished car if Employee elects the
automobile allowance. The allowance and all
24
payments with respect to the automobile will be grossed-up for tax purposes in
accordance with Company practices as they exist as of the date of this
Agreement. Employee may from time to time also incur certain expenses on behalf
of the Company or in furtherance of its business for which reimbursement may not
be made under Company policy or practices.
9. TERMINATION OF EMPLOYMENT PERIOD AND/OR AGREEMENT.
-------------------------------------------------
a. Termination by the Company for Cause.
------------------------------------
(i) The Company may at any time, at its election, terminate the
Employment Period and the Term prior to the Term's expiration because of the
following causes: (A) willful misconduct by the Employee in the performance of
his duties under this Agreement or his habitual neglect of such duties, (B)
failure of the Employee to obtain or retain any permits, licenses or approvals
which shall be required by any state or local authorities where the failure to
obtain such license will result in the loss of a material license or franchise
held by the Company (or a subsidiary thereof), or (C) a willful breach by the
Employee of any of the material terms of this Agreement.
(ii) Any such termination shall be effective only if notice is given to
Employee not later than
25
ninety (90) days following the event, transaction, or occurrence giving rise to
such right of termination, or, if later, ninety (90) days after the Company
first discovers that such event, transaction, or occurrence has taken place.
Also, any such termination under (A) through (C) of Paragraph 9.a.(i) may only
occur if all of the following are demonstrated by the Company: (x) the failure,
breach or action directly materially adversely affects the Company (except in
the event of a termination under Paragraph 9.a.(i)(B)), (y) the failure, action
or breach by Employee was in bad faith and lacking in a good faith belief that
it was in or at least not opposed to the Company's interest (except in the event
of a termination under Paragraph 9.a.(i)(B)), and (z) the Company gave notice to
cure to Employee and Employee failed to cure within thirty (30) days after
notice thereof or, if a cure was not possible within thirty (30) days, failed to
take all practical action within such period leading to a cure.
(iii) (A) In the event that the Company elects to terminate the
Employment Period and the Term for cause pursuant to the foregoing provisions of
this Paragraph 9.a., the termination shall not be effective and the Agreement
(including, without limitation, Para-
26
graphs 9.d. and 9.e.) shall continue in full force and effect until the issuance
of an arbitration award affirming the Company action. Without limiting the
generality of the foregoing, the Company shall continue to pay Employee's then
current Salary and Incentive Compensation as specified in Paragraph 6. of this
Agreement and shall continue all other benefits until the issuance of such
arbitration award.
(B) Such arbitration shall be held in Los Angeles, California in
accordance with the rules of the American Arbitration Association (except as
otherwise provided in this Paragraph 9.(iii)(B)) within ninety (90) days
following receipt by the Employee of the notice to cure under Paragraph 9.a.(ii)
above. Any decision by the arbitrator shall be final and binding on the parties
and all successors in interest. Judgment upon an award of the arbitrator may be
entered in any court of competent jurisdiction. Employee shall cooperate with
the Company in effecting such an accelerated arbitration. The Company shall
make available to Employee any and all documents requested by the Employee for
purposes of defending such arbitration and allow Employee or Employee's
representatives access to any and all Company records and personnel for such
purpose. The Company will
27
produce any such records and personnel at the arbitration to the extent
requested by Employee. Notwithstanding the foregoing, the arbitration shall not
be commenced until Employee has had a reasonable opportunity to have the matter
investigated and his case prepared by any representatives; however, the Employee
shall use his best efforts to complete his presentation within the above
stipulated ninety (90) day period. The Company will pay all Employee's
reasonably incurred legal expenses and other costs in presenting the matter and
all costs of the arbitrator.
(C) In the event that the arbitrator shall decide in favor of the
Company, Employee shall repay all Salary earned by Employee following the
expiration of the 30-day cure period under Paragraph 9.a.(ii)(z) above. As to
Incentive Compensation in the event that the arbitration results in a judgment
in favor of the Company, for purposes of Paragraph 6.b.(v) of this Agreement,
the effective day of termination shall be the date of the expiration of the cure
period in Paragraph 9.a.(ii)(z) and to the extent Employee has received any
payment of Incentive Compensation pertaining to the Incentive Compensation
accruals after such date, Employee shall repay the same to the Company upon
demand. Not-
28
withstanding anything in this Paragraph 9.a.(iii), the Company may suspend
Employee upon the expiration of the cure period specified in Paragraph
9.a.(ii)(z) pending the outcome of arbitration; however, as stated above,
Employee shall continue to receive Salary, Incentive Compensation, and all
benefits during such suspension subject to Employee's obligation to repay Salary
and Incentive Compensation in the event the arbitration decision is against
Employee as set forth above. Employee shall be allowed to retain benefits in
all events.
(iv) In the event that there is a termination of the Employment
Period and the Term by the Company under this Paragraph 9.a. and the cause is
solely the cause described under Paragraph 9.a.(i)(B) above and not within
either Paragraph 9.a.(i)(A) or (C), Employee shall be entitled to severance pay
equivalent to one (1) year's Salary payable within five (5) days of the
effective date of termination, and to the continuation of all fringe benefits
and insurance described in Paragraph 6.c. for a one (1) year period following
such termination (which continuation shall not, however, duplicate insurance
already provided by Paragraph 6.c. for such period), provided, that the actions
of employee leading to the loss of license were in the good faith belief that
his
29
actions were for the benefit of and in the best interests of the Company and not
in violation of any law and that such payments are not in violation of law, and,
provided further, that Employee used his best efforts to obtain or retain (as
the case may be) such license.
b. Disability.
----------
In the event that Employee shall become subject to a Disability (as defined
below) during the Employment Period, the Incentive Compensation shall stop
accruing and the Salary payable to Employee shall be reduced to fifty percent
(50%) of the Salary in effect at the date of the Disability. Such reduced
compensation shall continue until the termination of Employee's Disability, the
expiration of the Term, or the expiration of thirty (30) months from the
inception of the Disability, whichever occurs first. During any such period of
Disability, the Company shall also keep in force for the benefit of Employee and
Employee's dependents all life, health and medical insurance policies maintained
for Employee's benefit under the terms of this Agreement and Employee shall be
considered to be employed for purposes of the vesting and accrual of benefits of
all other plans and programs of the Company in which Employee is a participant
and which vest or accrue benefits over a period of
30
time, except Incentive Compensation. Notwithstanding the foregoing, the Company
shall not be required to add Employee to any new bonus, profit sharing, stock
bonus, stock option, deferred compensation, and other similar plans or make any
new awards to Employee under this Agreement with respect to such new or
presently existing plan during the period of such Disability. All Salary
payments pursuant to this Paragraph 9.b. due to Employee under its terms shall
be reduced by any disability payments made in accordance with any existing
disability program or disability insurance of the Company. For purposes of this
Agreement, Employee shall be deemed to have become subject to a Disability
(herein "Disability") if, because of ill health or physical or mental
disability, Employee shall be unable to perform his duties and responsibility to
the extent reasonably necessary for Employee to give the Company substantially
the value of his services for a consecutive one hundred and eighty (180) day
period and upon the completion of such one hundred and eighty (180) day period,
either the Company or the Employee shall have given written notice to the other
of such party's election that Employee be treated as subject to a Disability.
The date of such Disability
31
shall be the third calendar day immediately following transmittal of such
written notice of Disability.
If, because of ill health or physical or mental disability, Employee shall
be unable to perform his duties and responsibility to the extent reasonably
necessary for Employee to give the Company substantially the value of his
services for a consecutive sixty (60) days, the Company, in its sole discretion
(but in consultation with the Employee to the extent practicable), may appoint
temporarily an Acting Chief Executive Officer; provided, however, that if the
Employee becomes able to provide such services again during the Term of this
Agreement, he shall replace the Acting Chief Executive Officer and resume acting
as Chief Executive Officer of the Company.
If, because of ill health or physical or mental disability, Employee shall
be unable to perform his duties and responsibility to the extent reasonably
necessary for Employee to give the Company substantially the value of his
services for a consecutive three-hundred-sixty-five (365) days, if the
Employee's personal physician and a physician selected by the Company shall
unanimously determine that the Employee will be subject to a Disability for the
remainder of the Term (or, if they shall be unable to agree, they shall mutually
agree upon
32
a third physician who shall make a determination as to whether the Employee will
be subject to a Disability for the remainder of the Term), then the Company may,
in its discretion, remove the Employee from the positions of both Chairman of
the Board and Chief Executive Officer, and the Employee shall have no right to
treat such removal as a "Wrongful Termination".
c. Death.
-----
The Term and the Employment Period will automatically terminate upon the
death of the Employee; however, the Company will pay death benefits equal to
fifty percent (50%) of Employee's Salary at his death to Employee's surviving
spouse for twelve (12) months after Employee's death or so long as the spouse
survives Employee, whichever ends first, and there shall be full acceleration of
vesting or exercisability upon death of all outstanding unvested stock options
and stock awards including, without limitation, those awards under the Key
Employee Stock Bonus Plan, the Key Employee Stock Grant Plan, Key Employee
Incentive Share Grant Agreement or any similar stock plans or agreements of the
Company (whether such awards are made before or after the date of this
Agreement) and delivery to the appropriate person of all stock pursuant to terms
of any such plans or agreements.
33
d. Termination by the Company (without Cause).
------------------------------------------
(i) Wrongful Termination Described.
------------------------------
A. Wrongful Termination. Notwithstanding the foregoing, if
--------------------
during the Employment Period Employee is not reelected to, or is removed from,
the position of either Chairman of the Board or Chief Executive Officer other
than for cause as provided in Paragraph 9.a. above, or if the Company otherwise
materially breaches this Agreement and fails to complete the cure of such breach
within thirty (30) days after notice from Employee, then, at any time within
three (3) months after the date upon which Employee is removed from either such
position or the breach date, as the case may be, Employee may elect by notice in
writing to the Secretary of the Company to treat the situation as a "Wrongful
Termination" of Employee's employment by the Company effective one (1) week
after the notice and to discontinue his obligations to perform services
hereunder. The Employment Period shall end at such effective date.
B. Arbitrated Determination of Company Breach. If Employee
------------------------------------------
believes the Company has materially breached this Agreement, then, in lieu of
electing to notify the Secretary of the Company to treat the situation as
Wrongful Termination, Employee may request an arbitra-
34
tion to determine whether the Company has in fact materially breached this
Agreement. The arbitration shall be conducted under the rules of Paragraph
9.a.(iii)B. and all provisions of Paragraph 9.a.(iii)B. shall apply, including
without limitation the Company's obligation to pay legal and other expenses and
costs of Employee and the arbitration costs. Employee shall continue to perform
his services for the Company pending the decision of the arbitrator and shall
receive all Salary, Incentive Compensation and benefits for such period. If the
arbitrator shall decide for Employee, Employee shall have two (2) months after
such decision to elect by written notice to the Company to treat the breach as a
Wrongful Termination under this Paragraph 9.d. as provided in 9.d.(i) above.
The arbitration requested by Employee shall be binding on both Employee and the
Company as to the matters submitted to arbitration.
(ii) Employee's Obligations after Wrongful Termination. In the
-------------------------------------------------
event of a Wrongful Termination, Employees' obligations under Paragraph 2 shall
cease as of the date notice of such termination is given; provided, however,
that all payments and benefits provided to Employee hereunder because of a
Wrongful Termination shall be upon the condition of, and partly in consider-
35
ation for, Employee's continued compliance with any covenants in this Agreement
which by their terms apply during the Term of thereafter.
(iii) Payments and Benefits to Employee after a Wrongful
--------------------------------------------------
Termination. In the event of a Wrongful Termination upon or after a Change in
- -----------
Control, certain additional payments and benefits to Employee are provided under
Paragraph 9.e.(iii). In the event of any Wrongful Termination, the Company shall
pay the Employee (i) within five (5) days of the date notice of such termination
is given, any amounts which have become payable under other provisions of this
Agreement or other obligations of the Company to Employee which have accrued but
have not yet been paid, including without limitation Salary earned prior to the
date the notice is given and compensation for unused vacation, and (ii) in
accordance with the other provisions of this Agreement, all entitlements of
Employee, including without limitation entitlements under Paragraphs 6.b.(v),
6.d., 13, and 14. Accrued Incentive Compensation shall be paid in accordance
with the provisions of this Agreement or the Corporate Executive Incentive Plan
(or its successor), whichever is applicable. The Company shall also be obligated
as follows:
36
A. Within five (5) days following the date notice of such
termination is given, the Company shall pay the Employee an amount equal to the
present value of the sum of (x) all Salary then unearned for the balance of the
Term (without consideration of cost of living increases) plus (y) the present
value of an amount determined by multiplying the number of years and fractional
years to the nearest month then remaining in the Term times the amount of
Incentive Compensation earned by Employee for the last full fiscal year of the
Company preceding the date of termination. In making this present value
calculation the projected Incentive Compensation shall be assumed to be earned
pro rata over the remaining Term. For this purpose, the rate used for the
determination of the present value shall be the average of the five (5) year
treasury note rates effective at the end of each of the six (6) calendar months
immediately preceding the month in which the termination of employment occurs.
If Employee agrees to take a ten percent (10%) reduction in the amount otherwise
payable under this Paragraph 9.d.(iii)A. for the present value of Salary and
Incentive Compensation with respect to the remaining Term, Employee shall have
not duty to mitigate damages following a Wrongful Termination by the Company,
and the Company shall not
37
be entitled to any reduction of its obligations under this Agreement or
repayment from Employee by virtue of any subsequent employment of Employee
except as set forth below in Paragraph 9.d.(iii)C. below.
B. During the remaining Term, the Company shall keep in force for
the benefit of Employee and Employee's dependents all life insurance policies
maintained for Employee's benefit under the terms of this Agreement and fulfill
its automobile obligations under Paragraph 8. During such period the Company
shall not be required to add Employee to any new profit sharing, stock bonus,
stock option, bonus, deferred compensation and other similar plans or make any
awards to Employee under this Agreement with respect to new or old plans of such
nature. In the event of a Wrongful Termination, all existing stock options and
any awards under the Key Employee Stock Grant Plan, Key Employee Incentive Share
Grant Agreement or any similar stock plans or agreements of the Company (whether
made before or after this Agreement) not otherwise exercisable or vested under
its terms shall be immediately exercisable or vested in full upon such
termination (i.e., upon the giving of the Employee's notice of termination
----
specified in Paragraph 9.d.(i)A. or B. above) and shall thereafter be
exercisable or vested
38
in full pursuant to the terms of such stock option or other awards.
C. Notwithstanding Paragraph 9.d.(iii)B., any life insurance
afforded Employee under this Agreement shall be only supplementary or secondary
to any such protection provided by other employment or through Medicare.
e. Employee's Additional Election and Rights after a Change in Control.
-------------------------------------------------------------------
(i) Employee's Right to Elect Termination after a Change in Control.
---------------------------------------------------------------
A. Permitted Period for Elective Termination. In the event of
-----------------------------------------
a Change in Control, Employee shall have the right to elect to terminate the
Employment Period (and his obligation to render services under this Agreement)
by notice in writing to the Secretary of the Company within twelve (12) months
after the Change in Control.
B. Payments and Benefits to Employee after Elective Termination.
------------------------------------------------------------
If the Employee elects termination under Paragraph 9.e.(i)A., the Company (i)
shall pay Employee, upon receipt of such notice of termination, any amounts
which have become payable under other provisions of this Agreement or other
unpaid obligations
39
of the Company which have then accrued, but have not yet been paid, including
without limitation Salary and Incentive Compensation earned prior to the date
notice is given and compensation for unused vacation, and (ii) shall provide, in
accordance with the other provisions of this Agreement, all entitlements of
Employee, including without limitation entitlements of Employee under the
provisions of Paragraph 6.b.(v), 6.d., 13, and 14. The Company shall also pay
to the Employee (or there shall automatically be paid or delivered in the case
of Paragraph 9.e.(i)(B)(y) below):
(w) benefits described in the first sentence of Paragraph
9.d.(iii)B. to be provided for the greater of period (A) or (B) described in
Paragraph 9.e.(i)B.(x), in accordance with the provisions of Paragraphs
9.d.(iii)B. and C. as if the termination were a Wrongful Termination,
(x) upon the effective date of termination of Employee's
employment, as severance pay, a lump sum amount equal to the present value of
the aggregate of the remaining amount of Salary and Incentive Compensation
provided with respect to the greater of (A) the remaining Term (as if he had
continued to render services for the duration of the Term, but without
consideration of cost
40
of living increases) or (B) two (2) years, calculated (in the case of either (A)
or (B)) in accordance with Paragraph 9.d.(iii)A. above, including (if Employee
agrees) the reduction by 10% in lieu of mitigation,
(y) except as otherwise specified herein, full acceleration of
vesting or exercisability upon notice of termination of all outstanding unvested
stock options and stock awards including, without limitation, those awards under
the Key Employee Stock Bonus Plan, the Key Employee Stock Grant Plan, Key
Employee Incentive Share Grant Agreement or any similar stock plans or
agreements of the Company (whether such awards are made before or after the date
of this Agreement) and delivery to Employee of all stock pursuant to terms of
any such plans, and
(z) notwithstanding any other provision hereof, within five (5)
days following the date notice of such termination is given, in lieu of any
benefits payable under the Company's Executive Security Plan ("ESP"), a lump sum
equal to the Termination Benefit as defined in the ESP and computed in
accordance with the ESP provisions with the following assumptions: (i) as if the
ESP had no forfeiture provisions provided in Section 5.3 thereof, and (ii) as if
the Employee had continued to be employed by the Company for the greater of
period (A) or
41
(B) described above in Paragraph 9.e.(i)B.(x); provided, however, that, if any
part (or all) of such lump sum shall not be paid, either pursuant to the
"Contingent Severance Agreement" (the agreement by that name between Employee
and the Company, dated as of the same date hereof as amended from time to time)
or pursuant to this Agreement (whether as the result of the application of
Paragraph 9.e.(i)C. or otherwise), the Employee shall remain entitled to
whatever benefits (if any) the ESP, by its own terms, grants the Employee and
the Employee shall be paid such benefits in accordance therewith after reduction
for any amount paid pursuant to the Contingent Severance Agreement or this
Paragraph 9.e.(i)B.(z).
C. Contingent Limitation on Amounts. (w) Notwithstanding any
--------------------------------
other provisions of this Agreement or any other agreement, plan or arrangement,
in the event that any payment or benefit received or to be received by Employee
(whether pursuant to the terms of this Agreement or any other plan, arrangement
or agreement with the Company, or any other plan, arrangement or agreement with
the Company, or any other plan, arrangement or agreement with any person whose
actions result in a Change in Control or any person affiliated with the Company
or such person) (all such payments and benefits
42
being hereinafter called "Total Payments") would not be deductible (in whole or
in part) as a result of Section 280G of the Internal Revenue Code of 1986, as
amended (the "Code"), by the Company, an affiliate or other person making such
payment or providing such benefit, then the portion of the Total Payments
payable pursuant to this Agreement shall be reduced to the extent necessary so
that no portion of the Total Payments is subject to the parachute excise tax
(the "Excise Tax") imposed by Section 4999 of the Code (after taking into
account any reduction in the Total Payments provided by reason of Section 280G
of the Code in any other plan, arrangement or agreement) if (A) the net amount
of such Total Payments, as so reduced (and after deduction of the net amount of
Federal, state of local income tax on such reduced Total Payments) is greater
than (B) the excess of (i) the net amount of such Total Payments, without
reduction (but after deduction of the net amount of Federal, state and local
income tax on such Total Payments), over (ii) the amount of Excise Tax to which
the Employee would be subject in respect of such Total Payments. Any reduction
of the Total Payments shall be made in one of the two alternative orders set
forth in Paragraph 9.e.(i)C.(x) hereof.
43
(x) If the Total Payments all become payable at approximately the
same time, (i) the benefits under Paragraph 9.e.(i)B.(w) (or under the first
sentence of Paragraph 9.d.(iii)B., if applicable) shall first be reduced (if
necessary, to zero), (ii) the payment pursuant to Paragraph 9.e.(i)B.(z) (or
pursuant to Paragraph 9.e.(iii)(x), if applicable) shall next be reduced (if
necessary to zero), (iii) acceleration of vesting of awards under stock options,
the Key Employee Stock Bonus Plan, Key Employee Stock Grant Plan, Key Employee
Incentive Share Agreement or any similar stock plan or agreement of the Company
and severance pay under Paragraph 9.e.(i)B.(x) (or payments under Paragraph
9.d.(iii)A., if applicable) shall next be reduced (if necessary to zero), and
(iv) other portions of the Total Payments shall be reduced as necessary. If the
Total Payments do not become due and payable at the same time, the respective
Total Payments shall be paid in full in the order in which they become payable
until any portion thereof would not be deductible, and such portion (and any
subsequent portions) of the Total Payments shall be reduced to zero.
(y) For purposes of determining whether and the extent to which
the Total Payments will be subject to the Excise Tax, (i) no portion of the
Total
44
Payments the receipt or enjoyment of which the Employee shall have effectively
waived in writing prior to the date of termination shall be taken into account;
(ii) no portion of the Total Payments shall be taken into account which in the
opinion of tax counsel selected by the Company's independent auditors and
acceptable to the Employee does not constitute a "parachute payment" within the
meaning of Section 280G(b)(2) of the Code, including by reason of Section
280G(b)(4)(A) of the Code; (iii) in calculating the Excise Tax, the payments in
Paragraphs 9.e.(ii)B.(w) through (z) (or Paragraph 9.d.(iii)A. through B. and
Paragraph 9.e.(iii)(x), if applicable) shall be reduced only to the extent
necessary so that the Total Payments (other than those referred to in clauses
9.e.(i)(C)(y)(i) or (ii)) in their entirety constitute reasonable compensation
for services actually rendered within the meaning of Section 280G(b)(4) of the
Code or are otherwise not subject to disallowance as deductions because of
Section 280G of the Code, in the opinion of tax counsel referred to in clause
9.e.(i)(C)(y)(ii); and (iv) the value of any non-cash benefit or any deferred
payment or benefit included in the Total Payments shall be determined by the
Company's independent auditors in accordance with the principles of Section
280G(d)(3) and
45
(4) of the Code. Prior to the earliest payment date set forth in Paragraph
9.e.(i)B. (or Paragraph 9.d.(iii) and 9.e.(iii), as applicable), the Company
shall provide the Employee with its calculation of the amounts referred to in
this Paragraph 9.e.(i)C and such supporting materials as are reasonably
necessary for the Employee to evaluate the Company's calculations. If the
Employee objects to the Company's calculations, the Company shall (on or prior
to the applicable payment date) pay to the Employee such portion of the amounts
payable pursuant to this Agreement (up to one hundred percent (100%) thereof) as
the Employee determines is necessary to result in the Employee's receiving the
greater of the amounts in clauses (A) and (B) of Paragraph 9.e.(i)C(w).
D. Employee's Obligations after Elective Termination. If
-------------------------------------------------
Employee elects to terminate his obligations to render services under this
Agreement pursuant to Paragraph 9.e.(i)A., his obligations under Paragraph 2
shall cease as of the date notice of such termination is given. Employee agrees
that all payments made because of such elective termination shall be upon the
condition of, and partly in consideration for, his continued compliance with any
covenants under Paragraph
46
11 of this Agreement which by their terms apply during the Term or thereafter.
(ii) Agreement in Full Effect after a Change in Control. Upon and
--------------------------------------------------
after a Change in Control, until and unless Employee makes a written election
pursuant to Paragraph 9.e.(i)A., this Agreement shall continue in full force and
effect, in accordance with all the provisions hereof.
(iii) Additional Payments and Provisions after Wrongful
-------------------------------------------------
Termination upon or after a Change in Control. In the event of a Wrongful
- ---------------------------------------------
Termination upon or after a Change in Control (or upon or after the occurrence
of any other event which constitutes a change in ownership or effective control
of the Company or in the ownership of its assets, or which would be deemed to be
such a change under Section 280G of the Internal Revenue Code of 1986, as
amended, or the regulations or other legal authority developed thereunder), the
Company shall provide Employee with the payments and benefits required by
Paragraph 9.d.(iii) and the following shall apply:
(i) notwithstanding any other provisions hereof, in lieu of any
benefits payable under the Company's Executive Security Plan ("ESP"), the
Company shall pay, within five 95) days following the date notice
47
of such termination is given, a lump sum equivalent to the Termination Benefit
as defined in the ESP and computed in accordance with the ESP provisions with
the following assumptions: (i) as if the ESP had no forfeiture provisions
provided in Section 5.3 thereof, and (ii) as if the Employee had continued to be
employed by the Company for the Term; provided, however, that, if any part (or
all) of such lump sum shall not be paid, either pursuant to the Contingent
Severance Agreement or pursuant to this Agreement, the Employee shall remain
entitled to whatever benefits (if any) the ESP grants the Employee (such
benefits to be reduced by any amount paid pursuant to the Contingent Severance
Agreement or this Paragraph 9.e.(iii)(x)) and the Employee shall be paid such
benefits in accordance therewith; and
(y) Section 5.3 of the ESP shall be void as to Employee.
(i) Offset of Certain Amounts. Notwithstanding the provisions of
-------------------------
Paragraphs 9.d. and 9.e., any payments or benefits to Employee pursuant to
Paragraph 9.d.(iii)A.-C., 9.e.(i)B.(w)-(z) or 9.e.(iii)(x)-(z), shall be reduced
by any amounts the Company may have previously paid Employee for the same items
pursuant to Section 6(A) of the Contingent Severance Agreement.
48
10. RESTRICTION OF COMPETITION.
--------------------------
During the Term the Employee will not, as an officer, director, employee,
or consultant, work for, or participate in, the activities of any firm or person
which is engaged (a) in the operation of a casino in the continental United
States, or (b) in any other line of business which is the same, or substantially
the same, as a line of business from which the Company and its subsidiaries at
the time, and at such, if any, earlier time as this Agreement is terminated,
derive at least twenty-five percent (25%) of their consolidated revenue, and
which is engaged in significant competition with the Company or any of its
subsidiaries. For the purpose of this Paragraph 10, the term "line of business"
shall mean a group of products or services treated as a line of business by the
Company in its most recent annual report (or most nearly similar report) filed
with the Securities and Exchange Commission. The Company, in its sole
discretion, may waive this Paragraph 10 to expand the class of companies with
which Employee could mitigate damages under Paragraph 9 above. Employee's
obligations under this Paragraph 10 shall terminate immediately upon any
Wrongful Termination of Employee by the Company or upon a Change in Control.
49
11. CONFIDENTIAL INFORMATION
------------------------
The Employee will not, during or after the Term, disclose to any firm or
person any information, including, but not limited to, information about
customers or about the design, manufacture or marketing of products or services,
which is treated as confidential by the Company and to which the Employee gains
access by reason of his position as an employee of the Company.
12. RIGHT TO INJUNCTIVE RELIEF.
--------------------------
The Employee acknowledges that the Company will suffer irreparable injury,
not readily susceptible of valuation in monetary damages, if the Employee
breaches any of his obligations under Paragraph 10 and 11 above. Accordingly,
the Employee agrees that the Company shall be entitled, in addition to, and not
in lieu of any other available remedies, to seek and obtain injunctive relief
against any breach or prospective breach by the Employee of the Employee's
obligations under Paragraphs 10 and 11 in any Federal or state court sitting in
Los Angeles County in the State of California or, at the Company's election, in
Clark County of the State of Nevada or in such other state as may be the state
in which the Employee maintains his principal residence or his principal place
of business. The Employee hereby submits to the
50
jurisdiction of all those courts for the purposes of any actions or proceedings
instituted by the Company to obtain such injunctive relief, and agrees that
process may be served by registered mail, addressed to the last address of the
Employee known to the Company, or in any other manner authorized by law.
13. LIABILITY INSURANCE.
-------------------
a. Insurance
---------
Subject only to the provisions of Paragraph 13.b. below, the Company hereby
agrees that, so long as Employee shall continue to serve as a director, officer,
employee or consultant of the Company (or shall continue at the request of the
Company to serve as a director, officer, employee, partner, consultant, or agent
of another corporation, partnership, joint venture, trust or other enterprise)
and thereafter so long as Employee shall be subject to any possible claim or
threatened, pending or completed action, suit or proceeding, whether civil,
criminal or investigative by reason of the fact that Employee was a director,
officer, or employee, of the Company (or served in any of said other
capacities), the Company will purchase and maintain in effect for the benefit of
Employee one or more valid, binding and enforceable policy or policies of
directors and officers
51
insurance providing, in all respects, coverage at least comparable to that
presently provided pursuant to the directors and officers insurance presently
available to the Company ("the Insurance Policies").
b. Limitation On Company Obligation
--------------------------------
The Company shall not be required to maintain the Insurance Policies in
effect if said insurance is not reasonably available or if, in the reasonable
business judgment of the then Board either (i) the premium cost for such
insurance is substantially disproportionate to the amount of coverage or (ii)
the coverage provided by such insurance is so limited by exclusions that there
is insufficient benefit from such insurance.
14. INDEMNITY.
---------
a. Subject only to the exclusions set forth in Paragraph 14.b. below, and
in addition to any rights of Employee under the By-laws of the Company, any
applicable state law, Paragraph 13 of this Agreement, or any other agreement,
the Company hereby further agrees to hold harmless and indemnify Employees:
(i) Against any and all expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by
Employee in connection with any threatened, pending or complet-
52
ed action, suit or proceeding, whether civil, criminal, administrative or
investigative (including an action by or in the right of the Company) to which
Employee is, was or at any time becomes a party, or is threatened to be made a
party, by reason of the fact that Employee is, was or at any time becomes a
director, officer, employee, consultant, or agent of Company, or is or was
serving or at any times serves at the request of the Company, as a director,
officer, employee, consultant, partner, trustee or agent (regardless of his
title) of another corporation, partnership, joint venture, trust or other
enterprise; and
(ii) Otherwise to the fullest extent as may be provided to Employee by
the Company under the non-exclusivity provisions of the By-laws of the Company
and the Florida Business Corporations Act, and
(iii) From any and all income and excise taxes (and interest and
penalties relating thereto) imposed on Employee with reference to any payment
under this Paragraph 14 (including without limitation payments in indemnity for
such taxes).
b. No indemnity pursuant to this Paragraph 14 shall be paid for such
taxes).
53
(i) except to the extent the aggregate of losses to be indemnified
thereunder exceed the sum of $500 plus the amount of such losses for which the
Employee is indemnified either pursuant to the By-laws of the Company or any
subsidiary, pursuant to any Directors and Officers insurance purchased and
maintained by the Company pursuant to Paragraph 13 above;
(ii) in respect to remuneration paid to Employee if it shall be
determined by a final judgment or other final adjudication that such
remuneration was in violation of law;
(iii) on account of any suit in which judgment is rendered against
Employee for an accounting of profits made by the purchase or sale by Employee
of securities of the Company pursuant to the provisions of Section 16(b) of the
Securities Exchange Act of 1934 and amendments thereto or similar provisions of
any federal, state or local statutory law;
(iv) on account of actions or omissions which are finally adjudicated to
have been material to the cause of action adjudicated and to fall within any of
paragraphs (a) through (d) of the last sentence of Section 607.0850 of the
Florida Business Corporations Act; or
54
(v) if a final decision by a Court having jurisdiction in the matter
shall determine that such indemnification to Employee is not lawful.
c. All agreements and obligations of the Company contained herein shall
continue during the period Employee is a director, officer, employee, consultant
or agent of the Company (or is or was serving at the request of the Company as a
director, officer, employee, partner, consultant or agent of another
corporation, partnership, joint venture, trust or other enterprise) and shall
continue thereafter so long as Employee shall be subject to any possible claim
or threatened, pending or completed action, suit or proceeding, whether civil,
criminal or investigative, by reason of the fact that Employee was an officer or
director of the Company or serving in any other capacity referred to herein.
d. The Company shall not be liable to indemnify Employee under this
Agreement for any amounts paid in settlement of any action or claim effected
without its written consent. The Company shall not settle any action or claim
in any manner which would impose any penalty or limitation on Employee without
Employee's written consent. Neither the Company or Employee will unreasonably
withhold consent to any proposed settlement.
55
e. The Company will pay all expenses immediately upon the presentment of
bills for such expenses. Employee agrees that Employee will reimburse the
Company for all reasonable expenses paid by the Company in defending any civil
or criminal action, suit or proceeding against Employee in the event and only to
the extent that it shall be ultimately determined that Employee is not entitled
to be indemnified by the Company for such expenses under the provisions of the
applicable state statute, the By-laws, this Agreement or otherwise. This
Agreement shall not affect any rights of Employee against the Company, any
insurer, or any other person to seek indemnification or contribution.
f. If the Company fails to pay any expenses (including, without limiting
the generality of the foregoing, legal fees and expenses incurred in defending
any action, suit or proceeding), Employee shall be entitled to institute suit
against the Company to compel such payment and the Company shall pay Employee
all costs and legal fees incurred in enforcing such right to prompt payment.
g. To the extent allowable under Florida law, the burden of proof with
respect to any proceeding or determination with respect to Employee's
entitlement to
56
indemnification under this Agreement shall be on the Company.
h. Neither the failure of the Company, its Board of Directors, independent
legal counsel, nor its stockholders to have made a determination that
indemnification of the Employee is proper in the circumstances because he has
met the applicable standard of conduct set forth in the Florida Business
Corporations Act, nor an actual determination by the Company, its Board of
Directors, independent legal counsel, or its shareholders that the Employee has
not met such applicable standard of conduct, shall be a defense to any action on
the part of Employee to recover indemnification under this Agreement to create a
presumption that Employee has not met the applicable standard of conduct.
15. CHANGE IN CONTROL.
-----------------
a. Change in Control. For purposes of this Agreement, "Change in Control"
-----------------
shall mean a change in control of the Company, which shall be deemed to have
occurred upon the first fulfillment of the conditions set forth in any one of
the following four paragraphs:
(i) any Person, other than a trustee or other fiduciary holding
securities under an employee benefit plan of the Company or a corporation owned,
57
directly or indirectly, by the stockholders of the Company in substantially the
same proportions as their ownership of stock of the Company, is or becomes the
Beneficial Owner, directly or indirectly, of securities of the Company
representing twenty-five percent (25%) or more of the combined voting power of
the Company's then outstanding securities; or
(ii) during any period of two consecutive years (not including any
period prior to the execution of this Agreement), individuals who at the
beginning of such period constitute the Board and any new director (other than a
director designated by a Person who has entered into an agreement with the
Company to effect a transaction described in Paragraph 15.a.(i) or 15.a.(iii)
hereof) whose election by the Board or nomination for election by the Company's
stockholders was approved by a vote of at least two-thirds (2/3) of the
directors then still in office who either were directors at the beginning of the
period or whose election or nomination for election was previously so approved,
cease for any reason to constitute a majority thereof; or
(iii) the shareholders of the Company approve a merger or consolidation
of the Company with any other corporation; other than a merger or consolidation
58
which would result in the voting securities of the Company outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving
securities of the Company or such surviving entity outstanding immediately after
such merger or consolidation, or the shareholders of the Company approve a plan
o f complete liquidation of the Company or an agreement for the sale or
disposition by the Company of all of substantially all the Company's assets; or
(iv) any Person shall be or has become the Beneficial Owner of
securities of the Company representing twenty percent (20%) or more of the
combined voting power of the Company's then outstanding securities and (i) the
identity of the Chief Executive officer of the Company is changed during the
period beginning sixty (60) days before the attainment of the twenty percent
(20%) beneficial ownership and ending two (2) years thereafter, or (ii)
individuals constituting at least one-third (1/3) of the members of the Board at
the beginning of such period shall leave the Board during the period beginning
sixty (60) days before the attainment of the twenty percent (20%) beneficial
ownership and ending two (2) years thereafter.
59
b. Definitions. The meanings of certain capitalized terms used in
-----------
Paragraph 15.a. are provided below:
(i) "Beneficial Owner" shall have the meaning defined in Rules 13d-3
and 13d-5(b) under the Securities and Exchange Act of 1934, as amended (the
"Exchange Act").
(ii) "Person" shall have the same meanings as it does in section
3(a)(9) (including the definition of "Company" under section 3(a)(19)) including
a group and any other arrangement included as a "Person under section 13(d)(3)
of the Exchange Act, provided, a person shall not include an underwriter
temporarily holding securities pursuant to an offering of such securities.
7. MISCELLANEOUS.
-------------
a. Employee Representations. The Employee represents and warrants to the
------------------------
Company that there is no restriction or limitation, by reason of any agreement
or otherwise, upon the Employee's right or ability to enter into this Agreement
and fulfill his obligations under this Agreement.
b. Terminated 1991 Agreement. Employee's agreement with the Company dated
-------------------------
August 1, 1991, and
60
subsequently amended on August 1, 1992 and October 4, 1994, shall be terminated
upon the effective date of this Agreement.
c. Interest on Amounts Due. In the event any amount due either Employee
-----------------------
or the Company under this Agreement is not paid when due, it shall thereafter
bear interest at the rate equivalent to the Security Pacific National Bank, Los
Angeles (or its successor), prime rate as it shall vary from time to time over
the period until paid. Such interest shall be compounded on a monthly basis.
d. Amendment. This Agreement shall not be changed or terminated except in
---------
writing.
e. Law. This Agreement shall be governed by, and construed under, the
---
laws of the State of California except for Paragraphs 13 and 14 which will be
governed by Florida law and Paragraph 10 which shall be governed by the law of
the state in which a business of the Company is located with respect to which a
claim of competition is made (e.g., if Employee worked for a casino in Las
----
Vegas, Nevada law would govern any adjudication).
f. Successors, Assigns. The terms and provisions of this Agreement shall
-------------------
inure to the benefit of the personal representatives, heirs and legatees of the
61
Employee and shall be binding upon and inure to the benefit of any successors or
assigns of the Company . This Agreement shall survive any merger or voluntary
or involuntary dissolution and shall bind any person acquiring the Company's
assets in such event.
g. Notices. Any notices or other communications required or permitted to
-------
be given under this Agreement shall be deemed given on the day when delivered in
person, or the third business day after the day on which mailed by first class
mail from within the United States of America addressed to the party receiving
the communication at the principal office of the Company or such other address
as the party receiving the communication shall have designated to the other in
writing.
h. Consents and Approvals. As to any paragraph of this Agreement
----------------------
providing for the consent or approval of any party to this Agreement, such
provision shall be deemed to include the restriction that any such exercise of
approval or consent shall be reasonable and not unreasonably denied regardless
of whether such provision actually sets forth a specification that such an
approval or consent shall not be unreasonably denied.
i. Severability. If any provision of this Agreement is found invalid or
------------
unenforceable, the remain-
62
der of this Agreement shall nevertheless remain in full force and effect. If
any provision is held invalid or unenforceable with respect to particular
circumstances, it shall nevertheless remain in full force and effect in all
other circumstances. If the provision held invalid or substantially limited
involves the compensation or benefits of Employee, Employee shall have the
option for thirty (30) days following the final decision holding such provision
to be invalid to terminate this Agreement by written notice to the Company.
j. Captions. Captions in this Agreement are merely to facilitate
--------
references and shall not affect the interpretation of any of the provisions.
17. CHANGE IN CONTROL LIMITATION.
----------------------------
The parties hereto agree that consummation of the transactions contemplated
by the Merger Agreement (including, without limitation, the acquisition of
shares of the Company's common stock pursuant to the Offer, as defined therein)
will constitute a "Change in Control", as that term is used in this Agreement.
The parties further agree that no transaction or event subsequent to the
Effective Time, as defined in the Merger Agreement, will constitute a Change in
Control for purposes of this Agreement.
63
18. GUARANTEE BY ITT.
----------------
ITT hereby agrees to be bound by all the provisions of this Agreement,
including, without limitation, the undertakings in this Agreement directly
related to ITT or its common stock, and hereby guarantees the obligations of the
Company in this Agreement.
IN WITNESS WHEREOF, this Agreement has been executed at Los Angeles,
California.
EMPLOYEE CAESARS WORLD, INC.
____________________ By______________________
Henry Gluck
ITT CORPORATION
By______________________
64
EXHIBIT (c)(4)
AMENDED AND RESTATED
--------------------
EMPLOYMENT AGREEMENT
--------------------
This is an amendment and restatement signed this ____ day of December,
1994, of the Employment Agreement made as of August 1, 1991, by and between
CAESARS WORLD, INC. (the "Company"), a Florida corporation, and J. Terrence
Lanni (the "Employee"), as previously amended as of August 1, 1992 and October
4, 1994, with ITT Corporation ("ITT") being added as a party hereto (such
amendment and restatement being hereinafter called the "Agreement").
FACT RECITALS
-------------
A. Employee is presently employed under the employment agreement, as
amended, described above; and
B. During the course of Employee's employment with the Company, Employee
has performed outstanding services for the Company and has obtained a superior
reputation in the industry, with regulatory agencies, and with various
institutional holders and members of the financial constituency of the Company;
and
C. It is deemed by the Company to be in the best interests of the Company
and its shareholders to assure continuation of Employee's employment to the
employees of the Company and to the other interested parties described in B
above; and
D. The Company recognizes that the nature and character of the Company and
its present Board of Directors and Employee's present position, duties,
responsibilities and status within this structure are indispensable factors
which have caused Employee to remain in the employ of the Company and to enhance
the value of Employee's services to the Company; and
E. Employee desires assurance of a long-term future with the Company and
is willing to enter into a long-term agreement with the Company; and
F. Pursuant to an Agreement and Plan of Merger, dated as of December 19,
1994, among the Company, ITT Corporation and ITT Florida Enterprises Inc. (the
"Merger Agreement"), this Agreement is being executed prior to the acquisition
of shares of the Company's Common Stock pursuant to the Offer. The effective
date of this Agreement shall be the date of acquisition of shares of the
Company's common stock pursuant to the Offer.
1. TERM OF EMPLOYMENT.
------------------
Unless earlier terminated as herein provided, the term of Employee's
employment with the Company hereunder shall commence at the effective date and
shall end on the third anniversary of the effective date. For pur-
2
poses of this Agreement, the "Term" of this Agreement shall mean the full three-
year term of the Agreement, plus any extensions which may be mutually agreed
upon by all three parties hereto in writing. For purposes of this Agreement,
the "Employment Period" (which in no event shall extend beyond the Term) shall
mean the period during which Employee has an obligation to render services
hereunder, as described in Paragraph 2, taking into account any notice of
termination which may be given by either the Company or the Employee. It is
understood that there are certain circumstances of termination under which the
Employment Period (and Employee's obligation to render services) will end before
the Term (and certain of the Company's obligations will end). Various
provisions of this Agreement are intended to survive the expiration or
termination of the Term or the Employment Period, including, without limitation,
the provisions of Paragraphs 6.c., 6.d., 7 and 9 through 14, inclusive.
2. DUTIES AND AUTHORITY OF EMPLOYEE.
--------------------------------
During the Employment Period, the Employee shall be President and Chief
Operating Officer of the Company and shall devote his efforts to rendering
services to the Company and its affiliates in such capacities. As President,
the Employee shall have those powers and
3
duties set forth in Article VI, Section 6.6, of the Company's By-laws, as
amended, and all powers exercised by Employee in behalf of the Company in such
position prior to the date of this Agreement. He shall undertake those
assignments given him by the Chief Executive Officer of the Company. The
Employee shall report only to the Chief Executive Officer of the Company and the
Board of Directors of the Company (hereinafter "the Board"). Employee shall
comply with ITT's Code of Conduct, as set forth in the so-called "red book" as
of the date hereof.
3. DIRECTORSHIP.
------------
At each election during the Employment Period, ITT shall cause Employee to
be one of management's candidates for election to, and Employee agrees to serve
(if elected) on, the Board of Directors of the Company.
4. PLACE AND FACILITIES OF EMPLOYMENT.
----------------------------------
During the Employment Period, Employee's place of employment will be in the
West Los Angeles area. Employee shall not be required to render any services
hereunder outside of the West Los Angeles area except for business travel
reasonably necessary in connection with the Company's business. During the
Employment Period, Employee shall be furnished by the Company a private office
consistent with his status and a private secretary
4
of Employee's choice in the West Los Angeles area. The West Los Angeles area
means an area bordered by Washington Boulevard on the south, La Brea Avenue on
the east, Sunset Boulevard on the north, and Pacific Ocean on the west.
5. EXCLUSIVITY.
-----------
It is understood that the Employee's employment during the Employment
Period shall be on an executive basis, except that the Employee may, subject to
the provisions of Paragraph 10 hereof, undertake or continue to conduct other
business, civic, or charitable activities during the Employment Period if such
activities do not materially interfere, directly or indirectly, with the duties
of the Employee hereunder, or compete with any business of the Company;
provided, however, that no additional outside business activities shall be
undertaken without the prior consent of the Board. Notwithstanding the
foregoing, nothing contained in this Employment Agreement shall be deemed to
preclude Employee from owning not more than the lesser of one percent (1%) or
$250,000 in market value of the publicly traded capital stock of an entity
whether or not in competition with the business of the Company or its
subsidiaries or affiliates or from carrying on activities normally incident to
5
managing passive investments. Employee shall be deemed to be engaged in or
concerned with a duty or pursuit which is contrary to any provision of this
Agreement only if he has received written notice to such effect, setting forth
with reasonable specificity the basis of such claim, from the Company and has
not, within sixty (60) days from the date of his receipt of any such written
notice, initiated steps to eliminate his engagement in or concern with such
duties or pursuits as are specified in such notice as being contrary to this
Agreement.
6. COMPENSATION.
------------
a. Salary.
------
(i) During the Employment Period, the Employee shall be paid a salary
(herein "Salary"), which may be increased from time to time at the election of
the Board or any committee of the Board to which such power has been delegated
by the Board. Employee shall be entitled to annual salary reviews. As of the
date of this Agreement, the annual rate of Employee's Salary shall be $665,882.
(ii) On each August 1, beginning August 1, 1995, the Salary then effective
shall be adjusted in accordance with two-thirds of the increase or decrease of
the Consumer Price Index - United States City Average,
6
All Urban Consumers, All Items, published by the Bureau of Labor Statistics,
U.S. Department of Labor (herein "CPI"), on such date with respect to the CPI
for the preceding August 1. This "CPI Adjustment" shall be equal to two-thirds
of the increase or decrease in the CPI as of a given August 1 with respect to
the CPI for the preceding August 1, divided by the amount of the CPI on the
preceding August 1, multiplied by the Salary as of such preceding August 1. The
Salary for the ensuing fiscal year shall be the salary as of the previous August
1 (A) plus the CPI adjustment, in the case of an increase in the CPI since the
previous August 1, and (B) minus the CPI Adjustment, in the case of a decrease
in the CPI since the previous August 1. If at the time of any such adjustment
such CPI shall no longer be published, the parties shall agree on an appropriate
measure of the increase in cost of living. As of August 1 of any fiscal year,
the Salary as adjusted pursuant to the foregoing provisions or by the Board at
its election shall thereafter be the Salary under this Agreement.
(iii) The Employee's Salary shall be paid in the same installments which
prevail for other Senior Corporate Officers of the Company (in no event less
frequently than monthly) or such other installments as
7
are agreed upon between the Employee and the Company.
b. Bonus and Incentive Compensation.
--------------------------------
During the Employment Period, for each fiscal year the Employee shall be
paid the greater of (x) the annual bonus amount calculated pursuant to Paragraph
6.b.(i)-(viii) or (y) the annual bonus amount calculated pursuant to Paragraph
6.b.(ix).
(i) During the Employment Period, upon sign-off by the Company's auditors,
Employee shall be paid incentive compensation (herein "Incentive Compensation")
as provided in Paragraph 6.b.(viii) hereof, or, if Employee elects pursuant to
Paragraph 6.b.(viii) hereof, Employee shall be paid Incentive Compensation for
each fiscal year of the Company equivalent to six-tenths of one percent (0.60%)
of the Incentive Income (as defined below) of the Company but not more than
sixty percent (60%) of Employee's Salary earned during such fiscal year.
(ii) For this purpose, "Incentive Income" shall mean the Consolidated Net
Income of Caesars World, Inc. and subsidiaries for a particular fiscal year as
certified by the Company's independent auditors for purposes of the Company's
annual report to shareholders for such fiscal year (provided that, after the
consumma-
8
tion of the Offer pursuant to the Merger Agreement, the Incentive Income
and the Incentive Net Worth, as defined below, shall be calculated based on the
Company's continuing operations which existed immediately prior to such
consummation and as if the transactions contemplated by the Merger Agreement had
never taken place), after the following adjustments:
A. Add back all amounts charged against Consolidated Net Income in respect
of the following:
I. The minority interest in earnings of any consolidated subsidiary, and
taxes based upon or measured, in whole or in part, by income of the Company and
its subsidiaries;
II. The aggregate of net expense charges for all awards in the nature of
incentive compensation and bonuses for all officers and assistant officers of
the Company which were accrued for such fiscal year; and an amount equal to
twelve percent (12%) of any deficit of Incentive Net Worth (as defined in (iii)
below);
III. All items characterized as Extraordinary Losses on the consolidated
statement of income;
IV. All charges against such income of any kind whatsoever resulting from
either a write-up of Company assets as a result of a reorganization of the
9
Company or a revaluation of the Company assets as a result of an acquisition of
the Company in a transaction constituting a "purchase transaction" under
generally accepted accounting principles and any and all interest charges
imposed upon the Company as a result of the use of Company assets or credit to
finance any purchase by an outsider of the assets of the Company or of a
majority or more of the stock of the Company; and
V. All charges against income for items constituting unusual items under
generally accepted accounting principles which are treated as "one-line" items
for financial statement presentation purposes and which pertain to or arise out
of a tender or exchange offer for Company stock, a consolidation or merger of
the Company, or which pertain to or arise out of a recapitalization transaction
or other corporate restructuring initiated by the Company.
B. Subtract all amounts included in Consolidated Net Income in respect of
the following:
I. All amounts characterized as Extraordinary Gains on consolidated
statements of income for the Company and its subsidiaries;
10
II. An amount equal to twelve percent (12%) of Incentive Net Worth (as
defined in (iii) below); and
III. All increases in such income of any kind whatsoever resulting from a
write-down of Company assets as a result of a reorganization of the Company or a
revaluation of Company assets as a result of an acquisition of the Company in a
transaction constituting a "purchase transaction" under generally accepted
accounting principles.
(iii) For this purpose, Incentive Net Worth shall mean, as applied to a
particular fiscal year, the total Shareholders' Equity shown on the consolidated
balance sheet for the Company and its subsidiaries as of the end of the
preceding fiscal year, plus or minus the amount of any increase or decrease
during a fiscal year, from the issue or the purchase of common or preferred
stock or any distributions with respect to the Company's common or preferred
stock. As to increases or decreases during a given year, the increase or
decrease shall be appropriately adjusted by a proportion based on the number of
days in the year prior to or after the increase or decrease, as the case may be.
Increases in Shareholders' Equity during the year (or period of computation in
11
the event of termination of Employee during a fiscal year) resulting from the
issuance or vesting of stock bonus awards or the issuance of stock pursuant to
the exercise of employee stock options or stock appreciation rights should not
be taken into account in the computation for that year.
(iv) Notwithstanding the foregoing, in the event that any incentive plan
for Senior Corporate Officers (i.e., those officers of the corporation subject
----
to the jurisdiction of the Audit and Compensation Committee) uses a lower
percentage of net worth than twelve percent (12%) or a more favorable definition
of Incentive Income or Net Worth, or the equivalent, Employee's Incentive
Compensation shall be calculated using such more favorable definitions.
(v) In the event the Employment Period or the Term expires or terminates
before the end of a given fiscal year for any reason whatsoever or Employee
becomes subject to a Disability during a given fiscal year of the Employment
Period, the Incentive Compensation for such fiscal year shall be computed based
on the actual operating results of the Company to the end of the month preceding
the effective day of termination or the date of Disability (the "Computation
Period") and the
12
twelve percent (12%) item in Paragraph 6.b.(ii)B. above (or any substituted
rate) shall be reduced by one percent (1%) (or 1/12 of such rate if the then
effective rate shall be less than twelve percent (12%)) for each month less than
twelve (12) in the Computation Period. Incentive Compensation shall vest monthly
as earned even though calculation by the Company's auditors may not be completed
until a later date and payment is not made until after such calculations can be
completed.
(vi) In the event of any acquisitions by the Company during the
Employment Period, the Company and Employee will renegotiate the provisions of
this Paragraph 6.b. so as to modify the applicable formula to produce a
reasonable and fair result consistent with the previous formula but taking into
account the acquisition.
(vii) Notwithstanding the foregoing, in computing "Incentive Income" and
"Incentive Net Worth", as defined herein, charges or equity adjustments related
to or arising from the transactions contemplated by the Merger Agreement,
including, without limitation, with respect to deferred compensation or the
lapsing of restrictions on restricted shares of the Company's common stock,
shall not be taken into account.
13
(viii) As to any particular fiscal year of the Company, unless Employee
elects in writing, prior to the later to occur of (x) August 31 of such fiscal
year or (y) the tenth business day following his receipt of notice of the
Company's adoption of the Senior Corporate Executive Incentive Plan (or its
successor) for such fiscal year, to make this Paragraph 6.b. applicable for such
year, Employee shall instead automatically participate in the Senior Corporate
Executive Incentive Plan of the Company, or any successor plan thereto, and this
Paragraph 6.b. shall not apply for such year. Such an election as to any
particular year will only be applicable to that year and, absent a similar
agreement for any later year, this Paragraph 6.b. shall not apply to such later
year.
(ix) During the Employment Period, the Employee shall be paid an annual
bonus for each fiscal year of the Company based on an $380,000 target bonus,
with a pay-out varying between 0% and 150% of the target bonus. The percentage
pay-out shall be determined by the degree to which pre-established performance
goals based on the Company's budgeted operating cash flow and improvements
thereto are attained.
c. Other Benefits.
--------------
14
(i) After the consummation of the Offer pursuant to the Merger Agreement
and throughout the rest of the Employment Period, ITT will recommend to the
committee administering the 1994 ITT Corporation Incentive Stock Plan (the "ITT
Plan") that the Employee shall receive an annual grant of a stock option for
20,000 shares of common stock ($1 par value) of ITT pursuant to the ITT Plan.
The first such grant shall be made as of the day immediately following such
consummation. The options shall have an exercise price per ITT share equal to
the fair market value of an ITT share on the date of grant. The options shall
become exercisable as to two-thirds (2/3's) of the underlying ITT shares when
the trading price of an ITT share equals or exceeds a dollar amount which is
twenty-five percent (25%) over the exercise price per ITT share for ten
consecutive trading days and shall become fully exercisable at the earlier of
(x) the date when the trading price of an ITT share equals or exceeds a dollar
amount which is forty percent (40%) over the exercise price per ITT share for
ten consecutive trading days or (y) the earlier of the fifth (5th) anniversary
of the date of grant or the "Wrongful Termination" of the Employee's employment,
as defined in this Agreement. The term of the options shall be nine years.
15
If the Employee voluntarily terminates his employment hereunder within the first
year after the effective date hereof, he shall have 30 days after such
termination to exercise his options which are exercisable at the time of such
termination and his options which are unexercisable at the time of such
termination shall be forfeited. After such first year of employment hereunder,
if the Employee is eligible to receive immediate retirement benefits under
either an Executive Security Plan of the Company or an ITT pension plan, any
termination of employment (except a termination for "cause" as defined in this
Agreement) shall be treated as a retirement under the ITT Plan which entitles
him, whether or not his options are exercisable on the date of such termination,
to exercise all of his options within five years of such termination (or within
their original term, whichever is shorter) and such options shall continue to
vest after such termination in accordance with their terms. After such first
year of employment hereunder, if the Employee's employment is terminated for
"cause" as defined in this Agreement, he shall have 30 days after such
termination to exercise his options which are exercisable at the time of such
termination and his options which are
16
unexercisable at the time of such termination shall be forfeited.
(ii) The Employee shall, to the extent deemed appropriate by the Board (or
any applicable committee of the Board), participate at a level consistent with
his rank in profit sharing, stock appreciation right, stock bonus, stock option,
deferred compensation, and other similar benefits which are made available to
executives employed by the Company during the Employment Period. Also, during
the Employment Period, Employee shall continue to participate in all fringe
benefits and perquisites now furnished Employee and (subject to the terms of any
such plan) in the Executive Security Plan and Individual Retirement Plan, and
shall participate consistent with his rank in any retirement plan or other
fringe benefits or perquisites hereafter adopted by the Company and made
applicable to its officers. Further, during the Employment Period, the Company
will provide, at its expense, life, business travel, disability, medical, dental
and hospitalization insurance for the Employee and his dependents in amounts and
on terms as favorable as those provided for any other officer of the Company.
17
d. Retirement Benefits.
-------------------
(i) Supplemental Retirement.
-----------------------
In addition to any retirement benefits which the Company shall provide to
Employee under the terms of any retirement plan currently existing or which the
Company shall adopt during the Employment Period, the Company shall pay Employee
(or Employee's beneficiaries) an annual retirement benefit equal to the product
of (A) two percent (2%) times the number of years of Continuous Employment (as
defined in the Executive Security Plan of the Company as of the date hereof)
after July 31, 1985 (but not more than the aggregate of sixty percent (60%)) and
(B) the average Incentive Compensation accruing to Employee for all years of
Continuous Employment beginning after July 31, 1985 (i.e., beginning with the
----
Incentive Compensation paid for the fiscal year ended July 31, 1986). Payment
of the annual retirement benefit under this Paragraph 6.d.(i) shall commence on
the first day of the first month following Employee's sixty-fifth birthday or
upon Employee's retirement from employment with the Company, whichever shall
occur later. The annual retirement benefit shall be payable in monthly
installments for the life of Employee but not less than ten (10) years in any
event; and if Employee shall die before the expira-
18
tion of such ten (10) year period, the remaining payments shall be paid to the
Beneficiary of Employee as designated under the Executive Security Plan of the
Company. If Incentive Compensation for any given fiscal year is taken into
account in computing retirement benefits for Employee under any retirement plan
of the Company (other than pursuant to this Paragraph 6.d.(i)), the amount of
the accrual under this Paragraph 6.d.(i) shall be reduced on the basis of
actuarial equivalence by the benefit given to, or contribution in behalf of,
Employee under such other plan based on the Incentive Compensation of Employee
for that fiscal year.
(ii) Trust Fund Protection.
---------------------
At any time (a) that the consolidated shareholder equity of the Company
shall be below $150 million, (b) within thirty (30) days preceding the end of
the Term or at any time thereafter or (c) at any time within thirty (30) days
preceding the date Employee ceases to be the Chief Executive Officer and
Chairman of the Board of Directors of the Company or at any time thereafter,
Employee by notice to the Company may require that the Company establish a trust
account with a bank or financial institution (the "Trustee") mutually acceptable
to Employee and the Company and that the Company deposit
19
in such account an amount necessary to pay all retirement benefits of Employee
and Employee's beneficiaries provided under this Agreement and the Executive
Security Plan of the Company (or any other unfunded retirement plan of the
Company (or any other unfunded retirement plan hereafter adopted by the
Company). The Company shall continue to make additional payments to the Trustee
on an annual basis during the Term of this Agreement to the extent required in
order to maintain in the account sufficient funds to cover the anticipated
benefits to Employee and Employee's beneficiaries. Under the terms of the trust
agreement, the trust fund and the required retirement benefit payments to
Employee and his beneficiaries in behalf of the Company shall be subject to the
claims of the Company's creditors. To the extent that the trust fund is
insufficient to make the full payment that Employee or Employee's beneficiaries
are entitled to under this Agreement and any other retirement plan of the
Company, the Company shall pay the difference from its general assets. Any
excess funds remaining in the trust fund upon termination of all of the
Company's obligations to Employee and any of his beneficiaries under this
Paragraph 6.d. and any other retirement plan of the Company in which Employee
participates, shall revert to
20
the Company. To the extent that implementation of this subparagraph will
adversely affect the deferral of taxation of Employee with respect to the
accrual of retirement benefits on behalf of Employee, this Paragraph 6.d.(ii)
shall be deemed void.
(iii) Upon the first to occur of (x) the expiration of the Term or (y)
termination of the Term or the Employment Period other than under Paragraph
9.a., and continuing until one year after the death of Employee, the Company
will provide Employee and his dependents with medical, dental and
hospitalization insurance equivalent to that provided Senior Corporate Officers
of the Company or any parent corporation of the Company, provided Employee has
at the time of expiration or termination attained the age when Employee would be
first eligible for early retirement under the Executive Security Plan assuming
all other requirements under such plan were fulfilled at such time. Such
insurance shall be provided through the plans of the Company or, if this is not
practical, the Company shall directly pay all such expenses on the same basis as
if Employee had been included in such plans. To the extent Employee obtains
other employment (and Employee shall be under no obligation to do so under this
Paragraph 6.d.(iii)), insurance obtained
21
as a result of such other employment shall be the first line of insurance and
insurance provided under this provision shall only be supplementary. Also, to
the extent Employee is entitled to insurance under Medicare or its equivalent,
the insurance under this provision shall be only supplementary or second line to
the extent allowed by law.
e. Withholding.
-----------
All compensation shall be subject to normal required withholdings.
7. VACATIONS.
---------
Employee shall accrue vacation time at the rate of one and two thirds (1
2/3) days per month of service during the Employment Period, provided, however,
at no time shall more than sixty (60) days be accrued and during any period that
the cumulative accrual is at this sixty (60) day level, no additional vacation
time shall accrue. At Employee's option, vacation may be taken, either in whole
or in part, consecutively or not, in the year that Employee's entitlement to
that vacation accrues or, if unused during such year, such vacation time shall
be carried over (subject to the sixty (60) day maximum accrual) and may be used
in any subsequent year during the Employment Period, provided that no more than
sixty
22
(60) days of vacation may be taken in any calendar year. Upon termination of
Employee's employment with the Company for any reason whatsoever, Employee shall
be paid his Salary or all unused then accrued vacation at the Salary rate then
existing up to the maximum accrual of sixty (60) days.
8. EXPENSES.
--------
The Company will reimburse Employee for all expenses reasonably incurred by
Employee in the performance of his duties under this Agreement. Reimbursement
shall be made in accordance with the practices and requirements generally
applied by the Company in connection with reimbursement of expenses incurred by
its employees. It is understood that the Company will pay to Employee an
automobile allowance providing the equivalent of availability to Employee of a
car of comparable level of quality as presently being operated by Employee under
an automobile allowance from the Company. The Company also will pay for the
insurance, operating, maintenance and repair of such car (including gasoline and
oil) or a car used by Employee in lieu of a furnished car if Employee elects the
automobile allowance. The allowance and all payments with respect to the
automobile will be grossed-up for tax purposes in accordance with Company
practices
23
as they exist as of the date of this Agreement. Employee may from time to time
also incur certain expenses on behalf of the Company or in furtherance of its
business for which reimbursement may not be made under Company policy or
practices.
9. TERMINATION OF EMPLOYMENT PERIOD AND/OR AGREEMENT.
-------------------------------------------------
a. Termination by the Company for Cause.
------------------------------------
(i) The Company may at any time, at its election, terminate the Employment
Period and the Term prior to the Term's expiration because of the following
causes: (A) willful misconduct by the Employee in the performance of his duties
under this Agreement or his habitual neglect of such duties, (B) failure of the
Employee to obtain or retain any permits, licenses or approvals which shall be
required by any state or local authorities where the failure to obtain such
license will result in the loss of a material license or franchise held by the
Company (or a subsidiary thereof), or (C) a willful breach by the Employee of
any of the material terms of this Agreement.
(ii) Any such termination shall be effective only if notice is given to
Employee not later than ninety (90) days following the event, transaction, or
occurrence giving rise to such right of termination, or
24
if later, ninety (90) days after the Company first discovers that such event,
transaction, or occurrence has taken place. Also, any such termination under
(A) through (C) of Paragraph 9.a.(i) may only occur if all of the following are
demonstrated by the Company: (x) the failure, breach or action directly
materially adversely affects the Company (except in the event of a termination
under Paragraph 9.a.(i)(B)), (y) the failure, action or breach by Employee was
in bad faith and lacking in a good faith belief that it was in or at least not
opposed to the Company's interest (except in the event of a termination under
Paragraph 9.a.(i)(B)), and (z) the Company gave notice to cure to Employee and
Employee failed to cure within thirty (30) days after notice thereof or, if a
cure was not possible within thirty (30) days, failed to take all practical
action within such period leading to a cure.
(iii) (A) In the event that the Company elects to terminate the
Employment Period and the Term for cause pursuant to the foregoing provisions of
this Paragraph 9.a., the termination shall not be effective and the Agreement
(including, without limitation, Paragraphs 9.d. and 9.e.) shall continue in full
force and effect until the issuance of an arbitration award affirm-
25
ing the Company action. Without limiting the generality of the foregoing, the
Company shall continue to pay Employee's then current Salary and Incentive
Compensation as specified in Paragraph 6. of this Agreement and shall continue
all other benefits until the issuance of such arbitration award.
(B) Such arbitration shall be held in Los Angeles, California in
accordance with the rules of the American Arbitration Association (except as
otherwise provided in this Paragraph 9.(iii)(B)) within ninety (90) days
following receipt by the Employee of the notice to cure under Paragraph 9.a.(ii)
above. Any decision by the arbitrator shall be final and binding on the parties
and all successors in interest. Judgment upon an award of the arbitrator may be
entered in any court of competent jurisdiction. Employee shall cooperate with
the Company in effecting such an accelerated arbitration. The Company shall
make available to Employee any and all documents requested by the Employee for
purposes of defending such arbitration and allow Employee or Employee's
representatives access to any and all Company records and personnel for such
purpose. The Company will produce any such records and personnel at the
arbitration to the extent requested by Employee. Notwithstanding the
26
foregoing, the arbitration shall not be commenced until Employee has had a
reasonable opportunity to have the matter investigated and his case prepared by
any representatives; however, the Employee shall use his best efforts to
complete his presentation within the above stipulated ninety (90) day period.
The Company will pay all Employee's reasonably incurred legal expenses and other
costs in presenting the matter and all costs of the arbitrator.
(C) In the event that the arbitrator shall decide in favor of the Company,
Employee shall repay all Salary earned by Employee following the expiration of
the 30-day cure period under Paragraph 9.a.(ii)(z) above. As to Incentive
Compensation in the event that the arbitration results in a judgment in favor of
the Company, for purposes of Paragraph 6.b.(v) of this Agreement, the effective
day of termination shall be the date of the expiration of the cure period in
Paragraph 9.a.(ii)(z) and to the extent Employee has received any payment of
Incentive Compensation pertaining to the Incentive Compensation accruals after
such date, Employee shall repay the same to the Company upon demand.
Notwithstanding anything in this Paragraph 9.a.(iii), the Company may suspend
Employee upon the expiration of the
27
cure period specified in Paragraph 9.a.(ii)(z) pending the outcome of
arbitration; however, as stated above, Employee shall continue to receive
Salary, Incentive Compensation, and all benefits during such suspension subject
to Employee's obligation to repay Salary and Incentive Compensation in the event
the arbitration decision is against Employee as set forth above. Employee shall
be allowed to retain benefits in all events.
(iv) In the event that there is a termination of the Employment Period and
the Term by the Company under this Paragraph 9.a. and the cause is solely the
cause described under Paragraph 9.a.(i)(B) above and not within either Paragraph
9.a.(i)(A) or (C), Employee shall be entitled to severance pay equivalent to one
(1) year's Salary payable within five (5) days of the effective date of
termination, and to the continuation of all fringe benefits and insurance
described in Paragraph 6.c. for a one (1) year period following such termination
(which continuation shall not, however, duplicate insurance already provided by
Paragraph 6.c. for such period), provided, that the actions of employee leading
to the loss of license were in the good faith belief that his actions were for
the benefit of and in the best interests of the Company and not in violation of
any law and that
28
such payments are not in violation of law, and, provided further, that Employee
used his best efforts to obtain or retain (as the case may be) such license.
b. Disability.
----------
In the event that Employee shall become subject to a Disability (as defined
below) during the Employment Period, the Incentive Compensation shall stop
accruing and the Salary payable to Employee shall be reduced to fifty percent
(50%) of the Salary in effect at the date of the Disability. Such reduced
compensation shall continue until the termination of Employee's Disability, the
expiration of the Term, or the expiration of thirty (30) months from the
inception of the Disability, whichever occurs first. During any such period of
Disability, the Company shall also keep in force for the benefit of Employee and
Employee's dependents all life, health and medical insurance policies maintained
for Employee's benefit under the terms of this Agreement and Employee shall be
considered to be employed for purposes of the vesting and accrual of benefits of
all other plans and programs of the Company in which Employee is a participant
and which vest or accrue benefits over a period of time, except Incentive
Compensation. Notwithstanding the foregoing, the Company shall not be required
to add Em-
29
ployee to any new bonus, profit sharing, stock bonus, stock option, deferred
compensation, and other similar plans or make any new awards to Employee under
this Agreement with respect to such new or presently existing plan during the
period of such Disability. All Salary payments pursuant to this Paragraph 9.b.
due to Employee under its terms shall be reduced by any disability payments made
in accordance with any existing disability program or disability insurance of
the Company. For purposes of this Agreement, Employee shall be deemed to have
become subject to a Disability (herein "Disability") if, because of ill health
or physical or mental disability, Employee shall be unable to perform his duties
and responsibility to the extent reasonably necessary for Employee to give the
Company substantially the value of his services for a consecutive one hundred
and eighty (180) day period and upon the completion of such one hundred and
eighty (180) day period, either the Company or the Employee shall have given
written notice to the other of such party's election that Employee be treated as
subject to a Disability. The date of such Disability shall be the third
calendar day immediately following transmittal of such written notice of
Disability.
30
If, because of ill health or physical or mental disability, Employee shall
be unable to perform his duties and responsibility to the extent reasonably
necessary for Employee to give the Company substantially the value of his
services for a consecutive sixty (60) days, the Company, in its sole discretion
(but in consultation with the Employee to the extent practicable), may appoint
temporarily an Acting President and/or Acting Chief Operating Officer; provided,
however, that if the Employee becomes able to provide such services again during
the Term of this Agreement, he shall replace the Acting President and the Acting
Chief Operating Officer and resume acting as President and Chief Operating
Officer of the Company.
If, because of ill health or physical or mental disability, Employee shall
be unable to perform his duties and responsibility to the extent reasonably
necessary for Employee to give the Company substantially the value of his
services for a consecutive three-hundred-sixty-five (365) days, if the
Employee's personal physician and a physician selected by the Company shall
unanimously determine that the Employee will be subject to a Disability for the
remainder of the Term (or, if they
31
shall be unable to agree, they shall mutually agree upon a third physician who
shall make a determination as to whether the Employee will be subject to a
Disability for the remainder of the Term), then the Company may, in its
discretion, remove the Employee from the positions of both President and Chief
Operating Officer, and the Employee shall have no right to treat such removal as
a "Wrongful Termination".
c. Death.
-----
The Term and the Employment Period will automatically terminate upon the
death of the Employee; however, the Company will pay death benefits equal to
fifty percent (50%) of Employee's Salary at his death to Employee's surviving
spouse for twelve (12) months after Employee's death or so long as the spouse
survives Employee, whichever ends first, and there shall be full acceleration of
vesting or exercisability upon death of all outstanding unvested stock options
and stock awards including, without limitation, those awards under the Key
Employee Stock Bonus Plan, the Key Employee Stock Grant Plan, Key Employee
Incentive Share Grant Agreement or any similar stock plans or agreements of the
Company (whether such awards are made before or after the date of this
32
Agreement) and delivery to the appropriate person of all stock pursuant to terms
of any such plans or agreements.
d. Termination by the Company (without Cause).
------------------------------------------
(i) Wrongful Termination Described.
------------------------------
A. Wrongful Termination. Notwithstanding the foregoing, if during the
--------------------
Employment Period Employee is not reelected to, or is removed from, the position
of either Chairman of the Board or Chief Executive Officer other than for cause
as provided in Paragraph 9.a. above, or if the Company otherwise materially
breaches this Agreement and fails to complete the cure of such breach within
thirty (30) days after notice from Employee, then, at any time within three (3)
months after the date upon which Employee is removed from either such position
or the breach date, as the case may be, Employee may elect by notice in writing
to the Secretary of the Company to treat the situation as a "Wrongful
Termination" of Employee's employment by the Company effective one (1) week
after the notice and to discontinue his obligations to perform services
hereunder. The Employment Period shall end at such effective date.
B. Arbitrated Determination of Company Breach. If Employee believes the
------------------------------------------
Company has materially breached this Agreement, then, in lieu of electing to
33
notify the Secretary of the Company to treat the situation as Wrongful
Termination, Employee may request an arbitra-tion to determine whether the
Company has in fact materially breached this Agreement. The arbitration shall be
conducted under the rules of Paragraph 9.a.(iii)B. and all provisions of
Paragraph 9.a.(iii)B. shall apply, including without limitation the Company's
obligation to pay legal and other expenses and costs of Employee and the
arbitration costs. Employee shall continue to perform his services for the
Company pending the decision of the arbitrator and shall receive all Salary,
Incentive Compensation and benefits for such period. If the arbitrator shall
decide for Employee, Employee shall have two (2) months after such decision to
elect by written notice to the Company to treat the breach as a Wrongful
Termination under this Paragraph 9.d. as provided in 9.d.(i) above. The
arbitration requested by Employee shall be binding on both Employee and the
Company as to the matters submitted to arbitration.
(ii) Employee's Obligations after Wrongful Termination. In the event of a
-------------------------------------------------
Wrongful Termination, Employees' obligations under Paragraph 2 shall cease as of
the date notice of such termination is given; provided, however, that all
payments and benefits provided to
34
Employee hereunder because of a Wrongful Termination shall be upon the condition
of, and partly in consider-ation for, Employee's continued compliance with any
covenants in this Agreement which by their terms apply during the Term of
thereafter.
(iii) Payments and Benefits to Employee after a Wrongful Termination. In
--------------------------------------------------------------
the event of a Wrongful Termination upon or after a Change in Control, certain
additional payments and benefits to Employee are provided under Paragraph
9.e.(iii). In the event of any Wrongful Termination, the Company shall pay the
Employee (i) within five (5) days of the date notice of such termination is
given, any amounts which have become payable under other provisions of this
Agreement or other obligations of the Company to Employee which have accrued but
have not yet been paid, including without limitation Salary earned prior to the
date the notice is given and compensation for unused vacation, and (ii) in
accordance with the other provisions of this Agreement, all entitlements of
Employee, including without limitation entitlements under Paragraphs 6.b.(v),
6.d., 13, and 14. Accrued Incentive Compensation shall be paid in accordance
with the provisions of this Agreement or the Corporate Executive Incentive Plan
(or its successor), which-
35
ever is applicable. The Company shall also be obligated as follows:
A. Within five (5) days following the date notice of such termination is
given, the Company shall pay the Employee an amount equal to the present value
of the sum of (x) all Salary then unearned for the balance of the Term (without
consideration of cost of living increases) plus (y) the present value of an
amount determined by multiplying the number of years and fractional years to the
nearest month then remaining in the Term times the amount of Incentive
Compensation earned by Employee for the last full fiscal year of the Company
preceding the date of termination. In making this present value calculation the
projected Incentive Compensation shall be assumed to be earned pro rata over the
remaining Term. For this purpose, the rate used for the determination of the
present value shall be the average of the five (5) year treasury note rates
effective at the end of each of the six (6) calendar months immediately
preceding the month in which the termination of employment occurs. If Employee
agrees to take a ten percent (10%) reduction in the amount otherwise payable
under this Paragraph 9.d.(iii)A. for the present value of Salary and Incentive
Compensation with respect to the remaining Term, Employee
36
shall have not duty to mitigate damages following a Wrongful Termination by the
Company, and the Company shall not be entitled to any reduction of its
obligations under this Agreement or repayment from Employee by virtue of any
subsequent employment of Employee except as set forth below in Paragraph
9.d.(iii)C. below.
B. During the remaining Term, the Company shall keep in force for the
benefit of Employee and Employee's dependents all life insurance policies
maintained for Employee's benefit under the terms of this Agreement and fulfill
its automobile obligations under Paragraph 8. During such period the Company
shall not be required to add Employee to any new profit sharing, stock bonus,
stock option, bonus, deferred compensation and other similar plans or make any
awards to Employee under this Agreement with respect to new or old plans of such
nature. In the event of a Wrongful Termination, all existing stock options and
any awards under the Key Employee Stock Grant Plan, Key Employee Incentive Share
Grant Agreement or any similar stock plans or agreements of the Company (whether
made before or after this Agreement) not otherwise exercisable or vested under
its terms shall be immediately exercisable or vested in full upon such
termination (i.e., upon the giving of the Employee's
37
notice of termination specified in Paragraph 9.d.(i)A. or B. above) and shall
thereafter be exercisable or vested in full pursuant to the terms of such stock
option or other awards.
C. Notwithstanding Paragraph 9.d.(iii)B., any life insurance afforded
Employee under this Agreement shall be only supplementary or secondary to any
such protection provided by other employment or through Medicare.
e. Employee's Additional Election and Rights after a Change in Control.
-------------------------------------------------------------------
(i) Employee's Right to Elect Termination after a Change in Control.
---------------------------------------------------------------
A. Permitted Period for Elective Termination. In the event of a Change in
-----------------------------------------
Control, Employee shall have the right to elect to terminate the Employment
Period (and his obligation to render services under this Agreement) by notice in
writing to the Secretary of the Company within twelve (12) months after the
Change in Control.
B. Payments and Benefits to Employee after Elective Termination. If the
------------------------------------------------------------
Employee elects termination under Paragraph 9.e.(i)A., the Company (i) shall pay
Employee, upon receipt of such notice of termi-
38
nation, any amounts which have become payable under other provisions of this
Agreement or other unpaid obligations of the Company which have then accrued,
but have not yet been paid, including without limitation Salary and Incentive
Compensation earned prior to the date notice is given and compensation for
unused vacation, and (ii) shall provide, in accordance with the other provisions
of this Agreement, all entitlements of Employee, including without limitation
entitlements of Employee under the provisions of Paragraph 6.b.(v), 6.d., 13,
and 14. The Company shall also pay to the Employee (or there shall automatically
be paid or delivered in the case of Paragraph 9.e.(i)(B)(y) below):
(w) benefits described in the first sentence of Paragraph 9.d.(iii)B. to be
provided for the greater of period (A) or (B) described in Paragraph
9.e.(i)B.(x), in accordance with the provisions of Paragraphs 9.d.(iii)B. and C.
as if the termination were a Wrongful Termination,
(x) upon the effective date of termination of Employee's employment, as
severance pay, a lump sum amount equal to the present value of the aggregate of
the remaining amount of Salary and Incentive Compensation provided with respect
to the greater of (A) the remaining
39
Term (as if he had continued to render services for the duration of the Term,
but without consideration of cost of living increases) or (B) two (2) years,
calculated (in the case of either (A) or (B)) in accordance with Paragraph
9.d.(iii)A. above, including (if Employee agrees) the reduction by 10% in lieu
of mitigation,
(y) except as otherwise specified herein, full acceleration of vesting or
exercisability upon notice of termination of all outstanding unvested stock
options and stock awards including, without limitation, those awards under the
Key Employee Stock Bonus Plan, the Key Employee Stock Grant Plan, Key Employee
Incentive Share Grant Agreement or any similar stock plans or agreements of the
Company (whether such awards are made before or after the date of this
Agreement) and delivery to Employee of all stock pursuant to terms of any such
plans, and
(z) notwithstanding any other provision hereof, within five (5) days
following the date notice of such termination is given, in lieu of any benefits
payable under the Company's Executive Security Plan ("ESP"), a lump sum equal to
the Termination Benefit as defined in the ESP and computed in accordance with
the ESP provisions with the following assumptions: (i) as if the ESP had no
forfeiture provisions provided in Section 5.3
40
thereof, and (ii) as if the Employee had continued to be employed by the Company
for the greater of period (A) or (B) described above in Paragraph 9.e.(i)B.(x);
provided, however, that, if any part (or all) of such lump sum shall not be
paid, either pursuant to the "Contingent Severance Agreement" (the agreement by
that name between Employee and the Company, dated as of the same date hereof as
amended from time to time) or pursuant to this Agreement (whether as the result
of the application of Paragraph 9.e.(i)C. or otherwise), the Employee shall
remain entitled to whatever benefits (if any) the ESP, by its own terms, grants
the Employee and the Employee shall be paid such benefits in accordance
therewith after reduction for any amount paid pursuant to the Contingent
Severance Agreement or this Paragraph 9.e.(i)B.(z).
C. Contingent Limitation on Amounts. (w) Notwithstanding any other
--------------------------------
provisions of this Agreement or any other agreement, plan or arrangement, in the
event that any payment or benefit received or to be received by Employee
(whether pursuant to the terms of this Agreement or any other plan, arrangement
or agreement with the Company, or any other plan, arrangement or agreement with
the Company, or any other plan, arrangement or agreement with any person whose
actions result in a Change in
41
Control or any person affiliated with the Company or such person) (all such
payments and benefits being hereinafter called "Total Payments") would not be
deductible (in whole or in part) as a result of Section 280G of the Internal
Revenue Code of 1986, as amended (the "Code"), by the Company, an affiliate or
other person making such payment or providing such benefit, then the portion of
the Total Payments payable pursuant to this Agreement shall be reduced to the
extent necessary so that no portion of the Total Payments is subject to the
parachute excise tax (the "Excise Tax") imposed by Section 4999 of the Code
(after taking into account any reduction in the Total Payments provided by
reason of Section 280G of the Code in any other plan, arrangement or agreement)
if (A) the net amount of such Total Payments, as so reduced (and after deduction
of the net amount of Federal, state of local income tax on such reduced Total
Payments) is greater than (B) the excess of (i) the net amount of such Total
Payments, without reduction (but after deduction of the net amount of Federal,
state and local income tax on such Total Payments), over (ii) the amount of
Excise Tax to which the Employee would be subject in respect of such Total
Payments. Any reduction of the Total Payments
42
shall be made in one of the two alternative orders set forth in Paragraph
9.e.(i)C.(x) hereof.
(x) If the Total Payments all become payable at approximately the same
time, (i) the benefits under Paragraph 9.e.(i)B.(w) (or under the first sentence
of Paragraph 9.d.(iii)B., if applicable) shall first be reduced (if necessary,
to zero), (ii) the payment pursuant to Paragraph 9.e.(i)B.(z) (or pursuant to
Paragraph 9.e.(iii)(x), if applicable) shall next be reduced (if necessary to
zero), (iii) acceleration of vesting of awards under stock options, the Key
Employee Stock Bonus Plan, Key Employee Stock Grant Plan, Key Employee Incentive
Share Agreement or any similar stock plan or agreement of the Company and
severance pay under Paragraph 9.e.(i)B.(x) (or payments under Paragraph
9.d.(iii)A., if applicable) shall next be reduced (if necessary to zero), and
(iv) other portions of the Total Payments shall be reduced as necessary. If the
Total Payments do not become due and payable at the same time, the respective
Total Payments shall be paid in full in the order in which they become payable
until any portion thereof would not be deductible, and such portion (and any
subsequent portions) of the Total Payments shall be reduced to zero.
43
(y) For purposes of determining whether and the extent to which the Total
Payments will be subject to the Excise Tax, (i) no portion of the Total
Payments the receipt or enjoyment of which the Employee shall have effectively
waived in writing prior to the date of termination shall be taken into account;
(ii) no portion of the Total Payments shall be taken into account which in the
opinion of tax counsel selected by the Company's independent auditors and
acceptable to the Employee does not constitute a "parachute payment" within the
meaning of Section 280G(b)(2) of the Code, including by reason of Section
280G(b)(4)(A) of the Code; (iii) in calculating the Excise Tax, the payments in
Paragraphs 9.e.(ii)B.(w) through (z) (or Paragraph 9.d.(iii)A. through B. and
Paragraph 9.e.(iii)(x), if applicable) shall be reduced only to the extent
necessary so that the Total Payments (other than those referred to in clauses
9.e.(i)(C)(y)(i) or (ii)) in their entirety constitute reasonable compensation
for services actually rendered within the meaning of Section 280G(b)(4) of the
Code or are otherwise not subject to disallowance as deductions because of
Section 280G of the Code, in the opinion of tax counsel referred to in clause
9.e.(i)(C)(y)(ii); and (iv) the value of any non-cash benefit or any deferred
44
payment or benefit included in the Total Payments shall be determined by the
Company's independent auditors in accordance with the principles of Section
280G(d)(3) and (4) of the Code. Prior to the earliest payment date set forth in
Paragraph 9.e.(i)B. (or Paragraph 9.d.(iii) and 9.e.(iii), as applicable), the
Company shall provide the Employee with its calculation of the amounts referred
to in this Paragraph 9.e.(i)C and such supporting materials as are reasonably
necessary for the Employee to evaluate the Company's calculations. If the
Employee objects to the Company's calculations, the Company shall (on or prior
to the applicable payment date) pay to the Employee such portion of the amounts
payable pursuant to this Agreement (up to one hundred percent (100%) thereof) as
the Employee determines is necessary to result in the Employee's receiving the
greater of the amounts in clauses (A) and (B) of Paragraph 9.e.(i)C(w).
D. Employee's Obligations after Elective Termination. If Employee elects
-------------------------------------------------
to terminate his obligations to render services under this Agreement pursuant to
Paragraph 9.e.(i)A., his obligations under Paragraph 2 shall cease as of the
date notice of such termination is given. Employee agrees that all payments
made because of such elective termination shall be upon
45
the condition of, and partly in consideration for, his continued compliance with
any covenants under Paragraph 11 of this Agreement which by their terms apply
during the Term or thereafter.
(i) Agreement in Full Effect after a Change in Control. Upon and after a
--------------------------------------------------
Change in Control, until and unless Employee makes a written election pursuant
to Paragraph 9.e.(i)A., this Agreement shall continue in full force and effect,
in accordance with all the provisions hereof.
(ii) Additional Payments and Provisions after Wrongful Termination upon
------------------------------------------------------------------
or after a Change in Control. In the event of a Wrongful Termination upon or
- ----------------------------
after a Change in Control (or upon or after the occurrence of any other event
which constitutes a change in ownership or effective control of the Company or
in the ownership of its assets, or which would be deemed to be such a change
under Section 280G of the Internal Revenue Code of 1986, as amended, or the
regulations or other legal authority developed thereunder), the Company shall
provide Employee with the payments and benefits required by Paragraph 9.d.(iii)
and the following shall apply:
(x) notwithstanding any other provisions hereof, in lieu of any benefits
payable under the
46
Company's Executive Security Plan ("ESP"), the Company shall pay, within
five 95) days following the date notice of such termination is given, a lump sum
equivalent to the Termination Benefit as defined in the ESP and computed in
accordance with the ESP provisions with the following assumptions: (i) as if the
ESP had no forfeiture provisions provided in Section 5.3 thereof, and (ii) as if
the Employee had continued to be employed by the Company for the Term; provided,
however, that, if any part (or all) of such lump sum shall not be paid, either
pursuant to the Contingent Severance Agreement or pursuant to this Agreement,
the Employee shall remain entitled to whatever benefits (if any) the ESP grants
the Employee (such benefits to be reduced by any amount paid pursuant to the
Contingent Severance Agreement or this Paragraph 9.e.(iii)(x)) and the Employee
shall be paid such benefits in accordance therewith; and
(y) Section 5.3 of the ESP shall be void as to Employee.
(iv) Offset of Certain Amounts. Notwithstanding the provisions of
-------------------------
Paragraphs 9.d. and 9.e., any payments or benefits to Employee pursuant to
Paragraph 9.d.(iii)A.-C., 9.e.(i)B.(w)-(z) or 9.e.(iii)(x)-(z), shall be reduced
by any amounts the Company may have
47
previously paid Employee for the same items pursuant to Section 6(A) of the
Contingent Severance Agreement.
10. RESTRICTION OF COMPETITION.
--------------------------
During the Term the Employee will not, as an officer, director, employee,
or consultant, work for, or participate in, the activities of any firm or person
which is engaged (a) in the operation of a casino in the continental United
States, or (b) in any other line of business which is the same, or substantially
the same, as a line of business from which the Company and its subsidiaries at
the time, and at such, if any, earlier time as this Agreement is terminated,
derive at least twenty-five percent (25%) of their consolidated revenue, and
which is engaged in significant competition with the Company or any of its
subsidiaries. For the purpose of this Paragraph 10, the term "line of business"
shall mean a group of products or services treated as a line of business by the
Company in its most recent annual report (or most nearly similar report) filed
with the Securities and Exchange Commission. Employee's fulfillment of
obligations under this provision are a condition to the Company's obligations
under Paragraph 9. The Company, in its sole discretion, may waive this
Paragraph 10 to expand the class of companies with which Employee could
48
mitigate damages under Paragraph 9 above. Employee's obligations under this
Paragraph 10 shall terminate immediately upon any Wrongful Termination of
Employee by the Company or upon a Change in Control.
11. CONFIDENTIAL INFORMATION.
------------------------
The Employee will not, during or after the Term, disclose to any firm or
person any information, including, but not limited to, information about
customers or about the design, manufacture or marketing of products or services,
which is treated as confidential by the Company and to which the Employee gains
access by reason of his position as an employee of the Company.
12. RIGHT TO INJUNCTIVE RELIEF.
--------------------------
The Employee acknowledges that the Company will suffer irreparable injury,
not readily susceptible of valuation in monetary damages, if the Employee
breaches any of his obligations under Paragraph 10 and 11 above. Accordingly,
the Employee agrees that the Company shall be entitled, in addition to, and not
in lieu of any other available remedies, to seek and obtain injunctive relief
against any breach or prospective breach by the Employee of the Employee's
obligations under Paragraphs 10 and 11 in any Federal or state court sitting in
Los Angeles County in the State of California or, at the Company's
49
election, in Clark County of the State of Nevada or in such other state as may
be the state in which the Employee maintains his principal residence or his
principal place of business. The Employee hereby submits to the jurisdiction of
all those courts for the purposes of any actions or proceedings instituted by
the Company to obtain such injunctive relief, and agrees that process may be
served by registered mail, addressed to the last address of the Employee known
to the Company, or in any other manner authorized by law.
13. LIABILITY INSURANCE.
-------------------
a. Insurance
---------
Subject only to the provisions of Paragraph 13.b. below, the Company hereby
agrees that, so long as Employee shall continue to serve as a director, officer,
employee or consultant of the Company (or shall continue at the request of the
Company to serve as a director, officer, employee, partner, consultant, or agent
of another corporation, partnership, joint venture, trust or other enterprise)
and thereafter so long as Employee shall be subject to any possible claim or
threatened, pending or completed action, suit or proceeding, whether civil,
criminal or investigative by reason of the fact that Employee was a director,
officer, or employee, of
50
the Company (or served in any of said other capacities), the Company will
purchase and maintain in effect for the benefit of Employee one or more valid,
binding and enforceable policy or policies of directors and officers insurance
providing, in all respects, coverage at least comparable to that presently
provided pursuant to the directors and officers insurance presently available to
the Company ("the Insurance Policies").
b. Limitation On Company Obligation
--------------------------------
The Company shall not be required to maintain the Insurance Policies in
effect if said insurance is not reasonably available or if, in the reasonable
business judgment of the then Board either (i) the premium cost for such
insurance is substantially disproportionate to the amount of coverage or (ii)
the coverage provided by such insurance is so limited by exclusions that there
is insufficient benefit from such insurance.
14. INDEMNITY.
---------
a. Subject only to the exclusions set forth in Paragraph 14.b. below, and
in addition to any rights of Employee under the By-laws of the Company, any
applicable state law, Paragraph 13 of this Agreement, or any other agreement,
the Company hereby further agrees to hold harmless and indemnify Employees:
51
(i) Against any and all expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by
Employee in connection with any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative (including
an action by or in the right of the Company) to which Employee is, was or at any
time becomes a party, or is threatened to be made a party, by reason of the fact
that Employee is, was or at any time becomes a director, officer, employee,
consultant, or agent of Company, or is or was serving or at any times serves at
the request of the Company, as a director, officer, employee, consultant,
partner, trustee or agent (regardless of his title) of another corporation,
partnership, joint venture, trust or other enterprise; and
(ii) Otherwise to the fullest extent as may be provided to Employee by the
Company under the non-exclusivity provisions of the By-laws of the Company and
the Florida Business Corporations Act, and
(iii) From any and all income and excise taxes (and interest and penalties
relating thereto) imposed on Employee with reference to any payment under
52
this Paragraph 14 (including without limitation payments in indemnity for such
taxes).
b. No indemnity pursuant to this Paragraph 14 shall be paid for such
taxes).
(i) except to the extent the aggregate of losses to be indemnified
thereunder exceed the sum of $500 plus the amount of such losses for which the
Employee is indemnified either pursuant to the By-laws of the Company or any
subsidiary, pursuant to any Directors and Officers insurance purchased and
maintained by the Company pursuant to Paragraph 13 above;
(ii) in respect to remuneration paid to Employee if it shall be determined
by a final judgment or other final adjudication that such remuneration was in
violation of law;
(iii) on account of any suit in which judgment is rendered against
Employee for an accounting of profits made by the purchase or sale by Employee
of securities of the Company pursuant to the provisions of Section 16(b) of the
Securities Exchange Act of 1934 and amendments thereto or similar provisions of
any federal, state or local statutory law;
(iv) on account of actions or omissions which are finally adjudicated to
have been material to
53
the cause of action adjudicated and to fall within any of paragraphs (a) through
(d) of the last sentence of Sec-tion 607.0850 of the Florida Business
Corporations Act; or
(v) if a final decision by a Court having jurisdiction in the matter shall
determine that such indemnification to Employee is not lawful.
c. All agreements and obligations of the Company contained herein shall
continue during the period Employee is a director, officer, employee, consultant
or agent of the Company (or is or was serving at the request of the Company as a
director, officer, employee, partner, consultant or agent of another
corporation, partnership, joint venture, trust or other enterprise) and shall
continue thereafter so long as Employee shall be subject to any possible claim
or threatened, pending or completed action, suit or proceeding, whether civil,
criminal or investigative, by reason of the fact that Employee was an officer or
director of the Company or serving in any other capacity referred to herein.
d. The Company shall not be liable to indemnify Employee under this
Agreement for any amounts paid in settlement of any action or claim effected
without its written consent. The Company shall not settle any action
54
or claim in any manner which would impose any penalty or limitation on Employee
without Employee's written con sent. Neither the Company or Employee will
unreasonably withhold consent to any proposed settlement.
e. The Company will pay all expenses immediately upon the presentment of
bills for such expenses. Employee agrees that Employee will reimburse the
Company for all reasonable expenses paid by the Company in defending any civil
or criminal action, suit or proceeding against Employee in the event and only to
the extent that it shall be ultimately determined that Employee is not entitled
to be indemnified by the Company for such expenses under the provisions of the
applicable state statute, the By-laws, this Agreement or otherwise. This
Agreement shall not affect any rights of Employee against the Company, any
insurer, or any other person to seek indemnification or contribution.
f. If the Company fails to pay any expenses (including, without limiting
the generality of the foregoing, legal fees and expenses incurred in defending
any action, suit or proceeding), Employee shall be entitled to institute suit
against the Company to compel such payment and the Company shall pay Employee
all costs and
55
legal fees incurred in enforcing such right to prompt payment.
g. To the extent allowable under Florida law, the burden of proof with
respect to any proceeding or determination with respect to Employee's
entitlement to indemnification under this Agreement shall be on the Company.
h. Neither the failure of the Company, its Board of Directors, independent
legal counsel, nor its stockholders to have made a determination that
indemnification of the Employee is proper in the circumstances because he has
met the applicable standard of conduct set forth in the Florida Business
Corporations Act, nor an actual determination by the Company, its Board of
Directors, independent legal counsel, or its shareholders that the Employee has
not met such applicable standard of conduct, shall be a defense to any action on
the part of Employee to recover indemnification under this Agreement to create a
presumption that Employee has not met the applicable standard of conduct.
15. CHANGE IN CONTROL.
-----------------
a. Change in Control. For purposes of this Agreement, "Change in Control"
-----------------
shall mean a change in control of the Company, which shall be deemed to have
56
occurred upon the first fulfillment of the conditions set forth in any one of
the following four paragraphs:
(i) any Person, other than a trustee or other fiduciary holding securities
under an employee benefit plan of the Company or a corporation owned, directly
or indirectly, by the stockholders of the Company in substantially the same
proportions as their ownership of stock of the Company, is or becomes the
Beneficial Owner, directly or indirectly, of securities of the Company
representing twenty-five percent (25%) or more of the combined voting power of
the Company's then outstanding securities; or
(ii) during any period of two consecutive years (not including any period
prior to the execution of this Agreement), individuals who at the beginning of
such period constitute the Board and any new director (other than a director
designated by a Person who has entered into an agreement with the Company to
effect a transaction described in Paragraph 15.a.(i) or 15.a.(iii) hereof) whose
election by the Board or nomination for election by the Company's stockholders
was approved by a vote of at least two-thirds (2/3) of the directors then still
in office who either were directors at the beginning of the period or whose
election or nomination for election was
57
previously so approved, cease for any reason to constitute a majority thereof;
or
(iii) the shareholders of the Company approve a merger or consolidation of
the Company with any other corporation; other than a merger or consolidation
which would result in the voting securities of the Company outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving
securities of the Company or such surviving entity outstanding immediately after
such merger or consolidation, or the shareholders of the Company approve a plan
of complete liquidation of the Company or an agreement for the sale or
disposition by the Company of all of substantially all the Company's assets; or
(iv) any Person shall be or has become the Beneficial Owner of securities
of the Company representing twenty percent (20%) or more of the combined voting
power of the Company's then outstanding securities and (i) the identity of the
Chief Executive officer of the Company is changed during the period beginning
sixty (60) days before the attainment of the twenty percent (20%) beneficial
ownership and ending two (2) years thereafter, or (ii) individuals constituting
at least
58
one-third (1/3) of the members of the Board at the beginning of such period
shall leave the Board during the period beginning sixty (60) days before the
attainment of the twenty percent (20%) beneficial ownership and ending two (2)
years thereafter.
b. Definitions. The meanings of certain capitalized terms used in
-----------
Paragraph 15.a. are provided below:
(i) "Beneficial Owner" shall have the meaning defined in Rules 13d-3 and
13d-5(b) under the Securities and Exchange Act of 1934, as amended (the
"Exchange Act").
(ii) "Person" shall have the same meanings as it does in section 3(a)(9)
(including the definition of "Company" under section 3(a)(19)) including a group
and any other arrangement included as a "Person under section 13(d)(3) of the
Exchange Act, provided, a person shall not include an underwriter temporarily
holding securities pursuant to an offering of such securities.
16. MISCELLANEOUS.
-------------
a. Employee Representations. The Employee represents and warrants to the
------------------------
Company that there is no restriction or limitation, by reason of any agreement
or
59
otherwise, upon the Employee's right or ability to enter into this Agreement and
fulfill his obligations under this Agreement.
b. Terminated 1991 Agreement. Employee's agreement with the Company dated
-------------------------
August 1, 1991, and subsequently amended on August 1, 1992 and October 4, 1994,
shall be terminated upon the effective date of this Agreement.
c. Interest on Amounts Due. In the event any amount due either Employee
-----------------------
or the Company under this Agreement is not paid when due, it shall thereafter
bear interest at the rate equivalent to the Security Pacific National Bank, Los
Angeles (or its successor), prime rate as it shall vary from time to time over
the period until paid. Such interest shall be compounded on a monthly basis.
d. Amendment. This Agreement shall not be changed or terminated except in
---------
writing.
e. Law. This Agreement shall be governed by, and construed under, the
---
laws of the State of California except for Paragraphs 13 and 14 which will be
governed by Florida law and Paragraph 10 which shall be governed by the law of
the state in which a business of the Company is located with respect to which a
claim of competition
60
is made (e.g., if Employee worked for a casino in Las Vegas, Nevada law would
----
govern any adjudication).
f. Successors, Assigns. The terms and provisions of this Agreement shall
-------------------
inure to the benefit of the personal representatives, heirs and legatees of the
Employee and shall be binding upon and inure to the benefit of any successors or
assigns of the Company . This Agreement shall survive any merger or voluntary
or involuntary dissolution and shall bind any person acquiring the Company's
assets in such event.
g. Notices. Any notices or other communications required or permitted to
-------
be given under this Agreement shall be deemed given on the day when delivered in
person, or the third business day after the day on which mailed by first class
mail from within the United States of America addressed to the party receiving
the communication at the principal office of the Company or such other address
as the party receiving the communication shall have designated to the other in
writing.
h. Consents and Approvals. As to any paragraph of this Agreement
----------------------
providing for the consent or approval of any party to this Agreement, such
provision shall be deemed to include the restriction that any such exercise of
approval or consent shall be reasonable and
61
not unreasonably denied regardless of whether such provision actually sets forth
a specification that such an approval or consent shall not be unreasonably
denied.
i. Severability. If any provision of this Agreement is found invalid or
------------
unenforceable, the remainder of this Agreement shall nevertheless remain in full
force and effect. If any provision is held invalid or unenforceable with
respect to particular circumstances, it shall nevertheless remain in full force
and effect in all other circumstances. If the provision held invalid or
substantially limited involves the compensation or benefits of Employee,
Employee shall have the option for thirty (30) days following the final decision
holding such provision to be invalid to terminate this Agreement by written
notice to the Company.
j. Captions. Captions in this Agreement are merely to facilitate
--------
references and shall not affect the interpretation of any of the provisions.
17. CHANGE IN CONTROL LIMITATION.
----------------------------
The parties hereto agree that consummation of the transactions contemplated
by the Merger Agreement (including, without limitation, the acquisition of
shares of the Company's common stock pursuant to the Offer, as defined therein)
will constitute a "Change in Control",
62
as that term is used in this Agreement. The parties further agree that no
transaction or event subsequent to the Effective Time, as defined in the Merger
Agreement, will constitute a Change in Control for purposes of this Agreement.
18. GUARANTEE BY ITT.
----------------
ITT hereby agrees to be bound by all the provisions of this Agreement,
including, without limitation, the undertakings in this Agreement directly
related to ITT or its common stock, and hereby guarantees the obligations of the
Company in this Agreement.
IN WITNESS WHEREOF, this Agreement has been executed at Los Angeles,
California.
EMPLOYEE CAESARS WORLD, INC.
____________________ By______________________
J. Terrence Lanni
ITT CORPORATION
By______________________
63
