EXHIBIT 10.45
MEMBERSHIP INTEREST PURCHASE AGREEMENT
BY AND BETWEEN
W2007/ACEP HOLDINGS, LLC
AND
AMERICAN ENTERTAINMENT PROPERTIES CORP.,
DATED AS OF
APRIL 22, 2007
TABLE OF CONTENTS
PAGE
I. Definitions...........................................................1
II. Purchase of Company Membership Interests and Closing.................12
2.1 Purchase and Sale...........................................12
2.2 Purchase Price..............................................12
2.3 The Closing.................................................15
2.4 Further Assurances..........................................16
III. General Representations and Warranties of Seller.....................16
3.1 Title to Company Membership Interests.......................16
3.2 Incorporation; Power and Authority..........................16
3.3 Valid and Binding Agreement.................................17
3.4 No Breach; Consents.........................................17
3.5 Brokerage...................................................17
IV. Representations and Warranties of Seller Regarding the Company.......17
4.1 Incorporation; Power and Authority..........................17
4.2 [Intentionally Omitted.]....................................18
4.3 No Breach; Consents.........................................18
4.4 Capitalization..............................................18
4.5 Subsidiaries; Companies.....................................19
4.6 Audited Financial Statements................................20
4.7 Books and Records...........................................20
4.8 Absence of Certain Changes..................................20
4.9 Properties..................................................21
4.10 Tax Matters.................................................23
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TABLE OF CONTENTS
(continued)
PAGE
4.11 Benefit Plans; Labor Matters................................24
4.12 Intellectual Property.......................................26
4.13 Material Contracts..........................................27
4.14 Litigation..................................................29
4.15 Insurance...................................................29
4.16 Compliance with Applicable Laws.............................29
4.17 Environmental and Safety Matters............................31
4.18 Structural and Engineering Matters..........................31
4.19 Related Party Transactions..................................32
4.20 Brokerage...................................................32
4.21 No Other Representations or Warranties......................32
4.22 Chips or Tokens.............................................32
V. Representations and Warranties of Buyer..............................32
5.1 Incorporation; Power and Authority..........................33
5.2 Valid and Binding Agreement.................................33
5.3 No Breach; Consents.........................................33
5.4 Brokerage...................................................33
5.5 Investment Intent...........................................33
5.6 Gaming Licenses.............................................33
5.7 No Prohibition..............................................33
5.8 Tax Matters.................................................34
5.9 No Additional Representations...............................34
VI. Covenants............................................................34
6.1 Conduct of Business Prior to the Closing....................34
6.2 Access to Information; Confidentiality......................37
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TABLE OF CONTENTS
(continued)
PAGE
6.3 Tax Matters.................................................38
6.4 Environmental Matters.......................................41
6.5 Parties' Efforts............................................41
6.6 Intentionally Omitted.......................................42
6.7 Intentionally Omitted.......................................42
6.8 Intentionally Omitted.......................................42
6.9 Public Announcements........................................42
6.10 Supplemental Schedules......................................42
6.11 Obligation to Obtain Government Approvals...................42
6.12 Gaming Laws and Gaming Licenses.............................43
6.13 HSR Act; Filings and Cooperation............................43
6.14 HSR / Gaming Best Efforts...................................44
6.15 Mandatory Capital Improvements..............................45
6.16 Financial Statements........................................45
6.17 Limited Liability Company Conversion........................45
6.18 Title Insurance.............................................45
6.19 Stay Bonuses................................................45
VII. Conditions to Closing................................................45
7.1 Conditions to Buyer's Obligations...........................45
7.2 Conditions to Seller's Obligations..........................47
VIII. Termination..........................................................47
8.1 Termination.................................................47
8.2 Effect of Termination.......................................48
IX. Remedies.............................................................49
9.1 Survival....................................................49
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TABLE OF CONTENTS
(continued)
PAGE
9.2 Indemnification by Seller...................................50
9.3 Indemnification by Buyer....................................50
9.4 Limitations on Indemnification Payments to Buyer
Indemnitees.................................................50
9.5 Procedures..................................................51
9.6 Exclusive Remedy............................................53
9.7 Specific Performance........................................53
X. General..............................................................53
10.1 Expenses....................................................53
10.2 Amendment and Waiver........................................53
10.3 Notices.....................................................54
10.4 Assignment..................................................55
10.5 No Third-Party Beneficiaries................................55
10.6 Severability................................................55
10.7 Complete Agreement..........................................55
10.8 Signatures; Counterparts....................................55
10.9 Governing Law...............................................55
10.10 Jurisdiction................................................55
10.11 Waiver of Jury Trial........................................56
10.12 Construction................................................56
10.13 Time of Essence.............................................57
10.14 Like Kind Exchange Cooperation Clause.......................57
10.15 Buyer's Guaranty............................................58
10.16 Seller's Guaranty...........................................58
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MEMBERSHIP INTEREST PURCHASE AGREEMENT
This MEMBERSHIP INTEREST PURCHASE AGREEMENT (this "AGREEMENT"), dated
as of April 22, 2007, by and between W2007/ACEP HOLDINGS, LLC, a Delaware
limited liability company ("BUYER"), and AMERICAN ENTERTAINMENT PROPERTIES
CORP., a Delaware corporation ("SELLER"). Buyer and Seller are sometimes
hereinafter collectively referred to as the "PARTIES," or, individually, as a
"PARTY." Whitehall Street Global Real Estate Limited Partnership 2007, a
Delaware limited partnership, and American Real Estate Partners, L.P., a
Delaware limited partnership, are joining in this Agreement solely for the
purposes stated in Sections 10.15 and 10.16, respectively.
RECITALS
WHEREAS, Seller owns all of the issued and outstanding membership
interests of American Casino & Entertainment Properties, LLC, a Delaware limited
liability company (the "COMPANY").
WHEREAS, Seller desires to sell, and Buyer desires to buy, all of the
issued and outstanding membership interests of the Company on the terms and
subject to the conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual representations,
warranties and agreements contained in this Agreement, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Parties agree as follows:
I. DEFINITIONS
"AAA RULES" has the meaning set forth in Section 2.2(d)(iii)
"ACT" means the Securities Exchange Act of 1934, as amended.
"AFFILIATE" has the meaning set forth in Rule 12b-2 under the Act.
"AGREEMENT" has the meaning set forth in the heading of this Agreement.
"ANTITRUST AUTHORITIES" has the meaning set forth in Section 6.13.
"ASSETS" has the meaning set forth in Section 10.14.
"AUDIT NOTICE" has the meaning set forth in Section 2.2(d)(iii).
"AUDITED FINANCIAL STATEMENTS" has the meaning set forth in Section
4.6.
"BEAR ▇▇▇▇▇▇▇ PAYMENT" has the meaning set forth in Section 2.2(a).
"BENEFIT PLAN" means any bonus, pension, profit sharing, deferred
compensation,
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incentive compensation, stock ownership, stock purchase, stock option, phantom
stock, retirement, severance, disability, death benefit, retiree medical or life
insurance, supplemental retirement, hospitalization, medical, employee stock
purchase, stock appreciation, restricted stock, stock-based or other employee
benefit plan, program, agreement or arrangement as to which any of the Companies
sponsors, maintains, contributes or is obligated to contribute (i) for the
benefit of any current or former employee, officer, director, consultant or
independent contractor of any of the Companies, or (ii) that applies generally
to all employees of the Companies.
"BREAK-UP FEE" shall mean (A) a fee payable in cash by Buyer to Seller,
(i) if Buyer has not exercised either the First Extension Option or the Second
Extension Option, in an amount equal to five percent (5%) of the Initial
Purchase Price, (ii) if Buyer has exercised the First Extension Option, but has
not exercised the Second Extension Option, in an amount equal to six and
one-quarter percent (6.25%) of the Initial Purchase Price, or (iii) if Buyer has
exercised both the First Extension Option and the Second Extension Option, in an
amount equal to seven and one-half percent (7.5%) of the Initial Purchase Price,
or (B) a fee payable in cash by Seller to Buyer in an amount equal to five
percent (5%) of the Initial Purchase Price, in either case, which Break-Up Fee
shall be payable as set forth in Section 8.2.
"BUSINESS" shall mean the respective businesses carried on by the
Companies as of the date of this Agreement.
"BUSINESS DAY" means every day, other than Saturday, Sunday and
holidays, when commercial banks are open for business in the State of Nevada and
the State of New York.
"BUYER" has the meaning set forth in the heading of this Agreement.
"BUYER INDEMNITEES" has the meaning set forth in Section 9.2.
"BUYER REQUIRED CONSENTS" means each of the Consents set forth on
EXHIBIT A hereto.
"BUYER RETURNS" has the meaning set forth in Section 6.3(a).
"BUYER'S GUARANTOR" has the meaning set forth in Section 10.15.
"CEM" has the meaning set forth in Section 6.4(a).
"CLAIM" has the meaning set forth in Section 9.5(a).
"CLAIM RESPONSE" has the meaning set forth in Section 9.5(a).
"CLAIM RESPONSE PERIOD" has the meaning set forth in Section 9.5(a).
"CLAIMS NOTICE" has the meaning set forth in Section 9.5(a).
"CLOSING" has the meaning set forth in Section 2.3(a).
"CLOSING BALANCE SHEET" has the meaning set forth in Section 2.2(d)(i).
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"CLOSING DATE" has the meaning set forth in Section 2.3(a).
"CLOSING DATE PAYMENT" has the meaning set forth in Section 2.2(a).
"CLOSING NET WORKING CAPITAL" means (a) the Current Assets MINUS (b)
the Current Liabilities, as shown on the Final Closing Balance Sheet.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMPANIES" has the meaning set forth in Section 4.5(a).
"COMPANY" has the meaning set forth in the recitals of this Agreement.
"COMPANY INSURANCE POLICIES" has the meaning set forth in Section 4.15.
"COMPANY INTELLECTUAL PROPERTY" has the meaning set forth in Section
4.12.
"COMPANY MEMBERSHIP INTERESTS" has the meaning set forth in Section
2.1.
"CONFIDENTIALITY AGREEMENT" has the meaning set forth in Section 6.2.
"CONSENT" means any authorization, consent, approval, filing, waiver,
exemption or other action by or notice to any Person.
"CONTRACT" means a contract, agreement, lease, license, commitment or
binding understanding, whether oral or written, that is in effect as of the date
of this Agreement or any time after the date of this Agreement.
"CORPORATE ENTITIES" means those Companies that are corporations or are
taxable as a corporation.
"CREDIT AGREEMENT" has the meaning set forth in the definition of
"Indebtedness to be Discharged."
"CURRENT ASSETS" means the sum of the total consolidated current assets
(including, for the avoidance of doubt, cash and cash equivalents) of the
Companies as of immediately prior to the Closing Date as determined in
accordance with GAAP, applied on a basis consistent with the Audited Financial
Statements, excluding any income tax assets and the Excluded Assets.
"CURRENT LIABILITIES" means the sum of the total consolidated current
liabilities of the Companies as of immediately prior to the Closing Date, as
determined in accordance with GAAP, applied on a basis consistent with the
Audited Financial Statements, and specifically including (whether or not GAAP so
requires) severance liabilities accrued as of the Closing Date, the face amounts
shown (as of the Closing Date) on the meters for the Companies' in-house
progressive slots machines and the meters for the Companies' table games with an
in-house progressive jackpot feature and any outstanding chips or tokens having
a face amount in excess of Three Million Five Hundred Thousand Dollars
($3,500,000.00), but excluding any income tax liabilities.
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"DEVELOPMENT" has the meaning set forth in Section 6.10.
"DISCLOSURE SCHEDULE" means, with respect to either Seller or Buyer,
the schedules delivered by such Person on or prior to the date of this Agreement
and, if applicable, updated as contemplated by Section 6.10.
"DRE" means an entity that is disregarded, for federal income tax
purposes, as separate from its owner within the meaning of Section
301.7701-2(c)(2)(i) of the Treasury Regulations.
"ENCUMBRANCE" means any lien, encumbrance, charge, claim, equitable
interest, option, pledge, security interest, right of first refusal or any
restriction on voting or transfer, receipt of income, or on any other attribute
of ownership, provided that the term "Encumbrance" does not include any
restriction, limitation or other matter imposed by any Law, including, but not
limited to, applicable Gaming Laws.
"ENVIRONMENTAL LAW" means all federal, state or local laws governing
pollution or the protection of the environment.
"ENVIRONMENTAL REMEDIATION ESTIMATE" has the meaning set forth in
Section 6.4(a).
"EQUITY SECURITIES" means, with respect to any Person, (i) any shares
of capital stock, membership interests (including, but not limited to, the
Company Membership Interests), partnership interests or other ownership or
equity interests in, or securities of such person, or (ii) any securities,
rights or obligations convertible into, exchangeable for or exercisable to
acquire, or options, warrants, calls commitments or rights of any kind to
acquire any securities described in clause (i) of this definition.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, or any successor law.
"ERISA AFFILIATE" means each person which, pursuant to ERISA ss.
4001(b), is required to be treated as a single employer with the Company
pursuant to Code ss. 414(b), (c), (m) or (o).
"ESTIMATED NET WORKING CAPITAL" has the meaning set forth in Section
2.2(a).
"EXCLUDED ASSETS" means the real property and improvements having
addresses of ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, 2214 Fairfield Avenue, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ owned by LV Acquisitions
LLC, one of the Companies.
"FINAL CLOSING BALANCE SHEET" has the meaning set forth in Section
2.2(d)(iii).
"FINAL PURCHASE PRICE ALLOCATION" has the meaning set forth in Section
6.3(j).
"FIRST EXTENSION OPTION" has the meaning set forth in the definition of
"Outside Date."
"FIRST EXTENDED OUTSIDE DATE" has the meaning set forth in the
definition of "Outside Date."
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"GAAP" means United States generally accepted accounting principles, as
in effect from time to time.
"GAMING AUTHORITIES" means, collectively, (a) the Nevada Gaming
Commission, (b) the Nevada State Gaming Control Board, and (c) any other
Governmental Entity that holds regulatory, licensing or permit authority over
gambling, gaming or casino activities conducted by any of the Companies or any
of their respective Affiliates within such jurisdictions.
"GAMING LAWS" means the Nevada Gaming Control Act, as codified in
Nevada Revised Statutes Chapter 463 and the regulations of the Gaming
Authorities promulgated thereunder, and any other federal, state, local or
foreign statute, ordinance, rule or regulation governing or relating to the
ownership of the Company and of the Regulated Entities and the gambling, gaming
or casino activities and operations of any of the Company and any of the
Regulated Entities or any of their respective Affiliates, in each case as
amended from time to time.
"GAMING LICENSES" means all licenses, permits, approvals,
authorizations, registrations, findings of suitability, waivers and exemptions,
including any condition or limitation placed thereon, issued under the
applicable Gaming Laws that are necessary for the Regulated Entities to own and
operate their respective gaming facilities and related amenities.
"GOVERNMENTAL APPROVALS" means all (a) Gaming Licenses, Liquor Licenses
and any other permit, license, certificate, franchise, concession, approval,
consent, ratification, permission, clearance, confirmation, endorsement, waiver,
certification, filing, franchise, notice, variance, right, designation, rating,
registration, qualification, authorization or order that is or has been issued,
granted, given or otherwise made available by or under the authority of any
Governmental Entity or pursuant to any Law, and (b) rights under any Contract
with any Governmental Entity that relates to or is used in a Person's business
or operations, including any Governmental Authorizations.
"GOVERNMENTAL AUTHORIZATION" means any approval, consent, license,
permit, waiver, registration or other authorization issued, granted, given, made
available or otherwise required by any Governmental Entity or pursuant to Law.
"GOVERNMENTAL ENTITY" means any federal, state, local, foreign,
international or multinational entity or authority exercising executive,
legislative, judicial, regulatory, administrative or taxing functions of or
pertaining to government.
"GOVERNMENTAL ORDER" means any judgment, injunction, writ, order,
ruling, award or decree by any Governmental Entity or arbitrator.
"GUARANTEE" means any obligation, contingent or otherwise, of the
guarantor guaranteeing or having the economic effect of guaranteeing any
Indebtedness or other obligation of any other Person (the "primary obligor") in
any manner, whether directly or indirectly, and including any obligation of the
guarantor, direct or indirect, (a) to purchase or pay (or advance or supply
funds for the purchase or payment of) such Indebtedness or other obligation or
to purchase (or to advance or supply funds for the purchase of) any security for
the payment thereof, (b) to purchase or lease property, securities or services
for the purpose of assuring the owner of such Indebtedness or other obligation
of the payment thereof, (c) to maintain working
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capital, equity capital or any other financial statement condition or liquidity
of the primary obligor so as to enable the primary obligor to pay such
Indebtedness or other obligation, or (d) as an account party in respect of any
letter of credit or letter of guaranty issued to support such Indebtedness or
obligation.
"HSR ACT" means the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of
1976, as amended, and the regulations promulgated thereunder, including any
successor federal statute and regulations.
"HSR / GAMING BEST EFFORTS" has the meaning set forth in Section 6.14.
"INDEBTEDNESS" means, with respect to any of the Companies, without
duplication, (i) indebtedness for borrowed money (including the aggregate
principal amount thereof and the aggregate amount of any accrued but unpaid
interest thereon) or for the deferred purchase price of property or services
(other than current trade liabilities incurred in the ordinary course of
business and payable consistent with customary practices), (ii) obligations
evidenced by bonds, notes, debentures or similar instruments, (iii) drawn (but
not undrawn) amounts under any outstanding letters of credit, (iv) obligations
under financing leases, (v) all Monetary Encumbrances for amounts owed or owing
(whether or not then due) and not taken into account in the calculation of Net
Working Capital, (vi) all Guarantee obligations that guaranty obligations of
Persons other than the Companies and (vii) all obligations with respect to
deposits taken from another Person with a contingent obligation to return the
same (including, without limitation, tenant security deposits and security
deposits taken for hotel room reservations for any time after the Closing Date)
to the extent not taken into account in the calculation of Net Working Capital.
"INDEBTEDNESS TO BE DISCHARGED" means the following Indebtedness of the
Companies: (i) the Amended and Restated Credit Agreement, dated May 9, 2006 (the
"CREDIT AGREEMENT"), by and among American Casino & Entertainment Properties
LLC, a Delaware limited liability company, as Borrower, each of the entities
named as Guarantors therein, the several banks and other financial institutions
or entities parties thereto, as Lenders, ▇▇▇▇▇ Fargo Bank, N.A., as syndication
agent, CIT Services Corporation and Comerica West Incorporated, as
co-documentation agents, Bear, ▇▇▇▇▇▇▇ & Co. Inc., as sole lead arranger and
sole bookrunner, and Bear ▇▇▇▇▇▇▇ Corporate Lending Inc., as administrative
agent for the Lenders and each other agent, and (ii) the $215,000,000 aggregate
principal amount of 7.85% Senior Secured Notes due 2012 (the "SENIOR SECURED
NOTES") issued pursuant to that certain Indenture, dated as of January 29, 2004,
by and among American Casino & Entertainment Properties, LLC, a Delaware limited
liability company, and American Casino & Entertainment Properties Finance Corp.,
a Delaware corporation, as Co-Issuers, and Wilmington Trust Company, a Delaware
banking company, as Trustee.
"INDEMNIFYING PARTY" has the meaning set forth in Section 9.5(b).
"INDEMNITEE" has the meaning set forth in Section 9.5(a).
"INDEMNITOR" has the meaning set forth in Section 9.5(a).
"INITIAL PURCHASE PRICE" has the meaning set forth in Section 2.2(a).
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"INTELLECTUAL PROPERTY" means all United States and foreign
intellectual property, including without limitation (i) all inventions, patents,
patent applications and patent disclosures, together with all reissuances,
continuations, continuations-in-part, divisions, revisions, substitutions,
extensions and reexaminations thereof, (ii) all trademarks, service marks,
logos, trade names, corporate names, domain names, trade dress, including all
goodwill associated therewith, and all applications, registrations and renewals
in connection therewith, (iii) all copyrights and copyrightable works and all
applications, registrations and renewals in connection therewith, (iv) all trade
secrets and confidential information (including research and development,
know-how, formulas, compositions, manufacturing and production processes and
techniques, methods, models, schematics, technology, technical data, designs,
drawings, flowcharts, block diagrams, specifications, customer and supplier
lists, pricing and cost information and business and marketing plans and
proposals), and (v) all computer software, computer programs (whether in source
code, object code, or other form), databases, compilations and data, technology
supporting the foregoing, and all documentation, including user manuals and
training materials, related to any of the foregoing (collectively, "SOFTWARE").
"INTERMEDIARY" has the meaning set forth in Section 10.14.
"IRS" means the United States Internal Revenue Service.
"KNOWLEDGE" means, with respect to any Person, such Person's actual
knowledge, without independent investigation (and shall in no event encompass
constructive, imputed, implied, or similar concepts of knowledge), provided that
"Seller's Knowledge" or Knowledge of Seller shall be limited to the actual
knowledge of those individuals listed on EXHIBIT B, and, with respect to Section
4.10, the actual knowledge of the Director of Taxation of the Company (i.e.
▇▇▇▇▇ ▇▇▇▇▇▇) or his successor and of such Person or Persons familiar with the
day-to-day compliance for sales, use or gaming taxes.
"LAW" means any constitution, law, ordinance, principle of common law,
regulation, statute or treaty of any Governmental Entity.
"LEASED REAL PROPERTY" has the meaning set forth in Section 4.9(b).
"LEASES" has the meaning set forth in Section 4.9(b).
"LIABILITY" means any liability or obligation, whether accrued,
absolute, contingent, unliquidated or otherwise, whether due or to become due,
whether known or unknown, and regardless of when asserted.
"LIQUOR LICENSEE" means the Person(s) holding the applicable Liquor
License.
"LIQUOR LICENSES" means all those certain "off sale," "portable bar"
and other alcoholic beverage licenses issued by Governmental Entities to any of
the Companies pursuant to which the sale of alcoholic beverages is permitted in
the restaurants, bars, function rooms and guest rooms of the properties owned by
any of the Companies.
"LIQUOR OPERATIONS" means the sale and/or service of any liquor, wine,
beer and other alcoholic beverages at the properties owned by any of the
Companies.
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"LITIGATION" means any claim, action, arbitration, mediation, audit,
hearing, investigation, proceeding, litigation or suit (whether civil, criminal,
administrative, investigative or informal) commenced, brought, conducted or
heard by or before, or otherwise involving, any Governmental Entity or
arbitrator or mediator.
"LLCs" has the meaning set forth in Section 2.2(b).
"LOSSES" means, collectively, all losses, liabilities, claims, damages,
penalties, fines, judgments, awards, settlements, Taxes, costs, fees (including,
but not limited to, reasonable investigation fees), expenses (including, but not
limited to, reasonable attorneys' fees) and disbursements.
"MANDATORY CAPITAL IMPROVEMENT COSTS" has the meaning set forth in
Section 6.15.
"MATERIAL ADVERSE EFFECT" means any change, state of facts,
development, occurrence, circumstance, event or effect that, when considered
either individually or in the aggregate, is materially adverse to the business,
properties, assets, liabilities, operations, financial condition or results of
operations of the Companies taken as a whole; PROVIDED, HOWEVER, that, to the
extent that any change, circumstance, event or effect is caused by or results
from any of the following, it shall not be taken into account in determining
whether there has been a "Material Adverse Effect": (i) the negotiation,
announcement, execution or consummation of this Agreement, actions contemplated
or permitted by this Agreement or the performance of obligations under this
Agreement, including the impact thereof on relationships, contractual or
otherwise, with customers, suppliers or employees, (ii) conditions affecting the
United States economy or financial markets as a whole or that generally affect
the industries in which the Companies conduct their Business, in each case to
the extent the same does not have a disproportionate effect on the Companies
compared to similar companies in the industries in which the Companies conduct
their Business, (iii) any change in any applicable law, rule or regulation or
GAAP or interpretation thereof, in each case to the extent the same does not
have a disproportionate effect on the Companies compared to similar companies in
the industries in which the Companies conduct their Business, (iv) the
commencement, occurrence or continuation of any war, armed hostilities or acts
of terrorism involving or affecting the United States or any part thereof, in
each case to the extent the same does not have a disproportionate effect on the
Companies compared to similar companies in the industries in which the Companies
conduct their Business, (v) earthquakes, hurricanes, floods or other natural
disasters, in each case to the extent the same does not have a disproportionate
effect on the Companies compared to similar companies in the industries in which
the Companies conduct their Business, (vi) the failure by the Companies to meet
any revenue or earnings projections, forecasts or predictions for any periods
ending after the date of this Agreement (it being understood that the underlying
causes of, or factors contributing to, the failure to meet such objectives, if
otherwise within this definition of "Material Adverse Effect," shall be taken
into account in determining whether a Material Adverse Effect on the Companies
has occurred or would be expected to occur) and (viii) any action taken by or
omission to act by, or with the express consent of, Buyer with respect to the
transactions contemplated hereby or with respect to the Companies.
"MATERIAL CONTRACTS" has the meaning set forth in Section 4.13.
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"MONETARY ENCUMBRANCE" means an Encumbrance, which secures any
obligation to pay a sum of money, whether or not definite in amount, including,
without limitation, any Encumbrance affecting a parcel of real property that
secures (i) an outstanding obligation of any of the Companies under any
mortgage, deed of trust or other lien encumbering title to such parcel of real
property, (ii) any judgment entered against any of the Companies, (iii) any
delinquent tax obligation, (iv) any mechanics' or materialmen's liens or (v)
similar obligations of any of the Companies.
"MULTIEMPLOYER PLAN" has the meaning set forth in Section 4.11(d).
"NET WORKING CAPITAL" means, as the context may require, Estimated Net
Working Capital or Closing Net Working Capital.
"NEUTRAL AUDITOR" has the meaning set forth in Section 2.2(d)(iii).
"OBJECTION NOTICE" has the meaning set forth in Section 2.2(d)(ii).
"ORGANIZATIONAL DOCUMENTS" means (i) the articles or certificate of
incorporation and the bylaws of a corporation, (ii) the partnership agreement
and any statement of partnership of a general partnership, (iii) the limited
partnership agreement and the certificate of limited partnership of a limited
partnership, (iv) the limited liability company or operating agreement and
articles of organization or articles or certificate of formation of a limited
liability company, (v) any charter or similar document adopted or filed in
connection with the creation, formation or organization of a Person, and (vi)
any amendment to any of the foregoing.
"OUTSIDE DATE" means the Scheduled Closing Date unless (i) Buyer gives
Seller written notice that it shall not have, on or before ten (10) Business
Days prior to the Scheduled Closing Date, obtained all Gaming Licenses necessary
to consummate the transactions contemplated in this Agreement and to permit
Buyer to operate the Business after Closing and that it wishes to exercise its
option (the "FIRST EXTENSION OPTION") to extend the Outside Date until the
earlier of (a) three (3) Business Days after all such Gaming Licenses have been
obtained and (b) the date that is ten (10) months after the date of this
Agreement (the "FIRST EXTENDED OUTSIDE DATE"), then the First Extended Outside
Date shall be the Outside Date or (ii) Buyer gives Seller written notice that it
shall not have, on or before ten (10) Business Days prior to the First Extended
Outside Date, obtained all Gaming Licenses necessary to consummate the
transactions contemplated in this Agreement and that it wishes to exercise its
option (the "SECOND EXTENSION OPTION") to extend the Outside Date until the
earlier of (a) three (3) Business Days after all such Gaming Licenses have been
obtained and (b) the date that is twelve (12) months after the date of this
Agreement (the "SECOND EXTENDED OUTSIDE DATE"), then the Second Extended Outside
Date shall be the Outside Date; PROVIDED that no option may be exercised prior
to thirty (30) days prior to the then effective Outside Date.
"OWNED REAL PROPERTY" has the meaning set forth in Section
4.9(a)1.1(a).
"OWNED REAL PROPERTY SUBJECT TO LEASE" has the meaning set forth in
Section 4.9(a).
"OWNER LEASES" has the meaning set forth in Section 4.9(a).
9
"PARTY" or "PARTIES" each has the meaning set forth in the heading of
this Agreement.
"PERMIT" means any permit, certificate, license or other form of
authorization or approval issued by a government agency or authority and legally
required for the proper operation and use of any Real Property or the Business
of any of the Companies (including, without limitation, any certificates of
occupancy, elevator permits, conditional use permits, zoning variances,
non-conforming use permits and business licenses, but excluding Liquor
Licenses).
"PERMITTED ENCUMBRANCES" means (i) Encumbrances for Taxes and other
governmental charges and assessments that are not yet due and payable or which
are being contested in good faith by appropriate proceedings (provided that
required payments have been made in connection with any such contest), (ii)
Encumbrances of carriers, warehousemen, mechanics' and materialmen and other
like Encumbrances (provided that notices of lien have not been filed as of the
Closing Date); (iii) easements, rights of way and restrictions, zoning
ordinances and other similar Encumbrances affecting the Owned Real Property that
do not materially restrict or adversely affect the use thereof, (iv)
Encumbrances that will be removed prior to or in connection with the Closing,
and (v) restrictions arising under Gaming Laws.
"PERSON" means any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union, Governmental
Entity or other entity.
"PURCHASE PRICE" has the meaning set forth in Section 2.2(a).
"REAL PROPERTY" means, collectively, the Owned Real Property and the
Leased Real Property.
"REGULATED ENTITIES" means the Company and any Subsidiaries of the
Company that are subject to regulation by, or the jurisdiction of, Gaming
Authorities, as set forth on SECTION 1(b) OF THE DISCLOSURE SCHEDULE.
"RELATED PARTIES" has the meaning set forth in Section 4.19.
"REMEDIAL ACTION" has the meaning set forth in Section 6.14.
"REMEDIES EXCEPTION," when used with respect to any Person, means
except to the extent enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws affecting the enforcement
of creditors' rights generally and by general equitable principles.
"RESOLUTION PERIOD" has the meaning set forth in Section 2.2(d)(ii).
"SCHEDULED CLOSING DATE" means the earlier of (i) forty-five (45) days
after the satisfaction or waiver of all of the Closing conditions set forth in
Article VII, and (ii) the date that is eight (8) months from the date of this
Agreement.
"SECOND EXTENDED OUTSIDE DATE" has the meaning set forth in the
definition of "Outside Date."
10
"SECOND EXTENSION OPTION" has the meaning set forth in the definition
of "Outside Date."
"SELLER" has the meaning set forth in the heading of this Agreement.
"SELLER GROUP" means any "affiliated group" (as defined in Section
1504(a) of the Code without regard to the limitations contained in Section
1504(b) of the Code) that includes the Seller or any predecessor of or successor
to Seller (or another such predecessor or successor).
"SELLER INDEMNITEES" has the meaning set forth in Section 9.3.
"SELLER REQUIRED CONSENTS" means each of the Consents set forth on
EXHIBIT C hereto.
"SELLER RETURNS" has the meaning set forth in Section 6.3(a).
"SELLER'S GUARANTOR" has the meaning set forth in Section 10.16.
"SELLER'S KNOWLEDGE" has the meaning set forth in the definition of
"Knowledge."
"SENIOR SECURED NOTES" has the meaning set forth in the definition of
"Indebtedness to be Discharged."
"SINGLE-EMPLOYER PLAN" has the meaning set forth in Section 4.11(d).
"SOFTWARE" has the meaning set forth in the definition of "INTELLECTUAL
PROPERTY."
"SUBSIDIARY" of any Person means another Person, of which at least a
majority of the securities or ownership interests having by their terms ordinary
voting power to elect a majority of the board of directors or other persons
performing similar functions is owned or controlled directly or indirectly by
such first Person and/or by one or more of its Subsidiaries.
"TAX ALLOCATION AGREEMENT" means the Tax Allocation Agreement, dated as
of May 26, 2004, among Seller, the Company and those Subsidiaries that are
listed (as of the date hereof) on Section 4.5 of the Disclosure Schedules and
designated thereon as parties to the Tax Allocation Agreement.
"TAXES" means all taxes, charges, fees, levies or other assessments,
including all net income, gross income, gross receipts, sales, use, AD VALOREM,
transfer, franchise, profits, license, withholding, payroll, employment, social
security, unemployment, excise, estimated, severance, stamp, occupation,
property, gaming or other taxes, customs duties, fees, assessments or charges of
any kind whatsoever, including all interest and penalties thereon, and additions
to tax or additional amounts imposed by any Governmental Entity upon any of the
Companies.
"TAX RETURN" means any return, declaration, report, estimate,
information return and statement pertaining to any Taxes.
"TENTATIVE PURCHASE PRICE ALLOCATION" has the meaning set forth in
Section 6.3(j).
"THIRD PARTY" means any Person other than the Companies.
11
"TREASURY REGULATIONS" means the final and temporary regulations
promulgated under the Code.
"UPDATE" has the meaning set forth in Section 6.10.
"UPDATING PARTY" has the meaning set forth in Section 6.10.
"WORKING CAPITAL OVERAGE" has the meaning set forth in Section
2.2(d)(iv).
"WORKING CAPITAL UNDERAGE" has the meaning set forth in Section
2.2(d)(iv).
II. PURCHASE OF COMPANY MEMBERSHIP INTERESTS AND CLOSING
2.1 PURCHASE AND SALE. At the Closing and on the terms and subject to
the conditions set forth in this Agreement, Seller agrees to sell to Buyer, and
Buyer agrees to buy from Seller, all of the outstanding membership interests
issued by the Company (the "COMPANY MEMBERSHIP INTERESTS").
2.2 PURCHASE PRICE.
(a) CALCULATION. Subject to the adjustment set forth in Section
2.2(d) and Section 6.4, the total consideration for the purchase of the Company
Membership Interests shall consist of a cash payment in an aggregate amount
equal to (the "CLOSING DATE PAYMENT"): (i) One Billion Three Hundred Million
Dollars ($1,300,000,000.00) (the "INITIAL PURCHASE PRICE") MINUS (ii) the sum of
any Mandatory Capital Improvement Costs that are outstanding as of the Closing
Date, as described in Section 6.15, MINUS (iii) the aggregate principal amount
of Indebtedness of the Companies other than Indebtedness to be Discharged, on a
consolidated basis, immediately prior to the Closing PLUS (or MINUS if negative)
(iv) the Estimated Net Working Capital (the Initial Purchase Price, as so
adjusted by clauses (ii), (iii) and (iv) above, and as increased by (x) any
Working Capital Overage or decreased by (y) any Working Capital Underage, the
"PURCHASE PRICE"). Prior to the Closing, Seller shall cause the Company to repay
from funds provided by Seller the principal, any interest, any prepayment
penalty or premium and any other obligation owing under the terms of any
Indebtedness to be Discharged and to release and discharge all liens related
thereto on any of the assets of the Companies (and the funds so provided shall
be disregarded for purposes of calculating Net Working Capital). Seller shall be
responsible for the payment of any investment banking fees owing to Bear ▇▇▇▇▇▇▇
& Co., Inc. by the Company or Seller in connection with the transactions
contemplated hereby (the "BEAR ▇▇▇▇▇▇▇ PAYMENT") and for the payment of all of
Seller's and the Companies' legal fees and expenses incurred in connection with
this Agreement and the transactions contemplated hereby, in each case regardless
of when such items are invoiced. At least five (5) Business Days prior to the
Closing Date, Seller shall deliver to Buyer its good faith estimate of Closing
Net Working Capital (the "ESTIMATED NET WORKING CAPITAL"); provided, that Net
Working Capital shall not include any item deducted from or added to the Initial
Purchase Price pursuant to this Section 2.2(a).
(b) TAX CHARACTERIZATION. The Parties acknowledge that the sale of
the Company Membership Interests shall be characterized for federal income tax
purposes as a sale
12
by Seller of assets of certain directly or indirectly, wholly-owned limited
liability companies (the "LLCs").
(c) PURCHASE PRICE ALLOCATION. The Purchase Price shall be
allocated among the assets purchased in the manner set forth in Section 6.3(j).
(d) NET WORKING CAPITAL ADJUSTMENT.
(i) As soon as practicable, and in any event within ninety
(90) days after the Closing Date, Buyer will deliver to Seller an unaudited
consolidated balance sheet of the Companies as of immediately prior to the
Closing Date (the "CLOSING BALANCE SHEET"). The Closing Balance Sheet shall
include a line item that sets forth the Closing Net Working Capital and each
line item included on the Closing Balance Sheet shall be prepared in accordance
with GAAP, applied on a basis consistent with the basis on which the Audited
Financial Statements were prepared.
(ii) After receipt of the Closing Balance Sheet and Buyer's
proposed calculation of the Closing Net Working Capital, Seller shall have
thirty (30) days to review it. Buyer shall, and shall cause the Companies to,
(i) assist Seller in its review of the Closing Balance Sheet and provide Seller
and its representatives with reasonable access during normal business hours to
the books, records, facilities and employees of the Companies and (ii) cooperate
fully with Seller and its representatives, including the provision of all
information necessary or useful in reviewing and analyzing the Closing Balance
Sheet. At any time during such 30-day review period, Seller may deliver a
written notice to Buyer describing in reasonable detail all items of
disagreement related to the Closing Balance Sheet or Buyer's proposed
calculation of Closing Net Working Capital and the basis therefor and providing
the calculation by the Buyer of the Closing Net Working Capital (the "OBJECTION
NOTICE"). Any determination set forth in the Closing Balance Sheet that is not
specifically objected to by Seller in the Objection Notice shall be deemed
agreed to by Seller and shall be final, binding and conclusive for all purposes
under this Agreement upon delivery of the Objection Notice. If Seller delivers
the Objection Notice to Seller within the 30-day period referred to above, then
Buyer and Seller will, for twenty (20) days following the date of receipt of the
Objection Notice (the "RESOLUTION PERIOD"), attempt to resolve any such item of
disagreement themselves, and any written resolution by them as to any disputed
item shall be final, binding and conclusive on each of the Parties for all
purposes under this Agreement. If Seller fails to deliver the Objection Notice
to Seller within the 30-day period referred to above, then the Closing Balance
Sheet delivered by Buyer to Seller and Buyer's proposed calculation of the
Closing Net Working Capital shall be deemed agreed to by Seller and shall be
final, binding and conclusive on each of the Parties for all purposes under this
Agreement. Buyer shall provide Seller with reasonable access to the work papers
it generates in connection with the preparation of the Closing Balance Sheet.
(iii) If at the conclusion of the Resolution Period Seller and
Buyer have not reached an agreement on all items of disagreement set forth in
the Objection Notice, then all items remaining in dispute may, at the written
election of either Party delivered to the other Party (the "AUDIT NOTICE"), be
submitted by Buyer and Seller to an independent certified public accountant with
a nationally recognized independent accounting firm which has at least
13
fifteen (15) years experience in the hospitality and gaming industry and which
is mutually acceptable to Buyer and Seller within ten (10) days following
conclusion of the Resolution Period (the "NEUTRAL AUDITOR"). In the event that
Seller and Buyer do not agree on a Neutral Auditor within such time period, then
their dispute shall be submitted to arbitration pursuant to the rules of the
American Arbitration Association, as in effect at the time of the arbitration
(the "AAA RULES"), and the parties consent to such submission to arbitration and
the appointment of an arbitrator in accordance with the AAA Rules, which
arbitrator shall be an independent certified public accountant with a nationally
recognized independent accounting firm who has at least fifteen (15) years
experience in the hospitality and gaming industry who has no material
relationship with Buyer or Seller or their respective Affiliates (which
independent accountant shall then be considered the Neutral Auditor for all
purposes of this Agreement). If issues are submitted to the Neutral Auditor for
resolution, (i) Seller and Buyer shall (and shall cause each Party's respective
auditors and representatives to) cooperate with the Neutral Auditor and make
available to the Neutral Auditor all information, records, data, and supporting
papers relevant to the preparation of the Closing Balance Sheet and the
calculation of the Closing Net Working Capital; (ii) the determination of the
Closing Balance Sheet and the Closing Net Working Capital by the Neutral
Auditor, as set forth in a report to be delivered by the Neutral Auditor to both
Seller and Buyer, shall be final, binding and conclusive on each of the Parties
for all purposes under this Agreement; (iii) the report of the Neutral Auditor
shall not assign a value to any particular item greater than the greatest value
for such item claimed by either Party or less than the lowest value of such item
claimed by either Party, in each case as presented to the Neutral Auditor; and
(iv) the fees and expenses of the Neutral Auditor incurred for such
determination shall be shared equally by Seller and Buyer. The Neutral Auditor
shall be directed to deliver such report within thirty (30) days after the
submission to the Neutral Auditor of the issues remaining in dispute. The term
"FINAL CLOSING BALANCE SHEET" means the definitive Closing Balance Sheet agreed
to (or deemed by the provisions hereof to be agreed to) by Seller and Buyer in
accordance with Section 2.2(d)(ii) or the definitive Closing Balance Sheet
resulting from the determination made by the Neutral Auditor in accordance with
this Section 2.2(d)(iii) (in addition to those items theretofore agreed to (or
deemed by the provisions hereof to be agreed to) by Seller and Buyer in
accordance with Section 2.2(d)(ii)).
(iv) If the Closing Net Working Capital shown on the Final
Closing Balance Sheet exceeds the Estimated Net Working Capital, then Buyer
shall pay to Seller an amount equal to the amount of such excess (plus interest
on such amount at the prime lending rate prevailing during the period from the
Closing Date until the date of actual payment as published in THE WALL STREET
JOURNAL, calculated on a daily basis from the Closing Date until the date of
actual payment) (a "WORKING CAPITAL OVERAGE"). If the Closing Net Working
Capital is less than the Estimated Net Working Capital, then the Seller shall
pay to the Buyer an amount equal to such shortfall (plus interest on such amount
at the prime lending rate prevailing during the period from the Closing Date
until the date of actual payment as published in The Wall Street Journal,
calculated on a daily basis from the Closing Date until the date of actual
payment) (a "WORKING CAPITAL UNDERAGE"). All payments determined to be due under
this Section 2.2(d)(iv) to the Buyer or the Seller, as the case may be, shall be
made within five (5) Business Days after such determination by wire transfer to
an account designated by the other Party within two (2) days after such
determination.
14
2.3 THE CLOSING.
(a) GENERAL. The closing of the transactions contemplated by this
Agreement (the "CLOSING") will take place at the offices of American Real Estate
Partners, L.P., ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ #▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ at 10:00 a.m., local time, on the Scheduled Closing Date or as
soon thereafter as reasonably possible following satisfaction of the conditions
set forth in Article VII (the "CLOSING DATE"), or at such other place and on
such other date as may be mutually agreed by Buyer and Seller, in which case
Closing Date means the date and time so agreed. The Closing will be effective as
of the close of business on the Closing Date.
(b) DELIVERIES. Subject to the conditions set forth in this
Agreement, on the Closing Date:
(i) Seller will deliver to Buyer, and will cause the Company
to deliver to Buyer, as applicable:
(A) all Seller Required Consents, duly executed by all
appropriate parties;
(B) evidence of payment or cancellation of the Indebtedness
to be Discharged;
(C) certificates, dated as of a date not earlier than the
fourteenth (14th) day prior to the Closing, as to the good
standing of Seller and the Company, executed by the
appropriate official of their respective jurisdictions of
formation and, with respect to the Company, each jurisdiction
in which it is qualified to do business as a foreign limited
liability company;
(D) evidence of the resignations or removal (effective as
of the Closing Date) of any officers, directors and managers
specified in writing by Buyer at least three (3) days prior to
the Closing Date, as applicable, of all of the Companies;
(E) an affidavit of Seller, in a form reasonably
satisfactory to Buyer, stating, under penalties of perjury,
the Seller's U.S. taxpayer identification number and that
Seller is not a foreign person within the meaning of Section
1445(b)(2) of the Code; and
(F) a duly executed assignment of membership interests
transferring all of the Company Membership Interests, together
with any certificates (endorsed to Buyer with a stock power)
evidencing the Company Membership Interests.
(ii) Buyer will deliver to Seller, and will cause the Company,
to deliver to Seller, as applicable:
15
(A) The Closing Date Payment by wire transfer of
immediately available funds to the account designated by
Seller to Buyer;
(B) all Buyer Required Consents, duly executed by all
appropriate parties; and
(C) certificates, dated as of a date not earlier than the
fourteenth (14th) day prior to the Closing, as to the good
standing of Buyer, executed by the appropriate official of its
jurisdiction of formation and in each jurisdiction in which
Buyer is qualified to do business.
(iii) The Seller and Buyer will deliver to each other the
Tentative Purchase Price Allocation if their respective accountants have jointly
made such a determination pursuant to Section 6.3(j)(A).
(c) DELIVERY. All items delivered by the parties at the Closing
will be deemed to have been delivered simultaneously, and no items will be
deemed delivered or waived until all have been delivered.
2.4 FURTHER ASSURANCES. The Parties agree (a) to furnish upon request
to each other such further information, (b) to execute and deliver to each other
such other documents, and (c) without incurring any expenses not reimbursed by
the other Party or liability, to do such other acts and things, all as the other
Party may reasonably request for the purpose of carrying out the intent of this
Agreement.
III. GENERAL REPRESENTATIONS AND WARRANTIES OF SELLER
Except as set forth in the Disclosure Schedule or in any public filings
made by the Company pursuant to the Act, Seller hereby represents and warrants
to Buyer, as of the date of this Agreement as set forth in this Article III.
Although the Disclosure Schedule, for convenience, shall set forth specific
reference to the particular Section or subsection of this Agreement to which the
information set forth in the Disclosure Schedule relates, any information set
forth in the Disclosure Schedule shall be deemed to apply to this Article III in
its entirety. The mere inclusion of an item in the Disclosure Schedule as an
exception to a representation or warranty shall not be deemed an admission that
such item represents a material exception or material fact, event or
circumstance or that such item has had, or would reasonably be expected to have,
a Material Adverse Effect.
3.1 TITLE TO COMPANY MEMBERSHIP INTERESTS. Seller owns, of record and
beneficially, all of the issued and outstanding Company Membership Interests,
free and clear of any Encumbrance, other than those restrictions imposed by
applicable Gaming Laws. At the Closing, Seller will convey to Buyer good and
valid title to such Company Membership Interests free and clear of any
Encumbrance.
3.2 INCORPORATION; POWER AND AUTHORITY. Seller is a corporation, duly
organized, validly existing and in good standing under the Laws of the
jurisdiction of its organization. Seller has all necessary corporate power and
authority to execute, deliver and perform its obligations under this Agreement.
Seller is duly qualified to do business as a foreign corporation
16
in each jurisdiction is which the failure to be so qualified would be reasonably
expected to have a Material Adverse Effect.
3.3 VALID AND BINDING AGREEMENT. The execution, delivery and
performance by Seller of this Agreement have been duly and validly authorized by
all necessary corporate action. This Agreement has been duly executed and
delivered by Seller and constitutes the valid and binding obligation of Seller,
enforceable against Seller in accordance with its terms, subject to the Remedies
Exception.
3.4 NO BREACH; CONSENTS. The execution, delivery and performance of
this Agreement by Seller will not (a) contravene any provision of the
Organizational Documents or any authorizing resolutions of Seller; (b) violate
or conflict with any Law, Governmental Order or Governmental Authorization; (c)
conflict with, result in any breach of any of the provisions of, constitute a
default (or any event that would, with the passage of time or the giving of
notice or both, constitute a material default) under, result in a violation of,
increase the burdens under, result in the termination, amendment, suspension,
modification, abandonment or acceleration of payment (or any right to terminate)
or require a Consent under any Contract, Law, Governmental Order or Governmental
Authorization that is either binding upon or enforceable against or held by
Seller; (d) result in the creation of any Encumbrance upon the Company
Membership Interests; or (e) as of the Closing Date, require any Governmental
Authorization applicable to Seller or any of the Companies, except, in each
case, for filings required under the HSR Act, Gaming Laws and such Governmental
Approvals required for Seller to be able to perform its obligations under
Section 6.17.
3.5 BROKERAGE. Except for Bear ▇▇▇▇▇▇▇ & Co., Inc., whose fees with
respect to the Purchase Price will have been paid by Seller at the Closing, no
Person will be entitled to receive any brokerage commission, finder's fee, fee
for financial advisory services or similar compensation in connection with the
transactions contemplated by this Agreement based on any Contract made by or on
behalf of Seller for which Buyer or the Company is or could become liable or
obligated.
IV. REPRESENTATIONS AND WARRANTIES OF SELLER REGARDING THE COMPANY
Except as set forth in the Disclosure Schedule or in any public filings
made by the Company pursuant to the Act, Seller hereby represents and warrants
to Buyer, as of the date of this Agreement as set forth in this Article IV.
Although the Disclosure Schedule, for convenience, shall set forth specific
reference to the particular Section or subsection of this Agreement to which the
information set forth in the Disclosure Schedule relates, any information set
forth in the Disclosure Schedule shall be deemed to apply to this Article IV in
its entirety. The mere inclusion of an item in the Disclosure Schedule as an
exception to a representation or warranty shall not be deemed an admission that
such item represents a material exception or material fact, event or
circumstance or that such item has had, or would reasonably be expected to have,
a Material Adverse Effect.
4.1 INCORPORATION; POWER AND AUTHORITY. The Company is a limited
liability company duly organized, validly existing and in good standing under
the Laws of the jurisdiction of its organization, and has all necessary limited
liability company power and authority necessary to
17
execute, deliver and perform its obligations under this Agreement and to own,
lease and operate its assets and to carry on the Business as conducted as of the
date of this Agreement. The Company is duly qualified or licensed to do business
as a foreign limited liability company in good standing in the State of Nevada.
SECTION 4.1 OF THE DISCLOSURE SCHEDULE lists the jurisdiction of the Company's
organization and each jurisdiction in which it is so qualified.
4.2 [Intentionally Omitted.]
4.3 NO BREACH; CONSENTS. Except as set forth in SECTION 4.3 OF THE
DISCLOSURE SCHEDULE, the execution, delivery and performance of this Agreement
by Seller will not (a) contravene any provision of the Organizational Documents
or any authorizing resolutions of the Company; (b) violate any Law, Governmental
Order or Governmental Authorization, where such violation would be reasonably
expected to have a Material Adverse Effect; (c) materially conflict with, result
in any material breach of any of the provisions of, constitute a material
default (or any event that would, with the passage of time or the giving of
notice or both, constitute a material default) under, result in a material
violation of, materially increase the burdens under, result in the termination,
amendment, suspension, modification, abandonment or acceleration of payment (or
any right to terminate) under any contract to which any of the Companies is a
Party or by which any of the Companies' assets are bound, except as would not
reasonably be expected to have a Material Adverse Effect, (d) require any
Consent under any Contract, Law, Governmental Order or Governmental
Authorization that is either binding upon or enforceable against or held by any
of the Companies or the assets of any of the Companies; (e) result in the
creation of any Encumbrance upon the Companies or any of the material assets of
the Companies; or (f) as of the Closing Date, require any Governmental
Authorization applicable to Seller or any of the Companies, except, in each
case, for filings required under the HSR Act, Gaming Laws and such Governmental
Approvals required for Seller to be able to perform its obligations under
Section 6.17, or, except in the case of clause (d), where the failure to obtain
such Consents would not reasonably be expected to have a Material Adverse
Effect.
4.4 CAPITALIZATION. The Company Membership Interests constitute all of
the issued and outstanding membership interests of the Company. No Person other
than Seller owns any Equity Securities of the Company. The Company Membership
Interests are evidenced by a certificate of ownership, and no legend or other
reference to any purported Encumbrance appears on such certificate, other than
any legend required under applicable Gaming Laws or required under federal or
state securities Laws. Seller is not party to any agreement, understanding or
arrangement relating to the Company Membership Interests or other Equity
Securities of the Company other than this Agreement and the Organizational
Documents of the Company. All of the outstanding Company Membership Interests
are duly authorized, validly issued, and have been issued by the Company in
compliance with applicable Gaming Laws and applicable securities and corporate
Laws, Contracts applicable to the Company and the Company's Organizational
Documents. Except as set forth above, there are no Equity Securities of the
Company authorized, issued or outstanding; and there are no existing options,
warrants, calls, pre-emptive rights, rights of first refusal, subscriptions or
other rights, agreements, arrangements or commitments of any character, relating
to the issued or unissued Equity Securities of the Company, obligating any of
the Companies to issue, transfer or sell or cause to be issued, transferred or
sold any Equity Securities of any of the Companies. There are no issued and
18
outstanding securities, rights or obligations which are convertible into,
exchangeable for, or exercisable to acquire any Equity Securities of any of the
Companies.
4.5 SUBSIDIARIES; COMPANIES.
(a) SECTION 4.5 OF THE DISCLOSURE SCHEDULE is true, correct and
complete and sets forth (i) the name, jurisdiction of organization and
authorized capital (if a corporation) of each Subsidiary of the Company (the
Company and its Subsidiaries are hereinafter sometimes collectively referred to
as the "COMPANIES"), (ii) the jurisdictions in which each Subsidiary of the
Company is qualified to do business and (iii) for each Subsidiary of the
Company, the Equity Securities of such Subsidiary that are authorized, the
shares of capital stock or other Equity Securities of such Subsidiary that are
issued and outstanding, the Persons owning such issued and outstanding Equity
Securities and the number or other amount of Equity Securities owned by each
such Person. All of the outstanding shares of capital stock of each Subsidiary
that is a corporation have been duly authorized and validly issued and are fully
paid and nonassessable. Except as set forth on SECTION 4.5 OF THE DISCLOSURE
SCHEDULE, all of the outstanding Equity Securities of each Subsidiary of the
Company are wholly owned by the Company, by one or more Subsidiaries of the
Company or by the Company and one or more Subsidiaries of the Company, free and
clear of all Encumbrances. No Third Party owns any Equity Security or right or
option to acquire any Equity Security in any of the Company's Subsidiaries.
Except with respect to the ownership of Equity Securities of the Company's
Subsidiaries, none of the Companies owns, directly or indirectly, beneficially
or of record, any Equity Securities of any Third Party.
(b) None of the Companies is a party to any stockholder agreements,
voting trusts or other agreements or understandings relating to the voting,
purchase, redemption or other acquisition of any Equity Securities of any Third
Party. There are no outstanding obligations of the Companies to make any
investment in or to provide funds (whether in the form of a loan, capital
contribution or otherwise), and none of the Companies currently has outstanding
any obligation to make any such investment or provision of funds, to any Third
Party. No Third Party is in default with respect to such Third Party's
obligation to repay any loan to the Companies. None of the Companies has
outstanding any bonds, debentures, notes or other obligations the holders of
which have the right to vote (or which are convertible into or exercisable for
securities having the right to vote) with the Equity Securities of the
Companies. None of the Companies has outstanding any agreement to acquire any
debt obligations of any Third Party.
(c) Except for this Agreement, there are no, and none of the
Companies is bound by or subject to any, (i) preemptive or other outstanding
rights, subscriptions, options, warrants, conversion, put, call, exchange or
other rights, agreements, commitments, arrangements or understandings of any
kind pursuant to which any of the Companies, contingently or otherwise, is or
may become obligated to offer, issue, sell, purchase, return or redeem, or cause
to be offered, issued, sold, purchased, returned or redeemed, any Equity
Securities; (ii) stockholder agreements, voting trusts, proxies or other
agreements or understandings to which any of the Companies is a party or to
which any of the Companies is bound relating to the holding, voting, sale,
purchase, redemption or other acquisition of any Equity Securities; or (iii)
agreements, commitments, arrangements, understandings or other
19
obligations to declare, make or pay any dividends or distributions, whether
current or accumulated, or due or payable, with respect to any Equity
Securities. Except for this Agreement, none of the Companies is, or is obligated
to become, a party to any contract for the sale of or is otherwise obligated to
sell, transfer or otherwise dispose of any Equity Securities.
(d) Seller has made available to Buyer a complete and correct copy
of the Organizational Documents of each of the Companies, in each case as
currently in effect. All such Organizational Documents are in full force and
effect, and no other organizational documents are applicable to or binding upon
any of the Companies. Seller has made available to Buyer complete and correct
copies of the minutes of the meetings or written consents of the shareholders
(or other equity holders) and the board of directors (or similar bodies) and any
committee thereof of each of the Companies.
4.6 AUDITED FINANCIAL STATEMENTS. The Company has furnished Buyer with
copies of the audited consolidated balance sheets for the years ended December
31, 2006 and 2005 and the related statements of income, changes in members'
equity and cash flow for the fiscal years of the Companies ended on such dates
(the "AUDITED FINANCIAL STATEMENTS"). The Audited Financial Statements (i)
present fairly, in all material respects, the consolidated financial position of
the Companies and the results of operations and cash flows of the Companies,
each on a consolidated basis, as of the respective dates thereof and for the
periods covered thereby, and (ii) were prepared in accordance with GAAP applied
on a consistent basis throughout the periods covered thereby. There are no
liabilities or obligations of the Companies (whether accrued, contingent,
absolute, determined or determinable) other than: (i) liabilities or obligations
disclosed or provided for in the Audited Financial Statements; (ii) liabilities
or obligations incurred after December 31, 2006 in the ordinary course of
business consistent with past practice; (iii) liabilities under this Agreement
or incurred as expressly provided by this Agreement; (iv) liabilities disclosed
in Seller's Disclosure Schedule; and (v) other liabilities that would not have,
individually or in the aggregate, and would not be reasonably expected to have a
Material Adverse Effect.
4.7 BOOKS AND RECORDS. The books of account and other financial records
of the Company, all of which have been made available to Buyer, are accurate in
all material respects and represent actual, BONA FIDE transactions and have been
maintained in accordance with sound business practices. The minute books of the
Company, all of which have been made available to Buyer, contain summary records
of all meetings held of, and material limited liability company action taken by,
the members of the Company.
4.8 ABSENCE OF CERTAIN CHANGES.
(a) NO DAMAGES. Since December 31, 2006: (1) none of the Companies
has suffered any damage, destruction or loss (whether or not covered by
insurance) of property, plant or equipment, other than such damage, destruction
and loss that has not had, and would not be reasonably expected to have, a
Material Adverse Effect; (2) the Companies have conducted their Business in the
ordinary course consistent with past practice though the date of this Agreement;
and (3) there has been no Material Adverse Effect on any of the Companies.
(b) INCREASED COMPENSATION, ETC. Except as set forth in SECTION
4.8(b) OF THE
20
DISCLOSURE SCHEDULE, since December 31, 2006 through the date of this Agreement,
none of the Companies has, other than in the ordinary course of business: (1)
increased the compensation (including bonuses) payable on or after the date
hereof, or to become payable on or after the date hereof, to any employee,
director, manager or executive officer of any of the Companies or to any former
employee, director, manager or executive officer of any of the Companies; (2)
provided any of its employees (including any officer or director who is an
employee with materially increased security or tenure of employment; (3)
materially increased the amount payable to any of its employees upon the
termination of such person's employment; (4) materially increased, augmented or
improved benefits granted to or for the benefit of its employees under any
bonus, profit sharing, pension, retirement, deferred compensation, insurance or
other direct or indirect benefit plan or arrangement; (5) except for travel
advances in the ordinary course of business and loans to employees aggregating
less than $50,000, loaned or advanced money or other property to any of its
employees, officers, directors, or former employees, officers or directors; (6)
incurred, assumed, or guaranteed any liabilities or Indebtedness of any kind; or
(7) sold, assigned, transferred, leased or otherwise disposed of any material
assets of any of the Companies.
(c) DIVIDENDS, ETC. Except as set forth in the SECTION 4.8(C) OF
THE DISCLOSURE SCHEDULE, and except for payments contemplated by the Tax
Allocation Agreement, since December 31, 2006 the Companies have not: (1)
declared, paid or set aside for payment any dividend or other distribution in
respect of its capital stock (other than dividends or distributions payable to
the Company) or redeemed, purchased or otherwise acquired, directly or
indirectly, any shares of capital stock or other securities of any of the
Companies, other than dividends paid solely in cash; (2) except as required
under Section 6.17, amended or changed any of the Companies' Organizational
Documents; (3) acquired (by merger, consolidation, or acquisition of stock or
assets) any corporation, partnership or other business organization or business
or division thereof or any equity interest therein; or (4) made any material
loan, advance or capital contribution to, or investment in, any Person other
than loans, advances or capital contributions made by the Company to a
Subsidiary or by a Subsidiary to the Company.
4.9 PROPERTIES.
(a) OWNED REAL PROPERTY. SECTION 4.9(a)(i) OF THE DISCLOSURE
SCHEDULE contains an accurate and complete list of all real property owned by
any of the Companies (collectively, the "OWNED REAL PROPERTY") and identifies
which of the Companies owns each such Owned Real Property. Accurate and complete
copies of title reports or policies obtained by the Companies with respect to
each parcel of Owned Real Property have been previously made available to Buyer.
SECTION 4.9(a)(ii) OF THE DISCLOSURE SCHEDULE contains an accurate and complete
list of all real property owned by any of the Companies and leased to a Third
Party (collectively, the "OWNED REAL PROPERTY SUBJECT TO LEASE"), together with
a list of all leases or subleases of Owned Real Property Subject to Lease (the
"OWNER LEASES"). Accurate and complete copies of all Owner Leases (including,
without limitation, all amendments or modifications thereto) have been made
available to Buyer.
(b) LEASED REAL PROPERTY. SECTION 4.9(b) OF THE DISCLOSURE SCHEDULE
contains an accurate and complete list of all real property leased, subleased,
licensed or otherwise occupied (whether as tenant, subtenant or pursuant to
other occupancy arrangements) by any of
21
the Companies (collectively, including the improvements thereon, the "LEASED
REAL PROPERTY") and identifies which of the Companies leases, subleases,
licenses or otherwise occupies each such Leased Real Property. Accurate and
complete copies of all material agreements related to such Leased Real Property,
including the leases of real property to which any of the Companies is a party
(the "LEASES"), that have not been terminated or expired as of the date of this
Agreement have been made available to Buyer.
(c) TITLE. Each of the Companies identified on SECTION 4.9(a)(i) OF
THE DISCLOSURE SCHEDULE has good and insurable fee simple title to the Owned
Real Property set across from its name in such SECTION 4.9(a)(i) OF THE
DISCLOSURE SCHEDULE, and each of the Companies identified on SECTION 4.9(b) OF
THE DISCLOSURE SCHEDULE, has a valid leasehold interest in the Leased Real
Property set across from its name in such SECTION 4.9(B) OF THE DISCLOSURE
SCHEDULE. The Owned Real Property is owned free and clear of all Encumbrances
except for Permitted Encumbrances and the matters set forth in the title reports
and the title commitments delivered to Buyer or anything that would be disclosed
in an accurate and updated survey if it was delivered by Seller prior to the
Closing Date. Except for the Leased Real Property required to conduct the
Business, no Person owns any real property required to conduct the Business
except the specified Company. Except for the tenants under the Owner Leases, no
Person other than the Companies has any right to use, occupy or lease any of the
Owned Real Property.
(d) PERFORMANCE OF LEASES. The Companies have and, to Seller's
Knowledge, all other parties thereto have performed all material obligations
required to be performed by them under all Leases and under all Owner Leases. No
event or condition exists which constitutes or, with the giving of notice or the
passage of time or both, will constitute a default by any of the Companies,
which would be expected to have a Material Adverse Effect (i) as lessee or
licensee under any Lease, or (ii) as landlord or sub-landlord under any Owner
Lease. To Seller's Knowledge, no event or condition exists which constitutes or,
with the giving of notice or the passage of time or both, will constitute a
default by any other party which would be expected to have a Material Adverse
Effect (i) as lessor or licensor under any Lease, or (ii) as tenant or
sub-tenant under any Owner Lease. Each Lease and Owner Lease is in full force
and effect. Except as set forth in SECTION 4.9(d) OF THE DISCLOSURE SCHEDULE and
other exceptions that would not reasonably be expected to have a Material
Adverse Effect, (i) no rent or other payment due from the tenant under any Owner
Lease is, as of the date of this Agreement, delinquent for greater than thirty
(30) days past its due date or has been paid more than one month in advance of
its due date, (ii) there is no remaining right in the tenant under any Owner
Lease to any "free" rent, rent abatement (other than upon damage to or
destruction or condemnation of the leased premises) or other rent concession,
(iii) there is no remaining obligation on the part of the landlord under any
Owner Lease to construct, install or pay or reimburse the cost of any tenant
improvements, fixtures, furnishings or equipment or otherwise to make any
payments to the tenant, (iv) there is no remaining obligation, present or
contingent, on the part of any of the Companies to pay any commission, finder's
fee or similar compensation with respect to any Owner Lease, and (v) Seller has
received no written notice that any of the tenants under the Owner Leases is
subject to any bankruptcy, reorganization, insolvency or similar proceedings.
(e) OPTIONS AND OTHER RIGHTS. None of the Companies has granted or
is subject to any options, rights of first refusal, rights of first offer or any
other rights in favor of third parties which are currently in effect to purchase
or otherwise acquire any Real Property or
22
any interest therein other than any renewal or extension options set forth in
the Owner Leases.
4.10 TAX MATTERS. Except as set forth in SECTION 4.10 OF THE DISCLOSURE
SCHEDULE:
(a) FILINGS. All federal income Tax Returns and all other material
Tax Returns with respect to each of the Companies (including any consolidated
U.S. federal income Tax Returns for any consolidated group that includes each of
the Companies) that are required to be filed under applicable Law have been
filed, and all such Tax Returns are true and complete in all material respects
with respect to each of the Companies. The Company made available to the Buyer
true and correct copies of the United States federal income Tax Returns filed by
each of the Companies for the years ended December 31, 2003, 2004 and 2005.
(b) PAYMENT. Each of the Companies has paid or caused to be paid
all Taxes shown as due on the Tax Returns filed in accordance with Section
4.10(a).
(c) WITHHOLDING. Each of the Companies has withheld from its
employees and, to the extent required to be paid, has timely paid to the
appropriate authorities or set aside in an account for such purpose all proper
and accurate amounts that are required to be withheld, so paid or so set aside,
in each case in substantial compliance with all Tax withholding provisions on
amounts paid or owed to any employee, creditor, stockholder or member, or other
third party.
(d) NO TAX LIENS. There is no lien for Taxes upon any membership
interest of the Company or upon any asset of the Company (including, for the
avoidance of doubt, upon the stock of any of the Corporate Entities, the
membership interests in any of the LLCs or any other equity interest in any of
the Companies, or upon any of the assets of any of the Companies) nor, to
Seller's Knowledge, is any Governmental Entity in the process of imposing any
such Tax liens.
(e) NO DEFICIENCIES. The Companies have not received any
deficiencies for Taxes that have been asserted in writing, proposed in writing
or assessed in writing against any of the Companies that have not been paid or
otherwise settled or are not otherwise being challenged under appropriate
procedures, except for deficiencies that, if finally resolved in a manner
adverse to one of the Companies, would not reasonably be expected to have a
Material Adverse Effect.
(f) NO TIME EXTENSION. No waivers of statutes of limitations have
been requested in writing or given with respect to any Taxes of any of the
Companies or any member of the "affiliated group" (as defined in Section 1504(a)
of the Code without regard to the limitations contained in Section 1504(b) of
the Code) that includes any of the Companies.
(g) NO AUDITS. There are no pending or threatened in writing,
audits, examinations, investigations or other proceedings in respect of Taxes of
any of the Companies.
(h) NO PARACHUTE PAYMENT. No payment or other benefit, and no
acceleration of the vesting of any options, payments or other benefits as a
result of the transactions contemplated by this Agreement will be an "excess
parachute payment" to a "disqualified individual" as those terms are defined in
Section 280G of the Code.
23
(i) NO TAX SHARING. None of the Companies is currently a party to
or bound by any tax-sharing arrangement, other than the Tax Allocation
Agreement.
(j) INTENTIONALLY OMITTED.
(k) NO OTHER AFFILIATION. During the last six (6) years, none of
the Corporate Entities have been a member of an affiliated, combined,
consolidated or unitary Tax group other than such a tax group of which the
Seller or any corporate Subsidiary thereof is or was the common parent or has
any liability that arose during such time period for the Taxes of any Person
under Section 1.1502-6 of the Treasury Regulations (or similar provision under
state, local or foreign Law), as a transferee or successor, by contract or
otherwise.
(l) NO CLOSING AGREEMENT. To Seller's Knowledge, no closing
agreements, private letter rulings, technical advice memoranda or similar
agreement or rulings have been entered into or issued by any Governmental
Authority with respect to any of the Companies or an Affiliate thereof.
(m) NO CHANGE OF ACCOUNTING METHOD. None of the Companies will be
required, as a result of (A) a change in income tax accounting method for a Tax
period beginning on or before the Closing Date, to include any adjustment under
Section 481(c) of the Code (or any similar provision of state, local or foreign
Law) in taxable income for any Tax period beginning on or after the Closing
Date, or (B) any "closing agreement" as described in Section 7121 of the Code
(or any similar provision of state, local or foreign Tax Law), to include any
item of income in or exclude any item of deduction from any Tax period beginning
on or after the Closing Date.
(n) TAX STATUS OF COMPANIES. The Company is a limited liability
company that is owned wholly and directly by Seller, has not made an election on
IRS Form 8832 to be treated as an association taxable as a corporation. None of
the Companies has made an election on IRS Form 8832 to be treated as an
association taxable as a corporation.
(o) NO REPORTABLE TRANSACTIONS. To Seller's Knowledge, none of the
Companies is required to make any disclosure to the IRS with respect to a
"reportable transaction" pursuant to Section 1.6011-4 of the final Treasury
Regulations (other than transactions with significant book-tax differences).
4.11 BENEFIT PLANS; LABOR MATTERS.
(a) DESCRIPTION. Each material Benefit Plan as of the date hereof
is listed in SECTION 4.11(a) OF THE DISCLOSURE SCHEDULE. With respect to each
such Benefit Plan (other than a Multiemployer Plan or a "multiemployer plan"
within the meaning of Section 3 of ERISA), the Company has provided or made
available to Buyer a true and correct copy of (i) each such Benefit Plan and all
amendments thereto; (ii) each trust, insurance or administrative agreement
relating to each such Benefit Plan; (iii) the most recent summary plan
description or other written explanation of each Benefit Plan provided to
participants; (iv) the most recent annual report (Form 5500) filed with the IRS
and the most recent actuarial valuation; and (v) the most recent determination
letter, if any, issued by the IRS with respect to any Benefit Plan intended to
be qualified under Section 401(a) of the Code.
24
(b) COMPLIANCE. Each Benefit Plan maintained by any of the
Companies has been maintained in substantial compliance with its terms and, both
as to form and in operation, with the requirements of ERISA, the Code and other
applicable law, except for any noncompliance that would not reasonably be
expected to have a Material Adverse Effect on the Companies. All contributions
to and premiums in respect of each Benefit Plan have been timely paid or, to the
extent not yet due, have been adequately accrued and reflected on the applicable
financial statements of the Companies in accordance with GAAP.
(c) NO DISPUTES. As of the date of this Agreement, there are no
material pending or, to Seller's Knowledge, threatened litigation, disputes,
arbitrations, claims, suits or grievances involving a Benefit Plan (other than
routine claims for benefits payable under any such Benefit Plan).
(d) PENSION PLANS. (i) Except as set forth in SECTION 4.11(d) OF
THE DISCLOSURE SCHEDULE, no Benefit Plan is a "single-employer plan" within the
meaning of Section 4001(a)(15) of ERISA (a "SINGLE-EMPLOYER PLAN") or a
"multiemployer plan" within the meaning of Section 4001(a)(3) of ERISA (a
"MULTIEMPLOYER PLAN"). (ii) No Person (other than any of the Companies) that is
considered as a single employer with any of the Companies under Section 414 of
the Code or Section 4001(b) of ERISA maintains or contributes to, is obligated
to contribute to or has ever maintained or contributed to or been obligated to
contribute to a Single-Employer Plan or a Multiemployer Plan that could
reasonably be expected to result in any Liability to the Companies.
(e) POST-TERMINATION WELFARE BENEFITS. Except as set forth in
SECTION 4.11(E) OF THE DISCLOSURE SCHEDULE, no Benefit Plan provides
post-termination or retiree health or life benefits with respect to any current
or former employee (other than benefit coverage mandated by applicable law,
including coverage provided pursuant to Section 4980B of the Code). Except as
set forth in SECTION 4.11(e) OF THE DISCLOSURE SCHEDULE and in documents
provided to Buyer, the Companies may amend or terminate any such plan at any
time without incurring any liability thereunder other than in respect of claims
incurred prior to such amendment or termination.
(f) NO ADDITIONAL BENEFITS. Except as set forth in SECTION 4.11(f)
OF THE DISCLOSURE SCHEDULE, neither the execution and delivery of this Agreement
by the Company nor the consummation of the transactions contemplated hereby will
(i) result in the acceleration or creation of any rights of any person to
compensation or benefits under any Benefit Plan or other compensatory
arrangement, including severance pay or an increase in severance pay upon
termination of employment after the date hereof, in loan forgiveness or in an
obligation to fund benefits with respect to any Benefit Plan or other
compensatory arrangement or (ii) except as may be provided by applicable law,
limit or restrict the right of the Companies or, after the consummation of the
transactions contemplated hereby, Buyer to merge, amend or terminate any of the
Benefit Plans. As of the date hereof, there has been no amendment to,
announcement by the Companies relating to, or change in employee participation
or coverage under, any Benefit Plan which would increase materially the expense
of maintaining such plan above the level of the expense incurred therefore for
the most recent fiscal year.
(g) DEFERRED COMPENSATION PLANS. All Benefit Plans that are
"nonqualified deferred compensation plans" (within the meaning of Section 409A
of the Code) have been
25
maintained and administered in compliance with Section 409A of the Code and
existing regulations or other guidance issued thereunder.
(h) EMPLOYMENT AGREEMENTS. Except as set forth in SECTION 4.11(h)
OF THE DISCLOSURE SCHEDULE, none of the Companies: (i) is party to any
employment agreement with any of its employees, or (ii) has any severance plan
or policy applicable to any of its employees.
(i) LABOR MATTERS. Except as set forth in SECTION 4.11(i) OF THE
DISCLOSURE SCHEDULE, none of the Companies is party to any collective bargaining
agreements as of the date of this Agreement, and no employees of any of the
Companies are members of a labor union. There is no labor strike, picketing,
corporate campaign, dispute, slowdown, stoppage or lockout actually pending, or
to Seller's Knowledge, threatened against any of the Companies, and during the
past year there has not been any such action. Each of the Companies is currently
in compliance in all material respects with all applicable federal, state and
local laws relating to the employment of labor, including without limitation
those related to wages, hours, collective bargaining, the withholding,
collection and payment of Social Security, Unemployment Compensation and similar
payroll Taxes, equal pay, workers compensation, occupational health and safety,
immigration, payment of overtime and the classification of employees as overtime
eligible and overtime exempt, fair labor standards, discrimination on the basis
of race, age, sex, religion, color, national origin, disability and other
classifications protected by applicable federal, state and local laws. There are
no unfair labor practice charges or complaints pending or threatened against the
Companies before the National Labor Relations Board or other Governmental
Entity. There is no union organizational campaign presently in progress with
respect to any employees of the Companies and there is no request or petition
for union representation. There are no grievances or arbitrations pending or
threatened under any collective bargaining agreement to which the Companies are
a party which could involve liability, in the aggregate, in excess of $50,000.
To Seller's Knowledge, there is no pending or threatened inquiry or audit from
any Governmental Entity concerning the Company's compliance with any applicable
federal, state or local laws relating to employment.
(j) INDEPENDENT CONTRACTORS. Any individual engaged by the
Companies or providing services to the Companies as an independent contractor
has been accurately classified as an independent contractor for all purposes,
including, without limitation, payroll tax, withholding, unemployment insurance,
and benefits, and the Companies have no notice of any pending or threatened
inquiry or audit from any Governmental Entity concerning such independent
contractor status, or any pending or threatened claim by any party that any such
independent contractor be reclassified as an employee for any purpose.
(k) IMMIGRATION COMPLIANCE. The Companies maintain copies of I-9
Employment Eligibility Verification Forms for all persons it has employed,
including those persons it currently employs, during the three year period
ending on the date of the execution of this Agreement, and is in compliance with
the Immigration Reform and Control Act of 1986, as amended, respecting such
current or former employees.
4.12 INTELLECTUAL PROPERTY. The Companies own or validly license or
otherwise have the right to use all Intellectual Property essential to the
Business of the Companies as currently conducted (the "COMPANY INTELLECTUAL
PROPERTY"). SECTION 4.12 OF THE DISCLOSURE SCHEDULE sets
26
forth a true and complete list of each registered item of Intellectual Property,
including the registration or application number and the applicable filing
jurisdiction, as well as all material unregistered intellectual property owned
by the Companies. All registrations and applications for the Company
Intellectual Property are subsisting, unexpired, and free and clear of any
Encumbrances (except Permitted Encumbrances), and are not subject to any
outstanding order, judgment, award, decree or agreement adversely affecting the
use thereof by the Companies or their rights thereto. Except as set forth in
SECTION 4.12 OF THE DISCLOSURE SCHEDULE, no claims, litigations, arbitrations,
oppositions, cancellations, proceedings are pending or asserted, or, to Seller's
Knowledge, have been threatened in the past twelve (12) months, (a) challenging
the ownership, enforceability, validity, or use by any of the Companies of any
Company Intellectual Property, or (b) alleging that any of the Companies is
violating, misappropriating or infringing or otherwise adversely affecting the
rights of any Person with regard to any Intellectual Property. To Seller's
Knowledge, (i) no Person is infringing the rights of the any of the Companies
with respect to any Company Intellectual Property and (ii) the operation of the
Business of the Companies as currently conducted and the Intellectual Property
owned by the Companies do not violate, misappropriate or infringe the
Intellectual Property of any other Person. The Companies have taken commercially
reasonable actions to maintain and preserve the material Company Intellectual
Property used in the conduct of the Business. The Companies' Software and
information technology equipment operate and perform in all material respects as
required by the Companies in connection with their business.
4.13 MATERIAL CONTRACTS. SECTION 4.13 OF THE DISCLOSURE SCHEDULE
contains a list of all Contracts of the types described below that are in effect
as of the date of this Agreement (excluding customary purchase orders in the
ordinary course of business and Contracts that may be terminated by any of the
Companies, without penalty, on not more than thirty (30) days' prior notice or
that have annual payments, fees or compensation, as applicable, which do not
exceed $1,000,000):
(a) any Contract between any of the Companies, on the one hand, and
any employee, on the other hand, the performance of which involves payment by
any of the Companies of total compensation in excess of $200,000 per year;
(b) Indebtedness of the types described in clauses (i), (ii) or
(vi) of the definition of Indebtedness;
(c) any equipment lease Contract of any of the Companies under
which any equipment is held or used by any of the Companies;
(d) any Contract of any of the Companies not to compete in any
geography or business;
(e) any Contract relating to the acquisition or disposition of
Equity Securities, assets or any business or division (by way of merger,
consolidation, purchase, sale or otherwise) of any of the Companies;
(f) any joint venture or partnership Contract binding on any of the
Companies;
27
(g) any Contract that provides for the purchase of supplies or
equipment;
(h) any management agreement, partnership agreement or operating
agreement to which any of the Companies is a party;
(i) any Contract granting to any Person an option or a first
refusal, first-offer or similar preferential right to purchase or acquire any
Equity Securities or assets of any of the Companies;
(j) any collective bargaining agreement or neutrality agreement
with any labor union applicable to employees of any of the Companies (including
any letters or memoranda of understanding, side letters, binding grievance
settlements, arbitration awards or other binding modifications or
interpretations of collective bargaining agreements);
(k) any Contract with respect to any hedging, swap, forward, future
or derivative transaction or option or similar Contract involving, or settled by
reference to, one or more rates, currencies, commodities, equity or debt
instruments or securities, or economic, financial or pricing indices or measures
of economic, financial or pricing risk or any similar transaction or any
combination of these transactions;
(l) any Contract (or group of related Contracts) requiring future
payments or expenditures relating to investigation, cleanup, abatement,
remediation or similar actions in connection with liabilities under
Environmental Laws;
(m) any stockholders' agreement, partnership agreement, joint
venture agreement, or other Contract (however named) involving a sharing of
profits, losses, costs or liabilities by any of the Companies with any other
Person;
(n) any agreement with any Governmental Entity;
(o) any indemnification agreement with any officer or Director of
the any of the Companies or of the Seller (or any of their respective family
members);
(p) any agreement limiting the rights of the Companies to use their
intellectual property and any other Contract relating to Intellectual Property
(except for license for commercial off-the-shelf software that has not been
customized or modified for the Companies);
(q) any material agreement with a credit card or debit card
company;
(r) any arrangement or Contract providing for the acquisition or
disposition after the date of this Agreement of any assets of any of the
Companies other than in the ordinary course of business;
(s) any agreement, arrangement or contract restricting any Person
from disclosing any confidential information in its possession which relates to
any of the Companies; and
(t) any other Contract to which any of the Companies is a party or
by which it
28
or its properties are bound under which the aggregate payments for a twelve (12)
month period are at least $1,000,000.
The Company has heretofore made available to Buyer a true, complete and correct
copy of each of the Contracts described in this Section 4.13 (the "MATERIAL
CONTRACTS"), each as in effect on the date of this Agreement. None of the
Companies nor, to Seller's Knowledge, any other party to a Material Contract is
in default under, or in breach or violation of, nor has an event occurred that
(with or without notice, lapse of time or both) would constitute a default by
any of the Companies under any Material Contract, other than such defaults,
breaches or violations that, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect. Each of the Material
Contracts is a valid and binding obligation of the Company or Subsidiary party
thereto and, to the Seller's Knowledge, the other parties thereto.
4.14 LITIGATION. Except as set forth in SECTION 4.14 OF THE DISCLOSURE
SCHEDULE, as of the date of this Agreement, there is no claim, action suit,
investigation, hearing, arbitration or other civil, criminal or administrative
investigation, proceeding, order or petition pending or, to Seller's Knowledge,
threatened against any of the Companies that, (a) individually or in the
aggregate, involves a claim(s) in excess of $100,000, whether or not covered by
insurance, (b) involves a claim(s) for an unspecified amount which, individually
or in the aggregate, would reasonably be expected to result in payment by any of
the Companies of an amount in excess of $500,000 in the aggregate, (c) seeks
injunctive relief which, individually or in the aggregate, would reasonably be
expected to have a Material Adverse Effect or (d) which, as of the date of this
Agreement, questions or challenges the validity of this Agreement or any action
taken or to be taken by any of the Companies pursuant to this Agreement or in
connection with the transactions contemplated hereby.
4.15 INSURANCE. SECTION 4.15 OF THE DISCLOSURE SCHEDULE sets forth a
true and complete list of all insurance policies in effect as of the date of
this Agreement, providing coverage with respect to the business, assets,
operations, employees, officers and directors of the Companies (the "COMPANY
INSURANCE POLICIES"). The Company has made available to Buyer true and complete
copies of all Company Insurance Policies. As of the date of this Agreement, the
Company Insurance Policies are in full force and effect and all premiums due
have been paid. As of the date of this Agreement, none of the Companies has
received notice of cancellation, termination or non-renewal of any Company
Insurance Policy has, in the last five (5) years, been denied insurance
coverage.
4.16 COMPLIANCE WITH APPLICABLE LAWS.
(a) COMPLIANCE GENERALLY. (i) Each of the Companies has in the past
complied and is presently complying with all applicable Laws, and (ii) none of
the Companies has received written notification of any asserted present or past
failure to comply, or to Seller's Knowledge, has received written notice of any
threatened action to do so, except where the failure to have been in compliance
or to comply would not reasonably be expected to have a Material Adverse Effect.
(b) GOVERNMENTAL APPROVALS. Each of the Companies has in full force
and effect all Governmental Approvals necessary for it to acquire, own, lease or
operate its assets and
29
properties and to carry on its business as now conducted, and there has
occurred no default, revocation or suspension under any such Governmental
Approval, except for such failure to have such approvals or such defaults,
revocations or suspensions that would not reasonably be expected to have a
Material Adverse Effect.
(c) PERMITS. TO SELLER'S KNOWLEDGE, (i) all material Permits
required for the lawful operation of each Real Property and the Business of the
Companies as currently conducted have been validly issued and are currently in
full force and effect, (ii) each Real Property and each of the Companies is in
material compliance with the terms and conditions of each Permit applicable
thereto, and (iii) none of such Permits will be terminated or impaired or become
terminable as a result of the Transactions, except, in each case, where the same
would not reasonably be expected to have a Material Adverse Effect. True,
complete and correct copies of all such Permits and all amendments and
supplements thereto have been made available to Buyer prior to the date of this
Agreement.
(d) LIQUOR LICENSE. SECTION 4.16(d) OF THE DISCLOSURE SCHEDULE sets
forth a complete list of each of the Liquor Licenses and the Liquor Licensee
holding such Liquor License. The Liquor Licensees collectively hold all of the
Liquor Licenses required for the current Liquor Operations, and all of the
Liquor Licenses are currently in full force and effect. A true and complete copy
of each Liquor License has heretofore been delivered or made available to Buyer.
To Seller's Knowledge, the Liquor Licensees are in full compliance in all
material respects with the terms, conditions and provisions of all Liquor
Licenses.
(e) GAMING LICENSES. Each of the Regulated Entities holds all
Gaming Licenses necessary to operate its gaming business, and such Gaming
Licenses are in full force and effect and have not been revoked or suspended,
and there has been no violation under such Gaming Licenses, except for such
failure to hold such licenses or revocations, suspensions or violations as would
not reasonably be expected to have a Material Adverse Effect. SECTION 4.16(e) OF
THE DISCLOSURE SCHEDULE sets forth a complete list of each of the Gaming
Licenses and the Regulated Entity holding such Gaming License. Each of the
Regulated Entities has maintained and will maintain at all times reserves for
working capital, capital improvements, replacements and/or contingencies to the
extent, and in the amounts, required by the Gaming Laws, including the cash
reserve requirements thereunder.
(f) NO DENIAL OR REVOCATION OF GAMING LICENSES. None of the
Companies has: (i) ever applied for a casino, racing or other Gaming License in
any state or other jurisdiction and been denied; (ii) experienced any revocation
or failure to renew any such license; or (iii) withdrawn or not applied for any
such license or renewal after being informed orally or in writing by any
Governmental Entity that it would be denied such a license or renewal if it were
applied for. Except as set forth in SECTION 4.16(f) OF THE DISCLOSURE SCHEDULE,
Seller has no Knowledge of any facts or circumstances relating to the conduct of
the Companies, or the conduct of any director, officer, employee or stockholder
of any of the Companies that would reasonably be expected to cause any Gaming
Authority to revoke, suspend or fail to renew their respective Gaming Licenses
or take disciplinary action against any of the Companies or any director,
officer, employee or stockholder thereof.
(g) DIRECTORS', OFFICERS' AND MANAGERS' GAMING LICENSES. Each of
the
30
Companies' respective directors, officers, managers, employees, members and
stockholders hold all Governmental Approvals (including all Gaming Licenses and
other authorizations under Gaming Laws and Liquor Licenses) necessary to carry
on the Business of the Companies as now conducted, each of which is in full
force and effect, and there has occurred no default, revocation or suspension
under any such Governmental Approval.
4.17 ENVIRONMENTAL AND SAFETY MATTERS. EXCEPT AS SET FORTH ON SECTION
4.17 OF THE DISCLOSURE SCHEDULE:
(a) To Seller's Knowledge, each of the Companies is and has been in
compliance at all times with all applicable Environmental Laws as related to the
Business of the Companies, the failure to be in compliance with which would be
reasonably expected to have a Material Adverse Effect, and none of the Companies
has received any written notice, report or information regarding any liabilities
(whether accrued, absolute, contingent, unliquidated or otherwise), or any
corrective, investigatory or remedial obligations, arising under applicable
Environmental Laws with respect to the present operations or properties of the
Business of the Companies.
(b) To Seller's Knowledge, the Companies have obtained, and are and
have been in compliance at all times with all terms and conditions of, all
permits, licenses, approvals, certificates and other authorizations required
pursuant to Environmental Laws as related to the Business of the Companies for
the occupation of their premises (owned or leased) and the conduct of their
operations, where the failure to do so would reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect.
(c) To Seller's Knowledge, the Companies have filed, and are and
have been in material compliance at all times with, all disclosures, reporting,
and notifications required pursuant to Environmental Laws for the occupation of
their Real Property and the conduct of their operations and Business.
(d) The Companies have delivered or made available to Buyer true,
complete and correct copies of all environmental reports, analyses, tests or
monitoring commissioned by any of the Companies during the past five (5) years
pertaining to any property owned, leased or operated by any of the Companies to
the extent the same are in the Company's possession.
(e) To Seller's Knowledge, none of the Companies has received any
written notice that any hazardous substances that any of the Companies has
disposed of, arranged for the disposal of or released at any off-site location
that has resulted or could be expected to result in any of the Companies having
or incurring any liability under any Environmental Law, which liability would be
reasonably expected to have a Material Adverse Effect.
(f) The Section 4.17 will not be deemed breached by virtue of the
existence of matters for which Buyer is fully compensated under Section 6.4.
4.18 STRUCTURAL AND ENGINEERING MATTERS. The Companies have delivered
or made available to Buyer true, complete and correct copies of all structural
or engineering reports, analyses, tests or monitoring commissioned by any of the
Companies during the past five (5) years pertaining to any property owned,
leased or operated by any of the Companies.
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4.19 RELATED PARTY TRANSACTIONS. Except as set forth in SECTION 4.19 OF
THE DISCLOSURE SCHEDULE and except for transactions between the Companies, none
of (a) Seller or any Affiliate of Seller, (b) any director or any officer of any
of the Companies, and (c) any Person (other than the Companies) in which Seller,
any director or any officer owns any beneficial interest (other than a publicly
held corporation whose stock is traded on a national securities exchange or in
the over-the-counter market and less than 5% of the stock of which is
beneficially owned by all such Persons) (the Persons referred to in clauses (a),
(b) and (c) above are herein sometimes collectively referred to as "RELATED
PARTIES") has any personal interest in (i) any contract, agreement, arrangement
or understanding with, or relating to, the business or operations of, any of the
Companies, (ii) any loan, arrangement, understanding, agreement or contract for
or relating to indebtedness of any of the Companies, or (iii) any property
(real, personal or mixed), tangible or intangible, used in the business of any
of the Companies. Except for transactions between the Companies, the Companies
do not have any Contract with any of their respective Affiliates.
4.20 BROKERAGE. Except for the payment to Bear ▇▇▇▇▇▇▇ & Co., Inc., no
Person will be entitled to receive any brokerage commission, finder's fee, fee
for financial advisory services or similar compensation in connection with the
transactions contemplated by this Agreement based on any Contract made by or on
behalf of any of the Companies for which Buyer is or could become liable or
obligated.
4.21 NO OTHER REPRESENTATIONS OR WARRANTIES. Except for the
representations and warranties made by Seller in this Article IV, none of
Seller, the Company nor any other Person makes any representation or warranty
with respect to any of the Companies or their Business, operations, assets,
liabilities, or financial condition, notwithstanding the delivery or disclosure
to Buyer or any of its Affiliates of any documentation, forecasts or other
information with respect to any one or more of the foregoing. Specifically, but
without limitation, Seller makes no representation or warranty with respect to
any projections, estimates or budgets delivered to or made available to Buyer of
future revenues, future results of operations (or any component thereof), future
cash flows or future financial condition (or any component thereof), of any of
the Companies.
4.22 CHIPS OR TOKENS. The face amount of all outstanding chips or
tokens for all of the gaming operations conducted by the Companies does not
exceed Three Million Five Hundred Thousand Dollars ($3,500,000).
V. REPRESENTATIONS AND WARRANTIES OF BUYER.
Except as set forth in the Disclosure Schedule, Buyer hereby represents
and warrants to Seller, as of the date of this Agreement as set forth in this
Article V. Although the Disclosure Schedule, for convenience, shall set forth
specific reference to the particular Section or subsection of this Agreement to
which the information set forth in the Disclosure Schedule relates, any
information set forth in the Disclosure Schedule shall be deemed to apply to
this Article V in its entirety. The mere inclusion of an item in the Disclosure
Schedule as an exception to a representation or warranty shall not be deemed an
admission that such item represents a material exception or material fact, event
or circumstance or that such item has had, or would reasonably be expected to
have, a Material Adverse Effect.
32
5.1 INCORPORATION; POWER AND AUTHORITY. Buyer is a limited liability
company duly organized, validly existing and in good standing under the Laws of
the jurisdiction of its organization, and has all necessary power and authority
to execute, deliver and perform its obligations under this Agreement. Buyer is
duly qualified to do business as a foreign limited liability company in each
jurisdiction in which its failure to be so qualified would be reasonably
expected to have a Material Adverse Effect.
5.2 VALID AND BINDING AGREEMENT. The execution, delivery and
performance of this Agreement by Buyer have been duly and validly authorized by
all necessary limited liability company action. This Agreement has been duly
executed and delivered by Buyer and constitutes the valid and binding obligation
of Buyer, enforceable against it in accordance with its terms, subject to the
Remedies Exception.
5.3 NO BREACH; CONSENTS. The execution, delivery and performance of
this Agreement by Buyer will not (a) contravene any provision of the
Organizational Documents or authorizing resolutions of Buyer; (b) violate or
conflict with any Law, Governmental Order or Governmental Authorization; (c)
conflict with, result in any breach of any of the provisions of, constitute a
default (or any event that would, with the passage of time or the giving of
notice or both, constitute a default) under, result in a violation of,
materially increase the burdens under, result in the termination, amendment,
suspension, modification, abandonment or acceleration of payment (or any right
to terminate) or require a Consent under any Contract, Law, Governmental Order
or Governmental Authorization, that is either binding upon or enforceable
against or held by Buyer; or (d) as of the Closing Date, require any
Governmental Authorization applicable to Buyer, except for Buyer Required
Consents and Governmental Authorizations that are listed in SECTION 5.3 OF THE
DISCLOSURE SCHEDULE.
5.4 BROKERAGE. No Person will be entitled to receive any brokerage
commission, finder's fee, fee for financial advisory services or similar
compensation in connection with the transactions contemplated by this Agreement
based on any Contract made by or on behalf of Buyer for which Seller is or could
become liable or obligated.
5.5 INVESTMENT INTENT. Buyer is acquiring the Company Membership
Interests for its own account for investment purposes, and not with a view to
the distribution thereof.
5.6 GAMING LICENSES. Neither Buyer nor, to the Knowledge of Buyer, any
Affiliate of Buyer has ever made any application for a Gaming License and been
denied such Gaming License, and Buyer has no reason to believe that all Gaming
Licenses necessary for it to purchase the Company Membership Interests,
otherwise consummate the transactions contemplated by this Agreement and operate
the Business immediately after the Closing will not be obtained in the ordinary
course and without unusual delay or expense.
5.7 NO PROHIBITION. Neither the execution, delivery or performance of
this Agreement to which Buyer is a party, nor the consummation of any of the
transactions contemplated by this Agreement, will, directly or indirectly (with
or without notice or lapse of time), materially contravene, or conflict with, or
result in a material violation of, or cause Buyer, to suffer any material
adverse consequence under any Law or Governmental Order then applicable.
33
5.8 TAX MATTERS. Buyer is not an entity that is taxable as a
corporation for federal income tax purposes and has no plans (as of the date
hereof and as of the Closing Date) to (1) convert to or elect to become a
corporation for federal income tax purposes or (2) contribute any of the Company
Membership Interests or any of the assets of the Companies (including any
Membership Interests in any of the Companies) to an entity that is taxable as a
corporation for federal income tax purposes.
5.9 NO ADDITIONAL REPRESENTATIONS. Buyer acknowledges that the Company
has not made, nor shall the Company be deemed to have made, nor has Buyer relied
on, any representation, warranty, covenant or agreement, express or implied,
with respect to any of the Companies, the Business or the transactions
contemplated by this Agreement, other than those explicitly set forth in this
Agreement.
VI. COVENANTS
6.1 CONDUCT OF BUSINESS PRIOR TO THE CLOSING.
(a) Prior to the Closing, except for the distribution of the
Excluded Assets or as otherwise expressly contemplated by the Tax Allocation
Agreement and by this Agreement, without the prior consent of Buyer (which
consent will not be unreasonably withheld, conditioned or delayed), the Seller
will cause each of the Companies to conduct its business in the ordinary course
of business, consistent with past practice. For the avoidance of doubt, the
Parties acknowledge and agree that payments under the Tax Allocation Agreement
are not prohibited by this Agreement.
(b) Without limiting the generality of Section 6.1(a), prior to the
Closing Date or the earlier termination of this Agreement pursuant to Article
VIII hereof, except as set forth in SECTION 6.1(B) OF THE DISCLOSURE SCHEDULE or
as expressly contemplated by this Agreement, unless the Buyer has previously
consented in writing thereto (which consent will not be unreasonably withheld,
conditioned or delayed, other than in the case of clauses (iii), (vi), (vii),
(x), (xi), (xii), (xiv), (xvi) and (xix), in which cases Buyer may withhold its
consent in its sole discretion), the Seller will cause none of the Companies to:
(i) declare or make any distribution in respect of the equity
ownership of any of the Companies, other than distributions required to be
made pursuant to the Tax Allocation Agreement or with respect to the
Excluded Assets;
(ii) incur any Indebtedness of the types described in clauses
(i), (ii) and (vi) of the definition of the Indebtedness other than (A)
Indebtedness incurred in the ordinary course of business that is included
within the Indebtedness to be Discharged, including Indebtedness incurred
under the Credit Agreement, and (B) current liabilities incurred in the
ordinary course of business that are deducted from the Purchase Price
pursuant to Section 2.2 hereof;
(iii) (A) other than (y) dispositions of equipment or
inventory in the ordinary course of business and (z) the Excluded Assets,
transfer or dispose of any property or assets having a value in excess of
$250,000 in the aggregate, (B) merge into or with or consolidate with any
other entity, (C) grant, create, assume or permit to be created any
34
material mortgage or security interest or create any material Encumbrance,
easement, covenant, condition, right of way or restriction on any material
property or assets, other than Permitted Encumbrances, or (D) other than in
the ordinary course of business, cancel any debts owed to or claims held by
any of the Companies;
(iv) make, authorize or agree to make any capital expenditures
outside of the ordinary course of business or expenditures contemplated by
the Company's 2007 budget and approved development plans, as delivered to
Buyer prior to the date of this Agreement, or the Company's 2008 budget and
development plans approved by the Company's board of managers;
(v) other than in the ordinary course of business, enter into,
amend, extend, modify, or consent to the early termination of any Material
Contract or lease or waive, release or assign the rights of any of the
Companies thereunder (other than to any other of the Companies);
(vi) engage in any transactions with, or enter into any
Contracts with, any Affiliates of the Company (other than Contracts among
any of the Companies), except consistent with past practice or to the
extent required by Law or any existing agreements;
(vii) except as required pursuant to existing plans, policies
or agreements in effect prior to the date of this Agreement and set forth
in SECTION 4.12 OF THE DISCLOSURE SCHEDULE, or as otherwise required by
applicable Law, (A) grant, pay or provide any severance, retention or
termination payments or benefits to any director, officer or employee of
any of the Companies, except as consistent with past practice, (B) except
for travel and expense advances in the ordinary course of business and
loans to employees aggregating less than $50,000, loan or advance money or
other property to any of employee, officer, director, or former employee,
officer or director, (C) increase the compensation, bonus, welfare,
severance or other payments or benefits of, pay any bonus to, or make any
new Equity Securities-based awards to any director, officer or employee of
any of the Companies, except as consistent with past practice, (D)
establish, adopt, amend or terminate any Benefit Plan, including any
severance plan (other than to provide for the acceleration of benefits upon
a Change of Control under the Management Incentive Plan of the Company),
except as set forth in SECTION 4.11 OF THE DISCLOSURE SCHEDULE and except
for any amendment which does not increase the expense to the Companies
under, or limit the ability of the Companies to terminate, any Benefit
Plan, or (E) take any action to accelerate the vesting or payment, or fund
or in any other way secure the payment, of compensation or benefits under
any Benefit Plan, to the extent not already provided in any such Benefit
Plan;
(viii) agree to amendments or modifications to collective
bargaining agreements (including successor collective bargaining
agreements) except upon commercially reasonable terms which have been
reviewed and approved in advance by Buyer, which approval shall not be
unreasonably withheld and which approval shall be provided in a manner so
as to permit the Companies to fulfill their obligations to bargaining in
good faith where required prior to the Closing Date;
35
(ix) engage in any employment practices, including hiring and
firing or redeploying of employees, or significantly increase the number of
employees, other than in the ordinary course of business;
(x) make any amendment to its Organizational Documents;
(xi) repurchase any shares of capital stock or other equity
interests;
(xii) issue or sell any capital stock or other equity
interests or options, warrants, calls, subscriptions or other rights to
purchase any capital stock or other equity interests of any of the
Companies or reclassify, split, combine, subdivide or amend the terms of
the capital stock or other Equity Securities of any of the Companies
currently outstanding;
(xiii) pay, discharge, satisfy, settle or compromise any
claim, litigation or any legal proceeding, except for a discharge,
satisfaction, settlement or compromise involving less than $2,500,000,
including all fees, costs and expenses associated therewith, but excluding
from such amounts any contribution from any insurance company or other
parties to the litigation;
(xiv) fail to replace or renew the Company Insurance Policies
or fail to pay any premiums due and owing under such policies;
(xv) change any accounting policies or procedures (including
procedures with respect to reserves, revenue recognition, payments of
accounts payable and collection of accounts receivable) used by it unless
recommended by the Company's independent public auditors or required by
applicable law or GAAP;
(xvi) make or amend any Tax election, change or consent to
change the method of accounting of any of the Companies for Tax purposes
unless a change in the method of accounting is required by the Company's
independent public auditors or is required by applicable Law or GAAP, file
any amended Tax Return or enter into any settlement or compromise of any
Tax liability or Tax contest of any of the Companies, which settlement or
compromise would result in any payment by any of the Companies or receipt
by any of the Companies in excess of $100,000;
(xvii) transfer, cancel, dispose of, license or permit to
abandon, invalidate or lapse, any rights in, to or for the use of any
material Intellectual Property;
(xviii) materially reduce the amount or scope of property or
general liability coverage under any insurance currently maintained with
respect to the Real Property;
(xix) voluntarily change or attempt to change the current
zoning of any Real Property;
(xx) defer routine maintenance of any Real Property,
improvements or furniture, fixtures and equipment;
(xxi) materially reduce current sales and marketing efforts
with
36
respect to the Business of the Companies and the Real Property or
materially change the terms of any loyalty or other customer inducement
plans currently in place (other than changes consistent with past
practice); or
(xxii) agree or consent to take any of the actions described
in sub-clauses (i) through (xxi) above.
(c) Prior to making any written or oral communications to the
directors, officers or employees of the Companies or any of their Subsidiaries
pertaining to compensation or benefit matters that are affected by the
transactions contemplated by this Agreement, the Seller shall cause the Company
to provide Buyer with a copy of the intended communication, Buyer shall have
three (3) Business Days to review and comment on the Company's proposed
communication, and the Seller shall cause the Company to include any requested
changes proposed by Buyer that are reasonably acceptable to the Company.
(d) Prior to the Closing, Seller shall take all action necessary or
advisable to pay in full (from Seller's own funds) the Senior Secured Notes and
the amounts outstanding under the Credit Agreement (including any interest or
prepayment penalty or premium) and discharge any Encumbrances with respect
thereto against any of the assets of the Companies.
6.2 ACCESS TO INFORMATION; CONFIDENTIALITY. Upon reasonable notice and
subject to the terms of the Confidentiality Agreement, dated March 7, 2007,
between the Company and Buyer, as the same may be amended, supplemented or
modified (the "CONFIDENTIALITY AGREEMENT"), the Seller shall cause the Company
and each of the other Companies to afford to Buyer and to the officers,
employees, accountants, financing sources, counsel and other representatives of
Buyer reasonable access, during normal business hours during the period prior to
the Closing Date, to all their respective properties, books, contracts,
commitments and records, and during such period, the Company shall (and shall
cause each of the other Companies to) make available to Buyer all information
concerning its business, properties and, personnel as Buyer may reasonably
request; provided, however, that such access and information shall only be
provided to the extent that such access or the provision of such information
would not violate applicable Law; provided, further, that the foregoing shall
not require the Company (i) to permit any inspection, or to disclose any
information, that, in the reasonable judgment of the Company, would result in
the disclosure of any trade secrets of third Persons or violate any of its
obligations with respect to confidentiality, (ii) jeopardize the protection of
an attorney-client privilege or (iii) to disclose any privileged information of
any of the Companies. All requests for information made pursuant to this Section
6.2 shall be directed to an executive officer of the Company or such Person as
may be designated by the Company's executive officers. Except for disclosure
expressly permitted by the Confidentiality Agreement, Buyer shall hold, and
shall cause its officers, directors, employees, accountants, counsel, financial
advisors and other representatives to hold, all information received from the
Company, directly or indirectly, in confidence in accordance with the terms of
the Confidentiality Agreement. The Confidentiality Agreement shall survive any
termination of this Agreement. In the event of a termination of this Agreement
for any reason, Buyer shall promptly return or destroy, or cause to be returned
or destroyed, all nonpublic information so obtained from any of the Companies
and any copies made of such documents for Buyer, and Buyer shall promptly
thereafter provide Seller with a written certification of such destruction. No
investigation by Buyer shall diminish or obviate any
37
of the representations, warranties, covenants or agreements of the Seller or any
of the Companies contained in this Agreement.
6.3 TAX MATTERS.
(a) Responsibility for Taxes and Tax Returns. Buyer shall prepare
and file all Tax Returns that are required to be filed by or with respect to the
Companies for any taxable period that ends after the Closing Date and shall pay
any Taxes due in respect of such Tax Returns (the "BUYER RETURNS"). Seller shall
file or cause to be filed when due all Tax Returns that are required to be filed
by or with respect to the Companies for taxable periods ending on or before the
Closing Date and shall pay any Taxes due in respect of such Tax Returns (the
"SELLER RETURNS). Seller shall pay Buyer, with respect to Buyer Returns, the
Taxes for which Seller is liable pursuant to this Section 6.3, at least ten (10)
Business Days prior to the due date for the filing of the relevant Buyer Return.
(b) SELLER LIABILITY. Seller shall be liable for all Taxes
(including, without limitation, any obligation to contribute to the payment of a
tax determined on a consolidated, combined or unitary basis with respect to a
group of corporations that includes or included the Companies) resulting from
the Companies ceasing to be a member of the Seller Group or imposed on the
Companies or for which the Companies may otherwise be liable for any taxable
period that ends on or before the Closing Date and, with respect to any taxable
period beginning before and ending after the Closing Date, the portion of such
taxable year ending on and including the Closing Date. Notwithstanding the
preceding sentence, Seller shall not be responsible for (1) any transfer or
similar Taxes that become payable in connection with the transactions
contemplated by this Agreement, the sole responsibility for which is provided
for in Section 6.3(g), (2) any Taxes for any taxable period or portion thereof
ending on the Closing Date imposed on Seller, the Seller Group or the Companies
directly resulting from any transaction or action engaged in (or election made)
by Buyer or the Companies occurring after the effective time of the Closing
other than actions (or elections) explicitly contemplated by this Agreement; and
(3) any Taxes that are included as Current Liabilities in the calculation of
Closing Net Working Capital.
(c) REFUNDS. The Seller shall be entitled to any refund of Taxes of
the Companies received for any periods ending on and including the Closing Date
net of recovery costs incurred by the Companies and subject to offset for
amounts due by Seller to Buyer hereunder.
(d) BUYER LIABILITY. Buyer shall be liable for the Taxes of the
Companies for any taxable period that begins after the Closing Date and, with
respect to any taxable period beginning before and ending after the Closing
Date, the portion of such taxable period beginning after the Closing Date. The
Buyer shall be entitled to any refund of Taxes of the Companies received for any
periods beginning after the Closing Date.
(e) TAXES FOR SHORT TAXABLE YEAR. For purposes of Sections 6.3(b)
and (c), whenever it is necessary to determine the liability for Taxes of the
Companies for a portion of a taxable period that begins before and ends after
the Closing Date, the determination of the Taxes of the Companies for the
portion of the period ending on, and the portion of the period beginning
38
after, the Closing Date shall be determined by assuming that each of the
Companies had a taxable period which ended at the close of the Closing Date,
except that exemptions, allowances or deductions that are calculated on an
annual basis, such as the deduction for depreciation, shall be apportioned on a
daily basis.
(f) INTENTIONALLY OMITTED.
(g) TRANSFER TAXES. All real property transfer or gains, sales,
use, transfer, value added, stock transfer and stamp Taxes, and transfer,
recording, registration and other fees and any similar Taxes that become payable
in connection with the transactions contemplated by this Agreement (together
with any related interest, penalties or additions to Tax) shall be borne by the
Buyer.
(h) CONTEST PROVISIONS.
(i) Buyer shall promptly notify Seller in writing upon receipt
by Buyer, any of its Affiliates or the Companies of notice of any pending
or threatened federal, state, local or foreign Tax assessments which may
materially affect the tax liabilities of the Companies for which Seller
would be required to indemnify Buyer pursuant to this Section 6.3, provided
that failure to comply with this provision shall not affect Buyer's right
to indemnification hereunder except to the extent such failure to comply
directly and materially prejudices Seller's or the Companies' right to
contest such assessments. Seller shall have the sole right to represent the
Companies' interests in any tax audit or administrative or court proceeding
relating to taxable periods ending on or before the Closing Date, and to
employ counsel of its choice at its expense. Notwithstanding the foregoing,
Seller shall not be entitled to settle, either administratively or after
the commencement of litigation, any claim for Taxes which would adversely
affect the liability for Taxes of the Buyer or the Companies for any period
after the Closing Date to any material extent (including, but not limited
to, the imposition of income tax deficiencies, the reduction of asset basis
or cost adjustments, the lengthening of any amortization or depreciation
periods, the denial of amortization or depreciation deductions, or the
reduction of loss or credit carryforwards) without the prior written
consent of Buyer. Such consent shall not be unreasonably withheld,
conditioned or delayed, and shall not be necessary to the extent that
Seller has indemnified the Buyer against the effects of any such
settlement.
(ii) Seller shall be entitled to participate at its expense in
the defense of any claim for Taxes for a period ending after the Closing
Date which may be the subject of indemnification by Seller pursuant to
Section 9.2 and, with the written consent of Buyer, which consent shall not
be unreasonably withheld, conditioned or delayed, and at its sole expense,
may assume the entire defense of such Tax claim. Neither Buyer nor any of
the Companies may agree to settle any Tax claim for the portion of the
period ending on the Closing Date which may be the subject of
indemnification by Seller under Section 9.2 without the prior written
consent of Seller, which consent shall not be unreasonably withheld,
conditioned or delayed.
(i) Tax-Sharing Arrangements. Seller shall cause the Tax Allocation
Agreement to be terminated as of the Closing Date, and, after the Closing Date,
the Companies
39
shall not be bound thereby or have any liability thereunder or under any
tax-sharing arrangement.
(j) Final Purchase Price Allocation. Seller and Buyer will cause
their respective accountants to negotiate in good faith and jointly to determine
(A) by the Closing Date, a tentative allocation of the Purchase Price
("TENTATIVE PURCHASE PRICE ALLOCATION") among the assets of Seller, making
reasonable assumptions with respect to items requiring adjustments pursuant to
Sections 2.2(a)(ii)-(iv) and 2.2(d); and (B) within sixty (60) days of the
determination of the Final Closing Balance Sheet, a final allocation ("FINAL
PURCHASE PRICE ALLOCATION") of the Purchase Price among the assets of the
Seller, including any final adjustments to the Tentative Purchase Price
Allocation, in each case of (A) and (B) in a manner consistent with Section 1060
of the Code and the Treasury Regulations thereunder or, where applicable,
similar provisions of state, local or foreign Law. If the respective accountants
of Seller and Buyer are not able to jointly determine those matters described in
clauses (A) and (B) immediately preceding within the time period prescribed
respectively therein, then the Neutral Auditor serving, or if not then serving,
then the Neutral Auditor to be appointed under Section 2.2(d), shall make such
determinations and such determinations shall be legally binding on Buyer and
Seller. Buyer and Seller shall share the cost of the Neutral Auditor equally.
The Parties agree (x) on and from the date on which the Tentative Purchase Price
Allocation is determined until (but excluding) the date on which the Final
Purchase Price Allocation is determined, to rely for Tax reporting purposes on
the Tentative Purchase Price Allocation subject to the adjustments described in
clause (B) immediately preceding, and (y) on and from the date on which the
Final Purchase Price Allocation is determined, to file all Tax Returns in
accordance with the Final Purchase Price Allocation. The Parties acknowledge and
agree that the only differences between the Tentative Purchase Price Allocation
and the Final Purchase Price Allocation will be items requiring adjustments
pursuant to Sections 2.2(a)(ii)-(iv) and 2.2(d).
(k) ADJUSTMENT TO PURCHASE PRICE. Any payment by Buyer or Seller
under this Section 6.3 will be an adjustment to the Purchase Price.
(l) ASSISTANCE AND COOPERATION. After the Closing Date, each of
Seller and Buyer shall:
(i) cooperate and cause their respective Affiliates cooperate
with the other Party in preparing any Tax Returns or reports which such
other Party is responsible for preparing and filing in accordance with
Section 6.3(a);
(ii) cooperate fully in preparing for any audits of, or
disputes with taxing authorities regarding, any Tax Returns of the
Companies;
(iii) make available to the other and to any taxing authority
as reasonably requested all information, records, and documents relating to
Taxes of the Companies;
(iv) provide timely notice to the other in writing of any
pending or threatened tax audits or assessments of the Companies for
taxable periods for which the other may have a liability under this Section
6.3; and
(v) furnish the other with copies of all correspondence
received
40
from any Governmental Entity in connection with any Tax audit or
information request with respect to any such taxable period.
(m) SURVIVAL OF OBLIGATIONS. The obligations of the Parties
set forth in this Section 6.3 shall be unconditional and absolute and shall
remain in effect until ninety (90) days after the expiration of the
relevant statute of limitations for Tax purposes with respect to the
underlying Tax claim.
(n) INCOME TAX ASSETS AND LIABILITIES. The Parties acknowledge and
agree that the current and deferred income tax assets and liabilities of the
Companies on the Closing Date, as determined in accordance with GAAP, shall be
retained by, and be the responsibility of, Seller.
6.4 ENVIRONMENTAL MATTERS.
(a) Seller and Buyer will jointly direct an independent certified
environmental manager (the "CEM") in the State of Nevada, which will be either
Terracon or ERM or another CEM mutually reasonably acceptable to Buyer and
Seller to conduct phase I and, as appropriate, phase II environmental site
assessments for Owned Real Property to determine the environmental condition of
such property. As part of these assessments, the CEM shall, under the joint
direction of Seller and Buyer, provide an estimate of any probable environmental
remediation costs at each Owned Real Property ("ENVIRONMENTAL REMEDIATION
ESTIMATE").
(b) Seller shall be responsible for up to $10,000,000 of the
Environmental Remediation Estimate and, in Seller's sole discretion, shall
either (A) undertake such remediation up to a maximum of $10,000,000, or (B) pay
to Buyer 110% of the Environmental Remediation Estimate.
(c) If the Environmental Remediation Estimate is in excess of
$10,000,000, then Seller, in its sole discretion, may (A) undertake such
remedial action up to the Environmental Remediation Estimate, or (B) pay to
Buyer 110% of the Environmental Remediation Estimate or (C) terminate this
Agreement by delivering a notice that it wishes to terminate this Agreement
effective as of the date that is fifteen (15) Business Days after Seller
receives such notice; provided, however, that Buyer may elect, by giving notice
on or prior to the effective date of Seller's notice of its intent to terminate
the Agreement, to pay all costs of remediation in excess of $10,000,000, in
which case this Agreement shall not be terminated and shall remain in full force
and effect.
(d) Other than as specifically provided for herein or pursuant to
the representations in Section 4.17, Buyer shall have no recourse to Seller for
any environmental costs or liabilities addressed by this Section 6.4.
6.5 PARTIES' EFFORTS. Each of Seller and Buyer will use its
commercially reasonable efforts to cause the conditions set forth in Sections
7.1 and 7.2 to be satisfied and to consummate the transactions contemplated by
this Agreement as soon as reasonably possible and in any event prior to the
Closing Date and to provide such other documents as the other Party may
reasonably request for the purpose of facilitating the consummation of the
transactions contemplated by this Agreement.
41
6.6 INTENTIONALLY OMITTED.
6.7 INTENTIONALLY OMITTED.
6.8 INTENTIONALLY OMITTED.
6.9 PUBLIC ANNOUNCEMENTS. The initial press release issued by Buyer and
Seller concerning this Agreement and the transactions contemplated hereby shall
be a joint press release mutually agreed upon by the Parties, and, thereafter,
Buyer and Seller shall consult with each other and obtain each other's consent
before issuing any press release or otherwise making any public statements with
respect to the transactions contemplated by this Agreement and shall not issue
any such press release or make any such public statement prior to such
consultation and consent, except as may be required by applicable Law (including
federal or state securities law).
6.10 SUPPLEMENTAL SCHEDULES. Each of Buyer and Seller (for purposes of
this Section 6.10, the "UPDATING PARTY") will have the right (but will not be
required) to notify the other Party at any time prior to the Closing Date of any
development not within the reasonable control of the Updating Party that first
arises after the date of this Agreement if the existence of such development
would be reasonably expected to cause the conditions in Section 7.1(a) or
Section 7.2(a) hereof, as the case may be (a "DEVELOPMENT"), not to be
satisfied. Such notice of a Development will contain an update of the applicable
sections of the Disclosure Schedules, either by amending existing sections or
adding additional sections (an "UPDATE"). The Updating Party shall promptly
provide to the other Party any information or documentation reasonably requested
by the other Party in order to evaluate the Development, and, if the Update is
provided less than five (5) Business Days before the Outside Date, the Outside
Date will be extended until five (5) Business Days after the Update to afford
the other Party an opportunity to review such information. After receiving the
Update, the other Party will have five (5) Business Days to terminate this
Agreement pursuant to Section 8.1(b)(i) or 8.1(c)(i), as applicable, by
providing written notice to the Updating Party, with such termination being the
sole remedy relating to matters set forth in the Update, and, if the other Party
does not terminate the Agreement within such period, the Update will amend the
Disclosure Schedule of the Updating Party and shall be effective to qualify the
representations and warranties of the Updating Party contained in this
Agreement, and to cure any misrepresentation or breach of warranty that would
have existed hereunder had the Update not been provided.
6.11 OBLIGATION TO OBTAIN GOVERNMENT APPROVALS.
(a) PROCEDURES. The Parties acknowledge that this Agreement and the
transactions contemplated hereby are subject to the review and approval of the
applicable Gaming Authorities and Antitrust Authorities. Each of Seller and
Buyer shall use all reasonable efforts to file, as promptly as practicable after
the date of this Agreement, all applications, requests, notices, reports and
other documents required to be filed by such Party with any Governmental Entity
with respect to the transactions contemplated by this Agreement and to submit
promptly any additional information requested by any such Governmental Entity.
Each of Seller and Buyer shall have the right to consult with the other on, in
each case subject to applicable Laws relating to the exchange of information,
all the information relating to the other Party and any of its Affiliates that
appears in any filing made with, or written materials submitted
42
to, any Governmental Entity in connection with the transactions contemplated by
this Agreement. Without limiting the foregoing, each of Seller and Buyer shall
supply the other Party with copies of all written correspondence between such
Party or any of its representatives and Governmental Entities with respect to
Governmental Approvals. Each of Seller and Buyer shall promptly notify the other
Party upon receiving any communication from any Governmental Entity whose
consent or approval is required for consummation of the transactions
contemplated by this Agreement that causes such Party to reasonably believe that
there is a reasonable likelihood that such consent or approval from such
Governmental Entity will not be obtained or that the receipt of any such consent
or approval will be withheld, conditioned or delayed.
(b) REASONABLE EFFORTS. Each of Seller and Buyer shall use its best
efforts to take, or cause to be taken, all actions reasonably necessary to (i)
defend any lawsuits or other legal proceedings challenging this Agreement or the
consummation of the transactions contemplated by this Agreement and (ii) prevent
the entry by any Governmental Entity of any Governmental Order challenging this
Agreement or the consummation of the transactions contemplated by this
Agreement, appealing as promptly as possible any such Governmental Order and
having any such Governmental Order vacated or reversed.
(c) ASSISTANCE TO BUYER. Except as expressly set forth in this
Section 6.11, Seller shall have no obligation or affirmative duty under this
Agreement to obtain or assist Buyer in obtaining any Governmental Approval
required by Buyer to consummate the transactions contemplated by this Agreement.
Notwithstanding the foregoing or any other provision of this Agreement, Seller
shall have no obligation or affirmative duty under this Agreement to operate the
Business after the Closing
6.12 GAMING LAWS AND GAMING LICENSES. In addition to satisfying its
obligations under Section 6.11, Buyer shall use all reasonable efforts to obtain
any Gaming Licenses or any other Governmental Approval from any Gaming Authority
or other Governmental Authority necessary or desirable to consummate the
transactions contemplated in this Agreement and to permit Buyer to operate the
Business after the Closing. Buyer shall, and shall cause its members, directors
and officers to, promptly prepare and file all necessary documentation, to
effect all applications, notices, petitions and filings, to obtain as promptly
as practicable all Governmental Approvals required under applicable Gaming Laws
and to comply with the terms and conditions of all such Governmental Approvals
under Gaming Laws. Buyer shall, and shall cause its directors, managers,
officers, stockholders, members and employees to, file, within thirty (30) days
after the date of this Agreement, all required initial applications and
documents in connection with obtaining the Governmental Approvals required under
applicable Gaming Laws and shall act reasonably and promptly thereafter in
responding to additional requests and comments in connection therewith.
6.13 HSR ACT; FILINGS AND COOPERATION. In addition to satisfying its
obligations under Section 6.11, each of Seller and Buyer shall, promptly after
the date of this Agreement (but in no event later than twenty (20) days after
the date of this Agreement), prepare and file the notifications required under
the HSR Act in connection with the transactions contemplated by this Agreement.
Buyer and Seller shall thereafter respond as promptly as practicable to any
inquiries or requests received from the U.S. Federal Trade Commission or the
U.S. Department of Justice or any state attorney general or other Governmental
Entity (collectively, the "ANTITRUST
43
AUTHORITIES") for additional information or documentation in connection with
antitrust or related matters. Each of Buyer and Seller shall (i) give the other
Party prompt notice of the commencement of any legal proceeding by or before any
Antitrust Authority with respect to the transactions contemplated by this
Agreement, (ii) keep the other Party informed as to the status of any such legal
proceeding and (iii) promptly inform the other Party of any communication to or
from any Antitrust Authority regarding the transactions contemplated by this
Agreement. Buyer and Seller will consult and reasonably cooperate with one
another, and will consider in good faith the views of one another, in connection
with any analysis, appearance, presentation, memorandum, brief, argument,
opinion or proposal made or submitted in connection with any legal proceeding
under or relating to the HSR Act or any other federal or state antitrust or fair
trade law. In addition, except as may be prohibited by any Antitrust Authority
or by any legal requirement, in connection with any legal proceeding under or
relating to the HSR Act or any other federal or state antitrust or fair trade
law or any other similar legal proceeding, each of Seller and Buyer will permit
authorized representatives of the other Party to be present at each meeting or
conference relating to any such legal proceeding and to have access to and be
consulted in connection with any document, opinion or proposal made or submitted
to any Antitrust Authority in connection with any such legal proceeding.
6.14 HSR / GAMING BEST EFFORTS. Buyer shall use its HSR / Gaming Best
Efforts (as defined below) to obtain any approval from any Antitrust Authority
or Gaming Authority or to prevent the initiation of any lawsuit by any Antitrust
Authority or Gaming Authority under any antitrust or competition law or Gaming
Law or to prevent the entry of any decree, judgment, injunction preliminary or
permanent, or any order that would prohibit or otherwise make the transactions
contemplated by this Agreement unlawful. For purposes of this Section 6.14, "HSR
/ GAMING BEST EFFORTS" means that Buyer shall use its best efforts, but that
such best efforts shall be limited to only the following actions: (i) licensing
or otherwise making available to any Person on commercially reasonable terms,
any technology or other Intellectual Property rights of Buyer (including, but
not limited to, those that would be owned, directly or indirectly, by Buyer
after the Closing but specifically excluding any names commonly used at the
properties such as "Arizona Charlie's", "Stratosphere" and "Aquarius"); (ii)
holding separate any assets or operations (either before or after the Closing
Date) of Buyer or its Affiliates (including, but not limited to, those that
would be owned, directly or indirectly, by Buyer or its Affiliates after the
Closing); or (iii) making reasonable changes or modifications to any course of
conduct or otherwise making any reasonable commitment (to any Governmental
Entity or otherwise) regarding future operations of Buyer's or its Affiliates'
business ("REMEDIAL ACTION"). Without limitation, HSR / Gaming Best Efforts
shall also include defending any action or proceeding instituted (or threatened
to be instituted) challenging the transactions contemplated by this Agreement as
violative of any antitrust or competition law, or if any decree, judgment,
injunction or other order is entered, enforced or attempted to be entered or
enforced by a court or other Governmental Entity, which decree, judgment,
injunction or other order would make the transactions contemplated by this
Agreement illegal or would otherwise prohibit, prevent, restrict, impair or
delay consummation of the transactions contemplated hereby and taking any
reasonable action to contest or resist any such action or proceeding or to have
vacated, lifted, reversed or overturned any such decree, judgment, injunction or
other order, whether temporary, preliminary or permanent, that is in effect and
that prohibits, prevent or restricts consummation of the transactions
contemplated by this Agreement or to have such decree, judgment, injunction
44
or other order repealed, rescinded or made inapplicable so as to permit
consummation of the transactions contemplated by this Agreement.
6.15 MANDATORY CAPITAL IMPROVEMENTS. Seller hereby covenants and agrees
to fund the amounts for the capital expenditures set forth and described on
SECTION 6.15 OF THE DISCLOSURE SCHEDULE (the "MANDATORY CAPITAL IMPROVEMENT
COSTS") on or prior to the Closing Date. In the event that Seller does not fund
all of the Mandatory Capital Improvement Costs as of the Closing Date, then such
remaining Mandatory Capital Improvement Costs shall be deducted from the Initial
Purchase Price as set forth in Section 2.2(a).
6.16 FINANCIAL STATEMENTS. Seller will provide Buyer, as and when
available, monthly operating statements, quarterly and annual financial
statements and such other financial reports and statements as are routinely
provided to the Companies' shareholders or boards of directors.
6.17 LIMITED LIABILITY COMPANY CONVERSION. Notwithstanding anything to
the contrary in this Agreement, prior to Closing, Seller will, unless it is
unable to obtain gaming or other regulatory approval, cause each of the
Companies that is taxed as a corporation to be converted (whether by merger,
statutory conversion or otherwise) into a limited liability company that will be
a DRE for income tax purposes. If Seller is not able to cause such conversion
due to its inability to obtain any required gaming or other regulatory approval,
at Buyer's election, Buyer may either terminate this Agreement (in which case
neither Party will have any liability to the other) or elect to restructure (in
a manner reasonably acceptable to Seller) the transactions contemplated hereby
so as to carry out the intentions of the Parties as closely as possible to the
terms of this Agreement and in a manner that does not impose tax consequences on
Buyer or Seller that are less favorable than would result from the transactions
as currently contemplated had Seller fully complied with this covenant. Any
failure to comply with this covenant, other than as a result of Seller's
inability to obtain a required gaming or other regulatory approval, shall be
deemed a material breach of this Agreement by Seller.
6.18 TITLE INSURANCE. Buyer agrees to use its best efforts to obtain
the title insurance policies described in Section 4.9(c).
6.19 STAY BONUSES. The approximate Five Million Dollars ($5,000,000.00)
in "stay bonuses" and any change in control retention bonuses or similar
payments under The American Casino Entertainment Properties Key Employee Plan
and the employment agreements for certain key management employees, including
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇, set forth in SECTION 4.11(h) OF THE
DISCLOSURE SCHEDULE, shall be an obligation of Seller, whenever paid.
VII. CONDITIONS TO CLOSING
7.1 CONDITIONS TO BUYER'S OBLIGATIONS. The obligation of Buyer to take
the actions required to be taken by it at the Closing is subject to the
satisfaction or waiver by Buyer in its sole discretion, in whole or in part, of
each of the following conditions at or prior to the Closing:
(a) The representations and warranties set forth in Articles III
and IV shall be true and correct in all respects without giving effect to
qualifications contained therein as to materiality or Material Adverse Effect,
at and as of the Closing Date, as though then made and as though the Closing
Date has been substituted for the date of this Agreement in such
45
representations and warranties, except that any representation or warranty
expressly made as of a specified date (including the date of this Agreement)
will only need to have been true on and as of such date, except where any such
failures to be true and correct, individually or in the aggregate, have not had
and would not reasonably be expected to have a Material Adverse Effect.
(b) Seller will have performed and complied with each of its
covenants and agreements contained in this Agreement in all material respects,
including, without limitation, (i) the covenant in Section 6.17 and (ii) the
obligation in the second sentence in Section 2.2(a) to repay in full all
Indebtedness to be Discharged; provided, however, that in the event that the
condition in this clause (ii) is not satisfied on the date when the other
conditions in this Section 7.1 have been satisfied, Seller may extend the
Closing Date to a date not later than February 28, 2008;
(c) Each Seller Required Consent will have been obtained and will
be in full force and effect;
(d) Each Buyer Required Consent will have been obtained and will be
in full force and effect;
(e) No order or injunction will be in effect that prevents
consummation of any of the transactions contemplated by this Agreement;
(f) No Law prohibiting or rendering illegal the performance of this
Agreement or the Closing shall have been, after the date hereof, adopted,
promulgated or issued or entered;
(g) No Material Adverse Effect shall have occurred after the date
of this Agreement;
(h) Seller and the Company will have tendered for delivery
simultaneously with the Closing each of the agreements, certificates,
instruments and other documents that it is obligated to deliver pursuant to
Section 2.3(b)(i), and such agreements so delivered will be in full force and
effect;
(i) Buyer will have received a title insurance policy in a face
amount equal to the Initial Purchase Price insuring that the Companies have
title to the Owned Real Property in a manner that complies with the
representation set forth in Section 4.9(c); provided that this Section 7.1(i)
will not be applicable unless Buyer has complied with its obligations under
Section 6.18; and
(j) All Governmental Approvals required to consummate the
transactions contemplated hereby shall have been obtained (including under
Gaming Laws and the HSR Act), all such approvals shall remain in full force and
effect and all statutory waiting periods in respect thereof shall have expired.
46
7.2 CONDITIONS TO SELLER'S OBLIGATIONS. The obligation of Seller to
take the actions required to be taken by it at the Closing is subject to the
satisfaction or waiver, in whole or in part, of each of the following conditions
at or prior to the Closing:
(a) The representations and warranties set forth in Article V shall
be true and correct in all respects without giving effect to qualifications
contained therein as to materiality or Material Adverse Effect, at and as of the
Closing Date, as though then made and as though the Closing Date has been
substituted for the date of this Agreement in such representations and
warranties, except that any representation and warranty expressly made as of a
specified date (including the date of this Agreement) will only need to have
been true on and as of such date, except where any such failures to be true and
correct, individually or in the aggregate, have not had and would not reasonably
be expected to have a Material Adverse Effect.
(b) Buyer will have performed and complied with each of its
covenants and agreements contained in this Agreement in all material respects;
(c) Buyer will have tendered for delivery simultaneously with the
Closing each of the agreements, certificates, instruments and other documents
that Buyer is obligated to deliver and cause to have delivered pursuant to
Section 2.3(b)(ii) and such agreements so delivered will be in full force and
effect;
(d) Each Seller Required Consent will have been obtained and be in
full force and effect;
(e) Each Buyer Required Consent will have been obtained and be in
full force and effect;
(f) No order or injunction will be in effect that prevents
consummation of any of the transactions contemplated by this Agreement;
(g) No Law prohibiting or rendering illegal the performance of this
Agreement or the Closing shall have been, after the date hereof, adopted,
promulgated or issued or entered;
(h) [Intentionally Omitted];
(i) All Governmental Approvals required to consummate the
transactions contemplated hereby shall have been obtained (including under
Gaming Laws and the HSR Act), all such approvals shall remain in full force and
effect and all statutory waiting periods in respect thereof shall have expired;
and
(j) All right, title and interest in the Excluded Assets shall have
been conveyed (which conveyance may be by way of dividend or other transfer
without consideration) to a Person other than one of the Companies.
VIII. TERMINATION
8.1 TERMINATION. This Agreement may be terminated prior to the Closing:
47
(a) by the mutual written consent of Buyer and Seller;
(b) by Seller, if:
(i) Buyer has breached any representation or warranty of
Buyer, or failed to comply with any covenant or agreement of Buyer,
contained in this Agreement, which breach or failure to comply, either
individually or in the aggregate, would result in, if occurring or
continuing on the Closing Date, the failure of the condition set forth in
Section 7.2(a) or (b), and such breach or failure has not been waived by
Seller or cured by the Outside Date; or
(ii) the transactions contemplated by this Agreement have not
been consummated on or before Outside Date or such later date to which the
Parties may agree; provided that Seller will not be entitled to terminate
this Agreement pursuant to this Section 8.1(b)(ii) if Seller is not in
compliance with its obligations under this Agreement and such breach or
failure has not been waived by Buyer or cured by Seller prior to the date
of such termination; or
(iii) Seller elects to terminate pursuant to Section 6.4.
(c) by Buyer, if:
(i) Seller has breached any representation or warranty of
Seller, or failed to comply with any covenant or agreement of Seller,
contained in this Agreement, which breach or failure to comply, either
individually or in the aggregate, would result in, if occurring or
continuing on the Closing Date, the failure of the condition set forth in
Section 7.1(a) or (b), and such breach or failure has not been waived by
Buyer or cured by the Outside Date; or
(ii) the transactions contemplated by this Agreement have not
been consummated on or before the Outside Date or such later date to which
the Parties may agree; provided, that Buyer will not be entitled to
terminate this Agreement pursuant to this Section 8.1(c)(ii) if Buyer is
not in compliance with its obligations under this Agreement and such breach
or failure has not been waived by Seller or cured by Buyer prior to the
date of such termination.
The Party desiring to terminate this Agreement pursuant to Sections
8.1(b) or 8.1(c) shall give notice of such termination to the other Party in
accordance with Section 10.3.
8.2 EFFECT OF TERMINATION.
(a) PAYMENT BY BUYER. In the event of termination of this Agreement
by Seller pursuant to Sections 8.1(b)(i) or (ii), and the conditions set forth
in Sections 7.1(a), (b), (c), (e) (other than an order or injunction due to a
failure to obtain Buyer Required Consents), (f), (g), (h) and (i) have been
satisfied as of the date of such termination, Buyer shall, as promptly as
possible (but in any event within two (2) Business Days) following such
termination by Seller, pay to Seller (as the sole and exclusive remedy of Seller
in respect of such termination) the Break-Up Fee, and there shall be no other
Liability or obligation on the part of the Parties, or any
48
of the respective Affiliates, or any of the respective directors, officers,
members, employees, stockholders of any such Person; provided that the
provisions of this Section 8.2 and the Confidentiality Agreement shall remain in
full force and effect and survive any termination of this Agreement.
(b) PAYMENT BY SELLER. In the event of termination of this
Agreement either (A) by Buyer pursuant to Sections 8.1(c)(i) or (B) by Buyer
pursuant to Section 8.1(c)(ii), on the ground that the conditions set forth in
Sections 7.1(b), (c) and/or (h) have not been satisfied as of the Outside Date,
and the conditions set forth in Sections 7.2(a), (b), (c), (e), (f) and (g) have
been satisfied as of the date of such termination, Seller shall, in either case,
as promptly as possible (but in any event within two (2) Business Days)
following such termination by Seller pay to Buyer (as the sole and exclusive
remedy of Buyer in respect of such termination) the Break-Up Fee, and there
shall be no other Liability or obligation on the part of the Parties, or any of
the respective Affiliates, or any of the respective directors, officers,
members, employees, stockholders of any such Person; provided that the
provisions of this Section 8.2 and the Confidentiality Agreement shall remain in
full force and effect and survive any termination of this Agreement.
Notwithstanding the foregoing, in the event that Buyer terminates this Agreement
pursuant to Section 8.1(c)(i) due solely to the non-willful breach of
representations by Seller, Buyer shall be entitled to recover all of its damages
(including all out-of-pocket costs incurred in connection with the transactions
contemplated hereby), but shall not be entitled to payment of the Break-Up Fee.
(c) EFFECT OF OTHER TERMINATION. In the event of termination of
this Agreement, except as set forth in Sections 8.2(a) and (b), this Agreement
shall have no further force or effect and there shall be no other Liability or
obligation on the part of the Parties or their respective Affiliates or any of
the respective directors, officers, members, employees or stockholders of any
such Person; provided, that, except as set forth in Sections 8.2(a) and (b), no
such termination shall relieve any party of Liability for any willful breach or
willful failure to comply occurring prior to the time of such termination; and
provided, further, that the provisions of this Section 8.2 and the
Confidentiality Agreement shall remain in full force and effect and survive any
termination of this Agreement.
IX. REMEDIES
9.1 SURVIVAL. The representations, warranties, covenants and agreements
of Seller and Buyer contained in this Agreement (including the schedules and
exhibits attached hereto and the certificates delivered pursuant hereto) will
survive the Closing Date but only to the extent specified below:
(a) All covenants and agreements contained in this Agreement
(including the schedules and exhibits attached hereto and the certificates
delivered pursuant hereto) that contemplate performance thereof following the
Closing Date will survive the Closing Date in accordance with their terms.
(b) The representations and warranties of Seller and Buyer
contained in this Agreement (including the schedules and exhibits attached
hereto and the certificates delivered pursuant hereto) will survive the Closing
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Date until the 12-month anniversary of the Closing Date, at which point such
representations and warranties and any claim for indemnification by Seller or
Buyer on account thereof will terminate, as of the 12-month anniversary of the
Closing Date, unless a Claims Notice with respect to such Claim has been
delivered prior to the termination date; provided, however, that the
representations and warranties contained in Section 4.10 (Taxes) and paragraphs
(b), (d) and (j) of Section 4.11 (Benefit Plans; Labor Matters) of this
Agreement will survive the Closing Date until the expiration of the applicable
statute of limitations, at which point such representations and warranties and
any claim for indemnification by the Buyer on account thereof will terminate, as
of such date, unless a Claims Notice with respect to such Claim has been
delivered prior to the termination date; and PROVIDED, FURTHER, that the
representations and warranties contained in Sections 3.2 and 4.1 (Corporate
Existence, Power and Authorization) and Sections 4.4 and 4.5 (Capitalization)
will survive the Closing Date indefinitely.
9.2 INDEMNIFICATION BY SELLER. Seller will indemnify and hold harmless
Buyer and its successors and permitted assigns and the officers, directors and
stockholders of Buyer and their heirs and personal representatives
(collectively, the "BUYER INDEMNITEES") from and against, and will pay to the
Buyer Indemnitees the amount of, any and all Losses actually incurred by any of
the Buyer Indemnitees: (a) based upon any breach of or inaccuracy in the
representations and warranties of Seller contained in this Agreement (including
the schedules and exhibits attached hereto and the certificates delivered
pursuant hereto), in each case without regard to any qualifications contained
therein as to Knowledge (except in the case of Section 4.17), materiality or
Material Adverse Effect, (b) based upon any breach of the covenants or
agreements of Seller contained in this Agreement (including the schedules and
exhibits attached hereto and the certificates delivered pursuant hereto), (c)
arising under any defined benefit pension plan subject to Title IV of ERISA or
Section 412 of the Code which is maintained or contributed to an ERISA Affiliate
(other than any of the Companies) and (d) arising from, or in any way related
to, the Excluded Assets.
9.3 INDEMNIFICATION BY BUYER. Buyer will indemnify and hold harmless
Seller and its successors and permitted assigns and the officers, directors and
stockholders of Buyer and their heirs and personal representatives
(collectively, the "SELLER INDEMNITEES") from and against, and will pay to the
Seller Indemnitees the amount of, any and all Losses actually incurred by any of
the Seller Indemnitees (a) based upon any breach of or inaccuracy in the
representations and warranties of Buyer contained in this Agreement (including
the schedules and exhibits attached hereto and the certificates delivered
pursuant hereto), in each case without regard to any qualifications contained
therein as to Knowledge, materiality or Material Adverse Effect, (b) based upon
any breach of the covenants or agreements of Buyer contained in this Agreement
(including the schedules and exhibits attached hereto and the certificates
delivered pursuant hereto).
9.4 LIMITATIONS ON INDEMNIFICATION PAYMENTS TO BUYER INDEMNITEES.
Except under Section 6.3 but notwithstanding anything else herein to the
contrary, the right of the Buyer Indemnitees and the Seller Indemnitees to
indemnification is limited as follows:
(a) The Buyer Indemnitees shall be entitled to indemnification
pursuant to Section 9.2(a) to the extent (but only to the extent) that the
aggregate amount of all Losses suffered by the Buyer Indemnitees exceeds Ten
Million Dollars ($10,000,000.00); PROVIDED,
HOWEVER, that the limitation set forth in this Section 9.4(a) shall not apply to
Losses incurred by the Buyer Indemnitees based on any inaccuracy of the
representation set forth in Sections 3.1, 3.5, 4.4 and/or 4.10 or to Losses
incurred by the Buyer Indemnitees arising out of the fraud of the Seller or any
of its Affiliates.
(b) Notwithstanding anything in this Agreement to the contrary, the
aggregate maximum liability of Seller for any indemnification of the Buyer
Indemnitees pursuant to Section 9.2(a) shall be One Hundred Thirty Million
Dollars ($130,000,000.00); PROVIDED, HOWEVER, that the limitation set forth in
this Section 9.4(b) shall not apply to Losses incurred by the Buyer Indemnitees
based upon breach or inaccuracy of the representations set forth in Sections
3.1, 3.5, 4.4 and/or 4.10 or to Losses incurred by the Buyer Indemnitees arising
out of the fraud of the Seller or any of its Affiliates.
(c) The Buyer Indemnitees' right to indemnification pursuant to
Section 9.2 and the Seller Indemnitees' right to indemnification pursuant to
Section 9.3 on account of any Losses will be reduced by all insurance or other
Third Party indemnification proceeds actually received by (x) in the case of the
Buyer Indemnitees, the Buyer Indemnitees or the Companies (whether paid directly
to the Buyer Indemnitees or assigned by Seller to the Buyer Indemnitees) or (y)
in the case of the Seller Indemnitees, the Seller Indemnitees or the Companies
(whether paid directly to the Seller Indemnitees or assigned by Buyer to the
Seller Indemnitees), in each case, within ninety (90) days after the date of a
claim for indemnification made under this Section 9.4 (such reduction to be
offset by the amount that may be returned to the insurer by reason of a retro
active adjustment or other reimbursement). The Buyer Indemnitees shall assign or
remit to Seller any such insurance or other Third Party proceeds which are paid
to the Buyer Indemnitees with respect to Losses for which the Buyer Indemnitees
have been previously compensated pursuant to Section 9.2. The Seller Indemnitees
shall assign or remit to Buyer any such insurance or other Third Party proceeds
which are paid to the Seller Indemnitees with respect to Losses for which the
Seller Indemnitees have been previously compensated pursuant to Section 9.3.
(d) Neither the Buyer Indemnitees nor the Seller Indemnitees will
be entitled to indemnification pursuant to this Article 9, as applicable, for
punitive damages or for lost profits, consequential, exemplary or special
damages, other than to the extent that any such damages were paid or owed to a
Third Party for which indemnity is being sought.
9.5 PROCEDURES.
(a) NOTICE OF LOSSES BY BUYER INDEMNITEE. As soon as reasonably
practicable after a party claiming a right of indemnification hereunder (each,
an "INDEMNITEE") from a Party to this Agreement (each, an "INDEMNITOR") becomes
aware of any claim that it has under Section 9.2 or Section 9.3, as applicable,
that may result in a Loss (a "CLAIM"), the Indemnitee shall give written notice
thereof (a "CLAIMS NOTICE") to the Indemnitor. A Claims Notice must describe the
Claim in reasonable detail, and indicate the amount (estimated, as necessary) of
the Loss that has been or may be suffered by the applicable Indemnitee. No delay
in or failure to give a Claims Notice by an Indemnitee to an Indemnitor pursuant
to this Section 9.5(a) will adversely affect any of the other rights or remedies
that such Party has under this Agreement, or alter or relieve the other Party of
its obligation to indemnify the applicable Indemnitee, except to the extent that
51
the Indemnitor is prejudiced thereby. The Indemnitor shall respond to the
Indemnitee (a "CLAIM RESPONSE") within thirty (30) days (the "CLAIM RESPONSE
PERIOD") after the date that the Claims Notice is sent by the Indemnitee. Any
Claim Response must specify whether or not the Indemnitor disputes the Claim
described in such Claims Notice. If the Indemnitor fails to give a Claim
Response within the Claim Response Period, the Indemnitor will be deemed not to
dispute the Claim described in the related Claims Notice. If the Indemnitor
elects not to dispute a Claim described in a Claims Notice, whether by failing
to give a timely Claim Response or otherwise, then the amount of Losses alleged
in such Claims Notice will be conclusively deemed to be an obligation of the
Indemnitor, and the Indemnitor shall pay, in cash, to the Indemnitee within five
(5) days after the last day of the applicable Claim Response Period the amount
specified in the Claims Notice. If the Indemnitor delivers a Claim Response
within the Claim Response Period indicating that it disputes one or more of the
matters identified in the Claims Notice, the Indemnitor and the Indemnitee shall
promptly meet and attempt to settle the dispute. If the Indemnitor and the
Indemnitee are able to reach agreement within thirty (30) days after the
conclusion of the Claim Response Period, the amount of Losses, if any, agreed
upon will conclusively be deemed an obligation of the Indemnitor, and the
Indemnitor shall pay in cash to the Indemnitee within five (5) days after such
agreement the amount of Losses so agreed upon. If the Indemnitor and the
Indemnitee are unable to reach agreement within thirty (30) days after the
conclusion of the Claim Response Period, then either the Indemnitor or the
Indemnitee may resort to other legal remedies subject to the limitations set
forth in this Article IX.
(b) OPPORTUNITY TO DEFEND THIRD PARTY CLAIMS. In the event of any
claim by a Third Party against an Indemnitee, the Indemnitor, (each an
"INDEMNIFYING PARTY"), has the right, exercisable by written notice to the
Indemnitee, within thirty (30) days of receipt of a Claims Notice from the
Indemnitee, to assume and conduct the defense of such claim with counsel
selected by the Indemnifying Party. If the Indemnifying Party has assumed such
defense as provided in this Section 9.5(b), the Indemnifying Party will not be
liable for any legal expenses incurred by any Buyer Indemnitee in connection
with the defense of such Claim. If the Indemnifying Party does not assume the
defense of any Third Party claim in accordance with this Section 9.5(b), the
Buyer Indemnitee may defend such claim at the sole cost of the Indemnifying
Party (subject to the limitations set forth in this Article IX), and the
Indemnifying Party may still participate in, but not control, the defense of
such Third Party claim at the Indemnifying Party's sole cost and expense. The
Indemnitee will not consent to a settlement of, or the entry of any judgment
arising from, any such claim, without the prior written consent of the
Indemnifying Party (such consent not to be unreasonably withheld or delayed). An
Indemnifying Party shall be entitled, in its sole discretion, to settle any
claim or consent to the entry of any judgment that (i) includes as an
unconditional term thereof the giving by each claimant or plaintiff to such
Indemnitee of a release from all liability with respect to such claim or
litigation, and (ii) does not provide for injunctive or other nonmonetary relief
affecting the Indemnitee. In any such Third Party claim, the party responsible
for the defense of such claim shall, to the extent reasonably requested by the
other party, keep such other party informed as to the status of such claim,
including, without limitation, all settlement negotiations and offers. With
respect to a Third Party claim for which Seller is the party responsible for the
defense, Buyer and the Company shall make available to Seller and its
representatives all books and records of the Buyer and Company relating to such
Third Party claim and shall cooperate with Seller in the defense of the Third
Party claim.
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9.6 EXCLUSIVE REMEDY. The parties agree that, from and after the
Closing Date, the exclusive remedies of the parties for any Losses based upon,
arising out of or otherwise in respect of the matters set forth in this
Agreement or the transactions contemplated hereby are the indemnification or
reimbursement obligations of the parties set forth in this Article IX. The
provisions of this Section 9.6 shall not, however, prevent or limit a cause of
action under Section 9.6 to obtain an injunction or injunctions to prevent
breaches of this Agreement by Seller and to enforce specifically the terms and
provisions hereof against Seller.
9.7 SPECIFIC PERFORMANCE. The Parties agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the Parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement, this being in addition to any other
remedy to which they are entitled at law or in equity, provided that Seller
shall not be entitled to the remedy of specific performance pursuant to this
Section 9.7 in the event that the Break-Up Fee is payable to Seller pursuant to
Section 8.2(a) and Buyer pays the Break-Up Fee to Seller in accordance with the
terms thereof and provided further that (i) Buyer shall not be entitled to the
remedy of specific performance pursuant to this Section 9.7 in the event that
Buyer requests payment of the Break-Up Fee from Seller pursuant to Section
8.2(b) and Seller pays such Break-Up Fee to Buyer in full and (ii) Buyer shall
not be entitled to the Break-Up Fee in the event that Buyer seeks and actually
obtains specific performance pursuant to this Section 9.7.
X. GENERAL
10.1 EXPENSES. Except as otherwise expressly provided for in this
Agreement, Seller, on the one hand, and Buyer, on the other hand, will each pay
all expenses incurred by each of them (and, in the case of Seller, the expenses
incurred by the Company) in connection with the transactions contemplated by
this Agreement, including legal, accounting, and consulting fees and expenses
incurred in negotiating, executing and delivering this Agreement and the other
agreements, exhibits, documents and instruments contemplated by this Agreement
(whether the transactions contemplated by this Agreement are consummated or
not); provided, however, that Buyer will pay all costs and expenses (including
attorneys' fees) incurred by Buyer and Seller (and the Companies) in connection
with (a) the filing of notices under the HSR Act, and (b) any approvals related
to or arising out of the Gaming Laws or the Gaming Licenses. Buyer will also pay
all amounts payable to the title insurer in respect of title commitments, copies
of exceptions and title policies, search fees and closing fees, and amounts
payable to surveyors; provided, however, that, with respect to the first Two
Hundred Thousand Dollars ($200,000.00) of any premiums payable to the title
insurer, Seller shall pay any base premiums included in such premiums, and Buyer
shall pay for any premiums resulting from additional endorsements or coverage
requested by Buyer.
10.2 AMENDMENT AND WAIVER. This Agreement may not be amended, a
provision of this Agreement or any default, misrepresentation or breach of
warranty or agreement under this Agreement may not be waived, and consent may
not be rendered, except in a writing executed by the Party against which such
action is sought to be enforced. Neither the failure nor any delay by any Person
in exercising any right, power or privilege under this Agreement will operate as
a waiver of such right, power or privilege, and no single or partial exercise of
any such right,
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power or privilege will preclude any other or further exercise of such right,
power or privilege or the exercise of any other right, power or privilege. In
addition, no course of dealing between or among any Persons having any interest
in this Agreement will be deemed effective to modify or amend any part of this
Agreement or any rights or obligations of any Person under or by reason of this
Agreement. The rights and remedies of the Parties are cumulative and not
alternative.
10.3 NOTICES. All notices, demands and other communications to be given
or delivered under or by reason of the provisions of this Agreement will be in
writing and will be deemed to have been given (i) when delivered if personally
delivered by hand (with written confirmation of receipt), (ii) when received if
sent by a nationally recognized overnight courier service (receipt requested),
or (iii) when receipt is acknowledged by an affirmative act of the Party
receiving notice, if sent by facsimile, telecopy or other electronic
transmission device (provided that such an acknowledgement does not include an
acknowledgment generated automatically by a facsimile or telecopy machine or
other electronic transmission device). Notices, demands and communications to
Buyer and Seller will, unless another address is specified in writing, be sent
to the address indicated below:
Seller: American Entertainment Properties Corp.
▇▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇, President and Chief Executive
Officer
▇▇▇▇▇▇ ▇▇▇▇▇▇, Senior Vice President and
Chief Financial Officer
Facsimile Number: ▇▇▇-▇▇▇-▇▇▇▇
and
American Real Estate Partners, L.P.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ #▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Facsimile Number: ▇▇▇-▇▇▇-▇▇▇▇
with a copy (which shall not constitute notice) to:
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, P.C.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Facsimile Number: 303-223-1111
Buyer: W2007/ACEP Holdings, LLC
c/o Goldman, ▇▇▇▇▇ & Co.
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Chief Financial Officer
Facsimile Number: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy (which shall not constitute notice) to:
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Facsimile Number: (▇▇▇) ▇▇▇-▇▇▇▇
10.4 ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations under this Agreement may be assigned by any Party
without the prior written consent of the other Party, provided that, upon prior
written notice to Seller, Buyer may assign this Agreement and Buyer's rights,
interests and obligations under this Agreement to any Affiliate of Buyer, who,
as a condition precedent of the effectiveness of such assignment, shall provide
a certificate to Seller making all of the representations and warranties of
Buyer set forth in Article V; provided, however, that no such assignment shall
relieve Buyer or Buyer's Guarantor of its obligations under this Agreement.
Subject to the foregoing, this Agreement and all of the provisions of this
Agreement will be binding upon and inure to the benefit of the Parties and their
respective successors and permitted assigns.
10.5 NO THIRD-PARTY BENEFICIARIES. Nothing expressed or referred to in
this Agreement confers any rights or remedies upon any Person that is not a
Party or permitted assign of a Party.
10.6 SEVERABILITY. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under applicable
Law, but if any provision of this Agreement is held to be prohibited by or
invalid under applicable Law, such provision will be ineffective only to the
extent of such prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Agreement.
10.7 COMPLETE AGREEMENT. This Agreement (including the Disclosure
Schedule and any Update and the exhibits and schedules hereto) and the
Confidentiality Agreement contain the complete agreement between the Parties
hereto and supersede any prior understandings, agreements or representations by
or between the Parties, written or oral.
10.8 SIGNATURES; COUNTERPARTS. This Agreement may be executed in one or
more counterparts, any one of which need not contain the signatures of more than
one Party, but all such counterparts taken together will constitute one and the
same instrument. A facsimile signature will be considered an original signature.
10.9 GOVERNING LAW. THE INTERNAL LAW, WITHOUT REGARD TO CONFLICTS OF
LAWS PRINCIPLES, OF THE STATE OF DELAWARE WILL GOVERN ALL QUESTIONS CONCERNING
THE CONSTRUCTION, VALIDITY AND INTERPRETATION OF THIS AGREEMENT AND THE
PERFORMANCE OF THE OBLIGATIONS IMPOSED BY THIS AGREEMENT.
10.10 JURISDICTION. Each of the Parties submits to the exclusive
jurisdiction of the Chancery Court of the State of Delaware or any federal court
sitting in the State of Delaware, in
55
any action or proceeding arising out of or relating to this Agreement and agrees
that all claims in respect of the action or proceeding may be heard and
determined in any such court. Each Party also agrees not to bring any action or
proceeding arising out of or relating to this Agreement in any other court. Each
of the Parties waives any defense of inconvenient forum to the maintenance of
any action or proceeding so brought and waives any bond, surety or other
security that might be required of any other Party with respect to any such
action or proceeding. Any Party may make service on any other Party by sending
or delivering a copy of the process to the Party to be served. The Parties agree
that either or both of them may file a copy of this Section 10.10 with any court
as written evidence of the knowing, voluntary and bargained agreement between
the Parties irrevocably to waive any objections to venue or to convenience of
forum. Notwithstanding the foregoing, judgment upon an arbitration award
rendered under this Agreement may be entered in any court having jurisdiction
and the Parties hereby submit to personal jurisdiction in any court of competent
jurisdiction for that limited purpose.
10.11 WAIVER OF JURY TRIAL. EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY
CONTROVERSY THAT MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED
AND DIFFICULT ISSUES, AND THEREFORE IT IRREVOCABLY AND UNCONDITIONALLY WAIVES
ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY
OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (I)
NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (II) IT UNDERSTANDS AND HAS
CONSIDERED THE IMPLICATIONS OF SUCH WAIVER, (III) IT MAKES SUCH WAIVER
VOLUNTARILY AND (IV) IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG
OTHER THINGS, THE MUTUAL WAIVER AND CERTIFICATIONS IN THIS SECTION 10.11.
10.12 CONSTRUCTION. The Parties and their respective counsel have
participated jointly in the negotiation and drafting of this Agreement. In
addition, each of the Parties acknowledges that it is sophisticated and has been
advised by experienced counsel and, to the extent it deemed necessary, other
advisors in connection with the negotiation and drafting of this Agreement. In
the event an ambiguity or question of intent or interpretation arises, this
Agreement will be construed as if drafted jointly by the Parties, and no
presumption or burden of proof will arise favoring or disfavoring any Party by
virtue of the authorship of any of the provisions of this Agreement. Any
reference to any Law will be deemed to refer to all rules and regulations
promulgated thereunder, unless the context requires otherwise. The headings
preceding the text of articles and sections included in this Agreement and the
headings to the schedules and exhibits are for convenience only and are not be
deemed part of this Agreement or given effect in interpreting this Agreement.
References to sections, articles, schedules or exhibits are to the sections,
articles, schedules and exhibits contained in, referred to or attached to this
Agreement, unless otherwise specified. The word "including" means "including,
without limitation," and any reference in this Agreement to the phrase "as of
the date hereof" means as of the date of this Agreement. When any Party may take
any permissive action, including the granting of a consent, the waiver of any
provision of this Agreement or otherwise, whether to take such action
56
is in its sole and absolute discretion. The use of the masculine, feminine or
neuter gender or the singular or plural form of words will not limit any
provisions of this Agreement. A statement that an item is listed, disclosed or
described means that it is correctly listed, disclosed or described, and a
statement that a copy of an item has been delivered means a true and correct
copy of the item has been delivered. A document or a copy of a document shall be
deemed to have been delivered or made available to Buyer if such document is,
prior to the date hereof, actually delivered or is, prior to the date hereof,
set forth in its entirety in an exhibit or schedule to this Agreement, or is,
prior to the date hereof, posted on the datasite created by Seller and listed on
SECTION 10.12 OF THE DISCLOSURE SCHEDULE to facilitate the due diligence
investigation of the Companies or the Business and a legible copy of which is
available to Buyer, or is, prior to the date hereof, filed as an exhibit to any
publicly available filing made by the Company with the Securities and Exchange
Commission pursuant to the Act.
10.13 TIME OF ESSENCE. With regard to all dates and time periods set
forth or referred to in this Agreement, time is of the essence.
10.14 LIKE KIND EXCHANGE COOPERATION CLAUSE. Seller and Buyer
acknowledge and agree that the purchase and sale of all or any portion of the
assets owned by the Companies on the Closing Date ("ASSETS") may be part of a
tax-free exchange under Section 1031 of the Code for either Buyer or Seller.
Each Party hereby agrees to take all reasonable steps on or before the Closing
Date to facilitate such exchange if requested by the other Party, provided that
(a) no Party making such accommodation shall be required to acquire any
substitute property, (b) such exchange shall not affect the representations,
warranties, liabilities, covenants and obligations of the Parties to each other
under this Agreement, (c) no Party making such accommodation shall incur any
additional cost, expense or liability in connection with such exchange (other
than expenses of reviewing and executing documents required in connection with
such exchange), and (d) except as specifically provided in this Section 10.14,
no dates in this Agreement will be extended as a result thereof. Notwithstanding
anything to the contrary contained in the foregoing, if Seller so elects to
close the transfer of some or all of the Assets as such an exchange, then (i)
Seller, at its sole option, may delegate its obligations to transfer some or all
of the Assets under this Agreement, and may assign its rights to receive all or
a portion of the Purchase Price from Buyer, to a deferred exchange intermediary
(an "INTERMEDIARY") or to an exchange accommodation titleholder, as the case may
be; (ii) such delegation and assignment shall in no way reduce, modify or
otherwise affect the obligations of Seller pursuant to this Agreement; (iii)
Seller shall remain fully liable for its obligations under this Agreement as if
such delegation and assignment shall not have taken place; (iv) Intermediary or
exchange accommodation titleholder, as the case may be, shall have no liability
to Buyer; and (v) the closing of the transfer of the Assets to Buyer shall be
undertaken by direct deed, assignment or other appropriate conveyance from
Seller (or, if applicable, from other Affiliates of Seller whom Seller will
cause to execute such deeds, assignments and other appropriate instruments of
conveyance) to Buyer or to exchange accommodation titleholder, as the case may
be. Notwithstanding anything in this Agreement to the contrary, Seller shall
have the right to extend the Closing Date for up to thirty (30) days in order to
facilitate a tax-free exchange pursuant to this Section 10.14, and to obtain all
documentation in connection therewith.
Notwithstanding anything to the contrary contained in this Agreement,
if Buyer so elects to close the acquisition of some or all of the Assets as an
exchange, then (i) Buyer, at its sole
57
option, may delegate its obligations to acquire some or all of the Assets under
this Agreement, and may assign its rights to receive some or all of the Assets
from Seller, to an Intermediary or to an exchange accommodation titleholder, as
the case may be; (ii) such delegation and assignment shall in no way reduce,
modify or otherwise affect the obligations of Buyer pursuant to this Agreement;
(iii) Buyer shall remain fully liable for its obligations under this Agreement
as if such delegation and assignment shall not have taken place; (iv)
Intermediary or exchange accommodation titleholder, as the case may be, shall
have no liability to Seller; and (v) the closing of the acquisition of some or
all of the Assets by Buyer or the exchange accommodation titleholder, as the
case may be, shall be undertaken by direct deed, assignment and/or other
appropriate conveyance from Seller (or, if applicable, from other affiliates of
Seller whom Seller will cause to execute such deeds, assignments and other
appropriate instruments of conveyance) to Buyer (or to exchange accommodation
titleholder, as the case may be).
10.15 BUYER'S GUARANTY. Buyer's payment obligations under Section
8.2(a) are hereby irrevocably and unconditionally guaranteed by Whitehall Street
Global Real Estate Limited Partnership 2007, a Delaware limited partnership
("BUYER'S GUARANTOR"). Buyer's Guarantor acknowledges that it will benefit
financially from the acquisition by Buyer of the Company Membership Interests
pursuant to the terms of this Agreement, that Seller has informed Buyer that
Seller will not enter into this Agreement without Buyer's Guarantor's executing
this Section 10.15, that Buyer's Guarantor's executing of this Section 10.15 is
a material inducement to Seller's execution of, and performance of its
obligations under this Agreement and that Seller is relying on this Section
10.15 in entering into and performing its obligations under this Agreement. The
provisions of this Section 10.15 and the Buyer's Guarantor's guaranty hereunder
shall terminate in all respects upon the Closing Date and shall be of no further
force and effect. The provisions of this Section 10.15 constitute a guaranty of
payment and not of collection. Buyer's Guarantor hereby waives all defenses that
would otherwise be available as a matter of suretyship law or that would
otherwise be available to Buyer, other than the defense of payment in full.
10.16 SELLER'S GUARANTY. Seller's payment obligations under Section 9.2
are hereby irrevocably and unconditionally guaranteed by American Real Estate
Partners, L.P., a Delaware limited partnership ("SELLER'S GUARANTOR"). Seller's
Guarantor is executing this Agreement to guarantee obligations of Seller from
and after Closing. Seller's Guarantor acknowledges that it will benefit
financially from the acquisition by Buyer of the Properties pursuant to the
terms of this Agreement, that Buyer has informed Seller that Buyer will not
enter into this Agreement without Seller's Guarantor's executing this Section
10.16, that Seller's Guarantor's executing of this Section 10.16 is a material
inducement to Buyer's execution of, and performance of its obligations under
this Agreement and that Buyer is relying on this Section 10.16 in entering into
and performing its obligations under this Agreement. The provisions of this
Section 10.16 shall survive the Closing and shall terminate in all respects upon
the expiration of Seller's payment obligations under Section 9.2. The provisions
of this Section 10.16 constitute a guaranty of payment and not of collection.
Seller's Guarantor hereby waives all defenses that would otherwise be available
as a matter of suretyship law or that would otherwise be available to Seller,
other than the defense of payment in full.
[Remainder of Page Left Intentionally Blank]
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IN WITNESS WHEREOF, Buyer and Seller have executed this Membership
Interest Purchase Agreement as of the date first above written.
BUYER:
W2007/ACEP HOLDINGS, LLC
By: Whitehall Street Global Real Estate Limited Partnership 2007
By: WH Advisors, L.L.C. 2007
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Vice President
SELLER:
AMERICAN ENTERTAINMENT PROPERTIES CORP.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
-----------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Chief Financial Officer
59
For purposes of Section 10.15 only:
BUYER'S GUARANTOR:
WHITEHALL STREET GLOBAL REAL ESTATE LIMITED PARTNERSHIP 2007
By: WH Advisors, L.L.C. 2007
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
---------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Vice President
For purposes of Section 10.16 only:
SELLER'S GUARANTOR:
AMERICAN REAL ESTATE PARTNERS, L.P.
By: American Property Investors, Inc.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Principal Executive Officer
60