Exhibit (d)(3)
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MEMORANDUM OF UNDERSTANDING
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April 17, 2000
THIS MEMORANDUM OF UNDERSTANDING confirms the agreements among the
individuals listed on the signature pages hereto (collectively, the
"Executives"), and PH Casino Resorts, Inc., a Delaware corporation ("PHCR"), a
wholly owned subsidiary of Harveys Casino Resorts, a Nevada corporation
("Harveys"), in connection with PHCR's agreement to acquire Pinnacle
Entertainment, Inc., a Delaware corporation (the "Company"), pursuant to the
Agreement and Plan of Merger (the "Merger Agreement") by and among PHCR,
Pinnacle Acquisition Corporation, a Delaware corporation ("Pinnacle Acq Corp"),
and the Company. For all purposes herein (including the schedules attached
hereto), references to the Executives' employment agreements (including all
forms of compensation due thereunder) shall be deemed to include adjustments,
amendments or restatements thereof to the extent such adjustments, amendments or
restatements are permitted by the terms of the documents governing an
Acquisition Transaction (as defined below) or are otherwise agreed to in writing
by PHCR prior to the consummation of such Acquisition Transaction. Capitalized
terms used but not defined herein shall have the respective meanings ascribed to
such terms in the Merger Agreement.
1. General Statement of Purpose. The Executives and PHCR have conducted
discussions with respect to an acquisition by merger of all of the
outstanding shares of the Company, except for those shares that the Company
will repurchase from ▇.▇. ▇▇▇▇▇▇▇ (as contemplated in the Merger Agreement)
and/or those which the Executives will contribute directly to PHCR in
exchange for shares of its stock, and/or those options held by the
Executives to acquire shares of the Company, which shall be fully vested
and canceled in exchange for the issuance of options of PHCR (collectively
an "Acquisition Transaction"). The Executives and PHCR have concluded that
it would be desirable to effect an Acquisition Transaction. To that end,
the parties hereto have executed this Memorandum of Understanding and a
Voting and Contribution Agreement to confirm their binding agreements. The
Executives and PHCR agree that this Memorandum of Understanding shall
terminate and cease to be of effect upon the termination of the Merger
Agreement or upon the execution of definitive agreements with respect to
the matters set forth herein.
2. Rollover of Equity.
(a) Pinnacle Stock. In exchange for the shares of Pinnacle common stock
("Pinnacle Stock") rolled over, Executives will receive a number of
shares of voting and nonvoting stock ("PHCR Stock") of PHCR equal to
the product of (i) the number of shares of Pinnacle Stock contributed
to PHCR and (ii) $24.00 per share/1/, divided by $45.77707, the per
share price of PHCR Stock to be issued in exchange for all outstanding
shares of common stock of Harveys Casino Resorts, assuming a 10
million share fully diluted PHCR Stock capitalization before giving
effect to any issuances hereunder.
(b) Pinnacle Options. In the event that options held by the Executives
are not converted into Pinnacle Stock prior to the consummation of the
Acquisition Transaction, Executives with options to purchase Pinnacle
Stock (the "Pinnacle Options") will exchange such options for options
to purchase PHCR Stock, with the exercise price and number of shares
adjusted appropriately to preserve the value of each Executive's
Spread./2/
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/1/ If the Inglewood Land is sold on or prior to the fifth Business Day
prior to the Closing Date of the Acquisition Transaction, such number
will be increased in the same manner provided for holders of Pinnacle
Stock under the Merger Agreement. If the Inglewood Land is sold after
the fifth Business Day prior to the Closing Date of the Acquisition
Transaction, Executives will receive a cash payment for each share
contributed equal to any amount paid to a holder of a share of
Pinnacle Stock upon such event pursuant to the Merger Agreement and
one Class A CPR.
/2/ The Spread for each Pinnacle Option is equal to the product of (i) the
number of unexercised shares subject to a Pinnacle Option and (ii) the
difference between (A) $24.00 per share (subject to adjustment in the
event that the Inglewood Land is sold on or prior to the fifth
Business Day prior to the Closing Date of the Acquisition Transaction
as set forth in the first sentence of footnote 1) and (B) the per
share option exercise price. If the Inglewood Land is sold after the
fifth Business Day prior to the Closing Date of the Acquisition
Transaction, Executives will receive a cash payment for each share of
Pinnacle Stock subject to the exchanged Pinnacle Option equal to
(continued...)
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(i) Executives who so chose may, immediately following the
Acquisition Transaction, perform a cashless exercise of their
options to purchase PHCR Stock.
(ii) PHCR will make available to the Executives (other than Messrs.
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇) loans, in an aggregate amount not
to exceed $2.5 million, to pay taxes incurred by the Executives
in connection with the cashless exercise of their options either
before or after the Acquisition Transaction. Such loans would be
made upon the following terms:
(1) secured by all present and future equity interests in PHCR,
(2) interest rate of 8%, with interest to be compounded and
payable annually, with bonus payments (net of taxes on such
bonus payments) earned by Executive to be offset by such
interest payments due,
(3) 4 year maturity, with respect to the entire principal
balance, and any accrued but unpaid interest,
(4) prepayable without penalty,
(5) will accelerate upon the termination of the Executive's
employment.
(iii) PHCR will represent and warrant that it has no present plan or
intention to liquidate either the Company or Harveys, and PHCR
will not liquidate Pinnacle or Harveys within two (2) years
after the Closing Date unless it provides to the Executives an
opinion of its representing counsel, based on customary
assumptions but otherwise substantially unqualified that the
liquidation would not cause the contributions of Pinnacle Stock
to PHCR pursuant to the Voting Agreement to fail to qualify as
exchanges under Section 351 of the Internal Revenue Code of
1986, as amended (the "Code"). The immediately
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/2/(...continued)
any amount paid to a holder of a share of Pinnacle Stock upon such
event pursuant to the Merger Agreement and one Class A CPR.
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foregoing representations, warranties or covenants shall survive
any transfer of the ownership of 51% of Colony's (as defined in
Section 4) total equity interest in PHCR (whether voting or
nonvoting) held by Colony (or an affiliate of Colony).
(iv) PHCR shall deliver or cause to be delivered to each Stockholder
at the Closing a letter dated as of the Closing Date from Colony
Investors III, L.P. and each other investment vehicle used by
Colony Capital, Inc. that holds an interest in PHCR immediately
following the Harveys Merger (each a "Colony LP") representing
and warranting to such Stockholder that such Colony LP has no
present intention or plan to sell, exchange or otherwise
dispose of any of its interests in PHCR.
(v) When making future infusions of funds to Pinnacle Acq Corp
and/or the Pinnacle Surviving Corporation, if any, PHCR shall
endeavor in good faith to provide such funds to Pinnacle Acq
Corp and/or the Pinnacle Surviving Corporation by means of
intercompany loans unless PHCR determines in its reasonable
judgment that to do so would be inadvisable.
(c) Rights of Repurchase/Put Rights.
(i) Each of the Executives who is also an employee of the Company
regardless of whether he is a party to a written employment
agreement with the Company (other than Messrs. ▇▇▇▇▇▇▇▇ and
▇▇▇▇▇▇▇) will have the right, individually, to require PHCR to
repurchase his shares of PHCR stock and PHCR will have the right
acquire such shares, each in accordance with the provisions set
forth in this paragraph (i), upon the termination of an
Executive's employment with PHCR for any reason other than one
specified in subparagraph (ii) below. The repurchase price shall
be paid 1/3 upon exercise, and 1/3 on the first and second
anniversary of such termination. For purposes of such
repurchase, the fair market value of the shares of PHCR stock to
be repurchased shall be calculated based upon the following
formula: 6.45 times the 12 month trailing EBITDA of PHCR
(including the combined EBITDAs
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of Harveys and the Company for an appropriate number of months
in the event that there are less than twelve months of EBITDA
for the operating subsidiaries of PHCR following the closing of
the Acquisition Transaction), minus net debt (or other
liabilities that would customarily be treated as debt for
valuation purposes), divided by the total number of shares of
PHCR stock outstanding, times the number of shares of PHCR stock
to be repurchased. For purposes of calculating net debt, the
amount of capital invested in any uncompleted development
projects, including expansions of existing properties, shall be
included in the calculation of cash on hand. For purposes of
calculating EBITDA and net debt, such calculation will be made
in a manner substantially consistent with the past practices of
Harveys and the Company including in connection with equity
valuations for this transaction. The unpaid purchase price will
bear interest at the rate of 12% per year, compounded annually.
The right to trigger such repurchase process shall constitute
an absolute right and obligation of the Executives and PHCR,
respectively, in accordance with the terms hereof. No other
claims (other than repayment of the loans described in Section
2(b)(ii) above) shall either: (A) be asserted by either party in
such repurchase process; or (B) be deemed to have been waived as
a result of such repurchase.
(ii) In the event that an Executive described in subsection (i) above
either: (x) is terminated for cause/3/; or (y) voluntarily
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/3/ In the case of an Executive who is a party to a written
employment agreement with the Company, the determination of
whether he has been terminated for cause shall be governed by
the terms of his employment agreement, to the extent specified
therein. In the case of an Executive who is a party to a written
employment agreement with the Company but where the standard is
not so specified, and in the case of an Executive who is not a
party to a written employment agreement with the Company, such
Executive shall be deemed to have been terminated for cause if
the Company had the right to terminate such Executive's
employment for "gross misconduct" as such term is used for
purposes of determining an employee's right to continuation of
(continued...)
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terminates (1) in the case of an Executive who is a party to an
effective employment agreement with the Company that defines
good reason or a similar standard, without good reason as
defined in his employment agreement or (2) in the case of any
other Executive (other than Messrs. ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇), for
any reason, then PHCR will have the right to acquire, and the
Executive will have the right to require PHCR to repurchase such
shares on the same terms and conditions set forth in
subparagraph (ii) above, except such repurchase shall be paid
20% upon exercise and 20% on each of the first four
anniversaries of such termination and will bear interest at the
rate of 8% per annum (rather than 12%), compounded annually
from date of termination to the date of repurchase by PHCR.
3. Incentive Grants of Restricted Stock and Stock Options. If the Acquisition
Transaction is consummated, then, at the Closing PHCR shall grant 604,464
shares of restricted PHCR Common Stock (the "PHCR Restricted Stock"), to
the Executives in accordance with Schedule A hereto. The agreements
evidencing the PHCR Restricted Stock will, except as otherwise provided
herein, contain substantially the same terms (with respect to the issuance
of restricted stock only) as that certain management stock option and
restricted stock agreement, dated February 2, 1999, by and between Harveys
and ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇. An additional 530,223 shares of PHCR Common Stock
shall be reserved for issuance of stock options (the "New Options")
pursuant to a stock option plan for the benefit members of senior
management of the Company (the "Key Managers"). The division of such New
Options among the Key Managers shall reasonably be determined by ▇▇.
▇▇▇▇▇▇, consistent with industry standards and subject to the approval of
PHCR. The per share exercise price of the New Options shall be at $43.17,
the implied share value determined in accordance with the Bear ▇▇▇▇▇▇▇
model.
As set forth above, the incentive grants of PHCR Restricted Stock will,
except as otherwise provided herein, contain substantially the same terms
(with respect to the issuance of restricted stock only) as that certain
management
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/3/(...continued)
health coverage under Section 4980B(f)(3)(B) of the Code.
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stock option and restricted stock agreement, dated February 2,
1999, by and between Harveys and ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, which is intended to
defer the imposition of federal and state tax to the extent set forth
therein or, subject to the terms of Section 5(f) below, the termination of
the Executive's employment with PHCR (either as a member of management or
a director) occurs for whatever reason. At all times following the date
the incentive grants of PHCR Restricted Stock are awarded the Executive
shall be fully vested in such awards and the stock represented by such
incentive grant shall, except as set forth in Section 5(f) below, be fully
includable in the stock to be repurchased by PHCR pursuant to the terms set
forth in Section 2 above. Except as specifically set forth above, shares
issued or issuable under this Section 3 (except to Messrs. ▇▇▇▇▇▇▇ and
▇▇▇▇▇▇▇▇) shall be subject to a right of repurchase by PHCR pursuant to the
terms of the Stockholders Agreement (as defined in Section 4).
The New Options granted to each of Messrs. Alanis, Allen, Ostrow and
Kortman shall vest in accordance with the following schedule: 20% on each
of the first five anniversaries of the Closing; provided, however, that if
prior to the expiration of the current term of his existing employment
agreement with the Company (or upon the earlier replacement or extension,
as the case may be) (i) he is terminated without cause (as defined in his
employment agreement, if defined, or if not defined, as defined in
footnote 3 hereof); (ii) he voluntarily terminates his employment for good
reason (as defined in his employment agreement, if defined); or (iii) the
Company does not offer to renew his employment agreement on reasonable
terms (provided, however, that for purposes of this Memorandum of
Understanding, no offer shall be deemed unreasonable solely because it
offers vesting and forfeiture provisions with respect to incentive equity
that are on substantially the same terms as other employees) and such
agreement is allowed to expire, then such New Options shall become fully
vested and exercisable immediately upon such termination or expiration and
the all of shares subject to the New Options shall be subject to the
repurchase rights set forth in Section 2 above. In the event of
termination of employment for any other reason (or failure to renew an
employment agreement following a reasonable offer by the Company), then
such New Options as have not become vested and exercisable in accordance
with the schedule set forth above shall be forfeited and only the shares
subject to the New Options that have become vested and exercisable in
accordance with such schedule shall be subject to the repurchase rights set
forth in Section 2 above.
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All other New Options shall vest 20% on each of the first five
anniversaries of the Closing and shall otherwise have the same terms as
options issued under Harveys' current plan.
4. Stockholders Agreement. Any PHCR Stock or options issued hereunder shall
be subject to a stockholders agreement (the "Stockholders Agreement") with
substantially the same provisions as the Stockholders Agreement in effect
at Harveys on the date hereof, except to the extent that the provisions of
the Stockholders Agreement are inconsistent with the provisions hereof, in
which case the provisions set forth herein shall govern and control, and be
deemed to supercede such contrary provisions in the Stockholders Agreement.
In connection with the Stockholders Agreement, Colony Investors III, L.P.
("Colony") shall enter into an appropriate agreement with ▇▇. ▇▇▇▇▇▇▇ which
shall grant to ▇▇. ▇▇▇▇▇▇▇ the following rights: (1) the right to sell or
dispose of his Tag-Along Shares (as defined in the Stockholders Agreement)
pursuant to Subsection 2.5(a) of the Stockholders Agreement without giving
effect to Subsection 2.5(b) of the Stockholders Agreement; (2) a "lock-up"
restriction pursuant to Section 2.6 of the Stockholders Agreement which
shall be co-extensive with that of Colony; and (3) one demand registration
right, subject to customary terms and conditions and any lockup required in
connection with an IPO. So long as ▇▇. ▇▇▇▇▇▇▇ beneficially owns at least
50% of the outstanding PHCR Stock (including PHCR Restricted Stock and New
Options, if any) owned by him immediately following the Effective Time,
without ▇▇. ▇▇▇▇▇▇▇'▇ approval (which approval shall not be unreasonably
withheld or delayed), Colony shall not consent to any waiver of the
Stockholders Agreement or the Memorandum of Understanding or any of the
agreements contemplated by either of them that would materially adversely
affect ▇▇. ▇▇▇▇▇▇▇'▇ rights under the Stockholders Agreement.
In connection with the Stockholders Agreement, Colony also shall enter into
an appropriate agreement with ▇▇. ▇▇▇▇▇▇▇▇ which shall grant to ▇▇.
▇▇▇▇▇▇▇▇ the following rights: (1) the right to sell or dispose of his
Tag-Along Shares (as defined in the Stockholders Agreement) pursuant to
Subsection 2.5(a) of the Stockholders Agreement without giving effect to
Subsection 2.5(b) of the Stockholders Agreement; and (2) a "lock-up"
restriction pursuant to Section 2.6 of the Stockholders Agreement which
shall be co-extensive with that of Colony.
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5. Non-Competition Agreements.
(a) Each of the Executives who is a party to an employment agreement, in
addition to entering into the Stockholders Agreement, shall enter into
a non-competition agreement with the Company, pursuant to which such
person shall agree, on the terms set forth herein, not to: (i) engage
in owning, operating and developing casinos, hotels or race track
interests associated or materially competitive with casinos, hotels
or race track interests owned directly or indirectly by PHCR (or
where PHCR has announced its present intention to develop such
properties or interests), (ii) solicit any employee, agent or
consultant of the Company to terminate such person's relationship
with the Company or (iii) solicit any counterparty to any contract
with the Company to terminate such counterparty's contract or other
relationship with the Company. Notwithstanding the foregoing, in the
case of ▇▇. ▇▇▇▇▇▇▇, (A) the restrictions of subsections 5(a)(i), (ii)
and (iii) shall be effective during the period that he serves as a
member of the Board of Directors and shall continue, in the case of
subsection 5(a)(i), for a period of one year, and in the case of
subsection 5(a)(ii) and (iii), for a period of two years, from the
date that ▇▇. ▇▇▇▇▇▇▇ ceases to be a member of the Board of Directors,
(B) the restrictions of subsections 5(a)(i), (ii) and (iii) shall not
restrict ▇▇. ▇▇▇▇▇▇▇'▇ ownership, operation and development of
casinos, hotels or race track interests in New Mexico so long as PHCR
or any of its affiliates does not own any casinos, hotels or race
track interests in New Mexico or in a market outside of New Mexico
that competes directly with the markets inside New Mexico, and (C) if
PHCR or any of its Affiliates acquires a material interest in or
otherwise develops any casinos, hotels or race track interests in New
Mexico or in a market outside of New Mexico that competes directly
with the markets inside New Mexico, ▇▇. ▇▇▇▇▇▇▇ shall be permitted to
continue to operate and develop casinos, hotels or race track
interests, located in New Mexico and owned or operated in whole or in
part by him on the date of such acquisition or development or as to
which ▇▇. ▇▇▇▇▇▇▇ has announced a present intention to acquire or
develop. Notwithstanding the foregoing, in the case of ▇▇. ▇▇▇▇▇▇▇▇,
the restrictions of subsection 5(a)(i) shall only be effective during
the period that he serves as an employee of the Company.
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(b) In the case of each of the Executives (other than ▇▇. ▇▇▇▇▇▇▇▇) who is
a party to an employment agreement with the Company, the restrictions
of subsections 5(a)(i), (ii) and (iii) shall be effective during the
period that he serves as an employee of the Company and shall continue
to be effective following his termination of employment (i) in the
event he is terminated for cause (as determined in his employment
agreement) or voluntarily resigns without good reason (if and as
defined in his employment agreement) for a period of one year, in the
case of subsection 5(a)(i), and, in the case of subsections 5(a)(ii)
and (iii) for a period of two years, following such date of
termination; or (ii) in the event he is terminated other than for
cause or voluntarily terminates employment for good reason, or if the
Company does not offer to renew his then existing employment agreement
on reasonable terms and such agreement is allowed to expire, then the
provisions of subsection 5(a)(i) shall not apply and subsections
5(a)(ii) and (iii) shall apply for a period of two years following the
Executive's termination of employment.
(c) Each of the Executives (other than ▇▇. ▇▇▇▇▇▇▇) who is not a party to
an employment agreement, in addition to entering into the
Stockholders Agreement, shall enter into a non-competition agreement
with the Company, pursuant to which such persons shall agree not to:
(i) engage in owning, operating and developing casinos, hotels or race
track interests associated or materially competitive with casinos,
hotels or race track interests owned directly or indirectly by PHCR
(or where PHCR has announced its intention to develop such properties
or interests), (ii) solicit any employee, agent or consultant of the
Company to terminate such person's relationship with the Company or
(iii) solicit any counterparty to any contract with the Company to
terminate such counterparty's contract or other relationship with the
Company.
(d) In the case of each of the Executives (other than ▇▇. ▇▇▇▇▇▇▇) who is
not a party to an employment agreement with the Company, the
restrictions of subsections 5(c)(i), (ii) and (iii) shall be effective
during the period that he serves as an employee of the Company and
shall continue to be effective following his termination of employment
as follows:
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(i) in the event he is terminated for cause (as defined in footnote
3 above) or he voluntarily resigns on or prior to December 31,
2001, the provisions of subsection 5(c)(i) shall apply for a
period of one year following such date of termination and the
provisions of , subsections 5(c) (ii) and (iii) shall apply for
a period of two years following such date of termination.
(ii) in the event he is terminated other than for cause after
December 31, 2001, the provisions of subsection 5(c)(i) shall
not apply and the provisions of subsections 5(c)(ii) and (iii)
shall apply for a period of two years following such date of
termination.
(iii) in the event he is terminated for any reason or he resigns after
December 31, 2001, the provisions of subsection 5(c)(i) shall
not apply and the provisions of subsections 5(c)(ii) and (iii)
shall apply for a period of two years following such date of
termination.
(e) In the event that any Executive (other than ▇▇. ▇▇▇▇▇▇▇) that does not
have an employment agreement with the Company is terminated or resigns
under the circumstances described in Section 5(d)(i) above, then such
Executive shall not be entitled to payout of his PHCR Restricted Stock
upon termination of employment, but will continue to hold such PHCR
Restricted Stock in accordance with the terms thereof.
(f) Key Managers who are not Executives and who receive New Options,
shall, as a condition to receiving such New Options, shall be required
to agree not to (i) engage in owning, operating and developing
casinos, hotels or race track interests within 100 miles of the
principal gaming facility at which such Key Manager was employed, (ii)
solicit any employee, agent or consultant of the Company to terminate
such person's relationship with the Company or (iii) solicit any
counterparty to any contract with the Company to terminate such
counterparty's contract or other relationship with the Company. The
restrictions contained in this Section 5(f) shall continue for a
period of one year from the date of termination of such Key Manager's
employment.
(g) Except to the extent of the specific exceptions applicable to any
individual in subsections 5(a) and 5(f) above, reasonable exceptions
to the
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non-competition restrictions will be provided in respect of (i)
activities not materially competitive with the specific gaming
properties or interests owned directly or indirectly by PHCR (or where
PHCR has announced its intention to develop such properties or
interests) and (ii) passive ownership of less than 5% of public
companies.
6. Employment Agreements. The employment agreements of the Executives that
have employment agreements as of the date hereof shall be assumed without
modification except to the extent necessary to reflect the terms of this
transaction and the structure of the Company and its affiliates. The
employment agreements assumed by the Company shall terminate on the
respective dates set forth therein. There shall be no obligation, express
or implied, of PHCR or the Executives to renew such contracts, and any such
renewal shall be on such reasonable terms and conditions as shall be agreed
to by the Executive and PHCR.
7. Certain Governance Matters. Subject to licensing and regulatory
restrictions, the Board of Directors of PHCR upon consummation of the
Merger (the "PHCR Board") shall include ▇. ▇. ▇▇▇▇▇▇▇, Chairman of the PHCR
Board, and ▇▇▇▇ ▇▇▇▇▇▇ as well as ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇. and other nominees
determined by Colony (the "Colony Nominees"), provided that if affiliates
of Colony designated for the board of directors (other than employees of
PHCR and its subsidiaries) would cease to constitute a majority of the
board, Messrs. ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ shall resign from the Board (and any
committee thereof) and become non-voting observers until such time as
Colony may legally appoint additional Board members under applicable law;
provided further that prior thereto, PHCR will take such action as is
reasonably necessary to avoid triggering the end of deferral under the
Deferred Compensation Agreements between PHCR and ▇▇. ▇▇▇▇▇▇▇ and ▇▇.
▇▇▇▇▇▇, respectively. ▇▇. ▇▇▇▇▇▇▇ shall be a member of, and ▇▇. ▇▇▇▇▇▇▇
shall be designated as the chairman of, the Executive Committee of the PHCR
Board. The PHCR Board shall delegate to the Executive Committee (to the
extent permitted under applicable law) substantially all of its powers to
govern the business and affairs of the Company. Affiliates of Colony
designated for the board of directors (other than PHCR and its
subsidiaries) shall also constitute a majority of the compensation
committee of the board, if any. Unless otherwise determined by the Colony
Nominees, members of the PHCR Board shall not be entitled to any
compensation for services as members of the PHCR Board.
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8. Disclosure Requirements. In connection with their execution and delivery
of this Memorandum of Understanding, the Executives acknowledge and agree
to comply with all applicable disclosure requirements relating thereto
imposed under Federal and state securities laws.
9. Form of PHCR Common Stock. All issuances hereunder of PHCR Common Stock,
including options therefor, shall be comprised of a combination of voting
and non-voting securities so that each such class of security constitutes
the applicable percentage of all such shares of such class of security
outstanding at the time of issuance.
10. Fees and Expenses. The Executives, on the one hand (jointly and
severally), and PHCR, on the other hand, shall each be responsible for
their respective expenses incurred in connection with the consideration of
the contemplated Acquisition Transaction.
11. Binding Agreement; Standard of Conduct. The terms of the agreements herein
shall be more fully set forth in definitive documentation, which each of
the parties hereto agrees to negotiate in good faith. Subject to the
negotiation and execution of such definitive documentation and the reaching
of agreement on other matters contemplated but not specifically addressed
herein, each of the parties hereto acknowledges and agrees that this
Memorandum of Understanding is intended as a binding agreement among them
with respect to the matters set forth herein.
12. Parties in Interest. This Memorandum of Understanding shall be binding
upon and inure solely to the benefit of each party hereto, and nothing in
this Memorandum of Understanding, express or implied, is intended to confer
upon any other person any rights or remedies of any nature whatsoever under
or by reason of this Memorandum of Understanding. Neither this
Memorandum of Understanding nor any of the rights, interests or obligations
hereunder shall be assigned, in whole or in part, by operation of law or
otherwise by any of the parties without the prior written consent of the
other parties, except that PHCR may assign, in its sole discretion, any or
all of its rights, interests and obligations under this Memorandum of
Understanding to any controlled affiliate of Colony. Subject to the
preceding sentence, this Memorandum of Understanding shall be binding upon,
inure to the benefit of, and be enforceable by, the parties and their
respective successors and assigns.
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13. Equitable Adjustment. References herein to numbers of securities to be
issued shall be deemed to include such equitable adjustments, if any, as
may be required in the event of any subdivision, split, combination or
reclassification of such securities or securities into which such
securities are exercisable so that the parties hereto entitled to receive
such securities shall receive the number of such securities that such
parties would have owned or been entitled to receive after the happening of
any the events described above had it owned such securities immediately
prior to such time.
14. Governing Law. THIS MEMORANDUM OF UNDERSTANDING SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE, WITHOUT
REGARD TO ANY APPLICABLE CONFLICTS OF LAW.
14
IN WITNESS WHEREOF, each of the parties hereto has executed this
Memorandum of Understanding as of the date first above written.
PH CASINO RESORTS, INC.
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By: ____________________________
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Title: President
STOCKHOLDERS
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