UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
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FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 or 15(d) of the
Securities
Exchange Act of 1934
Date
of
Report (Date of Earliest Event Reported): September 3, 2006
American
Real Estate Partners, L.P.
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(Exact
name of registrant as specified in its charter)
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Delaware
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1-9516
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13-3398766
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(State
or other jurisdiction of incorporation)
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(Commission
File Number)
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(IRS
Employer
Identification
No.)
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767
Fifth Avenue, Suite 4700, New York, NY
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10153
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(Address
of principal executive offices)
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(Zip
Code)
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Registrant’s
telephone number, including area code: (212)
702-4300
N/A
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(Former
name or former address, if changed since last report)
Check
the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions:
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Written
communication pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
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[
]
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Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
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[
]
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Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17
CFR
240.14d-2(b))
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[
]
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Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17
CFR
240.13e-4(c))
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Section
1 - Registrant’s Business and Operations
Item
1.01
- Entry
into a Material Definitive Agreement.
On
September 3, 2006, our indirect majority-owned subsidiary, Atlantic Coast
Entertainment Holdings, Inc., a Delaware corporation, ACE Gaming, LLC, a New
Jersey limited liability company and a wholly-owned subsidiary of Atlantic
Coast
which owns The Sands Hotel and Casino in Atlantic City, American Real Estate
Holdings Limited Partnership, or AREH, of which we are the 99% limited partner,
and certain other entities owned by or affiliated with AREH entered into an
agreement with Pinnacle Entertainment, Inc. pursuant to which Pinnacle agreed
to
acquire all of the outstanding membership interests in ACE and 100% of the
equity interests in certain subsidiaries of AREH which own parcels of real
estate adjacent to The Sands, including 7.7 acres of land adjacent to The Sands
known as the Traymore site, for an aggregate price of approximately $250 million
(of which approximately $189 million is payable to Atlantic Coast and
approximately $61 million is payable to affiliates of AREH for the Traymore
site), plus an additional $20 million to Atlantic Coast for certain tax-related
benefits and additional real estate.
In
connection with the agreement, the majority stockholder of Atlantic Coast,
AREP
Sands Holdings, LLC, which owns approximately 58% of the outstanding stock
of
Atlantic Coast, and AREH entered into a Stockholders Agreement, dated as
of
September 3, 2006, or the Stockholders Agreement, with Pinnacle, pursuant
to
which AREP Sands delivered a written consent approving the Acquisition
Agreement. AREP Sands is a wholly-owned subsidiary of AREH.
In
addition, pursuant to the Stockholders Agreement, entities affiliated with
Mr.
Icahn, including AREH and AREP Sands, have agreed to pay Pinnacle all of
any
additional value received by such entities through a superior proposal or
certain other transactions or if Pinnacle matches or exceeds the terms of
any
superior proposal or otherwise pays more than the purchase price contemplated
by
the agreement.
As
part
of the agreement, Pinnacle required that Atlantic Coast proceed to close The
Sands, which is anticipated to occur within approximately 70 days of the signing
of the agreement. The agreement provides severance benefits to union employees
in accordance with union agreements and severance pay to non-union employees
who
remain with Atlantic Coast through the closing.
The
transaction is subject to the satisfaction of customary closing conditions
and
is not subject to financing. Under the agreement, AREH and Atlantic Coast have
certain indemnification obligations.
The
agreement contains non-solicitation, fiduciary out and termination fee
provisions. Atlantic Coast is not permitted to solicit other acquisition
proposals, but for 45 days after the date of the agreement may negotiate with
anyone that submits unsolicited proposals if Atlantic Coast’s board believes
that such a proposal is, or is reasonably likely to result in, a proposal that
is more favorable to Atlantic Coast’s stockholders. If within such 45-day
period, Atlantic Coast’s board determines that an alternative proposal is more
favorable to Atlantic Coast’s stockholders, Atlantic Coast is permitted to
terminate the agreement upon payment of a $10 million termination fee.
The
foregoing description of the transaction does not purport to be complete and
is
qualified in its entirety by reference to the agreement, which is attached
hereto as Exhibit 10.1 and is incorporated by reference herein.
Section
8 - Other Events
Item
8.01 - Other Events.
On
September 5, 2006, Atlantic Coast and Pinnacle issued a joint press release,
a
copy of which is attached as Exhibit 99.1.
Section
9 - Financial Statements and Exhibits
Item
9.01(d) Exhibits
Exhibit
10.1 - Acquisition
Agreement, dated September 3, 2006, by and among Pinnacle Entertainment, Inc.,
Atlantic Coast Entertainment Holdings, Inc., ACE Gaming LLC, American Real
Estate Holdings Limited Partnership, AREP Boardwalk Properties LLC, PSW
Properties LLC, AREH MLK LLC and Mitre Associates LLC.
Exhibit
10.2
-
Stockholders Agreement, dated as of September 3, 2006, among Pinnacle
Entertainment, Inc., American Real Estate Holdings Limited Partnership and
AREP
Sands Holding, LLC.
Exhibit
99.1 - Press
Release, dated September 5, 2006.
[remainder
of page intentionally left blank; signature page follows]
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant
has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
| AMERICAN REAL ESTATE PARTNERS, L.P. | |||
| (Registrant) | |||
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| By: | American
Property
Investors, Inc., its General Partner |
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| By: | /s/ Hillel Moerman | ||
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Hillel
Moerman,
Chief
Financial Officer
American
Property Investors, Inc.,
the
General Partner of
American
Real Estate Partners, L.P.
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| Date: September 8, 2006 | |||
Exhibit
10.1
ACQUISITION
AGREEMENT
dated
as
of September 3, 2006
by
and
among
PINNACLE
ENTERTAINMENT, INC.,
ATLANTIC
COAST ENTERTAINMENT HOLDINGS, INC.,
ACE
GAMING, LLC,
AMERICAN
REAL ESTATE HOLDINGS LIMITED PARTNERSHIP,
AREP
BOARDWALK PROPERTIES LLC,
PSW
PROPERTIES LLC,
AREH
MLK
LLC
and
MITRE
ASSOCIATES LLC
ACQUISITION
AGREEMENT
THIS
ACQUISITION AGREEMENT (this “Agreement”)
is
made and entered into as of September 3, 2006, by and among Pinnacle
Entertainment, Inc., a Delaware corporation (“Buyer”),
Atlantic Coast Entertainment Holdings, Inc., a Delaware corporation
(“ACE
Hi”),
ACE
Gaming, LLC, a New Jersey limited liability company and wholly-owned subsidiary
of ACE Hi (“ACE
Lo”
and,
together with ACE Hi, the “ACE
Selling Parties”),
American Real Estate Holdings Limited Partnership, a Delaware limited
partnership (“AREH”
and,
together with ACE Hi, each a “Seller”
and
collectively, the “Sellers”),
AREP
Boardwalk Properties LLC, a Delaware limited liability company (“Boardwalk”),
PSW
Properties LLC, a Delaware limited liability company (“MLK
I”),
AREH
MLK LLC, a Delaware limited liability company (“MLK
II”),
Mitre
Associates LLC, a Delaware limited liability company (“MLK
III”
and,
together with MLK I and MLK II, the “MLK
Entities”
and,
together with Boardwalk, the “AREH
Subs”
and,
together with ACE Lo, each a “Company”
and
collectively, the “Companies”;
AREH
and the AREH Subs are collectively referred to as the “AREH
Selling Parties”
and,
together with the ACE Selling Parties, each a “Selling
Party”
and
collectively, the “Selling
Parties”).
Capitalized terms used herein and not otherwise defined shall have the meanings
set forth or referenced in Section
13.1
hereof.
WHEREAS,
ACE Hi owns 100% of the issued and outstanding membership interests (the
“ACE
Lo
Equity Interests”)
in ACE
Lo.
WHEREAS,
ACE Lo is the owner of certain real estate situated in the City of Atlantic
City, State of New Jersey, more particularly described on Exhibit
A
attached
hereto and incorporated herein by reference (the “Casino
Land”
which,
together with the Improvements now or hereafter located thereon, shall be deemed
part of the Casino Property), and owns and operates a casino and hotel commonly
known as The Sands Hotel & Casino in Atlantic City at the Casino Property
(the “Casino
Business”);
WHEREAS,
AREH directly or indirectly owns or controls 100% of the issued and outstanding
membership interests (the “AREH
Subs Equity Interests”
and,
together with the ACE Lo Equity Interests, the “Interests”)
in the
AREH Subs.
WHEREAS,
Boardwalk is the owner of certain real estate situated in the City of Atlantic
City, State of New Jersey (commonly known as the Traymore site), more
particularly described on Exhibit
B
attached
hereto and incorporated herein by reference (the “Traymore
Land”
and,
together with the Improvements now or hereafter located thereon, the
“Traymore
Site”);
WHEREAS,
the MLK Entities are the owners of certain real estate situated in the City
of
Atlantic City, State of New Jersey adjacent to or in the vicinity of the Casino
Land, more particularly described on Exhibit
C
attached
hereto and incorporated herein by reference (the “MLK
Land”
and,
together with the Traymore Land, the “Adjacent
Land”;
the
MLK Land, together with the Improvements now or hereafter located thereon,
is
referred to as the “MLK
Properties”
and,
together with the Traymore Site, shall be deemed part of the Adjacent
Properties);
-1-
WHEREAS,
MLK III is party to an agreement (the “Restaurant
Purchase Agreement”)
to
purchase (the “Restaurant
Purchase”)
certain real estate in the City of Atlantic City, State of New Jersey adjacent
to the Casino Property (commonly known as the Poseidon Restaurant), more
particularly described on Exhibit D
attached
hereto and incorporated herein by reference (the “Restaurant
Land”
and,
together with the Improvements now or hereafter located thereon, the
“Restaurant
Site”);
WHEREAS,
following consummation of the Restaurant Purchase, for all purposes of this
Agreement: (i) the Restaurant Land will be deemed to be a part of the Adjacent
Land, (ii) the Restaurant Site will be deemed to be a part of the Adjacent
Properties, and (iii) the Adjacent Properties, together with the Casino
Property, shall each be referred to herein as a “Property”
and
collectively, as the “Properties”;
WHEREAS,
Buyer and Sellers acknowledge and agree that it is the intention of the parties
that, on the terms and subject to the conditions set forth in this Agreement,
Buyer will acquire (a) the ACE Lo Equity Interests (the “ACE
Lo
Purchase”)
from
ACE Hi and (b) the AREH Subs Equity Interests (the “AREH
Subs Purchase”
and,
together with the ACE Lo Purchase, the “Purchase”)
from
AREH; and
WHEREAS,
in order to facilitate Buyer’s construction of a new casino facility at the
Properties, Buyer has required that the ACE Selling Parties give the required
notice under the WARN Act and proceed towards a shutdown of the Casino
Business.
NOW,
THEREFORE, the parties hereto, in consideration of the premises and of the
mutual representations, warranties and covenants contained herein and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, agree as follows:
ARTICLE
I
PURCHASE
AND SALE OF INTERESTS;
CLOSING
Section
1.1 Purchase
and Sale of Interests.
Upon the
terms and subject to the conditions set forth in this Agreement, at the Closing,
each Seller agrees that it will sell, convey, assign and transfer to Buyer,
and
Buyer shall purchase and accept from such Seller, the Interests set forth
opposite such Seller’s name on Schedule
I
attached
hereto.
Section
1.2 Closing. Unless
this Agreement is earlier terminated pursuant to ARTICLE
XI
hereof,
the closing of the transactions contemplated by this Agreement, including the
purchase and sale of the Interests (the “Closing”),
shall
take place at 9:00 a.m., New York time, at the offices of Katten Muchin Rosenman
LLP, on the fifth (5th)
business day immediately following satisfaction of the required notice period
under the WARN Act; provided that,
if the
other conditions to Closing set forth in ARTICLE
X
shall
have not been satisfied or waived at such time (other than those conditions
to
be satisfied or waived at the Closing, but subject to the satisfaction or waiver
of such conditions at such time), then the parties shall use commercially
reasonable efforts to cause the remaining conditions to be satisfied or waived
and the Closing to occur as soon as reasonably practicable thereafter. The
date
upon which the Closing shall occur is sometimes referred to in this Agreement
as
the “Closing
Date.”
-2-
ARTICLE
II
PURCHASE
PRICE
Section
2.1 Purchase
and Sale of ACE Lo Equity Interests.
(a) (i) At
the
Closing, subject to the terms and conditions set forth herein, Buyer shall
pay
to ACE Hi, in consideration of its purchase of the ACE Lo Equity Interests,
$250,000,000
minus
the
Traymore Price (the “Initial
ACE Purchase Price”),
it
being expressly agreed and understood that although ACE Lo has an option to
purchase the Boardwalk Equity Interests pursuant to the Traymore Call Agreement,
Buyer shall purchase the Boardwalk Equity Interests directly from AREH pursuant
to Section
2.2.
The
Initial ACE Purchase Price shall be adjusted pursuant to Section
2.7
of this
Agreement (the “Closing
ACE Purchase Price”).
(ii) If
applicable, at the Closing, Buyer shall make the payments to ACE Hi as set
forth
in Section
9.16
and
Section
9.24.
If the
events referred to in Section
9.16 and
Section
9.24
have not
occurred by the Closing, those payments will be made following the Closing
along
with any other post-Closing payments required under this Agreement.
(b) For
purposes of this Agreement, the term:
(i) “ACE
Closing Price Adjustment”
means
the result of
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(A)
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the
sum of the following assets of ACE Lo, calculated in accordance with
GAAP
consistently applied (except to the extent that a different methodology
is
specified in this Agreement), as of the Measurement Date:
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(I)
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cash
and cash equivalents;
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(II)
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Accounts
Receivable;
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(III)
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Inventory;
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(IV)
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prepaid
expenses (other than prepaid real and personal property Taxes) of
the
Casino Business, to the extent they (x) relate to periods no more
than ninety (90) calendar days following the Measurement Date or
(y) are
set forth on Schedule 2.1(b)(i)(A)(IV),
to the extent of any remaining balances thereof as of the Measurement
Date;
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(V)
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prepaid
real and personal property Taxes and special assessments, if any,
of ACE
Lo related to the Casino Property that are attributable to periods
on or
after the Measurement Date; and
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(VI)
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refundable
deposits under ACE Material Contracts (including insurance and utility
deposits), minus
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(B)
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the
sum of the following liabilities of ACE Lo, calculated in accordance
with
GAAP consistently applied (except to the extent that a different
methodology is specified in this Agreement), as of the Measurement
Date:
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(I)
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accounts
payable;
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(II)
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accrued
expenses (including, without limitation, accruals for medical claims
and
general liability claims in accordance with past
practice);
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(III)
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unpaid
real and personal property Taxes and special assessments, if any,
of ACE
Lo related to the Casino Property that are attributable to periods
up to,
but not including, the Measurement Date;
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(IV)
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accrued
salary, bonus, commissions and other payroll and related expenses
that are
attributable to periods up to, but not including, the Measurement
Date;
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(V)
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Notes
Payable;
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(VI)
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Gaming
Liabilities;
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(VII)
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Agreed
Interim Amount; and
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(VIII)
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Advance
Room Deposits.
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For
clarity, (x) if the ACE Closing Price Adjustment is greater than zero
(i.e.,
a
positive number), the Initial ACE Purchase Price will be increased by such
amount and (y) if the ACE Closing Price Adjustment is less than zero
(i.e.,
a
negative number), the Initial ACE Purchase Price will be reduced by such
amount.
(ii) “ACE
Hi
NJSEA Payment”
means
the result of (A) ACE Lo’s proportionate share of the cash payment due on
October 15, 2006 to the NJSEA in respect of the twelve (12) months ended
June 30, 2006, calculated in accordance with Section 1 of the Grant and
Donations Agreement (the “2006
NJSEA Payment”),
multiplied
by
(B) the
ratio (the “ACE
Hi
NJSEA Ratio”)
equal
to (I) the gross gaming revenues of ACE Lo for the period from July 1, 2006
through the Measurement Date, divided
by
(II) the
gross gaming revenues of ACE Lo for the period from July 1, 2006 through the
Closing Date.
(iii) “Agreed
Interim Amount”
means
Forty Thousand Dollars ($40,000).
(iv) “Initial
Amount”
means
Ten Million Dollars ($10,000,000).
-4-
(v) “Agreed
Severance Amount”
means
the
sum of (A) the amount of ACE Lo’s contractual severance obligations to the
individuals listed on Schedule 2.1(b)(v)
attached
hereto in the amounts provided for in the agreements or order listed on such
Schedule 2.1(b)(v),
plus
(B) two
(2) weeks salary (as proportionately adjusted for part-time status) for each
non-union Casino Employee employed at the Casino Property immediately prior
to
the Closing, plus
(C) the Agreed Stay-Put Bonuses described in Section
9.28(c)
hereof,
and plus
(D) any
payments due under the Casino Shutdown Plan.
(vi) “Casino
Mansion Taxes”
means
the amount of “Mansion” Taxes payable pursuant to New Jersey Assembly Bill No.
4701 (ACS), as amended, with respect to the indirect transfer of the Casino
Property from ACE Hi to Buyer pursuant to the ACE Lo Purchase.
(vii) “Certain
Employee Liabilities”
means,
with respect to ACE Lo, (A) severance payments to the Casino Employees
arising out of terminations by ACE Lo of employment of Casino Employees before
the Measurement Date, (B) severance payments to Casino Employees arising
out of terminations of employment of Casino Employees on or after the
Measurement Date and through the Closing Date, to the extent that such severance
amounts paid or committed to be paid to such Casino Employees exceed the Agreed
Severance Amount, (C) payments to Casino Employees in respect of vacation
accrued through the Measurement Date and (D) the EBITDA Bonuses. Certain
Employee Liabilities do not include any payments required to be made under
the
WARN Act or the Casino Shutdown Plan; it being agreed that any such WARN Act
payments and payments to be made pursuant to the Casino Shutdown Plan, if any,
shall be the sole responsibility of Buyer.
(viii) “Comp
Points Liability”
means
the estimated liability of the food and beverage and gift certificates which
ACE
Lo is obligated to provide to customers in respect of “comp” points awarded to
such customers in the ordinary course of the Casino Business. The
estimated liability is calculated using a discount factor and expiration factor
applied to total points earned. The expiration factor is based on historical
redemption rates.
(ix) “CRDA
Price”
means
Ten Million Six Hundred Forty-One Thousand Seven Hundred Thirty-Four Dollars
($10,641,734).
(x) “Deposit
Delay Increment”
means
the result of (I) One Million Dollars ($1,000,000) multiplied
by
the
number of days between (A) the first
(1st)
business day after the date of this Agreement and (B) the date the Deposit
is
deposited with the Escrow Agent pursuant Section
2.3(a)
hereof.
(xi) “Discharged
ACE Indemnified Liabilities”
means
any ACE Indemnified Liabilities paid or discharged by ACE Lo in cash or
otherwise through a reduction of ACE Lo’s assets during the Measurement
Period.
(xii) “EBITDA
Bonuses”
means
bonuses payable to Casino Employees pursuant to the American Casino &
Entertainment Properties LLC & Atlantic Coast Entertainment Holdings, Inc.
Management Plan effective January 1, 2005, as revised January 10, 2006, which
are set forth on Schedule
2.1(b)(xii),
to
the extent required to be paid under such plan.
-5-
(xiii) “Estimated
ACE Closing Price Adjustment”
means
the estimate of the ACE Closing Price Adjustment determined pursuant to
Section
2.5(a)
hereof.
(xiv) “Estimated
ACE Hi NJSEA Payment”
means
the estimate of the ACE Hi NJSEA Payment determined pursuant to Section
2.5(a)
hereof.
(xv) “Estimated
Casino Mansion Taxes”
means
the estimate of the Casino Mansion Tax determined pursuant to Section
2.5(a)
hereof.
(xvi) “Estimated
Certain Employee Liabilities”
means
the estimate of the Certain Employee Liabilities determined pursuant to
Section
2.5(a)
hereof.
(xvii) “Estimated
Multiemployer Plan Liabilities”
means
Four Million Four Hundred Thousand Dollars ($4,400,000).
(xviii) “Gaming
Liabilities”
means
the following gaming-related liabilities incurred in connection with the Casino
Business: (A) the amount accrued on the meters of ACE Lo’s progressive slot
machines and progressive Caribbean stud poker games (“Progressive
Gaming Liabilities”),
(B) liabilities for redemption of outstanding chips, keno tickets, wagers,
ticket-in/ticket-out and other similar gaming liabilities at face value less
discounts in accordance with past practice taken prior to June 30, 2006
(“Outstanding
Chip & Ticket-In/Ticket-Out Liabilities”);
and
(C) unclaimed jackpot liabilities;
provided that,
the
amounts in each of subclauses (A) - (C) above shall be adjusted downward to
equal the amounts for which ACE Lo remains liable, which shall consist of (I)
any amounts required to be paid into escrow (any such amounts, “Escrow
Gaming Amounts”),
and
(II) any other amounts existing as of the Measurement Date for which ACE
Lo remains liable after the Casino Shutdown, such adjustment to be determined
following discussions among Buyer, ACE Hi and the New Jersey Casino Control
Commission (such amounts, the “Required
Gaming Liabilities”);
provided,
however,
that to
the extent that Required Gaming Liabilities include amounts accrued on meters
on
ACE Lo’s progressive slot machines required to be carried over to another meter
when Buyer reopens a casino on the Properties, only one-half (½) of such amounts
accrued on meters shall be included in Gaming Liabilities.
(xix) “Measurement
Date”
means
12:00:01 a.m. New York City time, on September 1, 2006.
(xx) “Measurement
Period”
means
the period from and after the Measurement Date through the Closing.
(xxi) “Multiemployer
Plan Liabilities”
means,
with respect to ACE Lo, obligations to Multiemployer Plans for delinquent
contributions thereto as of the Measurement Date or on account of any withdrawal
liability, determined as of the Measurement Date as if ACE Lo had incurred
a
complete or partial withdrawal event under Title IV of ERISA on such
date.
-6-
(c) Schedule
II
attached
hereto is an illustrative calculation of the ACE Closing Price Adjustment in
Section
2.1(b)(i)
in
accordance with this Agreement, on the assumption that the Measurement Date
occurred at 12:00:01 a.m. (New York time) on July 1, 2006.
Section
2.2 Purchase
and Sale of AREH Subs Equity Interests.
(a) Subject
to the terms and conditions set forth herein, the aggregate purchase price
for
the AREH Subs Equity Interests shall be equal to the result of clauses (i)
through (iv)
below
(such amount, the “AREH
Purchase Price”
and,
together with the Closing
ACE
Purchase Price, the “Purchase
Price”):
(i) the
Traymore Price plus
the MLK
Price (the “Base
AREH Purchase Price”);
plus
(ii) the
Restaurant Purchase Price; minus
(iii) one-half
(½) of the Adjacent Property Mansion Taxes; plus or
minus
(iv) the
AREH
Subs Prorations.
(b) For
purposes of this Agreement, the term:
(i) “Adjacent
Property Mansion Taxes”
means
the amount of “Mansion” Taxes payable pursuant to New Jersey Assembly Bill No.
4701 (ACS), as amended, with respect to the indirect transfer of the Adjacent
Properties from AREH to Buyer pursuant to the AREH Subs Purchase.
(ii) “AREH
Subs Prorations”
means
the result of: (A) prepaid real and personal property Taxes and special
assessments, if any, of the AREH Subs related to the Adjacent Properties that
are attributable to periods on and after the Closing Date, plus
(B) unamortized prepaid expenses of the AREH Subs under the Assumed AREH
Sub Contracts as of the Closing Date, minus
(C) unpaid utility charges for telephone, gas, electricity, sewer, water
and other services of the AREH Subs for the current billing period prorated
for
the period up to, but not including, the Closing Date, minus
(D) unpaid real and personal property Taxes and special assessments, if
any, of the AREH Subs related to the Adjacent Properties that are attributable
to periods up to, but not including, the Closing Date and that are to be paid
by
the AREH Subs or Buyer on or after the Closing Date; minus
(E) accrued expenses under the Assumed AREH Sub Contracts attributable
to periods prior to the Closing Date that are to be paid by the AREH Subs on
or
after the Closing Date; and minus
(F)
payments of rent and deposits received under the Assumed Leases attributable
to
periods on or after the Closing Date.
For
clarity, (x) if the AREH Subs Proration is greater than zero (i.e.,
a
positive number), the AREH Purchase Price will be increased by such amount
and
(y) if the AREH Subs Proration is less than zero (i.e.,
a
negative number), the AREH Purchase Price will be reduced by such
amount.
-7-
(iii) “Estimated
AREH Subs Prorations”
means
the good faith estimate of the AREH Subs Prorations pursuant to Section
2.6(b)
hereof.
(iv) “Estimated
Adjacent Property Mansion Taxes”
means
the good faith estimate of the Adjacent Property Mansion Taxes pursuant to
Section
2.6(b)
hereof.
(v) “MLK
Price”
means
(A) Five Million Seven Hundred Eighty-Five Thousand Dollars ($5,785,000), plus
the out-of-pocket costs and expenses (including transfer or similar Taxes,
if
any) actually paid by AREH or its Affiliates for the MLK Properties minus
the (B)
MLK Indebtedness.
(vi) “Restaurant
Purchase Price”
means
either (A) Five Million One Hundred Thousand Dollars
($5,100,000), plus the out-of-pocket costs and expenses (including transfer
or similar Taxes, if any) actually paid by AREH or its Affiliates in connection
with the Restaurant Purchase (such costs and expenses, the “Restaurant
Costs”),
in
the event that the closing of the Restaurant Purchase occurs prior to the
Closing or (B) Two Hundred Thousand Dollars ($200,000), representing the
deposit actually paid by AREH or its Affiliates under the purchase agreement
for
the Restaurant Site, plus the Restaurant Costs, in the event the closing of
the
Restaurant Purchase does not occur prior to the Closing.
Section
2.3 Deposit.
(a) On
the
first (1st)
business day following the execution of this Agreement, Buyer shall deposit
Fifty Million Dollars ($50,000,000) (as such amount may be adjusted pursuant
to
Section
9.1(d)
or
Section
9.4(b)
hereof,
the “Deposit”)
with
the Escrow Agent pursuant to an escrow agreement substantially in the form
attached hereto as Exhibit
E
(the
“Deposit
Escrow Agreement”)
executed and delivered by each of ACE Hi, Buyer and the Escrow Agent. Buyer
and
ACE Hi hereby acknowledge and agree that upon the Closing or any termination
of
this Agreement, any interest earned on the Deposit shall accrue for the benefit
of and be paid to Buyer. In
the
event that the required amount of the Deposit is reduced or eliminated in
accordance with Section
9.4(b)
hereof,
Buyer shall deliver written notice of such reduction to the Escrow Agent and
such reduced amount, together with any interest accrued thereon shall be
promptly released from the escrow under the Deposit Escrow Agreement (the
“Deposit
Escrow”)
by the
Escrow Agent and paid to Buyer pursuant to this Section
2.3(a)
and the
Deposit Escrow Agreement.
(b) Prior
to
the Closing Date, Buyer and ACE Hi acknowledge and agree that Buyer shall be
entitled to quarterly distributions of one-half (½) of all accrued interest on
the Deposit Escrow Amount, which shall be distributed by the Escrow Agent to
Buyer within ten (10) business days after the end of each calendar quarter
pursuant to the Deposit Escrow Agreement and this Section
2.4(c).
Interest earned on the Deposit shall be included in income by Buyer for Income
Tax purposes.
-8-
(c) At
the
Closing, the Deposit (without giving effect to the interest earned thereon)
shall be released to ACE Hi and the amount so released shall be credited against
the Closing ACE Purchase Price and deducted from the ACE Closing Payment
pursuant to Section
2.5(c)(xii)
hereof,
and Buyer and ACE Hi shall deliver written instructions to the Escrow Agent
to
(i) release from the Deposit Escrow and pay to ACE Hi the
Deposit and (ii) release from the Deposit Escrow and pay to Buyer any interest
earned on the Deposit, all pursuant to this Section
2.3(c)
and the
Deposit
Escrow Agreement.
(d) Upon
any
termination of this Agreement, (i) the Deposit (without giving effect to the
interest earned thereon) shall be released from the Deposit Escrow and paid
by
the Escrow Agent to Buyer or ACE Hi, as applicable, pursuant to Section
11.2(b)
hereof
and the terms of the Deposit Escrow Agreement and (ii) any interest earned
on
the Deposit shall be released from the Deposit Escrow and paid by the Escrow
Agent to Buyer pursuant to Section
11.2(b)
hereof
and the terms of the Deposit Escrow Agreement.
(e) Buyer
and
ACE Hi agree to execute and be bound by such other reasonable and customary
escrow instructions as may be necessary or reasonably required by the Escrow
Agent or the parties hereto in order to distribute and pay the funds held in
the
Deposit Escrow as provided in this Section
2.3
and the
Deposit Escrow Agreement. In the event of any inconsistency between the terms
and provisions of such supplemental escrow instructions and the terms and
provisions of this Agreement, or any inconsistency between the terms and
provisions of the Deposit Escrow Agreement and the terms and provisions of
this
Agreement, the terms and provisions of this Agreement shall control, absent
an
express written agreement between Buyer and ACE Hi to the contrary which
acknowledges this Section
2.3(e).
Section
2.4 GB
Indemnification Escrow Amount.
At
Closing, ACE Hi shall deposit with the Escrow Agent a portion of the ACE Closing
Payment equal to Fifty Million Dollars ($50,000,000) (as such amount may be
adjusted pursuant to Section
2.4(c)
hereof,
the “GB
Indemnification Escrow Amount”)
pursuant to an escrow agreement substantially in the form attached hereto as
Exhibit
F
(the
“GB
Indemnification Escrow Agreement”)
executed and delivered by each of ACE Hi, Buyer and the Escrow Agent, which
shall be held in a segregated escrow account (the “GB
Indemnification Escrow”)
invested in accordance with Schedule
2.4
attached
hereto pending the date of the satisfaction of the Holdback Condition (such
date, the “GB
Date”).
ACE
Hi shall be solely responsible for payment of all Taxes with respect to any
interest or income earned on or dividends paid with respect to the GB
Indemnification Escrow Amount. Pursuant to the GB Indemnification Escrow
Agreement and this Section 2.4, the GB Indemnification Escrow Amount shall
be
released by the Escrow Agent as follows:
(a) Upon
satisfaction of Holdback Condition: (x) ACE Hi shall be entitled to receive
all
of the GB Indemnification Escrow Amount (reduced by any amounts payable pursuant
to Section
2.4(b)
below),
together with any interest or income earned thereon or dividends paid with
respect thereto; and (y) Buyer shall deliver written instructions to the Escrow
Agent to release from the GB Indemnification Escrow and pay to ACE Hi all of
the
GB Indemnification Escrow Amount (reduced by any amounts payable pursuant to
Section 2.4(b) below), together with any interest or income earned thereon
or
dividends paid with respect thereto, pursuant to this Section
2.4(a)
and the
GB Indemnification Escrow Agreement,
and the
GB Indemnification Escrow Agreement shall provide that the Escrow Agent shall
release such amount to ACE Hi upon the earlier of: (i) receipt of such notice
from Buyer; or (ii) receipt of a final non-appealable order of a court of
competent jurisdiction declaring that the Holdback Condition has been
satisfied.
-9-
(c) Prior
to
the GB Date, Buyer and ACE Hi acknowledge and agree that (i) ACE Hi shall be
entitled to quarterly distributions of one-half (½) of all accrued interest on
the GB Indemnification Escrow Amount, which shall be distributed by the Escrow
Agent to ACE Hi within ten (10) business days after the end of each calendar
quarter pursuant to the GB Indemnification Escrow Agreement and this
Section
2.4(c),
(ii) in
the event that the net asset value of the GB Indemnification Escrow Amount
(determined in accordance with the procedures set forth on Schedule
2.4)
shall
increase to an amount in excess of Sixty Million Dollars ($60,000,000), the
Escrow Agent shall, within five (5) business days after receipt of written
instructions from ACE Hi following such increase, release from the GB
Indemnification Escrow and pay to ACE Hi any amounts held in the GB
Indemnification Escrow in excess of Fifty Million Dollars ($50,000,000), and
(iii) in the event that the net asset value of the GB Indemnification Escrow
Amount shall decrease to an amount less than Forty Million Dollars
($40,000,000), ACE Hi shall, within five (5) business days after such shortfall,
promptly deposit into the GB Indemnification Escrow an amount equal to the
amount of such shortfall in order to cause the GB Indemnification Escrow Amount
to be equal to Fifty Million Dollars ($50,000,000).
(d) If,
at
any time
(i) the
Holdback Condition shall not have been satisfied,
(ii) either
Seller, any of their Affiliates, the Companies, Buyer or any other Indemnified
Party shall have suffered an adverse judgment (the “GB
Judgment”)
in any
trial court proceeding or an adverse determination in any appellate court review
(other than any appellate court determination that remands the case to a trial
court for further proceedings) respecting the GB Claims,
-10-
(iii) Buyer
shall be attempting in good faith to obtain development financing for the
redevelopment of the Casino Land and/or the Traymore Land and the chief
executive officer of Buyer shall have certified in a sworn affidavit, under
penalty of perjury, that, in his good faith judgment and after consultation
with
Buyer’s potential financing sources or arrangers, Buyer would be unable to
obtain such development financing or such development financing would be more
expensive due to the existence of the GB Claims, and
(iv) two
(2)
years shall have passed from the Closing Date,
then
Buyer can make a written demand on ACE Hi to settle the GB Judgment within
thirty (30) days of such demand. In the event that the GB Judgment has not
been
satisfied at the end of such thirty (30)-day period, Buyer shall have the right
(A) to settle the GB Judgment so long as Buyer shall obtain full and complete
releases in favor of Buyer and all other Indemnified Parties, Seller, AREP
and
its Affiliates, GB, and all of the officers, directors, employees, attorneys
and
agents of the foregoing with respect to all matter asserted or that could have
been asserted in the legal actions resulting in the GB Judgment, (B) to deliver
written instructions to the Escrow Agent to release all or a portion of the
GB
Indemnification Escrow Amount from escrow and pay to the GB Parties amounts
sufficient to satisfy the settlement described in preceding subclause (A),
and
(C) to tender an indemnity claim pursuant to ARTICLE
XII
hereof
for any amounts in excess of the GB Indemnification Escrow Amount that are
required to be paid to the GB Parties in settlement of the GB Judgment;
provided however,
that no
amounts shall be released from the GB Indemnification Escrow to the GB Parties
pursuant to this Section
2.4(d)
if Buyer
shall have actually obtained development financing for the redevelopment of
the
Casino Land and the Traymore Land without conditions or restrictions that relate
to the satisfaction of the GB Claims. If the foregoing results in the
satisfaction of the Holdback Condition, Buyer shall deliver written instructions
to the Escrow Agent to release from the GB Indemnification Escrow and pay to
ACE
Hi any remaining amounts in the GB Indemnification Escrow, if any, pursuant
to
this Section
2.4(d)
and the
GB Indemnification Escrow Agreement.
Section
2.5 ACE
Closing Payment.
(a) At
least
five (5) business days prior to the Closing Date, ACE Hi shall deliver to Buyer
a closing statement (the “Preliminary
ACE Closing Schedule”)
setting forth ACE Hi’s determination of (i) the Estimated ACE Closing Price
Adjustment, (ii) the Estimated Certain Employee Liabilities, (iii) the
Discharged ACE Indemnified Liabilities, (iv) the Estimated Casino Mansion Taxes,
(v) the Estimated ACE Hi NJSEA Payment and (vi) a calculation of the ACE
Closing Payment, set forth in reasonable detail. The Preliminary ACE Closing
Schedule (and each component thereof) shall be prepared in accordance with
the
provisions of this Agreement and on a basis consistent with the methodology
set
forth on Schedule
II,
and
shall be accompanied by reasonably sufficient back-up or supporting data used
in
the preparation of the Preliminary ACE Closing Schedule as is sufficient to
reflect how ACE Hi made such determinations and calculations.
ACE Hi
shall give Buyer reasonable prior written notice of any cash counts and physical
inventories that will be taken by ACE Hi as of 5:59:59 a.m. on September 1,
2006, in connection with its preparation of the Preliminary ACE Closing
Schedule. Notwithstanding any provision of this Agreement to the contrary,
Buyer
shall, subject to applicable Gaming Laws, if any, be permitted to have a
representative of Buyer present to observe such cash counts and physical
inventories. Buyer and ACE Hi each shall bear its own expenses in the
preparation and review of the Preliminary ACE Closing Schedule.
-11-
(b) If
Buyer
shall disagree with any calculations set forth in the Preliminary ACE Closing
Schedule or ACE Hi’s determination of the ACE Closing Payment, it shall notify
ACE Hi of such disagreement in writing within two (2) business days after its
receipt of the Preliminary ACE Closing Schedule, which notice shall set forth
in
reasonable detail the particulars of such disagreement and Buyer’s estimate of
the ACE Closing Payment. In the event that Buyer provides no such notice of
disagreement within such two (2) business day period, ACE Hi’s estimate of the
ACE Closing Payment shall be deemed the “ACE Closing Payment.” If, however,
Buyer provides a timely notice of disagreement to ACE Hi, Buyer and ACE Hi
shall
use their commercially reasonable efforts for a period of two (2) business
days
to resolve any disagreements with respect to the Preliminary ACE Closing
Schedule and the calculation of the ACE Closing Payment for purposes of the
Closing. If, at the end of such period, Buyer and ACE Hi are unable to resolve
such disagreements, (i) ACE Hi’s estimate of the ACE Closing Payment shall be
deemed the “ACE
Closing Payment”
for
purposes of the Closing, and (ii) ACE Hi shall promptly deposit the difference
between Buyer’s estimate of the ACE Closing Payment and the ACE Closing Payment
into an interest-bearing escrow account with the Escrow Agent (the “ACE
Closing Payment Escrow”),
to be
disbursed to Buyer or ACE Hi following the Closing in accordance with
Section
2.7
and an
escrow agreement substantially in the form attached hereto as Exhibit
G-1
(the
“ACE
Closing Payment Escrow Agreement”)
executed and delivered by each of ACE Hi, Buyer and the Escrow Agent. ACE Hi
and
Buyer shall each bear their own expenses in the preparation and review of the
Preliminary ACE Closing Schedule.
(c) The
“ACE
Closing Payment”
shall
be a cash amount equal to the sum of:
(i) the
Initial ACE Purchase Price; plus
or
minus
(ii) the
Estimated ACE Closing Price Adjustment; minus
(iii) the
Estimated Certain Employee Liabilities; minus
(iv) the
Estimated Multiemployer Plan Liabilities; minus
(v) the
Discharged ACE Indemnified Liabilities; minus
(vi) one-half
(½) of the Estimated Casino Mansion Taxes; plus
(vii) the
CRDA
Price; minus
(viii) the
Comp
Points Liability; minus
(ix) the
Estimated ACE Hi NJSEA Payment; plus
(x) the
Initial Amount; plus
(xi) the
Deposit Delay Increment; and minus
-12-
(xii) the
amount of the Deposit delivered to ACE Hi at Closing pursuant to the terms
hereof.
Section
2.6 AREH
Closing Payment.
(a) At
least
five (5) business days prior to the Closing Date, AREH shall deliver to Buyer
a
closing statement (the “Preliminary
AREH Closing Schedule”)
consisting of AREH’s determination of (i) the Estimated AREH Subs Prorations,
(ii) the Estimated Adjacent Property Mansion Taxes and (iii) a calculation
of
the AREH Closing Payment, set forth in reasonable detail. The Preliminary AREH
Closing Schedule (and each component thereof) shall be prepared in accordance
with the provisions of this Agreement and shall be accompanied by reasonably
sufficient back-up or supporting data used in the preparation of the Preliminary
AREH Closing Schedule as is sufficient to reflect how AREH made such
determinations and calculations.
(b) If
Buyer
shall disagree with any calculations set forth in the Preliminary AREH Closing
Schedule or AREH’s determination of the AREH Closing Payment, it shall notify
AREH of such disagreement in writing within two (2) business days after its
receipt of the Preliminary AREH Closing Schedule, which notice shall set forth
in reasonable detail the particulars of such disagreement and Buyer’s estimate
of the AREH Closing Payment. In the event that Buyer provides no such notice
of
disagreement within such two (2) business day period, AREH’s estimate of the
AREH Closing Payment shall be deemed the “AREH Closing Payment” for purposes of
the Closing. If, however, Buyer provides a timely notice of disagreement to
AREH, Buyer and AREH shall use their commercially reasonable efforts for a
period of two (2) business days to resolve any disagreements with respect to
the
Preliminary AREH Closing Schedule and the calculation of the AREH Closing
Payment. If, at the end of such period, Buyer and AREH are unable to resolve
such disagreements, (i) AREH’s estimate of the AREH Closing Payment shall be
deemed the “AREH Closing Payment” for purposes of the Closing, and (ii) AREH
shall promptly deposit the difference between Buyer’s estimate of the AREH
Closing Payment and the AREH Closing Payment into an interest-bearing escrow
account with the Escrow Agent (the “AREH
Closing Payment Escrow”),
to be
disbursed to Buyer or AREH following the Closing in accordance with Section
2.8
and an
escrow agreement substantially in the form attached hereto as Exhibit
G-2
(the
“AREH
Closing Payment Escrow Agreement”)
executed and delivered by each of AREH, Buyer and the Escrow Agent. AREH and
Buyer shall each bear their own expenses in the preparation and review of the
Preliminary AREH Closing Schedule.
(c) The
“AREH
Closing Payment”
shall
be a cash amount equal to the sum of
(i) the
Base
AREH Purchase Price; plus
(ii) the
Restaurant Purchase Price; minus
(iii) one-half
(½) of the Estimated Adjacent Property Mansion Taxes; and plus
or
minus
(iv) the
Estimated AREH Subs Prorations.
-13-
Section
2.7 Final
ACE Purchase Price Adjustment.
(a) The
“Closing
ACE Purchase Price”
shall
be equal to the result of clauses (i) through (xi)
below:
(i) the
Initial ACE Purchase Price; plus
or
minus
(ii) the
ACE
Closing Price Adjustment; minus
(iii) the
Certain Employee Liabilities; minus
(iv) the
Estimated Multiemployer Plan Liabilities; minus
(v) the
Discharged ACE Indemnified Liabilities; minus
(vi) one-half
(½) of the Casino Mansion Taxes minus
(vii) the
Comp
Point Liability; minus
(viii) the
ACE
Hi NJSEA Payment; plus
(ix) the
Initial Amount; plus
(x) the
Deposit Delay Increment; and plus
(xi) the
CRDA
Price.
(b) As
soon
as reasonably practicable following the Closing Date, but in no event more
than
sixty (60) days after the Closing Date, Buyer shall cause to be prepared and
delivered to ACE Hi a statement (the “Final
ACE Closing Schedule”)
setting forth Buyer’s determination of (i) the items described in subclauses (i)
- (xi)
of
Section
2.7(a)
hereof
in accordance with the provisions of this Agreement and on a basis consistent
with the methodology set forth on Schedule
II,
and
(ii) the ACE Purchase Price Adjustment (as defined below), if any, based on
the
Final ACE Closing Schedule and the provisions of this Section
2.7
and set
forth in reasonable detail. The Final ACE Closing Schedule (and each component
thereof) shall be prepared in accordance with the provisions of this Agreement
and on a basis consistent with the methodology set forth on Schedule
II
and
shall be accompanied by reasonably sufficient back-up or supporting data used
in
the preparation of the Final ACE Closing Schedule as is sufficient to reflect
how Buyer made such determinations and calculations. Buyer shall give ACE Hi
reasonable prior written notice of any cash counts and physical inventories
that
will be taken by Buyer in connection with its preparation of the Final ACE
Closing Schedule. Notwithstanding any provision of this Agreement to the
contrary, ACE Hi shall, subject to applicable Gaming Laws, if any, be permitted
to have a representative of ACE Hi present to observe such cash counts and
physical inventories. Buyer and ACE Hi each shall bear its own expenses in
the
preparation and review of the Final ACE Closing Schedule.
-14-
(c) If
ACE Hi
shall disagree with the calculation of the Closing ACE Purchase Price or any
element of the Final ACE Closing Schedule, it shall, within thirty (30) business
days after its receipt of the Final ACE Closing Schedule, notify Buyer of such
disagreement in writing, setting forth the particulars of such disagreement.
In
connection therewith and subject to applicable Law, Buyer will provide ACE
Hi
and its Representatives reasonable access to ACE Lo’s books and records to the
extent reasonably related to ACE Hi’s review of the Final ACE Closing Schedule
and the calculation of Closing ACE Purchase Price. In the event that ACE Hi
does
not provide such notice of disagreement within such thirty (30) business day
period, ACE Hi shall be deemed to have accepted the Final ACE Closing Schedule
and the calculation of Closing ACE Purchase Price delivered by Buyer, which
shall be final, binding and conclusive for purposes of this Section
2.7(c)
with
respect to the determination of the Closing ACE Purchase Price. In
the event any such notice of disagreement is timely provided, Buyer and ACE
Hi,
in conjunction with their respective independent accounting firms, shall use
commercially reasonable efforts for a period of ten (10) business days (or
such
longer period as they may mutually agree) to resolve any disagreements with
respect to the calculation of the Closing ACE Purchase Price. If, at the end
of
such period, they are unable to resolve such disagreements, then an independent
accounting firm of recognized national standing with no existing relationship
with any of the parties and which Buyer and ACE Hi shall not have otherwise
retained on other matters prior to the resolution of the Final ACE Closing
Schedule or, to the extent Buyer and ACE Hi cannot agree on such independent
accounting firm, an arbitrator from the National Panel of Professional
Accounting and Related Services Disputes of the American Arbitration Association
selected by the mutual agreement of Buyer and ACE Hi (the “Auditor”)
shall
resolve any remaining disagreements provided, that if Buyer and ACE Hi cannot
mutually agree on an Auditor, any remaining disagreements shall be resolved
by a
court of competent jurisdiction in accordance with Section 13.2 hereof. For
the
avoidance of doubt, the following procedures by the Auditor shall only be
applicable if Buyer and ACE Hi mutually agree on the selection of an Auditor.
The Auditor shall determine as promptly as practicable whether the Final ACE
Closing Schedule was prepared in accordance with the standards set forth in
this
Agreement and, only with respect to the disputed line items submitted to the
Auditor, whether and to what extent (if any) the Closing ACE Purchase Price
requires adjustment. The Auditor may retain an actuarial firm or other
professionals as it may reasonably determine to be necessary or appropriate
in
discharging its duties under this Section
2.7(c).
The
parties and the Auditor shall agree on reasonable procedures for determining
the
disputed line items; provided,
that,
such
procedures shall include the following (collectively, the “Audit
Procedures”):
(i) each of Buyer and ACE Hi shall have the right to make one (1) written
submission to the Auditor regarding the disputed line items submitted to the
Auditor, (ii) each party shall have the right to make one (1) written submission
to the Auditor in response to the other party’s written submission in subclause
(i), (iii) the Auditor may submit follow-up questions to either party, and
such
parties shall have the right to respond to such questioning by the Auditor,
(iv)
each party shall have the right to submit one written response to the other
party’s response to the Auditor pursuant to subclause (iii), and (v) copies of
all written materials submitted to the Auditor (and summaries of all discussions
with the Auditor) shall be promptly provided to the other party. The Auditor
shall promptly deliver to Buyer and ACE Hi its determination in writing, which
determination shall be made subject to the definitions and principles set forth
in this Agreement and shall select either the position of ACE Hi or Buyer,
and
no compromise position, with respect to each of the disputed line items
submitted to the Auditor. The fees and expenses of the Auditor shall be paid
one-half by Buyer and one-half by ACE Hi. The determination of the Auditor
shall
be final, binding and conclusive for purposes of this Section
2.7(c)
and
enforceable as an arbitration award, and shall represent the exclusive remedy
with respect to the determination of the Closing ACE Purchase Price. The date
on
which Closing ACE Purchase Price is finally determined in accordance with this
Section
2.7
is
hereinafter referred to as the “ACE
Determination Date.”
-15-
(d) Within
ten (10) business days of the ACE Determination Date, the amount (which may
be a
positive or negative number) equal to
(i) the
Closing ACE Purchase Price, minus
(ii) the
ACE
Closing Payment, minus
(iii) the
amount of the Deposit delivered to ACE Hi pursuant to the terms
hereof.
(the
“ACE
Purchase Price Adjustment”)
shall
be
paid (A) from ACE Hi to Buyer (if the ACE Purchase Price Adjustment is a
negative amount), by ACE Hi’s delivery of written instructions to the Escrow
Agent to release from the ACE Closing Payment Escrow and pay to Buyer such
portion of the amounts in the ACE Closing Payment Escrow, if any, up to the
ACE
Purchase Price Adjustment (together with any interest earned on such portion),
and any remainder in cash by wire transfer of immediately available funds to
an
account designated by Buyer by written notice to ACE Hi given within two (2)
days of the ACE Determination Date or (B) from Buyer to ACE Hi
(if
the ACE Purchase Price Adjustment is a positive amount), in cash by wire
transfer of immediately available funds to an account designated by ACE Hi
by
written notice to Buyer given within two (2) days of the ACE Determination
Date.
Any funds remaining in the ACE Closing Payment Escrow following the payment
of
the ACE Purchase Price Adjustment pursuant to the preceding sentence shall
be
promptly released from escrow and paid by the Escrow Agent to ACE Hi as
authorized by written instructions delivered to the Escrow Agent by ACE Hi.
Section
2.8 Final
AREH Purchase Price Adjustment.
(a) As
soon
as reasonably practicable following the Closing Date, but in no event more
than
sixty (60) days after the Closing Date, Buyer shall cause to be prepared and
delivered to AREH a statement (the “Final
AREH Closing Schedule”)
setting forth Buyer’s determination of (i) the AREH Subs Prorations, (ii) a
calculation of the AREH Purchase Price and (iii) the AREH Purchase Price
Adjustment (as defined below), if any, based on the Final AREH Closing Schedule
and the provisions of this Section
2.8
and set
forth in reasonable detail. The Final AREH Closing Schedule (and each component
thereof) shall be accompanied by reasonably sufficient back-up or supporting
data used in the preparation of the Final AREH Closing Schedule as is sufficient
to reflect how Buyer made such determinations and calculations. Buyer and AREH
each shall bear its own expenses in the preparation and review of the Final
AREH
Closing Schedule.
(b) If
AREH
shall disagree with the calculation of the AREH Purchase Price or any element
of
the Final AREH Closing Schedule relevant thereto, it shall, within thirty (30)
business days after its receipt of the Final AREH Closing Schedule, notify
Buyer
of such disagreement in writing, setting forth in detail the particulars of
such
disagreement. In connection therewith and subject to applicable Law, Buyer
will
provide AREH reasonable access to any of the respective AREH Subs’ books and
records to the extent reasonably related to AREH’s review of the Final AREH
Closing Schedule and the calculation of AREH Purchase Price. In the event that
AREH does not provide such notice of disagreement within such thirty (30)
business day period, AREH shall be deemed to have accepted the Final AREH
Closing Schedule and the calculation of AREH Purchase Price delivered by Buyer,
which shall be final, binding and conclusive for purposes of this Section
2.8(b)
with
respect to the determination of the AREH Purchase Price. In the event any such
notice of disagreement is timely provided, Buyer and AREH, in conjunction with
their respective independent accounting firms, shall use commercially reasonable
efforts for a period of ten (10) business days (or such longer period as they
may mutually agree) to resolve any disagreements with respect to the calculation
of the AREH Purchase Price. If, at the end of such period, they are unable
to
resolve such disagreements, then the Auditor shall resolve any remaining
disagreements provided, that if Buyer and AREH cannot mutually agree on an
Auditor, any remaining disagreements shall be resolved by a court of competent
jurisdiction in accordance with Section 13.2 hereof. For the avoidance of doubt,
the following procedures by the Auditor shall only be applicable if Buyer and
AREH mutually agree on the selection of an Auditor. The parties and the Auditor
shall agree on reasonable procedures for determining the disputed line items;
provided,
that,
that
such procedures shall include the Audit Procedures. The Auditor shall determine
as promptly as practicable whether the Final AREH Closing Schedule was prepared
in accordance with the standards set forth in this Agreement and, only with
respect to the disputed line items submitted to the Auditor, whether and to
what
extent (if any) the AREH Purchase Price requires adjustment. The Auditor shall
promptly deliver to Buyer and AREH its determination in writing, which
determination shall be made subject to the definitions and principles set forth
in this Agreement and shall select either the position of AREH or Buyer, and
no
compromise position, with respect to each of the disputed line items submitted
to the Auditor. The fees and expenses of the Auditor shall be paid one-half
by
Buyer and one-half by AREH. The determination of the Auditor shall be final,
binding and conclusive for purposes of this Section
2.8(b)
and
enforceable as an arbitration award, and shall represent the exclusive remedy
with respect to the determination of the AREH Purchase Price. The date on which
AREH Purchase Price is finally determined in accordance with this Section
2.8
is
hereinafter referred to as the “AREH
Determination Date.”
-16-
(c) Within
ten (10) business days of the AREH Determination Date, the amount (which may
be
a positive or negative number) equal to
(i) the
AREH
Purchase Price, minus
(ii) the
AREH
Closing Payment
(the
“AREH
Purchase Price Adjustment”)
shall
be paid (A) from AREH to Buyer (if the AREH Purchase Price Adjustment is a
negative amount) by Buyer’s delivery of written instructions to the Escrow Agent
to release from the AREH Closing Payment Escrow and pay to Buyer all or a
portion of the funds in the AREH Closing Payment Escrow, if any, up to the
amount of the AREH Purchase Price Adjustment (together with any interest earned
on such payment), and any remainder in cash by wire transfer of immediately
available funds to an account designated by Buyer by written notice to AREH
given within two (2) days of the AREH Determination Date or (B) from Buyer
to
AREH (if the AREH Purchase Price Adjustment is a positive amount), in
cash
by wire transfer of immediately available funds to an account designated by
AREH
by written notice to Buyer given within two (2) days of the AREH Determination
Date. Any funds remaining in the AREH Closing Payment Escrow following the
payment of the AREH Purchase Price Adjustment pursuant to the preceding sentence
shall be promptly released from escrow and paid by the Escrow Agent to AREH
as
authorized by written instructions delivered to the Escrow Agent by
AREH.
-17-
Section
2.9 Closing
Deliveries.
(a) At
the
Closing, the ACE Selling Parties shall deliver to Buyer:
(i) the
certificates, if any, representing the ACE Lo Equity Interests, either duly
endorsed for transfer to Buyer or accompanied by appropriate duly executed
limited liability interest powers or, if the ACE Lo Equity Interests are not
certificated, one or more instruments of assignment in a form approved by Buyer
conveying such ACE Lo Equity Interests to Buyer;
(ii) the
resignations or evidence of their removal from office of the persons named
on
Schedule
III(a)
as
directors, officers and managers, as applicable, of ACE Lo and Brighton Park
Maintenance Corp., effective as of the Closing Date, together with any required
amendments to the organizational documents of ACE Lo and Brighton Park
Maintenance Corp. and filings with Governmental Entities;
(iii) the
certificates required by Section
10.2(a)
and
Section
10.2(b)
hereof;
(iv) affidavits
executed by ACE Hi and any of its required Affiliates that satisfy the
requirements of Section 1445 of the Code; and
(v) owners’
affidavits and indemnities in the forms attached to the preliminary
certification and report on title for each parcel of the ACE Real Properties
set
forth on Exhibit
H-1
attached
hereto (the “ACE
Real Property Preliminary Certifications and Reports”).
(b) At
the
Closing, AREH shall deliver to Buyer:
(i) the
certificates, if any, representing the AREH Subs Equity Interests, either duly
endorsed for transfer to Buyer or accompanied by appropriate duly executed
limited liability interest powers or, if the AREH Subs Equity Interests are
not
certificated, one or more instruments of assignment in a form approved by Buyer
conveying such AREH Subs Equity Interests to Buyer;
(ii) the
resignations of the persons named on Schedule
III(b)
as
directors, officers and managers, as applicable, of the Companies effective
as
of the Closing Date, together with any required amendments to the organizational
documents of the Companies and filings with Governmental Entities;
(iii) the
certificates required by Section
10.2(a)
and
Section
10.2(b)
hereof;
(iv) affidavits
executed by AREH and any of its required Affiliates that satisfy the
requirements of Section 1445 of the Code; and
-18-
(v) owner’s
affidavits and indemnities in the forms attached to the preliminary
certifications and reports on title for each parcel of the Adjacent Real
Properties set forth on Exhibit
H-2
attached
hereto (the “Adjacent
Real Property Preliminary Certifications and Reports”
and,
together with the ACE Real Property Preliminary Certifications and Reports,
the
“Preliminary
Certifications and Reports”).
(c) At
the
Closing, Buyer shall deliver:
(i) to
ACE
Hi, immediately available funds by wire transfer to an account designated
by ACE Hi (which account shall be designated in writing to Buyer at least two
(2) business days prior to the Closing Date) in an amount
equal to the ACE Closing Payment;
(ii) to
AREH,
immediately available funds by wire transfer to an account designated
by AREH (which account shall be designated in writing to Buyer at least two
(2)
business days prior to the Closing Date) in an amount
equal to the AREH Closing Payment; and
(iii) to
each
Seller, the certificates required by Section
10.3(a)
and
Section
10.3(b)
hereof.
Section
2.10 No
Duplication.
To the
extent that any item is included in any adjustment in this ARTICLE
II,
such
item shall not be included in any other adjustment if such inclusion would
result in any duplication or double-counting. Similarly, anything to the
contrary in this Agreement notwithstanding, amounts which have been deducted
in
calculating the Closing ACE Purchase Price or the AREH Purchase Price shall
not
be subject to indemnification by the Selling Parties hereunder.
ARTICLE
III
[RESERVED]
ARTICLE
IV
REPRESENTATIONS
AND WARRANTIES OF ACE
SELLING PARTIES
THAT
ARE
BROUGHT DOWN FOR PURPOSES OF THE CLOSING CONDITIONS
Each
ACE
Selling Party hereby represents and warrants, jointly and severally, to Buyer
that the statements contained in this ARTICLE
IV
are true
and correct as of the date hereof and as of the Closing Date as if made at
and
as of such times (except to the extent expressly made as of an earlier date,
in
which case as of such earlier date), except as set forth herein and in the
disclosure letter delivered by the ACE Selling Parties to Buyer on the date
of
this Agreement (the “ACE
Disclosure Letter”).
The
ACE Disclosure Letter is arranged in paragraphs corresponding to the numbered
and lettered paragraphs contained in this Agreement and the disclosure in any
paragraph shall, to the extent applicable, only qualify other paragraphs in
this
Agreement to the extent the matters to be excepted from such other paragraphs
is
readily apparent from the text of the disclosure in the ACE Disclosure Letter.
-19-
Section
4.1 Organization
of the Selling Parties.
(a) ACE
Hi is
organized and validly existing under the laws of the State of Delaware and
has
all requisite corporate power and authority to carry on its business as now
being conducted.
(b) ACE
Lo is
organized and validly existing under the laws of the State of New Jersey and
has
all requisite limited liability company power and authority to carry on its
business as now being conducted.
Section
4.2 Authority;
No Conflict; Required Filings and Consents.
(a) (i)
ACE
Hi has all requisite corporate power and authority and (ii) ACE Lo has all
requisite limited liability company power and authority, to enter into this
Agreement and to consummate the transactions that are contemplated by this
Agreement. The execution and delivery of this Agreement by each ACE Selling
Party and the consummation by each ACE Selling Party of the transactions to
which it is a party that are contemplated by this Agreement have been duly
and
validly authorized by (A) in the case of ACE Lo, ACE Hi, as ACE Lo’s sole member
and (B) in the case of ACE Hi, the approval by ACE Hi’s Board of Directors, and
subject to obtaining the approval and adoption of this Agreement and approval
of
the Purchase by the Requisite Stockholder Approval, no other action of any
such
ACE Selling Party or any board or committee thereof or any other limited
liability or corporate proceeding on the part of such ACE Selling Parties or
their respective members or stockholders are necessary to authorize this
Agreement and to consummate the transactions contemplated by this Agreement.
The
Board of Directors of ACE Hi has received all information relating to this
Agreement and the ACE Lo Purchase necessary to make an informed judgment, and
has deemed the ACE Lo Purchase expedient and for the best interests of ACE
Hi.
This Agreement has been duly executed and delivered by each ACE Selling Party,
and assuming this Agreement constitutes the valid and binding obligation of
Buyer and the AREH Selling Parties, constitutes the valid and binding obligation
of the ACE Selling Parties, enforceable against each of the ACE Selling Parties
in accordance with its terms, subject, as to enforcement, to (x) applicable
bankruptcy, insolvency, reorganization, moratorium or similar Laws now or
hereinafter in effect affecting creditors’ rights generally and (y) general
principles of equity.
(b) Except
for ACE Lo’s surrender of its gaming license to own and operate the Casino
Business in the State of New Jersey as contemplated by this Agreement, the
execution and delivery of this Agreement by the ACE Selling Parties and the
consummation by the ACE Selling Parties of the transactions contemplated by
this
Agreement will not, (i) conflict with, or result in any violation or breach
of, any provision of the respective organization documents of the ACE Selling
Parties, or (ii) subject to the governmental filings and other matters
referred to in Section
4.2(c)
hereof,
contravene, conflict with, or result in a violation of any of the terms or
requirements of, or give any Governmental Entity the right to revoke, withdraw,
suspend, cancel, terminate, or modify, in each case in any respect, any permit,
concession, franchise, license, judgment, or Law applicable to the ACE Selling
Parties, or any of them, except in the case of clause (ii) for any such
contraventions, conflicts, violations, revocations, withdrawals, suspensions,
cancellations, terminations or modifications which (x) are not, individually
or
in the aggregate, reasonably likely to have a Material Adverse Effect on ACE
Lo
or (y) would not materially impair or delay the Closing.
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(c) No
consent, approval, license, order or authorization of, or registration,
declaration or filing with, or Permit from (“Consent”),
any
court, administrative agency, commission, Gaming Authority or other governmental
authority or instrumentality (“Governmental
Entity”)
is
required by or with respect to the ACE Selling Parties in connection with the
execution and delivery of this Agreement by the ACE Selling Parties or the
consummation by the ACE Selling Parties, or either of them, of the transactions
to which they are a party that are contemplated by this Agreement, except for
(i) the filing of the pre-merger notification report under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (“HSR
Act”),
(ii)
any approvals or filing of notices required under the Gaming Laws, and
(iii) such other Consents which, if not obtained or made, would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on ACE Lo.
Section
4.3 Capitalization.
(a) The
ACE
Lo Equity Interests represent all of the issued and outstanding Equity Interests
of ACE Lo, all of which are duly authorized, validly issued, fully paid and
nonassessable, were not issued in violation of any preemptive rights created
by
applicable Laws, ACE Lo’s organizational documents or any Contract. Except for
the EBITDA bonus plan, there are no outstanding or authorized profit
participation or any other contractual rights of which ACE Lo is obligated
the
value of which is derived from the financial performance of ACE Lo or the value
of the ACE Lo Equity Interests. Except for the EBITDA bonus plan, there is
no
liability for, or obligation with respect to, any dividends, distributions
or
similar participation interests declared or accumulated but unpaid with respect
to any ACE Lo Equity Interests. Except as contemplated by this Agreement, there
are no obligations, contingent or otherwise, of ACE Lo to repurchase, redeem
or
otherwise acquire any of the ACE Lo Equity Interests or to provide funds to
or
make any material investment (in the form of a loan, capital contribution or
otherwise) in any entity.
(b) There
are
no (i) options, warrants or other rights, agreements, arrangements or
commitments to which any ACE Selling Parties is a party, or by which any ACE
Selling Parties is bound, relating to issued or unissued ACE Lo Equity
Interests, (ii) securities convertible into or exchangeable for ACE Lo Equity
Interests, (iii) obligations of any ACE Selling Party to issue, sell,
transfer, pledge or otherwise dispose of any ACE Lo Equity Interests or
securities convertible into or exchangeable for ACE Lo Equity Interests or
(iv)
bonds, debentures, notes or other indebtedness of ACE Lo having voting rights
(or convertible into securities having such rights) issued and outstanding.
There are no voting trusts, proxies or other voting agreements or understandings
to which any ACE Selling Party is a party or by which any ACE Selling Party
is
bound with respect to the issued or unissued ACE Lo Equity Interests.
(c) ACE
Hi
owns all of the issued and outstanding ACE Lo Equity Interests free and clear
of
all Liens, has good title to such ACE Lo Equity Interests, and, at the Closing,
will transfer and convey to Buyer good title to such ACE Lo Equity Interests,
free and clear of all Liens. None of the ACE Lo Equity Interests were
certificated and no evidences of ownership were ever issued by ACE Lo for the
ACE Lo Equity Interests.
-21-
Section
4.4 Certain
Real Estate Contracts. Except
as
set forth in Section
4.4
of the
ACE Disclosure Letter, there are no Contracts with respect to the sale,
exchange, encumbrance, lease, occupancy or transfer of all or any portion of
the
Casino Land, or any interest therein, and no Person has any option, right of
first refusal or right of first offer to purchase all or any portion of the
Casino Land, or any interest therein. Except as set forth in Section
4.4
of the
ACE Disclosure Letter, there are no agreements relating to the use and occupancy
of the Casino Land that are not terminable upon thirty (30) days’
notice.
Section
4.5 Vote
Required.
The
affirmative vote of the holders of record of at least a majority of the
outstanding common stock, par value $0.01 per share, of ACE Hi (the
“ACE
Hi
Common Stock”)
with
respect to the sale of substantially all of the assets of ACE Hi (the
“Requisite
Stockholder Approval”),
is
the only vote of the holders of any capital stock in ACE Hi required to approve
this Agreement, the ACE Lo Purchase and the other transactions contemplated
hereby directly relating to the ACE Selling Parties.
No
information statement under Regulation 14C promulgated under the Exchange Act
is
required in connection with this Agreement, the ACE Lo Purchase and the other
transactions contemplated hereby directly relating to the ACE Selling
Parties.
Section
4.6 Labor
and Employment Matters.
ACE Lo
is not a party to any collective bargaining agreement, neutrality agreement,
“card check” or other current labor agreement with or respecting any labor union
or organization
that
purports to cause any current or future facilities of Buyer or any Affiliate
of
Buyer (including without limitation a redeveloped casino on the Casino Land,
but
excluding the Sands’ casino operations in their present form), (a) to be bound
by the existing collective bargaining agreements to which ACE Lo is currently
bound, (b) to recognize any union as a bargaining agent or (c) to
alter the procedures pursuant to which a union is recognized as a bargaining
agent.
ARTICLE
V
REPRESENTATIONS
AND WARRANTIES OF ACE SELLING PARTIES
THAT
ARE
BROUGHT DOWN SOLELY FOR PURPOSES OF INDEMNITY
Each
ACE
Selling Party hereby represents and warrants, jointly and severally, to Buyer
that the statements contained in this ARTICLE
V
are true
and correct as of the date hereof and as of the Closing Date as if made at
and
as of such times (except to the extent expressly made as of an earlier date,
in
which case as of such earlier date), except as set forth herein and in the
ACE
Disclosure Letter. The ACE Disclosure Letter is arranged in paragraphs
corresponding to the numbered and lettered paragraphs contained in this
Agreement and the disclosure in any paragraph shall, to the extent applicable,
only qualify other paragraphs in this Agreement to the extent the matters to
be
excepted from such other paragraphs is readily apparent from the text of the
disclosure in the ACE Disclosure Letter.
Section
5.1 Other
Organizational Matters.
As of
the Measurement Date, (a) each of the ACE Selling Parties is duly qualified
or
licensed to do business and is in good standing in each jurisdiction in which
the property owned, leased or operated by it or the nature of the business
conducted by it makes such qualification or licensing necessary, except where
the failure to be so qualified, licensed or in good standing would not have
a
Material Adverse Effect on the ACE Selling Parties, (b) ACE Lo has no
Subsidiaries or does not hold or own any interests or investments in any Person,
other than Brighton Park Maintenance Corp. or interests or investments which
constitute cash or cash equivalents and (c) copies of the organizational
documents of each of the ACE Selling Parties and Brighton Park Maintenance
Corp.
have been made available to Buyer, and such copies are accurate and complete
copies of such organizational documents as in effect on the date
hereof.
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Section
5.2 Absence
of Undisclosed Liabilities.
Section
5.2
of the
ACE Disclosure Letter sets forth the liabilities and obligations of ACE Lo
as of
June 30, 2006, required to be reflected on a balance sheet in accordance with
GAAP. As of the Measurement Date, except as set forth on Section
5.2
of the
ACE Disclosure Letter and except for liabilities incurred since June 30, 2006
in
the ordinary course of business consistent with past practice, to the ACE
Selling Parties’ knowledge, there are no liabilities or obligations of ACE Lo,
whether or not accrued, contingent or otherwise, except as have been reflected
in the ACE Closing Price Adjustment pursuant to Section
2.1(b)(i).
Section
5.3 Material
Contracts.
(a) As
of the
Measurement Date, Section
5.3(a)
of the
ACE Disclosure Letter sets forth a true, correct and complete list of all
material Contracts to which ACE Lo is a party or by which it is bound, or by
which any of its assets or properties is subject to or bound by, which are
necessary for the operation of the Casino Business or which involve payments
or
liabilities in excess of One Hundred Thousand Dollars ($100,000) (collectively,
the “ACE
Lo
Material Contracts”).
(b) As
of the
Measurement Date, ACE Lo has delivered or made available to Buyer full copies
of
all written ACE Lo Material Contracts, together with all amendments thereto,
and
accurate descriptions of all material terms of all oral ACE Lo Material
Contracts.
(c) As
of the
Measurement Date, (i) each Assumed ACE Lo Contract is valid and binding upon
ACE
Lo (and, to the ACE Selling Parties’ knowledge, on all other parties thereto),
in accordance with its terms and is in full force and effect, (ii) ACE Lo has
in
all material respects performed the obligations required to be performed by
it
as of the date hereof under each Assumed ACE Lo Contract and, to the ACE Selling
Parties’ knowledge, each other party to each Assumed ACE Lo Contract has in all
material respects performed the obligations required to be performed by it
under
such Assumed ACE Lo Contract, (iii) there is no material breach or material
violation of or default by ACE Lo under any of the Assumed ACE Lo Contracts,
whether or not such breach, violation or default has been waived, and (iv)
no
event has occurred with respect to ACE Lo which, with notice or lapse of time
or
both, would constitute a material breach, material violation or material default
of, or give rise to a right of termination, material modification, cancellation,
foreclosure, imposition of a Lien, prepayment or acceleration under, any of
the
Assumed ACE Lo Contracts.
-23-
Section
5.4 Litigation.
(a) As
of the
Measurement Date, there is no Legal Proceeding pending or, to the ACE Selling
Parties’ knowledge, threatened against (i) either of the ACE Selling
Parties or any of their respective assets, properties or businesses or
(ii) any of their respective executive officers or directors, in their
capacities as such, before any Governmental Entity, where the amount involved
(excluding attorneys’ fees and costs) would reasonably be expected to exceed
Five Hundred Thousand Dollars ($500,000).
(b) As
of the
Measurement Date, there are no Legal Proceedings pending or, to the ACE Selling
Parties’ knowledge, threatened with respect to this Agreement or seeking to
prevent, hinder, materially modify or challenge the Purchase or the other
transactions contemplated hereby.
(c) Since
June 30, 2006 and prior to the Measurement Date, except as set forth in
Section
5.4(c)
of the
ACE Disclosure Letter, ACE Lo has not entered into any agreement to settle
or
compromise any Legal Proceeding pending or threatened against it which involves
(i) any material obligation other than money that would, individually or in
the aggregate, reasonably be expected to have Material Adverse Effect on ACE
Lo,
and/or (ii) the payment of money by ACE Lo, where such payment or payments
would
exceed Five Hundred Thousand Dollars ($500,000).
(d) As
of the
Measurement Date, except as set forth on Section
5.4(d)
of the
ACE Disclosure Letter, ACE Lo is not subject to any outstanding judgment against
it awarding monetary damages in excess of Five Hundred Thousand Dollars
($500,000).
(e) The
provisions of this Section
5.4
shall
not apply (and are not intended to apply) to Taxes.
Section
5.5 ERISA.
(a) Certain
Terms.
For
purposes of this Agreement, (i) the term “Plans”
shall
mean (A) all “Employee
Benefit Plans”
(as
such term is defined in section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended (“ERISA”))
existing as of the Measurement Date, of which ACE Lo is a sponsor or
participating employer or as to which ACE Lo makes contributions or is required
to make contributions, or which covers any Casino Employee, (B) any employment
agreement to which ACE Lo is a party, or which covers any Casino Employee,
or
(C) any other material arrangement or policy of ACE Lo, or which covers any
Casino Employee (whether written or oral) providing for health, life, vision
or
dental insurance coverage (including self-insured arrangements), workers’
compensation, disability benefits, supplemental unemployment benefits, vacation
benefits or retirement benefits, fringe benefits, or for profit sharing,
deferred compensation, bonuses, stock options, stock appreciation or other
forms
of incentive compensation or post-retirement insurance, compensation or
benefits; provided,
however,
that
the term “Plan”
shall
not include any Multiemployer Plan; (ii) the term “ERISA
Affiliate”
shall
mean any member of the same controlled group of businesses as ACE Lo within
the
meaning of Section 4001(a)(14) of ERISA; and (iii) the term “Multiemployer
Plan”
shall
mean any “multiemployer plan” within the meaning of Section 4001(a)(3) of ERISA
to which ACE Lo contributes or is required to contribute, or had been required
to contribute since December 31, 1998.
-24-
(b) Section
5.5(a)
of the
ACE Disclosure Letter sets forth a true and complete list of all Plans and
each
Multiemployer Plan to which ACE Lo is required to contribute. With respect
to
each Plan, ACE Lo has made available to Buyer complete and correct copies of
the
Plan document, any summary plan description, the latest Internal Revenue Service
determination letter, the last two annual financial statements, and the last
two
annual reports on IRS Form 5500 (including all required schedules and
accountant’s opinions). Except as contemplated by this Agreement, none of ACE Lo
or any of its ERISA Affiliates has announced or otherwise made any commitment
to
amend any Plan in any material respect or to create any arrangement that would
be a Plan if in effect currently.
(c) Each
Plan
is and has been operated and administered in all material respects in accordance
with its terms and all applicable laws, including, without limitation, ERISA
and
the Code. Each Plan intended to be tax-qualified under Section 401(a) of the
Code has received a favorable determination letter (or is a prototype plan
which
is the subject of a favorable opinion letter) from the Internal Revenue Service
as to its tax-qualified status under the Code and, to the ACE Selling Parties’
knowledge, nothing has occurred since the date of such favorable determination
letter or opinion letter which would adversely affect the qualified status
of
such Plan.
(d) All
contributions and premium payments required to have been paid under or with
respect to any Plan as of the Measurement Date have been timely paid. With
respect to any insurance policy which provides, or has provided, funding for
benefits under any Plan, (A) there is and will be no liability of either ACE
Lo,
Buyer or Buyer’s Subsidiaries in the nature of a retroactive or retrospective
rate adjustment, loss sharing arrangement, or actual or contingent liability
as
of the Measurement Date, nor would there be any such liability if such insurance
policy were terminated as of the Measurement Date, and (B) to the knowledge
of
the ACE Selling Parties, no insurance company issuing any such policy is in
receivership, conservatorship, bankruptcy, liquidation, or similar proceeding,
and no such proceedings with respect to any insurer are imminent.
(e) No
Plan
provides health, life insurance or other welfare benefits to retirees or other
terminated employees of ACE Lo, other than continuation coverage required by
Section 4980B of the Code or Sections 601-608 of ERISA (“COBRA”)
or any
similar state law. There has been no failure by any ERISA Affiliate of ACE
Lo to
comply with COBRA for which ACE Lo could be liable.
(f) None
of
the Plans is a “defined benefit plan,” within the meaning of Section 3(35) of
ERISA or is a plan subject to Section 412 of the Code, nor has ACE Lo been
obligated to contribute to any such “defined benefit plan” or plan subject to
Section 412 of the Code since December 31, 1998.
(g) With
respect to any “defined benefit plan,” within the meaning of Section 3(35) of
ERISA or any plan subject to Section 412 of the Code, maintained or contributed
to by any ERISA Affiliate of ACE Lo: (i) no liability to the Pension Benefit
Guaranty Corporation (“PBGC”)
has
been incurred (other than for premiums not yet due); (ii) no notice of intent
to
terminate any such plan in a distress termination (within the meaning of Section
4041(c) of ERISA) has been filed with the PBGC or distributed to participants;
(iii) no proceedings to terminate any such plan have been instituted by the
PBGC; (iv) no “accumulated funding deficiency,” within the meaning of Section
302 of ERISA or Section 412 of the Code, whether or not waived, has been
incurred, and (v) all required contributions have been timely made. There are
no
Liens against the property of ACE Lo under section 412(n) of the Code or
sections 302(f) or 4068 of ERISA.
-25-
(h) With
respect to each “multiemployer plan,” within the meaning of Section 4001(a)(3)
of ERISA, contributed to by ACE Lo or any of its ERISA Affiliates: (i) neither
ACE Lo nor any of its ERISA Affiliates any outstanding liability for a complete
or partial withdrawal or delinquent contributions, (ii) to the ACE Selling
Parties’ knowledge, no such plan is in reorganization (within the meaning of
Section 4241 of ERISA) or insolvent (within the meaning of Section 4245 of
ERISA), and (iii) to the knowledge of the ACE Selling Parties, none of such
multiemployer plans nor any trust created thereunder has incurred any
“accumulated funding deficiency,” as such term is defined in section 412 of the
Code, whether or not waived, and no condition has occurred or exists which
by
the passage of time could be expected to result in an accumulated funding
deficiency as of the last day of the current plan year of any such multiemployer
plan. As of the Measurement Date, there has been no (A) withdrawal by either
ACE
Lo or any of its ERISA Affiliates that is a substantial employer from a
single-employer plan (as defined in Section 4001(a)(15) of ERISA) which is
a
Plan and which has two or more contributing sponsors at least two of whom are
not under common control, as referred to in section 4063(b) of ERISA, or (B)
cessation by either ACE Lo or any of its ERISA Affiliates of operations at
a
facility causing more than 20% of participants in a Plan which is a
single-employer plan (as defined in Section 4001(a)(15) of ERISA) to be
separated from employment, as referred to in section 4062(f) of ERISA. None
of
ACE Lo or any of its ERISA Affiliates, or any other organization of which any
of
them are a successor or parent corporation as defined in section 4069(b) of
ERISA, have engaged in any transaction described in section 4069(a) of
ERISA.
(i) No
event
has occurred and no condition exists with respect to any Plan which could
subject any Plan, ACE Lo, or Buyer to any material liability for a breach of
fiduciary duty, a “prohibited transaction,” within the meaning of Section 406 of
ERISA or Section 4975 of the Code, or a tax, penalty or fine under Section
502
or 4071 of ERISA or Subtitle D, Chapter 43 of the Code.
(j) There
is
not pending or, to the ACE Selling Parties’ knowledge, threatened, any action,
suit, or claim (other than routine claims for benefits in the ordinary course)
involving a Plan which could give rise to a material liability. No Plan is
currently under governmental investigation or audit.
(k) Except
as
otherwise contemplated by this Agreement, neither the execution of this
Agreement nor the consummation of the transactions contemplated by this
Agreement, will (i) materially increase the amount of benefits otherwise payable
under any Plan, (ii) result in any material respect the acceleration of the
time
of payment, exercisability, funding or vesting of any such benefits, or (iii)
result in any material payment (whether severance pay or otherwise) becoming
due
to, or with respect to, any current or former employee or director of ACE Lo.
No
payment or series of payments that would constitute a “parachute payment”
(within the meaning of Section 280G of the Code) has been made or is required
to
be made under any Plan, directly or indirectly, to any employee in connection
with the execution of this Agreement or as a result of the consummation of
the
transactions contemplated hereby.
-26-
Section
5.6 Other
Labor and Employment Matters.
(a) As
of the
Measurement Date, ACE Lo is in compliance with all applicable Laws relating
to
employment, employment practices, safety and health, employment discrimination,
wages, hours and terms and conditions of employment, including employee
compensation matters (collectively, “Employment
Laws”),
except where the failure to so comply would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on the
ACE
Selling Parties. As of the Measurement Date, since January 1, 2003, ACE Lo
has
not received any written notice from any Governmental Entity that ACE Lo has
violated any Employment Law in any material respect.
(b) As
of the
Measurement Date, there are no unfair labor practice charges, complaints or
petitions for elections or other Legal Proceedings pending against the ACE
Selling Parties, or either of them, before the National Labor Relations Board,
or any similar labor relations governmental bodies, or, of which the ACE Selling
Parties, or either of them, has received notice, and there is no strike,
slowdown, work stoppage or lockout or, to the knowledge of the ACE Selling
Parties, any threat thereof, by or with respect to any employees of ACE
Lo.
(c) As
of the
Measurement Date, ACE Lo is not a party to any collective bargaining agreement,
neutrality agreement, “card check” or other current labor agreement with or
respecting any labor union or organization.
(d) As
of the
Measurement Date, neither of the ACE Selling Parties have knowledge of any
activity or proceeding of any labor organization (or representative thereof)
or
employee group (or representative thereof) to organize any non-unionized
employees of ACE Lo.
Section
5.7 Intellectual
Property.
(a) Section
5.7(a) of
the
ACE Disclosure Letter contains a complete and correct list of all material
Owned
Intellectual Property that has been registered or is the subject of a pending
application for registration by or on behalf of ACE Lo (the “Registrations”),
as of
the Measurement Date. Section
5.7(a)
of the
ACE Disclosure Letter contains a complete and correct list of all material
Licensed Intellectual Property used in or necessary to the conduct of the
business of ACE Lo, and identification of the Contract, license, sublicense
or
other agreement pursuant to which each such item of material Licensed
Intellectual Property is licensed to and used by ACE Lo as of the Measurement
Date. Section
5.7(a)
of the
ACE Disclosure Letter contains a list of all ACE Lo Material Contracts which
govern the rights or obligations of ACE Lo with respect to any ACE Lo
Intellectual Property used in or necessary to the conduct of the Casino Business
(the “Intellectual
Property Agreements”)
as of
the Measurement Date. Correct and complete copies of all written items
identified in Section
5.7(a)
of the
ACE Disclosure Letter have been delivered or made available by ACE Lo to
Buyer.
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(b) As
of the
Measurement Date, ACE Lo owns the right, title and interest in the Customer
Data
free and clear of any Liens and has the right to use the Specified Intellectual
Property (other than the Customer Data) free and clear of any Liens, in each
case as currently used in the conduct of the Casino Business. As of the
Measurement Date, the Intellectual Property Agreements are free and clear of
all
Liens. The Specified Intellectual Property comprise all of the material
Intellectual Property reasonably necessary for or used in the conduct of the
Casino Business as presently conducted, as of the Measurement Date.
(c) As
of the
Measurement Date, the ACE Selling Parties have no knowledge that ACE Lo has
infringed or otherwise violated any rights of any Person by its use of any
Specified Intellectual Property. As of the Measurement Date, except as set
forth
in Section
5.7(c)
of the
ACE Disclosure Letter, to the ACE Selling Parties’ knowledge, none of the
Specified Intellectual Property:
(i) is
being
infringed by any other Person; or
(ii) is
otherwise used or is available for use by any other Person, except for (A)
any
rights retained by a licensor pursuant to the terms of an Intellectual Property
Agreement, and (B) any Intellectual Property that is used pursuant to an
Intellectual Property Agreement in the conduct of the Casino Business but was
not developed or licensed for the exclusive use of ACE Lo.
(d) As
of the
Measurement Date, the Intellectual Property Agreements are valid, legal,
binding, enforceable and in full force and effect in accordance with their
terms, and to the ACE Selling Parties’ knowledge no default, violation or breach
exists thereunder by ACE Lo or any other party thereto, and no event has
occurred and is continuing that, with notice or the passage of time or both,
would constitute a default, violation or breach thereunder by ACE Lo or any
other party, except where such default, violation, breach or event would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on ACE Lo.
(e) As
of the
Measurement Date, no claim or demand of any Person has been made on ACE Lo
nor
is there any Legal Proceeding that is pending or, to the ACE Selling Parties’
knowledge, threatened, which (i) challenges the rights of ACE Lo in respect
of
any Specified Intellectual Property, (ii) asserts that ACE Lo is infringing
or otherwise violating, or is required to pay any royalty, license fee, charge
or other amount with regard to, any ACE Lo Intellectual Property, or (iii)
claims that any default exists under any Intellectual Property Agreement. Since
January 1, 2003, to the ACE Selling Parties’ knowledge, none of the Specified
Intellectual Property has been subject to any outstanding ruling, decree,
judgment, stipulation or other order by or with any court, arbitrator or
administrative agency, or has been the subject of any litigation.
Section
5.8 Tax
Matters.
(a) ACE
Lo
has been properly classified as an entity disregarded as an entity separate
from
its owner within the meaning of Treasury Regulations Section
301.7701-3(b)(1)(ii), and applicable state Income Tax Law, at all times since
its inception and is not a successor to any other person or entity. ACE Lo’s
owner for such Federal and applicable state Income Tax purposes has been ACE
Hi
at all times since ACE Lo’s inception.
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(b) All
material Tax Returns required to be filed with respect to (including without
limitation with respect to the income, business, or activities of) ACE Lo,
either separately by any Person or as part of a consolidated, combined or
unitary group, have been timely filed (taking into account extensions timely
filed) with the appropriate Governmental Entity. All such Tax Returns are true,
correct and complete in all material respects. Neither ACE Lo nor ACE Hi is
currently the beneficiary of any extension of time to file any such Tax Return,
except as set forth on Section
5.8(b)
of the
ACE Disclosure Letter. ACE Hi has delivered to Buyer true, correct and complete
copies of all material Tax Returns of, or with respect to the income, business,
or activities of, ACE Lo relating to any open Tax Periods that have been filed
by ACE Hi or ACE Lo.
(c) As
of the
Measurement Date, all material Taxes that have become due with respect to
(including without limitation with respect to the income, business, or
activities of) ACE Lo have been timely paid (whether or not shown on a Tax
Return). ACE Lo is in compliance in all material respects with, and its records
contain all information and documents necessary to comply in all material
respects with, all applicable information reporting and Tax withholding
requirements under federal, state and local Laws. All material Taxes that ACE
Lo
is or was required by Law to withhold or collect have been duly withheld or
collected and, to the extent required, have been timely paid to the proper
Governmental Entity. ACE Lo has properly requested, received and retained all
necessary exemption certificates and other documentation supporting any claimed
exemption or waiver of Taxes on sales or other transactions as to which ACE
Lo
would have been obligated to collect or withhold Taxes, except where its failure
to do so would not have a Material Adverse Effect on ACE Lo.
(d) As
of the
Measurement Date, (i) there are currently no deficiencies for Taxes that have
been claimed, proposed or assessed with respect to the income, business, or
activities of ACE Lo, nor are there any ongoing, pending or threatened claims,
audits, investigations, examinations, or subpoenas or requests for information
relating to any liability in respect of Taxes with respect to the income,
business, or activities of ACE Lo, nor are there any matters under discussion
with any Governmental Entity in respect of Taxes with respect to the income,
business, or activities of ACE Lo, (ii) no power of attorney has been
executed by or on behalf of ACE Lo with respect to any matters relating to
Taxes
that is currently in force, and no extension or waiver of a statute of
limitations relating to Taxes of ACE Hi or ACE Lo is in effect and (iii) no
claim has ever been made by any Governmental Entity in a jurisdiction where
ACE
Lo does not file Tax Returns that ACE Lo is or may be subject to taxation in
that jurisdiction.
(e) As
of the
Measurement Date, ACE Lo has not requested or received any ruling from any
Governmental Entity, or signed any binding agreement with any Governmental
Entity, which would increase the Tax liability of ACE Lo for any
Post-Measurement Date Tax Period. Neither Buyer nor ACE Lo will be required
to
recognize for Tax purposes in a Post-Closing Tax Period any income or gain
that
would otherwise have been required to be recognized under the accrual method
of
accounting in a Pre-Closing Tax Period, as a result of ACE Hi or ACE Lo making
a
change in method of accounting.
(f) As
of the
Measurement Date, there are no Liens for Taxes (other than for current Taxes
not
yet due and payable) upon any of the assets of ACE Lo.
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(g) ACE
Lo
has not been a member of any affiliated group of corporations which has filed
a
combined, consolidated or unitary Income Tax Return for federal, state, local
or
foreign Tax purposes. ACE Lo is not liable for the Taxes of any Person under
Treasury Regulation Section 1.1502-6 or any similar provision of state, local
or
foreign Law, as a transferee or successor, by contract, or otherwise.
Notwithstanding the foregoing, ACE Hi has been a member of an affiliated group
of corporations which has filed a combined, consolidated or unitary Income
Tax
Return for federal, state, local or foreign Tax purposes.
(h) As
of the
Measurement Date, (A) there are no Tax sharing, indemnity, allocation or similar
agreements in effect as between ACE Lo (or any predecessors thereof), on the
one
hand, and any other Person, on the other hand and (B) ACE Lo has no contractual
obligations to indemnify any other Person with respect to Taxes.
(i) ACE
Hi is
not a “foreign person” within the meaning of Section 1445 of the
Code.
Section
5.9 Insurance.
(a) ACE
Lo
has made available to Buyer prior to the date of this Agreement full copies
of
all policies of property, fire and casualty, product liability, workers’
compensation, and other forms of insurance (including self-insurance
arrangements) held or used by ACE Lo. As of the Measurement Date, all such
policies are in full force and effect, all premiums due with respect thereto
have been paid or accrued.
(b) As
of the
Measurement Date, with respect to each such insurance policy, neither ACE Lo
nor, to the ACE Selling Parties’ knowledge, any other party to the policy is in
material breach or material default thereunder.
(c) As
of the
Measurement Date, there is no claim by ACE Lo under any such insurance policies
referenced in Section
5.9(a)
currently pending against any insurer under such insurance policies in excess
of
Five Hundred Thousand Dollars ($500,000) in the aggregate as to which coverage
has been denied or disputed, in whole or in part, by any such
insurer.
Section
5.10 Affiliate
Transactions.
None of
the directors, officers, Affiliates or present or former equityholders of any
ACE Selling Party or any Affiliate of any of the foregoing Persons is a party
to
any material agreement, understanding, indebtedness or proposed transaction
with
ACE Lo or is directly or, to the ACE Selling Parties’ knowledge, indirectly
interested in any material Contract with ACE Lo, including without limitation
any agreement under which it: (i) leases any material real or personal property
(either to or from such Person), (ii) licenses material Intellectual Property
(either to or from such Person), (iii) is obligated to purchase any material
asset from or sell such asset to such Person, (iv) purchases any material
products or services from such Person, (v) pays or receives material
commissions, rebates or other payments, (vi) lends or borrows more than Ten
Thousand Dollars ($10,000) at any given time, (vii) provides management
services, (viii) leases any real property, including office or facility
leases or (ix) provides or receives any other material benefit or payment.
ACE
Lo has not guaranteed or assumed any obligations of its or its Affiliates’
respective managers, directors, officers, stockholders, members or other
Affiliates or any Affiliate of any of the foregoing Persons. No manager,
director, officer, equityholder or other Affiliate of the ACE Selling Parties
or
any Affiliate of any of the foregoing Persons owns or has any material rights
in
or to any of the Properties or the assets of ACE Lo.
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Section
5.11 Personal
Property.
As of
the Measurement Date, (a) Section
5.11
of the
ACE Disclosure Letter sets forth a true, correct and complete list of each
material tangible asset (other than real estate) owned by ACE Lo, including
without limitation, all slot machines and other types of gaming equipment and
vehicles, (b) except for the assets and properties leased or licensed under
the
ACE Lo Material Contracts set forth in Section
5.3
of the
ACE Disclosure Letter, except for assets and properties which constitute
Intellectual Property, ACE Lo has good and marketable title to, or the right
to
use, all of the material tangible and intangible assets and material properties
used in connection with the Casino Business, free and clear of any Lien other
than Permitted Encumbrances and (c) ACE Lo owns or leases all material
assets and properties which are required for the operation of the Casino
Business as presently conducted.
Section
5.12 Brokers.
Neither
of the ACE Selling Parties nor any of their respective Affiliates or
Representatives have employed any broker, financial advisor or finder or
incurred any liability for any brokerage fees, commissions or finder’s fees in
connection with the transactions contemplated by this Agreement.
Section
5.13 No
Other Conflicts.
Except
for such breaches, conflicts, violations, defaults, terminations, cancellations,
accelerations, losses or failures to obtain consents or waivers that directly
result from the Casino Shutdown or as contemplated by this Agreement, the
execution and delivery of this Agreement by the ACE Selling Parties and the
consummation by the ACE Selling Parties of the transactions contemplated by
this
Agreement will not, result in any violation or breach of, or constitute (with
or
without notice or lapse of time, or both) a default (or give rise to a right
of
termination, cancellation or acceleration of any obligation or loss of any
benefit) under, or require a consent or waiver under, any of the terms,
conditions or provisions of any bond, mortgage, indenture or Assumed ACE Lo
Contract to which the ACE Selling Parties, or either of them, is a party or
by
which the ACE Selling Parties, or either of them, may be bound, except for
any
such breaches, conflicts, violations, defaults, terminations, cancellations,
accelerations, losses or failures to obtain any such consent or waiver which
(x)
are not, individually or in the aggregate, reasonably likely to have a Material
Adverse Effect on ACE Lo or (y) would not materially impair or delay the
Closing.
Section
5.14 Real
Estate.
(a) Section
5.14(a) of
the
ACE Disclosure Letter contains (i) a complete and accurate list, legal
descriptions, and street addresses where available, of all real property and/or
Improvements that are owned (or at the Closing will be owned) by ACE Lo,
including without limitation the Casino Land (each such property, “ACE
Owned Property”)
and
(ii) a complete and accurate list, legal descriptions, and street addresses
where available, of all real property leased or occupied by ACE Lo, as tenant,
lessee, sub-lessee, licensee, manager, or otherwise, including, without
limitation, all real property on which any Casino Business operations, parking
lot operations, billboard advertising, casino operations, casino support
operations, office or administrative operations are conducted or which are
otherwise used in the Casino Business since July 1, 2005, including without
limitation the property held under the Madison House Lease (each such leased
property, a “ACE
Leased Property”).
ACE
Owned Property and ACE Leased Property are referred to herein collectively
as
the “ACE
Real Property”
or
the
“Casino
Property.”
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(b) ACE
Lo
holds title to each parcel of the ACE Real Property as set forth in the Pro
Forma Title Policies set forth on Exhibit
I-1
attached
hereto (the “ACE
Real Property Pro Forma Title Policies”).
(c) As
of the
Measurement Date, ACE Lo has provided to Buyer a true, correct and complete
copy
of the Madison House Lease and all other Contracts related to the ACE Leased
Property. The Madison House Lease is in full force and effect on the date
hereof, and there exists no default or event of default under the Madison House
Lease on the date hereof on the part of (i) the ACE Selling Parties or (ii)
to
the ACE Selling Parties’ knowledge, the landlord thereunder.
(d) As
of the
Measurement Date, the ACE Real Property (including without limitation the
Warehouse Property) constitutes all the fee and leasehold interests in real
property used in the Casino Business since July 1, 2006. There are no
non-contiguous, offsite or other real properties or Improvements owned, leased
or otherwise used by ACE Lo, whether located in Atlantic City, New Jersey or
otherwise, in connection with the operation of the Casino Business since July
1,
2006.
(e) ACE
Lo
has the option to acquire the Boardwalk Equity Interests pursuant to the
Traymore Call Agreement. ACE Lo’s option rights under the Traymore Call
Agreement have not been exercised. The Traymore Call Agreement is in full force
and effect on the date hereof, and there exists no default or event of default
under the Traymore Call Agreement on the date hereof by ACE Lo, AREH or any
other party thereto.
(f) As
of the
Measurement Date, each of the ACE Selling Parties has, to the extent in its
possession or control, delivered or made available for review to Buyer true,
correct and complete copies of (i) the current title insurance policies and/or
any updated preliminary title reports, commitments or lender’s policies of title
insurance relating to the ACE Real Property, (ii) the most recent surveys
related to the ACE Real Property, and (iii) all material development
agreements, reciprocal easement agreements, land use agreements, redevelopment
agreements, agreements relating to the zoning of the ACE Real Property and
all
other material agreements relating to the use or operation of the ACE Real
Property and any business conducted thereon, and all building condition or
engineering property reports with respect to the ACE Real Property.
(g) As
of the
Measurement Date, to the ACE Selling Parties’ knowledge, the ACE Real Property
and its use or occupancy is now in compliance in all material respects with
all
applicable building, zoning, subdivision and other land use and similar Laws
affecting the ACE Real Property.
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(h) As
of the
Measurement Date, there is no action, proceeding or litigation, in each case,
to
which the ACE Selling Parties are a party defendant, pending, or, to the best
of
the ACE Selling Parties’ knowledge threatened to be brought against the ACE
Selling Parties as a party defendant (i) to condemn all or any portion of the
ACE Real Property, (ii) to take all or any portion of the ACE Real Property,
or
any interest therein, by eminent domain, (iii) to modify the zoning of, or
other
governmental rules or restrictions applicable to, the ACE Real Property or
the
use or development thereof, (iv) for any street widening or changes in
highway or traffic lanes or patterns in the immediate vicinity of the ACE Real
Property, (v) which otherwise would interfere with the use, ownership,
improvement, development and/or operation of the ACE Real Property, or (vi)
otherwise relating to the ACE Real Property or the interests of ACE Lo therein,
in each case, which would, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on (A) ACE Lo, (B) the ability of
the
ACE Selling Parties to operate the ACE Real Property in the manner presently
conducted or
(C)
the ability of Buyer or ACE Lo to use, own, improve, develop and/or operate
any
individual parcel of ACE Real Property.
(i) As
of the
Measurement Date, (i) the ACE Selling Parties are not party to any
commitments to or agreements with any Governmental Entity or agency (federal,
state or local) or any other Person affecting the use, improvement or ownership
of the ACE Real Property which are not described in the ACE Disclosure Letter or
herein and (ii) except as set forth in Section
5.14(i)
of the
ACE Disclosure Letter, there are no outstanding judgments relating to the
ownership, lease, use or occupancy by any Person of any ACE Real
Property.
(j) As
of the
Measurement Date, (i) ACE Lo has obtained all appropriate certificates of
occupancy, easements and rights of way, including proofs of dedication, required
to use and operate the ACE Real Property in the manner in which the ACE Real
Property is currently used and in a manner consistent with past practice, except
for such certificates, easements or rights of way that are ministerial in nature
and normally issued in due course upon the application therefor without further
action of the applicant, (ii) correct and complete copies of all such
certificates, permits and licenses have been provided to Buyer, and
(iii) ACE Lo has all approvals, permits and licenses (including without
limitation all environmental Permits) necessary to own and operate the ACE
Real
Property as currently owned and operated and in a manner consistent with past
practice.
(k) As
of the
Measurement Date, except as set forth in the Pro Forma Title Policies, no
special assessments have been levied or, to the ACE Selling Parties’ knowledge,
are threatened or pending against all or any part of the ACE Real Property.
Section
5.15 Compliance
with Laws.
(a) As
of the
Measurement Date, to the ACE Selling Parties’ knowledge, ACE Lo is, and its
operations are being conducted, in compliance with all Laws and judgments
applicable to ACE Lo (including without limitation any Gaming Laws), except
where the failure to so comply would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on the ACE Selling
Parties.
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(b) As
of the
Measurement Date, ACE Lo and, to the ACE Selling Parties’ knowledge, each of its
members, managers, directors, officers and Persons performing management
functions similar to officers, hold all material permits, registrations,
findings of suitability, licenses, variances, exemptions, certificates of
occupancy, orders and approvals of all Governmental Entities (including all
authorizations under Gaming Laws), necessary to operate the Casino Property
and
conduct the Casino Business (“Permits”),
each
of which is in full force and effect in all material respects, and, to the
ACE
Selling Parties’ knowledge, no event has occurred which permits, or upon the
giving of notice or passage of time or both, would permit, revocation,
non-renewal, modification, suspension, limitation or termination of any Permit
that currently is in effect, except where such revocation, non-renewal,
modification, suspension, limitation or termination would not, individually
or
in the aggregate, reasonably be expected to have a Material Adverse Effect
on
the ACE Selling Parties. To the ACE Selling Parties’ knowledge, each of its
members, managers, directors, officers, key employees and Persons performing
management functions similar to officers, in each case whose position is related
to the Casino Business, are in compliance in all material respects with the
terms of the Permits. There are no Legal Proceedings by any Governmental Entity
with respect to ACE Lo, the Casino Business or the Casino Property that are
pending, or to the knowledge of the ACE Selling Parties, threatened, which
may
result in the revocation, cancellation, termination or suspension, or any
adverse modification of any Permits. Notwithstanding anything contained in
this
Section
5.15,
the
representations contained herein do not concern Environmental Laws, which are
the subject of the representations in Section 5.17.
(c) As
of the
Measurement Date, neither ACE Lo nor, to the ACE Selling Parties’ knowledge, any
of its members, managers, directors, officers, key employees or Persons
performing management functions similar to officers, in each case whose position
is related to the Casino Business, has received any written claim, demand,
notice, complaint, court order or administrative order from any Governmental
Entity in the past three (3) years under, or relating to any violation or
possible violation of any Gaming Laws related to actions or inactions at the
Casino Property which did or would be reasonably likely to result in fines
or
penalties of One Million Dollars ($1,000,000) or more, in the aggregate. To
the
ACE Selling Parties’ knowledge, there are no facts, which if known to the Gaming
Authorities will or would be reasonably likely to result in the revocation,
limitation or suspension of any Gaming Approval.
(d) The
provisions of this Section
5.15
shall
not apply (and are not intended to apply) to Taxes.
Section
5.16 Investment
Company Act of 1940.
Neither
of the ACE Selling Parties is, or on the Closing Date will be, required to
be
registered as an investment company under the Investment Company Act of 1940,
as
amended.
Section
5.17 Other
Environmental Matters.
(a) As
of the
Measurement Date, to the knowledge of the ACE Selling Parties, (i) there
does not exist on, at, in or under the Casino Property or any other real
property presently or formerly owned, leased, operated or used by ACE Lo any
Hazardous Substance that would reasonably be expected to give rise to a material
liability and (ii)
ACE Lo
is in compliance in all material respects with all applicable Environmental
Laws.
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(b) As
of the
Measurement Date, there are no pending or, to the knowledge of the ACE Selling
Parties, threatened claims or other proposed actions or proceedings by any
Person (including any Governmental Entity or third party) affecting the Casino
Property or any other real property presently or formerly owned, leased,
operated or used by ACE Lo under or pursuant to any Environmental Laws that
would reasonably be expected to give rise to a material liability.
(c) As
of the
Measurement Date, to the knowledge of the ACE Selling Parties, there are no,
and
there have not been any, aboveground or underground storage tanks on, at, in
or
under the Casino Property or any other real property presently or formerly
owned, leased, operated or used by ACE Lo.
(d) As
of the
Measurement Date, ACE Lo has not used, treated, stored, disposed of, arranged
for or permitted the disposal of, transported, handled or released any Hazardous
Substances, or owned or operated any property or facility (including without
limitation the Casino Property) in a manner that has given or would reasonably
be expected to give rise to any material liability, including any liability
for
response costs, corrective action costs, personal injury, property damage,
natural resources damage or attorneys fees, pursuant to any Environmental
Laws.
(e) As
of the
Measurement Date, accurate and complete copies of all environmental reports,
tests, studies, investigations and surveys performed on or with respect to
the
Casino Property by, on behalf of or in the possession of ACE Lo have been
provided to Buyer.
(f) As
of the
Measurement Date, none of the ACE Selling Parties has received any order,
citation, directive, inquiry, notice, summons, warning or other communication
of
any alleged potential or actual violation of Environmental Law or any actual
or
potential material Environmental Liability respecting the Casino Property or
any
other real property presently or formerly owned, leased, operated or used by
ACE
Lo.
ARTICLE
VI
REPRESENTATIONS
AND WARRANTIES OF AREH SELLING PARTIES
THAT
ARE
BROUGHT DOWN FOR PURPOSES OF THE CLOSING CONDITIONS
Each
AREH
Selling Party hereby represents and warrants, jointly and severally, to Buyer
that the statements contained in this ARTICLE
VI
are true
and correct as of the date hereof and as of the Closing Date as if made at
and
as of such times, except as set forth herein and in the disclosure letter
delivered by the AREH Selling Parties to Buyer on the date of this Agreement
(the “AREH
Disclosure Letter”).
The
AREH Disclosure Letter is arranged in paragraphs corresponding to the numbered
and lettered paragraphs contained in this Agreement and the disclosure in any
paragraph shall, to the extent applicable, only qualify other paragraphs in
this
Agreement to the extent the matters to be excepted from such other paragraphs
is
reasonably apparent from the text of the disclosure in the AREH Disclosure
Letter.
Section
6.1 Organization
of the Selling Parties.
Each
of
the AREH Selling Parties is duly organized and validly existing under the laws
of its jurisdiction of organization and has all requisite limited liability
company or partnership power and authority to carry on its respective business
as now being conducted.
-35-
Section
6.2 Authority;
No Conflict; Required Filings and Consents.
(a) Each
of
the AREH Selling Parties has all requisite power and authority to enter into
this Agreement and to consummate the transactions that are contemplated hereby.
The execution and delivery of this Agreement by the AREH Selling Parties and
the
consummation by each AREH Selling Party of the transactions to which it is
a
party that are contemplated by this Agreement have been duly and validly
authorized by all requisite limited liability company or partnership action,
and
no other action of any such AREH Selling Party or any board or committee thereof
or any other limited liability or partnership proceeding on the part of such
AREH Selling Parties or their respective members or partners are necessary
to
authorize this Agreement, and no other action of any AREH Selling Party or
any
board or committee thereof or any other limited liability or partnership
proceeding on the part of such AREH Selling Parties or their respective members
or partners is necessary to consummate the transactions contemplated by this
Agreement. This Agreement has been duly executed and delivered by each AREH
Selling Party and, assuming this Agreement constitutes the valid and binding
obligation of Buyer and the ACE Selling Parties, constitutes the valid and
binding obligation of the AREH Selling Parties, enforceable against each of
the
AREH Selling Parties in accordance with its terms, subject, as to enforcement,
to (x) applicable bankruptcy, insolvency, reorganization, moratorium or
similar Laws now or hereinafter in effect affecting creditors’ rights generally
and (y) general principles of equity.
(b) The
execution and delivery of this Agreement by the AREH Selling Parties and the
consummation by the AREH Selling Parties of the transactions contemplated by
this Agreement will not, (i) conflict with, or result in any violation or
breach of, any provision of the respective organizational documents of the
AREH
Selling Parties or (ii) subject to the governmental filings and other
matters referred to in Section
6.2(c)
hereof,
contravene, conflict with, or result in a violation of any of the terms or
requirements of, or give any Governmental Entity or any other Person the right
to revoke, withdraw, suspend, cancel, terminate, or modify, in each case in
any
respect, any permit, concession, franchise, license, judgment, or Law applicable
to the AREH Selling Parties, or any of them, except in the case of clause (ii)
for any such contraventions, conflicts, violations, revocations, withdrawals,
suspensions, cancellations, terminations or modifications which (x) are not,
individually or in the aggregate, reasonably likely to have a Material Adverse
Effect on the AREH Selling Parties or (y) would not materially impair or
delay the Closing.
(c) No
Consent of, with or from any Governmental Entity is required by or with respect
to any AREH Selling Party in connection with the execution and delivery of
this
Agreement by the AREH Selling Parties or the consummation by the AREH Selling
Parties, or any of them, of the transactions to which they are a party that
are
contemplated by this Agreement, except for (i) the filing of the pre-merger
notification report under the HSR Act and (ii) such other Consents which, if
not
obtained or made, would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on the AREH Selling
Parties.
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Section
6.3 Capitalization.
(a) The
AREH
Subs Equity Interests represent all of the issued and outstanding Equity
Interests of the AREH Subs, all of which are duly authorized, validly issued,
fully paid and nonassessable, were not issued in violation of any preemptive
rights created by applicable Laws, the applicable AREH Sub’s organizational
documents or any Contract. There are no outstanding or authorized profit
participation or any other contractual rights the value of which is derived
from
the financial performance of the AREH Subs or the value of any AREH Subs Equity
Interests. There is no liability for, or obligation with respect to, any
dividends, distributions or similar participation interests declared or
accumulated but unpaid with respect to any AREH Subs Equity Interests. There
are
no obligations, contingent or otherwise, of any AREH Sub to repurchase, redeem
or otherwise acquire any of the AREH Subs Equity Interests or to provide funds
to or make any material investment (in the form of a loan, capital contribution
or otherwise) in any entity other than guarantees of bank obligations or
indebtedness for borrowed money entered into in the ordinary course of business.
(b) There
are
no (i) options, warrants or other rights, agreements, arrangements or
commitments to which any AREH Sub is a party, or by which any AREH Sub is bound,
relating to issued or unissued AREH Subs Equity Interests, other than the
Traymore Call Agreement, (ii) securities convertible into or exchangeable
for AREH Subs Equity Interests, (iii) obligations of any AREH Selling Party
to issue, sell, transfer, pledge or otherwise dispose of any Equity Interests
in, or securities convertible into or exchangeable for Equity Interests in,
any
AREH Sub or (iv) bonds, debentures, notes or other indebtedness of any AREH
Sub
having voting rights (or convertible into securities having such rights) issued
and outstanding. There are no voting trusts, proxies or other voting agreements
or understandings to which any AREH Sub is a party or by which any AREH Sub
is
bound with respect to the issued or unissued Equity Interests of such AREH
Sub.
ACE Lo’s option rights under the Traymore Call Agreement have not been
exercised. The Traymore Call Agreement is in full force and effect on the date
hereof, and there exists no default or event of default under the Traymore
Call
Agreement on the date hereof by ACE Lo, AREH or any other party
thereto.
(c) AREH,
either directly or through its wholly-owned Subsidiaries, (i) owns all of
the issued and outstanding AREH Subs Equity Interests free and clear of all
Liens, (ii) has good title to such AREH Subs Equity Interests and,
(iii) at the Closing, (A) will transfer and convey to Buyer good title to
such AREH Subs Equity Interests, and/or (B) will cause BEC to transfer and
convey to Buyer good and marketable title to the Boardwalk Equity Interests,
and/or (C) will cause Draper Associates LLC to transfer and convey to Buyer
good and marketable title to the Equity Interests in MLK I and MLK III, in
each
case free and clear of all Liens. None of the AREH Subs Equity Interests were
certificated and no evidences of ownership were ever issued by any of the AREH
Sub for the AREH Subs Equity Interests.
Section
6.4 Certain
Real Estate Contracts.
There
are no Contracts with respect to the sale, exchange, encumbrance, lease or
transfer of any or any portion of the Traymore Land, or any interest therein,
and no Person has any option, right of first refusal or right of first offer
to
purchase all or any portion of the Traymore Land, or any interest therein.
There
are no agreements relating to the use and occupancy of the Traymore Land that
are not terminable upon thirty (30) days’ notice.
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Section
6.5 Labor
Matters.
No AREH
Sub is a party to any collective bargaining agreement, neutrality agreement,
“card check” or other current labor agreement with or respecting any labor union
or organization that purports to bind the current or future casino properties
of
any purchaser of the AREH Subs Equity Interests (including Buyer, pursuant
to
this Agreement) or require a redeveloped casino on the Traymore Site to be
unionized.
ARTICLE
VII
REPRESENTATIONS
AND WARRANTIES OF AREH SELLING PARTIES
THAT
ARE
BROUGHT DOWN SOLELY FOR PURPOSES OF INDEMNITY
Each
AREH
Selling Party hereby represents and warrants, jointly and severally, to Buyer
that the statements contained in this ARTICLE
VII
are true
and correct as of the date hereof and as of the Closing Date as if made at
and
as of such times (except to the extent expressly made as of an earlier date,
in
which case as of such earlier date), except as set forth herein and in the
AREH
Disclosure Letter. The AREH Disclosure Letter is arranged in paragraphs
corresponding to the numbered and lettered paragraphs contained in this
Agreement and the disclosure in any paragraph shall, to the extent applicable,
only qualify other paragraphs in this Agreement to the extent the matters to
be
excepted from such other paragraphs is reasonably apparent from the text of
the
disclosure in the AREH Disclosure Letter.
Section
7.1 Other
Organizational Matters.
Each of
the AREH Selling Parties is duly qualified or licensed to do business and is
in
good standing in each jurisdiction in which the property owned, leased or
operated by it or the nature of the business conducted by it makes such
qualification or licensing necessary, except where the failure to be so
qualified, licensed or in good standing would not have a Material Adverse Effect
on the AREH Selling Parties. None of the AREH Subs has any Subsidiaries or
holds
or owns any interests or investments in any Person, other than interests or
investments which constitute cash or cash equivalents. Copies of the
organizational documents of each of the AREH Selling Parties have been made
available to Buyer, and such copies are accurate and complete copies of such
organizational documents as in effect on the date hereof.
Section
7.2 Agreements,
Contracts and Commitments.
Section
7.2
of the
AREH Disclosure Letter sets forth a true, correct and complete list and, if
such
Contract is not in writing, a description of any material terms thereof, of
each
material Contract to which any of the AREH Subs is a party or to which any
is
bound (collectively, the “AREH
Subs Contracts”),
in
each case in effect on the date hereof. The AREH Selling Parties have delivered
or made available to Buyer full copies of all written AREH Subs Contracts as
in
effect on the date hereof. Each Assumed AREH Subs Contract is valid and binding
upon the AREH Subs (and, to the AREH Selling Parties’ knowledge, on all other
parties thereto), in accordance with its terms and is in full force and effect.
As of the Measurement Date, (i) there is no breach or violation of or default
by
any of the AREH Subs under any Assumed AREH Subs Contract, whether or not such
breach, violation or default has been waived, (ii) to the AREH Selling Parties’
knowledge there is no breach or violation of or default by any other Person
under any Assumed AREH Subs Contract, (iii) the AREH Subs have performed all
obligations required to be performed by the AREH Subs under any Assumed AREH
Subs Contract, and (iv) no event has occurred with respect to any AREH Subs
which, with notice or lapse of time or both, would constitute a breach,
violation or default of, or give rise to a right of termination, modification,
cancellation, foreclosure, imposition of a Lien, prepayment or acceleration
under, any Assumed AREH Subs Contract, except in the case of each of clauses
(i)
- (iv) above, as would not, individually or in the aggregate, be reasonably
likely to have a Material Adverse Effect on the AREH Selling
Parties.
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Section
7.3 Absence
of Undisclosed Liabilities.
Section
7.3
of the
AREH Disclosure Letter sets forth the liabilities and obligations of the AREH
Subs as of June 30, 2006, required to be reflected on a balance sheet in
accordance with GAAP. As of the Measurement Date, except as set forth on
Section
7.3
of the
AREH Disclosure Letter and except for liabilities incurred since June 30, 2006
in the ordinary course of business consistent with past practice, to the AREH
Selling Parties’ knowledge, there are no liabilities or obligations of any AREH
Subs, whether or not accrued, contingent or otherwise.
Section
7.4 Tax
Matters.
(a) Each
of
the AREH Subs has been properly classified as an entity disregarded as an entity
separate from its owner within the meaning of Treasury Regulations Section
301.7701-3(b)(1)(ii), and applicable state Income Tax Law, at all times since
its inception and is not a successor to any other person or entity. Each AREH
Subs’ owner for such Federal and applicable state Income Tax purposes has been
AREH at all times since such AREH Subs’ respective inception.
(b) All
material Tax Returns required to be filed with respect to (including without
limitation with respect to the income, business, or activities of) the AREH
Subs, either separately by any Person or as part of a consolidated, combined
or
unitary group, have been timely filed (taking into account extensions timely
filed) with the appropriate Governmental Entity. All such Tax Returns are true,
correct and complete in all material respects. Neither the AREH Subs nor AREH
is
currently the beneficiary of any extension of time to file any such Tax Return,
except as set forth in Section
7.4(b)
of the
AREH Disclosure Letter. AREH has delivered to Buyer true, correct and complete
copies of all material Tax Returns of, or with respect to the income, business,
or activities of, the AREH Subs relating to any open Tax Periods that have
been
filed by the AREH Subs.
(c) As
of the
Measurement Date, all material Taxes that have become due with respect to
(including without limitation with respect to the income, business, or
activities of) each of the AREH Subs have been timely paid (whether or not
shown
on a Tax Return). Each of the AREH Subs is in compliance in all material
respects with, and its records contain all information and documents necessary
to comply in all material respects with, all applicable information reporting
and Tax withholding requirements under federal, state and local Laws. All
material Taxes that any of the AREH Subs is or was required by Law to withhold
or collect have been duly withheld or collected and, to the extent required,
have been timely paid to the proper Governmental Entity. Each of the AREH Subs
has properly requested, received and retained all necessary exemption
certificates and other documentation supporting any claimed exemption or waiver
of Taxes on sales or other transactions as to which such AREH Subs would have
been obligated to collect or withhold Taxes, except where its failure to do
so
would not have a Material Adverse Effect on such AREH Sub.
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(d) As
of the
Measurement Date, there are currently no deficiencies for Taxes that have been
claimed, proposed or assessed with respect to the income, business, or
activities of any of the AREH Subs, nor are there any ongoing, pending or
threatened claims, audits, investigations, examinations, or subpoenas or
requests for information relating to any liability in respect of Taxes with
respect to the income, business, or activities of the AREH Subs, nor are there
any matters under discussion with any Governmental Entity in respect of Taxes
with respect to the income, business, or activities of any AREH Subs. Except
as
set forth in Section
7.4(d)
of the
AREH Disclosure Letter, no power of attorney has been executed by or on behalf
of any of the AREH Subs with respect to any matters relating to Taxes that
is
currently in force, and no extension or waiver of a statute of limitations
relating to Taxes of the AREH Subs is in effect. No claim has ever been made
by
any Governmental Entity in a jurisdiction where any AREH Sub does not file
Tax
Returns that such AREH Sub is or may be subject to taxation in that
jurisdiction.
(e) As
of the
Measurement Date, none of the AREH Subs has requested or received any ruling
from any Governmental Entity, or signed any binding agreement with any
Governmental Entity, that would increase the Tax liability of any AREH Sub
for
any Post-Measurement Date Tax Period. Neither Buyer nor the AREH Subs will
be
required to recognize for Tax purposes in a Post-Closing Tax Period any income
or gain that would otherwise have been required to be recognized under the
accrual method of accounting in a Pre-Closing Tax Period, as a result of any
of
the AREH Selling Parties making a change in method of accounting.
(f) As
of the
Measurement Date, there are no Liens for Taxes (other than for current Taxes
not
yet due and payable) upon any of the assets of any of the AREH Subs.
(g) None
of
the AREH Subs has been a member of any affiliated group of corporations which
has filed a combined, consolidated or unitary Income Tax Return for federal,
state, local or foreign Tax purposes. None of the AREH Subs is liable for the
Taxes of any Person under Treasury Regulation Section 1.1502-6 or any similar
provision of state, local or foreign Law, as a transferee or successor, by
contract, or otherwise.
(h) As
of the
Measurement Date, there are no Tax sharing, indemnity, allocation or similar
agreements in effect as between any of the AREH Subs (or any predecessors
thereof), on the one hand, and any other Person, on the other hand. None of
the
AREH Subs has any contractual obligations to indemnify any other Person with
respect to Taxes.
(i) AREH
is
not a “foreign person” within the meaning of Section 1445 of the
Code.
Section
7.5 Insurance.
As of
the Measurement Date, the insurance policies maintained by the AREH Selling
Parties or their respective Affiliates in respect of the Adjacent Properties
are
in full force and effect, and all premiums due with respect thereto have been
paid or accrued. As
of the
Measurement Date, with respect to each such insurance policy, neither the AREH
Subs nor any other party to the policy is in breach or default
thereunder. As
of the
Measurement Date, there is no claim by any of the AREH Selling Parties or their
respective Affiliates under any such insurance policies currently pending
against any insurer under such insurance policies as to which coverage has
been
denied or disputed, in whole or in part, by any such insurer.
As of
the Measurement Date, to the knowledge of the AREH Selling Parties, the AREH
Selling Parties have not received any written notice from any insurance carrier
which has issued a policy of insurance with respect to the Adjacent Properties
of any material defects or deficiencies or requesting the performance of any
material repairs, alterations or other work with respect to the Adjacent
Properties.
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Section
7.6 Litigation.
(a) As
of the
Measurement Date, there is no Legal Proceeding pending, or as to which either
of
the AREH Selling Parties has received any written notice of assertion or, to
the
knowledge of the AREH Selling Parties, threatened against (i) either of the
AREH
Selling Parties or any of their respective assets, properties or businesses
or
(ii) any of their respective executive officers or directors, in their
capacities as such, before any Governmental Entity, where the amount involved
(excluding attorneys’ fees and costs) would reasonably be expected to exceed
Five Hundred Thousand Dollars ($500,000).
(b) As
of the
Measurement Date, there are no Legal Proceedings pending or, to the AREH Selling
Parties’ knowledge, threatened with respect to this Agreement or seeking to
prevent, hinder, materially modify or challenge the Purchase or the other
transactions contemplated hereby.
(c) As
of the
Measurement Date, no AREH Sub has entered into any agreement to settle or
compromise any Legal Proceeding pending or threatened against it which involves
(i) any material obligation other than money that would, individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect on
such
AREH Sub, and/or (ii) the payment of money, which such payment or payments
would
exceed Five Hundred Thousand Dollars ($500,000).
(d) As
of the
Measurement Date, no AREH Sub is subject to any outstanding judgment against
it
awarding monetary damages in excess of Five Hundred Thousand Dollars
($500,000).
(e) The
provisions of this Section
7.6
shall
not apply (and are not intended to apply) to Taxes.
Section
7.7 Brokers.
None of
the AREH Selling Parties nor any of their respective Affiliates or
Representatives have employed any broker, financial advisor or finder or
incurred any liability for any brokerage fees, commissions or finder’s fees in
connection with the transactions contemplated by this Agreement.
Section
7.8 Operations
of AREH Subs.
Each of
the AREH Subs was formed solely to purchase the applicable Adjacent Properties,
and none of the AREH Subs has engaged in any business or other activities or
incurred any liabilities, other than in connection with the purchase and
ownership of the Adjacent Properties and the transactions contemplated
hereby.
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Section
7.9 No
Other Conflicts.
The
execution and delivery of this Agreement by the AREH Selling Parties and the
consummation by the AREH Selling Parties of the transactions contemplated by
this Agreement will not, result in any violation or breach of, or constitute
(with or without notice or lapse of time, or both) a default (or give rise
to a
right of termination, cancellation or acceleration of any obligation or loss
of
any benefit) under, or require a consent or waiver under, any of the terms,
conditions or provisions of any bond, mortgage, indenture or Assumed AREH Subs
Contract to which the AREH Selling Parties, or any of them, is a party or by
which the AREH Selling Parties, or any of them, may be bound, except for any
such breaches, conflicts, violations, defaults, terminations, cancellations,
accelerations, losses or failures to obtain any such consent or waiver which
(a)
are not, individually or in the aggregate, reasonably likely to have a Material
Adverse Effect on the AREH Selling Parties or (b) would not materially
impair or delay the Closing.
Section
7.10 Adjacent
Real Property.
(a) Section
7.10(a) of
the
AREH Disclosure Letter contains (i) a complete and accurate list, legal
descriptions and street addresses where available, of all real property and/or
Improvements owned (or, with respect to the Restaurant Land, that may be owned
at the Closing) by the AREH Subs, including without limitation the Adjacent
Land
(the “Adjacent
Owned Property”)
and
(ii) a complete and accurate list, legal descriptions, and street addresses
where available, of all real property leased or occupied pursuant to written
occupancy agreements by the AREH Subs, as tenant, lessee, sub-lessee, licensee,
manager, or otherwise, including, without limitation, all real property on
which
any parking lot operations, office or administrative operations are conducted
or
which are otherwise material to the operation of the AREH Subs’ businesses (each
such leased property, an “Adjacent
Leased Property”).
The
Adjacent Owned Property and the Adjacent Leased Property are referred to herein
collectively as the “Adjacent
Real Property”
or
the
“Adjacent
Properties.”
(b) The
AREH
Subs (or, with respect to the Restaurant Site, if the Restaurant Purchase is
consummated prior to the Closing, will) hold title to each parcel of the
Adjacent Real Property as set forth in the pro forma title policies set forth
on
Exhibit
I-2
attached
hereto (the “Adjacent
Real Property Pro Forma Title Policies”
and,
together with the ACE Real Property Pro Forma Title Policies, the “Pro
Forma Title Policies”).
(c) As
of the
Measurement Date, the AREH Selling Parties have provided to Buyer true, correct
and complete copies of all agreements by any AREH Sub as lessor or sublessor
and
any third party in connection with the Adjacent Real Property, or any portion
thereof (the “Assumed
Leases”),
each
of which is in full force and effect on the date hereof, and there exists no
default or event of default under such Assumed Lease on the date hereof on
the
part of either landlord or tenant thereunder. Except for the Assumed Leases,
there are no other agreements, written or oral, between the AREH Subs and any
other Person giving any Person or entity any rights to use, occupy or operate
on
or any interest in the Adjacent Real Property or any portion thereof or
otherwise affecting or relating to the Adjacent Real Property. None of the
AREH
Subs is in material default under the documents governing the Assumed Leases
and, to the AREH Selling Parties’ knowledge, no defaults (whether or not
subsequently cured) by any AREH Subs or any other party have been alleged in
writing thereunder, and to the AREH Selling Parties’ knowledge, no event has
occurred with the giving of notice, or the passage of time, or both, which
would
constitute a material default or violation or breach in any respect under the
documents governing the Assumed Leases.
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(d) As
of the
Measurement Date, the AREH Selling Parties have delivered or made available
for
review to Buyer true, correct and complete copies of (i) the current title
insurance policies and/or any updated preliminary title reports, commitments
or
lender’s policies of title insurance relating to the Adjacent Real Property,
(ii) the most recent surveys related to the Adjacent Real Property, and
(iii) all material development agreements, reciprocal easement agreements,
land
use agreements, redevelopment agreements, agreements relating to the zoning
of
the Adjacent Real Property and all other material agreements relating to the
use
or operation of the Adjacent Real Property and any business conducted thereon,
and all building condition or engineering property reports with respect to
the
Adjacent Land.
(e) As
of the
Measurement Date, there are no documents pursuant to which the Adjacent Leased
Property is occupied by an AREH Sub, as tenant, subtenant, licensee or
otherwise.
(f) As
of the
Measurement Date, to the AREH Selling Parties’ knowledge, the Adjacent Real
Property and its use or occupancy is now in compliance in all material respects
with all applicable building, zoning, subdivision and other land use and similar
Laws affecting the Adjacent Real Property.
(g) As
of the
Measurement Date, there is no action, proceeding or litigation, in each case,
to
which the AREH Selling Parties are a party defendant, pending, or, to the AREH
Selling Parties’ knowledge, threatened to be brought against the AREH Selling
Parties as a party defendant (i) to condemn all or any portion of the Adjacent
Real Property, (ii) to take all or any portion of the Adjacent Real Property,
or
any interest therein, by eminent domain, (iii) to modify the zoning of, or
other
governmental rules or restrictions applicable to, the Adjacent Real Property
or
the use or development thereof, (iv) for any street widening or changes in
highway or traffic lanes or patterns in the immediate vicinity of the Adjacent
Real Property, (v) which otherwise would interfere with the use, ownership,
improvement, development and/or operation of the Adjacent Real Property, or
(vi)
otherwise relating to the Adjacent Real Property or the interests of the AREH
Selling Parties therein, which would, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on the AREH Selling
Parties or the ability of the AREH Subs or Buyer to use, own, improve, develop
and/or operate any individual parcel of Adjacent Real Property.
(h) As
of the
Measurement Date, the AREH Selling Parties are not party to any commitments
to
or agreements with any Governmental Entity or agency (federal, state or local)
affecting the use, improvement or ownership of the Adjacent Real Property which
are not described in the AREH Disclosure Letter or herein.
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(i) As
of the
Measurement Date, there are no outstanding judgments relating to the ownership,
lease, use or occupancy by any Person of any Adjacent Real
Property.
(j) As
of the
Measurement Date, the AREH Subs have obtained all appropriate certificates
of
occupancy, easements and rights of way, including proofs of dedication, required
to use and operate the Adjacent Real Property in the manner in which the
Adjacent Real Property is currently used and in a manner consistent with past
practice, except for such certificates, easements or rights of way that are
ministerial in nature and normally issued in due course upon the application
therefor without further action of the applicant. Correct and complete copies
of
all such certificates, permits and licenses have been provided to Buyer. As
of
the Measurement Date, the AREH Subs have all approvals, permits and licenses
(including without limitation all environmental Permits) necessary to own and
operate the Adjacent Real Property as currently owned and operated and in a
manner consistent with past practice.
(k) Except
as
set forth in the Pro Forma Title Policies, as of the Measurement Date, no
special assessments have been levied or, to the knowledge of the AREH Selling
Parties, are threatened or pending against all or any part of the Adjacent
Real
Property.
(l) There
are
no Contracts with respect to the sale, exchange, encumbrance, lease or transfer
of any or any portion of the Adjacent Real Property, or any interest therein,
and no Person has any option, right of first refusal or right of first offer
to
purchase all or any portion of the Adjacent Real Property, or any interest
therein. There are no agreements relating to the use and occupancy of the
Adjacent Real Property that are not terminable upon thirty (30) days’ notice.
Section
7.11 Compliance
With Laws.
As of
the Measurement Date, to the AREH Selling Parties’ knowledge, the use and
occupancy by the AREH Subs of the Adjacent Real Property is in compliance with
all applicable Laws of any Governmental Entity. As of the Measurement Date,
none
of the AREH Selling Parties have received any notice from any Governmental
Entity having jurisdiction over the Adjacent Real Property advising that the
Adjacent Real Property or any use or occupancy thereof is in material violation
of any applicable Law, ordinance or regulation, including without limitation
any
zoning or other municipal ordinance. Notwithstanding anything to the contrary
in
this Section
7.11,
the
representations herein do not concern Environmental Laws, which are the subject
of the representations in Section
7.12.
Section
7.12 Other
Environmental Matters.
(a) As
of the
Measurement Date, to the knowledge of the AREH Selling Parties, there does
not
exist
on, at, in or under the Adjacent Real Property or any other real property
presently or formerly owned, leased, operated or used by any of the AREH Subs
any Hazardous Substance that would reasonably be expected to give rise to a
material liability. As of the Measurement Date, to the knowledge of the AREH
Selling Parties, each of the AREH Subs is in compliance in all material respects
with all applicable Environmental Laws.
(b) As
of the
Measurement Date, there are no pending or, to the knowledge of the AREH Selling
Parties, threatened claims or other proposed actions or proceedings by any
Person (including any Governmental Entity or third party) affecting the Adjacent
Real Property or any other real property presently or formerly owned, leased,
operated or used by the AREH Subs under or pursuant to any Environmental Laws
that would reasonably be expected to give rise to a material
liability.
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(c) As
of the
Measurement Date, and to the knowledge of the AREH Selling Parties, there are
no, and there have not been any, aboveground or underground storage tanks on,
at, in or under the Adjacent Real Property or any other real property presently
or formerly owned, leased, operated or used by the AREH Subs.
(d) As
of the
Measurement Date, none of the AREH Subs has used, treated, stored or disposed
of, arranged for or permitted the disposal of, transported, handled or released
any Hazardous Substances, or owned or operated any facility (including without
limitation the Traymore Property) in a manner that has given or would reasonably
be expected to give rise to any material liability, including any liability
for
response costs, corrective action costs, personal injury, property damage,
natural resources damage or attorneys fees, pursuant to any Environmental
Laws.
(e) As
of the
Measurement Date, accurate and complete copies of all environmental reports,
tests, studies, investigations and surveys performed on or with respect to
the
Adjacent Real Property by, on behalf of or in the possession of any of the
AREH
Subs have been provided to Buyer.
(f) As
of the
Measurement Date, none of the AREH Selling Parties has received any written
order, citation, directive, inquiry, notice, summons, warning or other
communication of any alleged potential or actual violation of Environmental
Law
or any actual or potential material Environmental Liability respecting the
Adjacent Real Property or any other real property presently or formerly owned,
leased, operated or used by any of the AREH Subs.
Section
7.13 Labor
Matters.
No AREH
Sub is a party to any collective bargaining agreement, neutrality agreement,
“card check” or other current labor agreement with or respecting any labor union
or organization.
ARTICLE
VIII
REPRESENTATIONS
AND WARRANTIES OF BUYER
Buyer
hereby represents and warrants to the Selling Parties that the statements
contained in this ARTICLE
VIII
are true
and correct as of the date hereof except as set forth herein and in the
disclosure letter delivered by Buyer to the AREH Selling Parties on the date
of
this Agreement (the “Buyer
Disclosure Letter”).
The
Buyer Disclosure Letter is arranged in paragraphs corresponding to the numbered
and lettered paragraphs contained in this Agreement and the disclosure in any
paragraph shall, to the extent applicable, only qualify other paragraphs in
this
Agreement to the extent the matters to be excepted from such other paragraphs
is
reasonably apparent from the text of the disclosure in the Buyer Disclosure
Letter.
Section
8.1 Organization.
Buyer
is duly organized and validly existing under the laws of its jurisdiction of
organization and has full power and authority to conduct its business as and
to
the extent now conducted and to own, use and lease its assets and
properties.
-45-
Section
8.2 Authority;
No Conflict; Required Filings and Consents.
(a) Buyer
has
full power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation by Buyer of the transactions to which it is a party that
are contemplated hereby have been duly authorized by all necessary action on
the
part of Buyer and no other proceedings or actions on the part of Buyer or its
stockholders are necessary to authorize such execution, delivery and
performance. This Agreement has been duly executed and delivered by Buyer and,
assuming this Agreement constitutes the valid and binding obligation of the
respective Selling Parties thereto, constitutes the valid and binding obligation
of Buyer, enforceable against Buyer in accordance with its terms, subject,
as to
enforcement, to (i) applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws now or hereinafter in effect affecting creditors’
rights generally and (ii) general principles of equity.
(b) The
execution and delivery of this Agreement by Buyer does not, and the consummation
by Buyer of the transactions to which it is a party that are contemplated by
this Agreement will not, (i) conflict with, or result in any violation or breach
of, any provision of the organizational documents of Buyer, (ii) result in
any
violation or breach of, or constitute (with or without notice or lapse of time,
or both) a default (or give rise to a right of termination, cancellation or
acceleration of any obligation or loss of any benefit) under, or require a
consent or waiver under, any of the terms, conditions or provisions of any
note,
bond, mortgage, indenture, lease, or other Contract or obligation to which
Buyer
is a party or by which it or its properties or assets may be bound, or
(iii) subject to the governmental filings and other matters referred to in
Section
8.2(c)
hereof,
contravene, conflict with or result in a violation of any of the terms or
requirements of, or give any Governmental Entity or any other Person the right
to revoke, withdraw, suspend, cancel, terminate, or modify any permit,
concession, franchise, license, judgment, or Law applicable to Buyer or any
of
its properties or assets, except in the case of clause (ii) and (iii) for any
such breaches, conflicts, violations, defaults, terminations, cancellations,
accelerations, losses or failures to obtain any such consent or waiver which
are
not, individually or in the aggregate, reasonably likely to have a Buyer
Material Adverse Effect.
(c) No
consent, approval, order or authorization of, or registration, declaration
or
filing with, any Governmental Entity is required by or with respect to Buyer
in
connection with the execution and delivery of this Agreement by Buyer or the
consummation by Buyer of the Purchase and the other transactions contemplated
hereby, except for (i) the filing of the pre-merger notification report under
the HSR Act, (ii) any approvals or filing of notices required under the Gaming
Laws, if any, and (iii) such other material filings, consents, approvals,
orders, authorizations, permits, registrations and declarations as may be
required under the Laws of any jurisdiction in which the Companies conduct
any
business or own any assets.
Section
8.3 Financing.
Subject
to (a) the accuracy of Sellers’ representations and warranties in this
Agreement, (b) the accuracy and completeness of the materials provided by the
Selling Parties to Buyer prior to the date of this Agreement and (c) the
Selling Parties’ compliance with their respective covenants and agreements in
this Agreement, Buyer has available to it as of the date of this Agreement
and
will have available to it on the Closing Date funds or access to funds
sufficient to enable Buyer to pay the Purchase Price and all fees and expenses
necessary or related to the consummation of the transactions contemplated by
this Agreement.
-46-
Section
8.4 Legal
Proceedings.
As of
the date hereof, except as set forth in Section
8.4
of the
Buyer Disclosure Letter, there are no Legal Proceedings pending or, to Buyer’s
knowledge, threatened with respect to this Agreement or seeking to prevent,
hinder, materially modify or challenge the Purchase or the other transactions
contemplated hereby.
Section
8.5 Brokers.
Neither
Buyer nor any of its Representatives have employed any broker, financial advisor
or finder or incurred any liability for any brokerage fees, commissions or
finder’s fees in connection with the transactions contemplated by this
Agreement.
Section
8.6 Ownership
of New Jersey Casino.
Buyer
does not own a casino facility or other gaming facility located in the state
of
New Jersey.
ARTICLE
IX
COVENANTS
Section
9.1 Casino
Shutdown; WARN Act Notice.
(a) Within
three (3) business days following the execution of this Agreement, ACE Hi shall
cause ACE Lo to give the notice required under the WARN Act (the “WARN
Act Notice”)
to
employees of ACE Lo (the “Casino
Employees”)
(such
date, the “WARN
Act Notice Date”).
To
the extent that it may do so in compliance with applicable law and subject
to
any contrary order or directive from the Gaming Authorities, ACE Hi shall cause
ACE Lo to continue to operate the Casino Business through the required notice
period under the WARN Act in accordance with Section
9.1(b)
and
Section
9.2(a)
hereof.
Whether
or not ACE Lo is permitted to continue to operate a gaming business, it shall
continue to employ and compensate its employees that have not resigned or been
terminated in accordance with past practice during the required notice period
under the WARN Act.
(b) Prior
to
the Closing, ACE Hi shall cause ACE Lo to surrender to the New Jersey Casino
Control Commission its certificate of operation for the Casino Business in
the
State of New Jersey (the “Casino
Shutdown”).
In
addition, ACE Hi shall use commercially reasonable efforts to cause ACE Lo
to
comply with a Casino Shutdown plan set forth in Section
9.1(b)
of the
ACE Disclosure Letter (the “Casino
Shutdown Plan”).
(c) The
parties hereby acknowledge and agree that prior the Casino Shutdown, the
operations of ACE Lo may deteriorate and such deterioration, by itself, will
not
constitute a breach of any representation, warranty or covenant or condition
to
Buyer’s obligation to close or constitute grounds for a termination of this
Agreement or the Purchase. Subject to Section
9.2(a)(i)(B)
through (N) and (x)(ii) hereof, Buyer hereby acknowledges and agrees that:
(i)
ACE Lo and the Casino Business may not be able to operate in a manner that
is in
the ordinary course of business or that is consistent with past practice, and
its failure to operate in the ordinary course of business or consistent with
past practice shall not, by itself, constitute a breach of any representation,
warranty or covenant or condition to Buyer’s obligation to close or constitute
grounds for a termination of this Agreement or the Purchase, and (ii) if
employees in certain key positions resign, ACE Lo may be required to cease
all
gaming operations.
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(d) Buyer
shall be responsible for funding any cash shortfalls, including for any Taxes
imposed on ACE Lo, of ACE Lo due to losses of the Casino Business after the
Measurement Date and prior to Closing; provided that,
at the
time of any such funding by Buyer, ACE Lo shall be in material compliance with
all of the covenants contained in Section
9.2(a)
hereof.
Not less than five (5) business days prior to the date on which ACE Hi
reasonably projects that ACE Lo will suffer a cash shortfall, ACE Hi shall
deliver written notice to Buyer of such projected cash shortfall and the amount
of such cash shortfall, accompanied by reasonably sufficient back-up or
supporting data used in the calculation of such projected cash shortfall as
is
sufficient to reflect how ACE Hi made such determination. Within two (2)
business days following Buyer’s receipt of such written notice, Buyer and ACE Hi
shall deliver joint written instructions to the Escrow Agent to deduct from
the
Deposit, release from escrow and pay to ACE Lo cash in an amount sufficient
to
cover such projected shortfall pursuant to the Deposit Escrow Agreement and
this
Section
9.1(d)
and (ii)
ACE Lo shall issue a promissory note in favor of Buyer substantially in the
form
attached hereto as Exhibit
J
(an
“ACE
Lo
Promissory Note”)
in an
amount equal to the withdrawal from the Deposit described in preceding subclause
(i). Each ACE Lo Promissory Note shall provide, among other things, that the
cash payments by Buyer contemplated by this Section
9.1(d)
shall be
repaid by ACE Lo to Buyer only in the event this Agreement is terminated (A)
by
either Buyer or Sellers, pursuant to Section
11.1(b)
(unless
Buyer’s failure to fulfill any obligation under this Agreement has been the
primary cause of, or materially contributed to, the failure of the Closing
to
occur on or before the Outside Date) or Section
11.1(c)
(unless
Buyer shall not have used its commercially reasonable efforts to prevent the
entry of and to remove the applicable Restraint or if Buyer’s failure to fulfill
any obligation under this Agreement has been the primary cause of, or materially
contributed to, the action resulting in such Restraint), (B) by Buyer, pursuant
to Section
11.1(d)
or
Section
11.1(h),
or
(C) by ACE Hi, with respect to the ACE Lo Purchase, pursuant to
Section
11.1(g).
The ACE
Lo Promissory Note shall not be payable under any other circumstances. In the
event that the Deposit shall decrease to an amount less than Forty Million
Dollars ($40,000,000) as a result of the payments described in the preceding
sentence, Buyer shall, within five (5) business days after such shortfall,
promptly deposit into the Deposit Escrow cash in an amount equal to such
shortfall in order to cause the Deposit to be equal to Fifty Million Dollars
($50,000,000). For purposes of clarity, Buyer and ACE Hi hereby acknowledge
and
agree that any adjustment in size of the Deposit pursuant to this Section
9.1(d)
will
result in a larger or smaller ACE Closing Payment.
In no
event will any ACE Lo Promissory Note be treated as a liability to reduce any
payment to the Selling Parties under Article II hereof.
(e) Prior
to the
Closing, Buyer and ACE Hi shall use commercially reasonable efforts to resolve
with the New Jersey Casino Control Commission the appropriate amounts, if any,
of Progressive Gaming Liabilities, Outstanding Chip & Ticket-In/Ticket-Out
Liabilities and unclaimed jackpot liabilities for which ACE Lo shall remain
liable after the Casino Shutdown, including without limitation amounts to be
paid into escrow, withheld and/or carried over to another meter when the casino
reopens.
Buyer
shall and shall cause ACE Lo following the Closing to promptly pay to ACE Hi
(i)
any Escrow Gaming Amounts permitted to be released from any such escrow by
the
New Jersey Casino Control Commission and (ii) one-half (½) of any amounts (less
a present value discount) permitted to be carried over to another meter when
the
casino reopens by the New Jersey Casino Control Commission or any other
Governmental Entity, in each case in cash by wire transfer of immediately
available funds to an account designated by ACE Hi to Buyer.
-48-
Section
9.2 Conduct
of Business.
(a) Notwithstanding
the acknowledgements and agreements contained in Section
9.1(c)
hereof,
the ACE Selling Parties shall be obligated to observe the covenants contained
in
this Section
9.2(a)(i)(B)
through (N) and (a)(ii). Except as provided in this Agreement (but specifically
excluding Section
9.1(c))
or as
set forth in Section
9.2
of the
ACE Disclosure Letter, during the period commencing on the date of this
Agreement until the earliest of (x) the termination of this Agreement with
respect to the ACE Lo Purchase or (y) the Closing, subject to the
limitations set forth below:
(i) the
ACE
Selling Parties shall (except to the extent that Buyer shall otherwise consent
in writing, which consent may not be unreasonably withheld):
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(A)
|
subject
to the limitations set forth in Section 9.1(c) above and including
the
effects of the Casino Shutdown and the other requirements of this
Agreement, conduct ACE Lo’s business in the ordinary course in accordance
with past practice;
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(B)
|
(I)
take all appropriate actions in accordance with past practice to
maintain
the confidentiality of ACE Lo’s business information and trade secrets
(including the Customer Data), including without limitation (x) in
accordance with past practice, limiting access to such confidential
business information and trade secrets (including the Customer Data),
and
(y) other reasonable procedures and (II) obtain signed
confidentiality agreements in the form of Exhibit
9.2
attached hereto provided by Buyer from each Casino Employee listed
on
Schedule 9.2(a)(i)(B)
attached hereto as a condition to their receipt of severance payments
upon
the termination of their employment at the Casino Property, unless
such
severance payments are required to be paid by ACE Lo pursuant to
the
agreements or order listed on Schedule
2.1(b)(v)
attached hereto;
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(C)
|
use
commercially reasonable efforts to protect from theft ACE Lo’s existing
tangible assets (other than real property) provided that no claim
shall be
asserted by Buyer for any loss of such assets since the date hereof
that,
in the aggregate, do not exceed One Hundred Thousand Dollars
($100,000);
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(D)
|
use
commercially reasonable efforts to terminate the services of ACE
Lo’s
officers and employees, suppliers and vendors (other than (I) ACE
Lo’s capital leases for gaming equipment, including shufflemasters and
slot machines, (II) the License Agreement, (III) the Madison
House Lease and (IV) the Brighton Park Agreements) in a manner consistent
with maintaining required operations through the Closing Date during
a
Casino Shutdown;
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-49-
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(E)
|
comply
with ACE Lo’s obligations under the Madison House Lease, except to the
extent such obligations are inconsistent with the Casino Shutdown;
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(F)
|
maintain
ACE Lo’s qualifications and licenses to do business and maintain ACE Lo
in
good standing in each jurisdiction in which the property owned, leased
or
operated by it or the nature of the business conducted by it makes
such
qualification or licensing necessary, except as contemplated in this
Agreement or where the failure to be so qualified, licensed or in
good
standing would not have a Material Adverse Effect on the ACE Selling
Parties;
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(G)
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(I) with
respect to ACE Hi, continue to pay Income Taxes if and when due with
respect to the income, business, or activities of ACE Lo, and
(II) with respect to ACE Lo, shall continue to pay Non-Income Taxes
when due with respect to the income, business, or activities of ACE
Lo;
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(H)
|
(I)
to the extent permitted by applicable Law, keep Buyer fully informed
and
consult with Buyer regarding any “effects” negotiations with any labor
union or union representatives in connection with the Casino Shutdown,
and
(II) refrain from entering into any agreement or commitment in
connection with any such negotiations without Buyer’s prior written
consent;
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(I)
|
(I)
maintain the existing insurance coverage relating to the assets of
ACE Lo
(however, in the event any such coverage shall be terminated or lapse,
ACE
Lo shall provide written notice to Buyer a reasonable amount of time
prior
to such termination or lapse and procure such replacement insurance
as
shall be requested by Buyer, (II) at Buyer’s cost, acquire such other
commercially available insurance coverage that Buyer directs in order
to
cover the assets of ACE Lo following the Measurement Date and
(III) file claims for any available insurance coverage and diligently
pursue such claims;
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(J)
|
terminate
all Contracts and other arrangements, whether written or oral, to
which
ACE Lo is a party or pursuant to which any of ACE Lo’s assets are bound
under which any Affiliates of the Selling Parties (other than ACE
Lo)
provide or receive any direct benefit or payment, as of the Measurement
Date, except for the Contracts listed on Schedule
9.2(a)(i)(J);
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(K)
|
following
the Measurement Date, at Buyer’s cost, take any specific actions and
implement any specific changes or upgrades to ACE Lo’s procedures with
respect to compliance with applicable building and safety codes,
Environmental Laws and other applicable Laws and with respect to
avoiding
environmental mishaps, in each case as reasonably requested by Buyer;
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(L)
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clear
all Liens on any of the assets of ACE Lo (other than Liens arising
from or
in connection with the GB Claims), provided that
this covenant shall be deemed satisfied with respect to any Lien
that has
been bonded, discharged or which constitutes a Permitted
Encumbrance;
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(M)
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promptly
notify Buyer upon receipt of any written correspondence received
by any
ACE Selling Party regarding potential condemnation proceedings or
restrictions on the use of the Casino Property and take all steps
reasonably requested by Buyer to resist any such condemnation proceedings
or avoid the imposition of such restrictions;
and
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(N)
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(I) operate
each Plan in substantial compliance with its terms and with ERISA,
the
Code, and all other applicable Laws, (II) timely make all required
contributions to all Plans and Multiemployer Plans, (III) not incur
any liability on account of any “defined benefit plan” within the meaning
of Section 3(35) of ERISA or any plan subject to Section 412 of the
Code
maintained or contributed to by any ERISA Affiliate of ACE Lo, (IV)
not
permit the creation of any Lien against the property of ACE Lo under
Section 412(n) of the Code or Sections 302(f) or 4068 of ERISA, or
the
commission of any “prohibited transaction” within the meaning of Section
406 of ERISA or Section 4975 of the Code for which ACE Lo or Buyer
could
be liable.
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(ii) without
limiting the generality of the foregoing, the ACE Selling Parties agree that
they shall not (except to the extent that Buyer shall otherwise consent in
writing, which consent shall not be unreasonably withheld); provided,
however,
that
the conversion of the 3% Notes or the exercise or conversion of outstanding
warrants to purchase ACE Hi Common Stock, in each case in accordance with their
respective terms, shall not constitute a violation of this section:
|
(A)
|
amend
or otherwise change ACE Lo’s organizational documents or form any
Subsidiaries of ACE Lo or amend any term of the ACE Lo Equity
Interests;
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-51-
|
(B)
|
declare,
set aside, make or pay any dividend, distribution (whether payable
in
cash, securities or property or any combination thereof), contribution,
loan or any other payment in respect of any ACE Lo Equity Interests
other
than a distribution in kind of the Warehouse Property and the Warehouse
Agreement or the cash proceeds of the Warehouse Property and/or the
Warehouse Agreement to ACE Hi pursuant to Section
9.23;
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(C)
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issue,
sell, pledge, dispose of, grant, transfer, encumber or authorize
the
issuance, sale, pledge, disposition, grant, transfer or encumbrance
of any
Equity Interests in ACE Lo, or any securities convertible into or
exchangeable for, or any options, warrants or rights to acquire,
Equity
Interests in ACE Lo, or any appreciation rights, performance units
or
other rights of any kind to acquire Equity Interests or such convertible
or exchangeable securities of ACE
Lo;
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(D)
|
split,
combine or reclassify any of the ACE Lo Equity Interests;
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(E)
|
adopt
a plan of or any complete or partial liquidation or adopt resolutions
providing for or authorizing such liquidation of or adoption of a
plan of
or any dissolution, merger or consolidation of ACE Hi or ACE
Lo;
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(F)
|
except
as set forth on Schedule
9.2(a)(ii)(F)
attached hereto, pursuant to the Casino Shutdown Plan, or as required
by
applicable Law or any collective bargaining agreements that are listed
on
Section
4.6
of
the ACE Disclosure Letter, grant to employees, officers or directors
of
ACE Lo any increase in salary or wages payable by ACE
Lo;
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(G)
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enter
into or amend any employment, consulting, indemnification, severance
or
termination agreement payable by ACE Lo with any present or former
employee, manager, officer or director of any ACE Selling Party;
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(H)
|
except
for agreements to provide severance to the Casino Employees pursuant
to
the Stay-Put Bonuses or otherwise in accordance with this Agreement,
and
except as otherwise provided in Section
9.21,
establish, adopt, enter into or amend in any material respect any
Employee
Benefit Plan applicable to ACE Lo (or arrangement that, had it been
in
existence on the date hereof, would be a Employee Benefit Plan applicable
to ACE Lo);
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(I)
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except
as otherwise provided by applicable Law, enter into or amend any
collective bargaining agreement or any successor collective bargaining
agreement, neutrality agreement, “card check” or any other labor agreement
with or respecting any labor union or union representative;
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-52-
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(J)
|
make
or authorize any capital expenditure payable by ACE Lo, except for
(I)
necessary maintenance and safety expenditures and (II) other capital
expenditures that do not exceed, in the aggregate, Two Hundred Thousand
Dollars ($200,000);
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(K)
|
knowingly
operate in a manner not in compliance with applicable Laws and judgments,
where in each case such knowing operation or failure would result
in a
Material Adverse Effect on ACE Lo;
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(L)
|
enter
into any commitments or agreements with any Governmental Entity or
agency
(Federal, state or local) or any other Person affecting the use,
improvement or ownership of the ACE Real Property;
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(M)
|
enter
into or amend any commitment or Contract (i) having a term beyond
the
Closing; or (ii) that obligates ACE Lo or binds any of ACE Lo’s assets, in
each case other than those entered into with third parties that are
not
Affiliates of any of the Selling Parties and as reasonably necessary
to
implement the Casino Shutdown Plan, and provided that at least two
(2)
days’ prior written notice has been provided to Buyer before entering into
such commitments or Contracts;
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(N)
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(I)
sell, pledge, transfer, lease, dispose of, grant, encumber or otherwise
authorize the sale, pledge, lease, transfer, disposition, grant or
encumbrance of any of the properties or assets of ACE Lo, except
for
(x) sales of inventory in the ordinary course of business or (y)
Permitted Encumbrances, or (II) acquire (x) any corporation, limited
liability company, partnership, joint venture, association or other
business organization or division thereof, or a substantial portion
of the
assets thereof (including without limitation by merger, consolidation,
lease or acquisition of Equity Interests or assets), (y) any interests
or
investments in any Person, other than interests or investments which
constitute cash or cash equivalents or (z) any other assets outside
of the
ordinary course of business;
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(O)
|
fail
to perform in all material respects all of ACE Lo’s obligations under the
ACE Material Contracts, or waive, release, assign, settle or compromise
any material rights or claims, except to the extent such obligations
are
inconsistent with the Casino
Shutdown;
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(P)
|
except
as permitted in Section 9.16 or Section 12.3 hereof, with respect
to ACE
Lo (including without limitation with respect to its income, business,
or
activities), (I) make or rescind any material election relating to
Taxes,
(II) settle or compromise any material claim, action, suit, litigation,
proceeding, arbitration, investigation, audit or controversy relating
to
Taxes, (III) make any material change to any method of reporting
income,
deductions, or other items for Tax purposes, (IV) make any material
change
in method of accounting for Tax purposes, in each case except as
required
by Law, (V) execute any power of attorney by or on behalf of ACE
Lo with
respect to any matters relating to Taxes, (VI) extend or waive any
statute of limitations relating to Taxes of ACE Lo, or (VII) enter
into any Tax sharing, indemnity, allocation or similar agreements
as
between ACE Lo, on the one hand, and any other Person, or enter into
any
contractual obligations to indemnify any other Person with respect
to
Taxes;
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-53-
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(Q)
|
except
as contemplated in Section 9.1(d), with respect to ACE Lo, (I) incur
or
assume any Indebtedness, except (x) up to One Hundred Thousand
Dollars ($100,000) and (y) as will be repaid in full prior to or at
the Closing by ACE Lo, (II) assume, guarantee, endorse or otherwise
cause
ACE Lo to become liable or responsible (whether directly, contingently
or
otherwise, but excluding the deposit, negotiation or endorsement
of
negotiable instruments for collection in the ordinary course of business)
for the obligations of any other Person, (III) vary ACE Lo’s inventory
practices in any material respect from ACE Lo’s past practices in the
ordinary course of business, except any such variation as is consistent
with the Casino Shutdown, (IV) accept deposits or advance payments
in
respect of any room reservations for any periods after the Closing
or (V)
make or authorize any loans, advances or capital contributions to,
or
investments in, any other Person (including advances to present or
former
employees, officers, managers, directors or other Affiliates of ACE
Lo)
except in the ordinary course of
business;
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(R)
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other
than in the ordinary course of business, waive any material defenses
with
respect to, or make any payment of any material liability (other
than
Indebtedness permitted by paragraph (Q)
above) of ACE Lo, including without limitation any payments of principal
as guarantor under the 3% Notes, before the same comes due in accordance
with its terms;
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(S)
|
enter
into or amend any Leases with respect to the Casino
Property;
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(T)
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adopt
or propose any amendment, change or modification in the certificate
of
incorporation or bylaws or other applicable governing instruments
of ACE
Hi that would delay, prevent, frustrate or materially interfere with
this
Agreement, the ACE Lo Purchase and the other transactions contemplated
hereby;
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(U)
|
waive
any benefits, or agree to modify in any manner, any confidentiality,
standstill or similar agreement to which ACE Lo is a
party;
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(V)
|
make
any material change in accounting principles, practices or methods
by ACE
Lo, except insofar as may be required by a change in GAAP;
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(W)
|
settle
or compromise any Legal Proceeding for which Buyer is not indemnified
pursuant to this Agreement, other than in respect of the GB Claims
or as
permitted in paragraph (P)
above;
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(X)
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create
any Liens on title to the Casino Property, other than Permitted
Encumbrances;
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(Y)
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enter
into any new lines of business or expand the Casino Business;
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(Z)
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dispose
of, transfer, or alter in any material way the mix and type of slot
machines at the Casino Property;
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(AA)
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exercise
ACE Lo’s option rights under the Traymore Call
Agreement;
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(BB)
|
(I)
slow ACE Lo’s collection practices for gaming receivables,
(II) increase wagering limits or (III) increase the level of credit
to customers;
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(CC)
|
take
any action that could reasonably be expected to result in a failure
of any
of the conditions set forth in ARTICLE
X
hereof; or
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(DD)
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agree
or commit to do any of the
foregoing.
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(b) Except
as
expressly contemplated by this Agreement or as disclosed on Section
9.2(b)
of the
AREH Disclosure Letter, during the period from the date of this Agreement and
continuing until the earlier of (x) the termination of this Agreement with
respect to the AREH Subs Purchase or (y) the Closing:
(i) the
AREH
Selling Parties shall (except to the extent that Buyer shall otherwise consent
in writing, which consent may not be unreasonably withheld):
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(A)
|
operate
and manage the Adjacent Properties in the same manner done by the
AREH
Subs prior to the date of this Agreement,
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(B)
|
(I) with
respect to AREH, continue to pay Income Taxes if and when due with
respect
to the income, business, or activities of AREH and each of the AREH
Subs,
and (II) with respect to the AREH Subs, shall continue to pay
Non-Income Taxes when due with respect to the income, business, or
activities of AREH and each of the AREH Subs,
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(C)
|
(I)
maintain the existing insurance coverage relating to the assets of
the
AREH Subs (however, in the event any such coverage shall be terminated
or
lapse, the AREH Subs shall provide written notice to Buyer a reasonable
amount of time prior to such termination or lapse and procure such
replacement insurance as shall be requested by Buyer, (II) at Buyer’s
cost, the AREH Subs shall acquire such other commercially available
insurance coverage that Buyer directs in order to cover the assets
of the
AREH Subs following the Measurement Date and (III) file claims for
any available insurance coverage and diligently pursue such claims,
and
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(D)
|
terminate
all Contracts and other arrangements, whether written or oral, to
which
any AREH Sub is a party or pursuant to which any of the AREH Subs’ assets
are bound under which any Affiliates of the Selling Parties (other
than
such AREH Subs) provide or receive any direct benefit or
payment,
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(E)
|
following
the Measurement Date, at Buyer’s cost, take any specific actions and
implement any specific changes or upgrades to the AREH Subs’ procedures
with respect to compliance with applicable building and safety codes,
Environmental Laws and other applicable Laws and with respect to
avoiding
environmental mishaps, in each case as reasonably requested by Buyer,
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|
(F)
|
clear
all Liens on any of the assets of AREH Subs, provided that
this covenant shall be deemed satisfied with respect to any Lien
that has
been bonded, discharged or which constitutes a Permitted
Encumbrance;
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(G)
|
promptly
notify Buyer upon receipt of any written correspondence received
by any
AREH Selling Party regarding potential condemnation proceedings or
restrictions on the use of the Traymore Property and take all steps
reasonably requested by Buyer to resist any such condemnation proceedings
or avoid the imposition of such restrictions;
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(H)
|
(I)
not adversely modify or amend the Restaurant Purchase Agreement and
(II) perform MLK III’s obligations under the Restaurant Purchase
Agreement; and
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(ii) without
limiting the generality of the foregoing, the AREH Selling Parties agree that
they shall not, and AREH agrees to cause its Subsidiaries and BEC not to (except
to the extent that Buyer shall otherwise consent in writing, which consent
may
not be unreasonably withheld):
|
(A)
|
amend
or otherwise change the AREH Subs’ organizational documents or amend any
term of the AREH Subs Equity
Interests;
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(B)
|
declare,
set aside, make or pay any dividend, distribution (whether payable
in
cash, securities or property or any combination thereof), contribution,
loan or any other payment in respect of any AREH Subs Equity Interests;
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|
(C)
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issue,
sell, pledge, dispose of, grant, transfer, encumber or authorize
the
issuance, sale, pledge, disposition, grant, transfer or encumbrance
of any
Equity Interests in the AREH Subs, or any securities convertible
into or
exchangeable for, or any options, warrants or rights to acquire,
Equity
Interests in the AREH Subs, or any appreciation rights, performance
units
or other rights of any kind to acquire Equity Interests or such
convertible or exchangeable securities of the AREH
Subs;
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(D)
|
split,
combine or reclassify of any of the AREH Subs Equity
Interests;
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(E)
|
adopt
a plan of or any complete or partial liquidation or adopt resolutions
providing for or authorizing such liquidation of or adoption of a
plan of
or any dissolution, merger or consolidation of any AREH
Sub;
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(F)
|
except
as otherwise provided by applicable Law, enter into or amend any
collective bargaining agreement or any successor collective bargaining
agreement, neutrality agreement, “card check” or any other labor agreement
with or respecting any labor union or union representative;
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(G)
|
make
or authorize any capital expenditure payable by any AREH Sub except
for
(I) necessary maintenance and safety expenditures and (II) other
capital expenditures that do not exceed, in the aggregate, Fifty
Thousand
Dollars ($50,000);
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(H)
|
knowingly
operate in a manner not in compliance with applicable Laws and judgments,
where in each case such knowing operation or failure would result
in a
Material Adverse Effect on the AREH
Subs;
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(I)
|
enter
into any commitments or agreements with any Governmental Entity or
agency
(Federal, state or local) or any other Person affecting the use,
improvement or ownership of the Adjacent Real Property;
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(J)
|
enter
into or amend any commitment or Contract that obligates any of the
AREH
Subs or binds any of the AREH Subs’ assets beyond the Closing Date, or
extend any existing Contract of any of the AREH Subs beyond the Closing
Date;
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|
(K)
|
(A)
sell, pledge, transfer, lease, dispose of, grant, encumber or otherwise
authorize the sale, pledge, lease, transfer, disposition, grant or
encumbrance of any of the properties or assets of the AREH Subs,
except
for (I) sales of inventory and excess or obsolete assets in the
ordinary course of business and (II) Permitted Encumbrances, or (B)
acquire (I) any corporation, limited liability company, partnership,
joint venture, association or other business organization or division
thereof, or a substantial portion of the assets thereof (including
without
limitation by merger, consolidation, lease or acquisition of Equity
Interests or assets) (other than Boardwalk) or (II) any other assets
outside of the ordinary course of business, other than the Restaurant
Site;
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(L)
|
enter
into, terminate or adversely modify or amend any of the Assumed AREH
Subs
Contracts or waive, release, assign, settle or compromise any material
rights or claims;
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(M)
|
except
as permitted in Section 9.16 or Section 12.3 hereof, with respect
to the
AREH Subs (including without limitation with respect to their respective
income, business, or activities), (I) make or rescind any material
election relating to Taxes, (II) settle or compromise any material
claim,
action, suit, litigation, proceeding, arbitration, investigation,
audit or
controversy relating to Taxes, (III) make any material change to
any
method of reporting income, deductions, or other items for Tax purposes,
in each case except as required by Law, (IV) make any material change
in
method of accounting for Tax purposes, in each case except as required
by
Law, (V) execute any power of attorney by or on behalf of any AREH
Sub
with respect to any matters relating to Taxes, (VI) extend or waive
any statute of limitations relating to Taxes of any AREH Sub, or
(VII) enter into any Tax sharing, indemnity, allocation or similar
agreements as between AREH Sub, on the one hand, and any other Person,
or
enter into any contractual obligations to indemnify any other Person
with
respect to Taxes;
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(N)
|
(I)
incur or assume any Indebtedness of the AREH Subs, except as will
be
repaid in full prior to or at the Closing by the AREH Subs, (II)
assume,
guarantee, endorse or otherwise cause any AREH Sub to become liable
or
responsible (whether directly, contingently or otherwise, but excluding
deposit, negotiation or endorsement of negotiable instruments for
collection in the ordinary course of business) for the obligations
of any
other Person, or (III) make or authorize any loans, advances or capital
contributions to, or investments in, any other
Person;
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(O)
|
other
than in the ordinary course of business, waive any material defenses
with
respect to, or make any payment of any material liability (other
than
Indebtedness permitted by paragraph (N)
above) of the AREH Subs;
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(P)
|
enter
into or amend any Leases with respect to the Adjacent
Properties;
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(Q)
|
allow
the Adjacent Properties to deteriorate, ordinary wear and tear
excepted;
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(R)
|
settle
or compromise any Legal Proceeding for which Buyer is not indemnified
pursuant to this Agreement, other than in respect of the GB Claims
or as
permitted in paragraph (M)
above;
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(S)
|
create
any Liens on title to the Adjacent Properties, other than Permitted
Encumbrances;
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(T)
|
take
any action that could reasonably be expected to result in a failure
of any
of the conditions set forth in ARTICLE
X
hereof; or
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|
(U)
|
agree
or commit to do any of the
foregoing.
|
Section
9.3 Cooperation;
Notice; Cure.
Subject
to compliance with applicable Law (including, without limitation, antitrust
Laws, Gaming Laws and privacy Laws), from the date hereof until the earlier
of
the termination of this Agreement or the Closing, Buyer and the Selling Parties
shall confer on a regular basis with one or more Representatives of each other
party to report on the general status of ongoing operations of the Properties.
Buyer and the Selling Parties shall promptly notify each other in writing of,
and will use commercially reasonable efforts to cure before the Closing Date,
any event, transaction or circumstance, as soon as practical after it becomes
known to such party, that (a) causes or will cause any covenant or agreement
of
Buyer and the Selling Parties under this Agreement to be breached in any
material respect, (b) renders or will render untrue in any material respect
any
representation or warranty of the respective parties contained in this Agreement
or (c) of any fact, circumstance, event or action which will result in, or
would
reasonably be expected to result in, the failure of such party to timely satisfy
any of the closing conditions specified in ARTICLE
X
hereof
of this Agreement, as applicable. Nothing contained in Section
9.2
hereof
shall prevent the Selling Parties from giving such notice, using such efforts
or
taking any action to cure or curing any such event, transaction or
circumstance.
Section
9.4 No
Solicitation.
(a) None
of
the ACE Selling Parties shall, nor shall they authorize, knowingly permit or
cause any of their respective Affiliates or their or their respective
Affiliates’ directors, officers, managers, employees or members, or any
investment banker, financial advisor, attorney, accountant or other
representative retained by any of them to, directly or indirectly, after the
date hereof, (i) solicit, initiate or knowingly encourage (including by way
of
furnishing non-public information), or knowingly take any other action designed
to facilitate, any inquiries or the making of any proposal that constitutes
a
Takeover Proposal (as defined below) or (ii) participate in any
negotiations or discussions (other than to state that they are not permitted
to
have discussions) regarding any Takeover Proposal; provided,
however,
that
if, at any time prior to October 18, 2006 (the “Alternative
Proposal Period”),
the
Board of Directors of ACE Hi determines in good faith, after consultation with
its Affiliates and advisors, that a Takeover Proposal that was not solicited
by
it after the date hereof and did not otherwise result from a breach of this
Section
9.4(a)
is, or
is reasonably likely to result in, a Superior Proposal (as defined in
Section
9.4(d)(ii)),
and
subject to providing prior written notice of its decision to take such action
to
Buyer and compliance with Section
9.4(c),
ACE Hi
and its Affiliates, and their respective directors, executive officers,
controlling persons, employees and advisors may (x) furnish information
with respect to ACE Lo, ACE Hi and their respective Affiliates (including
without limitation any Selling Party) to the Person making such proposal (and
its Representatives) pursuant to a customary confidentiality agreement
(provided, that such confidentiality agreement shall not in any way restrict
ACE
Hi from complying with its disclosure obligations under this Agreement,
including with respect to such proposal; provided further,
that
any such confidentiality agreement need not contain a standstill or similar
provision) and (y) participate in discussions or negotiations regarding such
proposal. ACE Hi agrees to provide Buyer with any information provided in
writing or a reasonable summary of oral information provided to the person
making such Takeover Proposal and its Representatives substantially
simultaneously with the provision thereof to such other person. Each of the
ACE
Selling Parties shall, and shall cause any of their respective Affiliates or
any
Persons acting on their behalf to, immediately cease and cause to be terminated
any activities, discussions or negotiations with any parties existing on the
date hereof with respect to any Takeover Proposal. Notwithstanding
the foregoing, the Board of Directors of ACE Hi shall be permitted to disclose
to the stockholders of ACE Hi a position with respect to a Takeover Proposal
required by Rule 14e-2(a), Item 1012(a) of Regulation M-A or Rule 14d-9
promulgated under the Exchange Act.
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(b) Except
as
contemplated by this Section
9.4,
neither
the Board of Directors of ACE Hi nor any committee thereof shall (i) withdraw
or
modify, or propose publicly to withdraw or modify, in a manner adverse to Buyer,
the approval or recommendation by such Board of Directors or such committee
of
this Agreement or the ACE Lo Purchase, (ii) approve or recommend, or propose
publicly to approve or recommend, any Takeover Proposal, or (iii) cause ACE
Hi
to enter into any letter of intent, agreement in principle, acquisition
agreement or other similar agreement (other than a confidentiality agreement
of
the type and under the circumstances described in Section
9.4(a))
related
to any Takeover Proposal (each, an “ACE
Hi
Acquisition Agreement”).
Notwithstanding the foregoing, in response to a Takeover Proposal that was
not
solicited by it after the date of this Agreement and that did not otherwise
result from a breach of Section
9.4(a),
prior
to October 18, 2006, the Board of Directors of ACE Hi may, if it determines
in
good faith, after consulting with outside counsel, that taking such action
is
reasonably required by the Board of Directors’ fiduciary obligations under
applicable Law, (A) withdraw or modify, or propose publicly to withdraw or
modify, the approval or recommendation by such Board of Directors or any
committee thereof of this Agreement or the Purchase, (B) approve or recommend,
or propose to approve or recommend, any Superior Proposal, or (C) terminate
this
Agreement with respect to the ACE Lo Purchase pursuant to Section
11.1(g)
hereof
simultaneously with the payment of the Termination Fee, but only after (I)
such
Board of Directors has determined in good faith that such Takeover Proposal
constitutes a Superior Proposal, (II) ACE Hi has notified Buyer in writing
of
the determination that such Takeover Proposal constitutes a Superior Proposal,
(III) Buyer has the opportunity to revise the terms of this Agreement to
match or exceed the terms of such Superior Proposal within three (3) business
days following receipt by Buyer of such notice, which shall include the right
to
match any non-price terms of such Superior Proposal (including without
limitation, decreasing the size of or eliminating the Deposit, or replacing
the
Deposit with a letter of credit, if applicable, in the event that clause (II)
in
Section
9.4(d)(ii)
is held
unenforceable by a court of competent jurisdiction) and (IV) following the
expiration of the three (3) business day period referenced in clause (III)
above, the Board of Directors of ACE Hi has determined that the Superior
Proposal remains a Superior Proposal. Notwithstanding the foregoing, other
than
in connection with a Takeover Proposal, the Board of Directors of ACE Hi may,
if
it determines in good faith, after consulting with outside counsel, that the
failure to take such action would result in a breach of the Board of Directors’
fiduciary obligations under applicable Law, withdraw or modify the approval
or
recommendation by such Board of Directors or any committee thereof of this
Agreement or the Purchase if ACE Hi has notified Buyer in writing of the
decision to do so at least three (3) business days prior to the taking of such
action, which notice shall specify in writing the reasons therefor.
Notwithstanding anything to the contrary in this Agreement, Buyer and the
Selling Parties hereby agree to issue a press release promptly following the
execution of this Agreement which shall include the principal terms of this
Agreement, including a summary of the primary terms of Section
9.4,
Section
9.5
and
Section
9.11
hereof.
The parties have agreed to include in such press release the description of
such
provisions in Exhibit
K
attached
hereto and that inclusion of such description in such press release shall be
deemed to have satisfied the requirement of the previous
sentence.
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(c) In
addition to the obligations of ACE Hi set forth in paragraphs (a) and (b) of
this Section
9.4,
ACE Hi
shall as promptly as practicable advise Buyer, orally and in writing, of any
request for information or of any Takeover Proposal (and in any case within
24
hours of such request or the receipt of such Takeover Proposal), the principal
terms and conditions of such request or Takeover Proposal and the identity
of
the person making such request or Takeover Proposal. ACE Hi shall keep Buyer
informed of the status and material details (including amendments or proposed
amendments) of any such request or Takeover Proposal as promptly as
practicable.
(d) For
purposes of this Agreement, the term:
(i) “Takeover
Proposal”
means
any bona fide inquiry, proposal or offer from any Person relating to (A) any
direct or indirect acquisition or purchase (or series of related acquisitions
or
purchases) of assets that constitute 20% or more of the Casino Property (other
than any direct or indirect (i) sale of any interests of GB Holdings or GB
Holding’s minority interest in ACE Hi, so long as AREH controls (through
entities other than GB Holdings or its successors) more than 50% of the voting
securities of ACE Hi, (ii) transfer of the interests in AREP Sands Holding
LLC
(“AREP
Sands”)
to any
direct or indirect wholly-owned Subsidiary of AREH, or (iii) transfer of
units of American Real Estate Partners, L.P. (“AREP”)),
(B)
any direct or indirect acquisition or purchase (or series of related
acquisitions or purchases) of (I) 50% or more of any class of voting
securities of ACE Hi or (II) any of the ACE Lo Equity Interests (other than
any direct or indirect (i) transfer of the interests in AREP Sands to any direct
or indirect wholly-owned Subsidiary of AREH or (ii) transfer of units of AREP),
(C) any tender offer or exchange offer (or other offer to purchase or
acquire) that, if consummated, would result in any Person beneficially owning
(I) 50% or more of any class of voting securities of ACE Hi or
(II) any of the ACE Lo Equity Interests (other than any direct or indirect
(i) transfer of the interests in AREP Sands to any direct or indirect
wholly-owned Subsidiary of AREH or (ii) transfer of units of AREP), (D) any
merger, consolidation, business combination, recapitalization, liquidation,
dissolution or similar transaction involving ACE Hi or ACE Lo or (E) any direct
or indirect acquisition or purchase of, any joint venture or partnership or
similar arrangement involving, or any recapitalization, restructuring or
leveraged financing or similar transaction involving all or any portion of
the
Casino Property, in each case other than (I) any direct or indirect
(i) transfer of the interests in AREP Sands to any direct or indirect
wholly-owned Subsidiary of AREH or (ii) transfer of units of AREP and (II)
the
transactions contemplated by this Agreement.
-61-
(ii) “Superior
Proposal”
means
any written Takeover Proposal that the Board of Directors of ACE Hi determines
in good faith (after consultation with its Affiliates and its advisors) to
be
more favorable (taking into account (A) all financial and strategic
considerations, including relevant legal, financial, regulatory and other
aspects of such Takeover Proposal and the Purchase and the other transactions
contemplated by this Agreement deemed relevant by the Board of Directors of
ACE
Hi, (B) the identity of the third party making such Takeover Proposal, (C)
the
anticipated timing, conditions and prospects for completion of such Takeover
Proposal, including the prospects for obtaining regulatory approvals and
financing, and any third party shareholder approvals and (D) the other terms
and
conditions of such Takeover Proposal) to ACE Hi’s stockholders than the ACE Lo
Purchase and the other transactions directly relating to the ACE Selling Parties
contemplated by this Agreement (taking into account all of the terms of any
proposal by Buyer to amend or modify the terms of the Purchase and the other
transactions contemplated by this Agreement), except that (I) the reference
to
“any of the ACE Lo Equity Interests” in clauses (B)(II) and (C)(II) of the
definition of “Takeover
Proposal”
in
Section
9.4(d)(i)
shall be
deemed to be a reference to “50% or more of the ACE Lo Equity Interests” and
(II) the Takeover Proposal must include an escrow deposit in an amount at least
equal to and upon terms and conditions substantially similar to the
Deposit.
Nothing
in this Section
9.4
is
intended to prevent or preclude ACE Hi from communicating with its Affiliates,
its or their controlling persons, or its counsel or advisors.
(e) (i) Prior
to
the termination of this Agreement with respect to the AREH Subs Purchase, AREH
shall not and shall not permit its Subsidiaries or BEC to transfer or agree
to
transfer the Traymore Site, directly or indirectly, to any Person (other than
to
a direct or indirect wholly-owned Subsidiary of AREH that assumes all the
obligations of the transferor under this Agreement), except either (x) in
accordance with this Agreement or (y) pursuant to an exercise of the
Traymore Call Right.
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(ii) If
the
Board of Directors of ACE Hi has determined that a Takeover Proposal constitutes
a Superior Proposal, AREH and Buyer shall remain obligated to consummate the
AREH Subs Purchase pursuant to this Agreement, and all the relevant provisions
of this Agreement relating to the AREH Subs Purchase shall survive any
termination by ACE Hi with respect to the ACE Lo Purchase pursuant to
Section
11.1(g)
hereof
based on the Superior Proposal; provided,
however,
that
(A) the closing of the AREH Subs Purchase shall occur simultaneously with the
closing of such Superior Proposal and (B) the closing of such Superior Proposal
shall be a condition to the closing of the AREH Subs Purchase. For the avoidance
of doubt, any purchase of the Boardwalk Equity Interests by Buyer pursuant
to
this subsection (ii)
would be
purchased subject to the continuing rights of ACE Lo, if any, under the Traymore
Call Right.
(iii) In
the
event that such Superior Proposal is terminated without being consummated,
then
the ACE Selling Parties shall promptly notify Buyer of such termination in
writing and Buyer may elect, by delivering written notice to the Selling Parties
within thirty (30) days of the receipt of such notice from the ACE Selling
Parties, to reinstate the rights and obligations of Buyer and the ACE Selling
Parties under this Agreement, including without limitation Buyer’s right to
purchase the ACE Lo Equity Interests and the AREH Subs Equity Interests from
ACE
Hi and AREH, respectively, for the same purchase price and, to the extent
possible, on the same terms and conditions as in this Agreement, modified as
appropriate to reflect changes in the timing and circumstances surrounding
the
transaction (a “Revival”),
and
the parties shall enter into appropriate documents and agreements for such
transaction as promptly as practicable.
In the
event that Buyer does not so elect to effect a Revival during such thirty
(30)-day period pursuant to the preceding sentence, this Agreement shall
immediately terminate pursuant to Section
11.1(i)
hereof.
(f) (i) None
of
the AREH Selling Parties shall, nor shall they authorize, knowingly permit
or
cause any of their respective Affiliates or their or their Affiliates’
directors, officers, managers, employees or members, or any investment banker,
financial advisor, attorney, accountant or other representative retained by
any
of them, or BEC, to, directly or indirectly, (A) solicit, initiate or
knowingly encourage (including by way of furnishing non-public information),
or
knowingly take any other action designed to facilitate, any inquiries or the
making of any proposal that constitutes an AREH Subs Takeover Proposal (as
defined below) or (B) participate in any negotiations or discussions (other
than
to state that they are not permitted to have discussions) regarding any AREH
Subs Takeover Proposal. Each of the AREH Selling Parties shall, and shall cause
any of their respective Affiliates or any Persons acting on their behalf,
including BEC, to immediately cease and cause to be terminated any activities,
discussions or negotiations with any parties existing on the date hereof with
respect to any AREH Subs Takeover Proposal.
(ii) None
of
the AREH Selling Parties (or the relevant governing bodies of such entities)
shall (A) withdraw or modify, or propose publicly to withdraw or modify, in
a
manner adverse to Buyer, the approval or recommendation by such AREH Selling
Party (or relevant governing body thereof) of this Agreement or the AREH Subs
Purchase, (ii) approve or recommend, or propose publicly to approve or
recommend, any AREH Subs Takeover Proposal, or (iii) cause any of the AREH
Selling Parties to enter into any letter of intent, agreement in principle,
acquisition agreement or other similar agreement related to any AREH Subs
Takeover Proposal.
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(iii) In
addition to the obligations of the AREH Selling Parties set forth in
subparagraphs (i) and (ii) of this Section
9.4(f),
AREH
shall as promptly as practicable advise Buyer, orally and in writing, of any
request for information or of any AREH Subs Takeover Proposal (and in any case
within 24 hours of such request or the receipt of such AREH Subs Takeover
Proposal), the principal terms and conditions of such request or AREH Subs
Takeover Proposal and the identity of the person making such request or AREH
Subs Takeover Proposal. AREH shall keep Buyer informed of the status and
material details (including amendments or proposed amendments) of any such
request or AREH Subs Takeover Proposal as promptly as practicable.
(iv) For
purposes of this Agreement, the term “AREH
Subs Takeover Proposal”
means
any bona fide inquiry, proposal or offer from any person relating to
(A) any direct or indirect acquisition or purchase of all or any portion of
the Traymore Site or the other Adjacent Properties, (B) any direct or indirect
acquisition or purchase of any Equity Interests of the AREH Subs, (C) any tender
offer or exchange offer (or other offer to purchase or acquire) that, if
consummated, would result in any Person beneficially owning any Equity Interests
of the AREH Subs, (D) any merger, consolidation, business combination,
recapitalization, liquidation, dissolution or similar transaction involving
any
of the AREH Subs, or (E) any direct or indirect acquisition or purchase of,
any
joint venture or partnership or similar arrangement involving, or any
recapitalization, restructuring or leveraged financing or similar transaction
involving all or any portion of the Traymore Site or all or any portion of
Adjacent Properties, in each case other than (I) any direct or indirect transfer
of units or Equity Interests, as applicable, of AREP or AREH, (II) any direct
or
indirect transfer of all or any portion of the assets of AREH or AREP to a
wholly-owned subsidiary of AREP or AREH, and (III) the transactions
contemplated by this Agreement.
Notwithstanding
any of the terms or restrictions of this Section
9.4(f),
AREH
and its Subsidiaries may provide information to, and participate in discussions
and negotiations with, any Person making a Superior Proposal in the same manner
and to the same extent as the ACE Selling Parties are permitted pursuant to
the
preceding provisions of this Section 9.4.
Section
9.5 Requisite
Stockholder Approval; Notice to Stockholders.
Within
one day following the execution of this Agreement, ACE Hi shall take all actions
necessary in accordance with the DGCL and its organizational documents for
the
purpose of obtaining the Requisite Stockholder Approval, including obtaining
from AREP Sands a stockholder written consent (the “Stockholder
Consent”)
approving this Agreement, the ACE Lo Purchase and the other transactions
contemplated hereby directly relating to the ACE Selling Parties. Promptly
following execution of the Stockholder Consent, and in no event more than five
(5) business days following the date of this Agreement, ACE Hi shall send,
pursuant to Section 228 of the DGCL, a written notice to all stockholders of
ACE
Hi that did not execute the Stockholder Consent informing them that this
Agreement, the ACE Lo Purchase and the other transactions contemplated hereby
directly relating to the ACE Selling Parties were approved by the stockholders
of ACE Hi. Notwithstanding the foregoing, the Requisite Stockholder Approval
shall be of no further force or effect in the event that ACE Hi terminates
this
Agreement with respect to the ACE Lo Purchase pursuant to Section
11.1(g)
hereof.
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Section
9.6 Access
to Information.
(a) To
the
extent permitted by applicable Law and confidentiality obligations and upon
reasonable advance notice, the ACE Selling Parties shall afford to Buyer and
its
officers, employees, accountants, counsel, financial advisors and other
representatives (and to its potential financing sources and their respective
representatives) (collectively, “Representatives”)
reasonable access during normal business hours during the period prior to the
Closing or termination of this Agreement to all of the Assumed ACE Lo Contracts
and the properties, books, contracts, commitments, personnel and records of
the
ACE Selling Parties, to the extent permitted by applicable Law, and, during
such
period, to the extent permitted by applicable Law and confidentiality
provisions, the ACE Selling Parties shall (i) confer on a regular and
frequent basis with one or more Representatives of Buyer to discuss material
operational and regulatory matters and the general status of its ongoing
operations, (ii) advise Buyer of any change or event that has had or would
reasonably be expected to have a material adverse effect on such party, and
(iii) furnish to Buyer promptly all other information concerning its business,
properties and personnel, in each case as Buyer may reasonably request. Buyer
shall schedule and coordinate all inspections with the individual(s) set forth
in Section
9.6(a)
of the
ACE Disclosure Letter. ACE Hi shall be entitled to have its Representatives
present at all times during any such inspection. Notwithstanding the foregoing,
no ACE Selling Party shall be required to provide access to or to disclose
any
information (i) where such access or disclosure could jeopardize the
attorney-client privilege or work product privilege of such ACE Selling Party
or
contravene any Law or binding agreement entered into prior to the date of this
Agreement, or (ii) to the extent that outside counsel to ACE Hi advises that
such access or disclosure should not be disclosed in order to ensure compliance
with any applicable Law. Buyer agrees to hold confidential all information
related to the ACE Selling Parties which it has received or to which it has
gained access pursuant to this Agreement in accordance with the Confidentiality
Agreement dated May 24, 2006 (the “Confidentiality
Agreement”),
by
and between Buyer, Boardwalk and ACE Hi.
(b) To
the
extent permitted by applicable Law and confidentiality obligations and upon
reasonable advance notice, the AREH Selling Parties shall afford to Buyer and
its Representatives reasonable access during normal business hours during the
period prior to the Closing to all Assumed AREH Contracts and the properties,
books, contracts, commitments, personnel and records of the AREH Subs, to the
extent permitted by applicable Law, and, during such period, to the extent
permitted by applicable Law and confidentiality provisions, the AREH Subs shall
(i) advise Buyer of any change or event that has had or would reasonably be
expected to have a material adverse effect on such party, and (ii) furnish
to Buyer promptly all other information concerning its business, properties
and
personnel, in each case as Buyer may reasonably request. Buyer shall schedule
and coordinate all inspections with the individual(s) set forth in Section
9.6(b)
of the
AREH Disclosure Letter. AREH shall be entitled to have its Representatives
present at all times during any such inspection. Notwithstanding the foregoing,
no AREH Sub shall be required to provide access to or to disclose any
information (i) where such access or disclosure could jeopardize the
attorney-client privilege or work product privilege of such AREH Sub or
contravene any Law or binding agreement entered into prior to the date of this
Agreement, or (ii) to the extent that outside counsel to such AREH Sub
advises that such access or disclosure should not be disclosed in order to
ensure compliance with any applicable Law. Buyer agrees to hold confidential
all
information related to the AREH Subs which it has received or to which it has
gained access pursuant to this Agreement in accordance with the Confidentiality
Agreement.
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Section
9.7 Regulatory
Matters; Commercially Reasonable Efforts.
(a) Regulatory
Approvals.
Each
party hereto shall cooperate and promptly prepare and file all necessary
documentation, effect all necessary applications, notices, petitions and
filings, and shall use commercially reasonable efforts to take or cause to
be
taken all actions, and do or cause to be done all things in order to obtain
all
approvals and authorizations of all Governmental Entities, necessary or
advisable to consummate and make effective, in the most expeditious manner
reasonably practicable, the transactions contemplated by this Agreement. Buyer
shall have the responsibility for the preparation and filing of any required
applications, filings or other materials; provided however,
that
the ACE Selling Parties shall provide and cause their respective Affiliates
to
provide Buyer with any information required in connection with such filings
as
promptly as practicable; and the Selling Parties or their Affiliates shall
have
the right to review and approve in advance all characterizations of the
information relating to the Selling Parties that appear in any application,
notice, petition or filing made in connection with the transactions contemplated
by this Agreement. Buyer and the Selling Parties agree that they will consult
and cooperate with each other with respect to the obtaining of all such
necessary approvals and authorizations of Governmental Entities.
(b) Filings.
Each of
Buyer, ACE Hi and AREH undertakes and agrees to file as soon as practicable
a
Notification and Report Form under the HSR Act with the United States Federal
Trade Commission (the “FTC”)
and
the Antitrust Division of the United States Department of Justice (the
“Antitrust
Division”).
Each
of Buyer and the Selling Parties shall respond as promptly as practicable under
the circumstances to any inquiries received from the FTC or the Antitrust
Division for additional information or documentation and to all inquiries and
requests received from any Governmental Entity in connection with any Law.
Buyer
shall have the exclusive right to direct and control the process of obtaining
the Governmental Consents (as defined below) required in connection with the
transactions contemplated by this Agreement and the Selling Parties agree to
reasonably cooperate with Buyer with respect thereto.
(c) Cooperation.
In
addition, each party shall, subject to applicable Law and to the terms and
conditions hereof, except as prohibited by any applicable representative of
any
applicable Governmental Entity, (i) promptly notify each other party hereto
of
any material communication to that party relating to the transactions
contemplated by this Agreement from the FTC, the Antitrust Division or any
other
Governmental Entity, and consult with the other party in advance regarding
any
material proposed written communication relating to the transactions
contemplated by this Agreement to any of the foregoing in response thereto,
and
(ii) furnish the other party or its outside counsel with copies of all
material correspondence, filings, and written communications (and memoranda
setting forth the substance thereof) between them and their Affiliates and
their
respective Representatives on the one hand, and any Government Entity or members
of its staff, on the other hand, with respect to this Agreement and the
transactions contemplated hereby.
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(d) Objections.
In
furtherance and not in limitation of the covenants of the parties contained
in
Section
9.7(a),
Section
9.7(b)
and
Section
9.7(c),
but
subject to Section
9.7(f),
each of
Buyer and the Selling Parties shall use its commercially reasonable efforts
to
resolve such objections, if any, as may be asserted by a Governmental Entity
or
other person with respect to the transactions contemplated hereby under any
antitrust Law or other applicable Law but no party shall be required under
this
Agreement to divest itself of assets or limit its freedom of action with respect
to, or its ability to retain, any business, services, employees or assets.
In
connection with the foregoing, if any administrative or judicial action or
proceeding, including any proceeding by a private party, is instituted (or
threatened to be instituted) challenging any transaction contemplated by this
Agreement as violative of any antitrust Law or other applicable Law, subject
to
Section
9.7(f),
each of
Buyer and the Selling Parties shall cooperate in all material respects with
each
other and use its respective commercially reasonable efforts to, as promptly
as
practicable, contest and resist any such action or proceeding, to limit the
scope or effect of any proposed action of, or remedy sought to be obtained
or
imposed by, any Governmental Entity, and to have vacated, lifted, reversed
or
overturned any decree, judgment, injunction or other order, whether temporary,
preliminary or permanent, that is in effect and that prohibits, prevents or
restricts the consummation of the transactions contemplated by this
Agreement.
(e) Further
Actions.
Upon
the terms and subject to the conditions set forth in this Agreement, each of
the
parties agrees to use its commercially reasonable efforts to take, or cause
to
be taken, all actions, and to do, or cause to be done, and to assist and
cooperate with the other parties in doing, all things reasonably necessary
or
advisable under applicable Laws (including the HSR Act and the Gaming Laws)
to
consummate and make effective, in the most expeditious manner reasonably
practicable, the transactions contemplated by this Agreement, including
(i) obtaining any required third party consents and Governmental Consents,
(ii) taking any steps reasonably requested by either party in order to comply
with applicable Laws related to (A) Front Money, (B) guests’ baggage
checked in or left in the care of ACE Lo at the Casino Property,
(C) guests’ personal property in safe deposit boxes located at the Casino
Property and (D) motor vehicles checked and placed in the care of ACE Lo at
the Casino Property, (iii) taking any steps required by the applicable
Gaming Authorities to store gaming equipment and (iv) and delivering any
additional instruments necessary to consummate the transactions contemplated
by
this Agreement.
(f) Commercially
Reasonable Efforts.
Notwithstanding the foregoing, as used in this Section
9.7
or in
any other provision of this Agreement, “commercially
reasonable efforts”
shall
not include nor require (A) any party to sell, or agree to sell, hold or agree
to hold separate, or otherwise dispose or agree to dispose of any properties
or
other asset, (B) any party to conduct or agree to conduct its business in any
particular manner after the Closing, (C) the Selling Parties or Buyer to
terminate the employment of or remove any of its executive officers or
directors, or (D) any Person to pay any fee or payment to obtain any
consent other than standard filing fees and the like established by any
applicable Governmental Entity. None of the Selling Parties may take or agree
to
take any action, or consent to or agree to consent to any such restriction
without the prior written consent of Buyer.
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(g) SEC
Filings.
Each of
Buyer and, following the Closing, ACE Lo, on the one hand, and ACE Hi, on the
other hand, shall, and shall use commercially reasonable efforts to cause their
Representatives to, reasonably cooperate with each other (including without
limitation providing reasonable access to the books and records of ACE Lo or
ACE
Hi), at the requesting party’s expense, in the preparation of any filings to be
made by such requesting party or its Affiliates with the SEC or other
Governmental Entities related to this Agreement and the transactions
contemplated hereby or otherwise, including without limitation, ACE Hi’s and/or
Buyer’s or their respective Affiliates’ filings of quarterly or annual reports
on Form 10-Q or Form 10-K or the filings of current reports on Form 8-K
announcing the Purchase and/or the Closing.
Section
9.8 State
Anti-Takeover Statutes.
The ACE
Selling Parties shall (i) use commercially reasonable efforts requested by
Buyer
such that no state anti-takeover statute or similar statute or regulation or
provision in any organizational document becomes applicable to this Agreement,
the ACE Lo Purchase or any of the other transactions contemplated hereby and
(ii) if any state anti-takeover statute or similar statute or regulation or
provision in any organizational document becomes applicable to this Agreement,
the ACE Lo Purchase or any of the other transactions contemplated hereby, use
commercially reasonable efforts reasonably requested by Buyer such that this
Agreement, the ACE Lo Purchase and the other transactions contemplated hereby
may be consummated as promptly as reasonably practicable on the terms
contemplated by this Agreement to minimize the effect of such statute or
regulation or provision in any organizational document on the ACE Lo Purchase
and the other transactions contemplated by this Agreement; provided that
the term
“commercially
reasonable efforts”
as
used
in this Section
9.8
shall
not include the payment of costs or incurrence of expenses by the ACE Selling
Parties or a requirement to identify or conduct a survey of state anti-takeover
statutes.
Section
9.9 Publicity.
Subject
to the provisions of Section 9.4(b) hereof, Buyer and the Selling Parties will
consult with each other before issuing, and provide each other the reasonable
opportunity to review, comment upon and concur with, any press release or other
public statements announcing the transactions contemplated by this Agreement
to
the public, including the Purchase, and shall not issue any such press release
or make any such public statement prior to such consultation, except as any
party, after consultation with counsel, determines is required by applicable
Law
or applicable rule or regulation of the NYSE; provided that
the
provisions of this Section
9.9
shall
not apply to require prior consultation with respect to any disclosures
containing the same information in substantially the same form as disclosures
that have previously been included in any press release or other public
statement and have previously been approved by the other parties
hereto.
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Section
9.10 Further
Assurances and Actions.
(a) Subject
to the terms and conditions herein, each party hereto agrees to use its
commercially reasonable efforts to take, or cause to be taken, all appropriate
action, and to do, or cause to be done, all things reasonably necessary, proper
or advisable under applicable Laws to consummate and make effective the
transactions contemplated by this Agreement, including, without limitation,
to
fulfill all conditions precedent applicable to such party pursuant to this
Agreement and to execute, acknowledge and deliver in proper form any further
documents, certificates, agreements and other writings, and take such other
action as such other party may reasonably require, in order to effectively
carry
out the intent of this Agreement.
(b) In
case
at any time after the Closing any further action is necessary to carry out
the
purposes of this Agreement or to vest Buyer with full title to all properties,
assets, rights, approvals, immunities, franchises of any of the parties to
the
Closing, the proper officers and/or directors of Buyer and the particular Seller
shall take all reasonable actions and such Seller shall bear the cost of any
such necessary action; provided that,
if such
action is necessary due to events or circumstances particular to Buyer, Buyer
shall bear the cost of such action.
Section
9.11 Fees
and Expenses.
(a) Except
as
provided in this Section
9.11
and
Section
2.7(c)
and
Section
2.8(b)
hereof,
all fees and expenses incurred in connection with the Purchase, this Agreement
and the transactions contemplated by this Agreement shall be paid by the party
incurring such fees or expenses, whether or not the Purchase is consummated;
provided that
(i) the
filing fees pursuant to the pre-merger notifications under the HSR Act shall
be
paid by Buyer; (ii) all recording or filing fees (excluding any Taxes or
fees described in the succeeding clauses (iii) and (iv)) with respect to the
removal of any Liens on the Properties shall be paid by Sellers; (iii) any
transfer, documentary, sales, use, stamp, registration and other such Taxes
(including all applicable real estate transfer or similar Taxes) and related
fees (including any penalties, interest and additions to Tax) incurred in
connection with the Purchase and the transfers and other transactions
contemplated by this Agreement (but excluding any Taxes or fees incurred with
respect to the distribution-in-kind of the Warehouse Property by ACE Lo to
ACE
Hi, which shall be paid solely by ACE Hi, notwithstanding Section
12.3(c)(i)),
shall
be borne solely by Buyer, (iv) the Casino Mansion Taxes and the Adjacent
Property Mansion Taxes shall be borne solely by Buyer (but in accordance with
Section
2.6(c)(iii)
and
Section
2.7(a)(vi)
hereof
one-half (½) of such Taxes shall be deducted from the AREH Closing Payment and
the ACE Closing Payment, respectively), (v) Buyer will
pay
for all costs of obtaining any title insurance hereunder, including without
limitation, the ALTA owner’s extended coverage policies of title insurance for
the Properties and (vi) the fees and expenses of the Escrow Agent under each
of
the escrow agreements contemplated by this Agreement shall be paid one-half
(½)
by Buyer and one-half (½) by the applicable Seller or Sellers that are parties
to such escrow agreements.
(b) In
the
event that (i) following execution of the Stockholder Consent, a Takeover
Proposal (or the intention of any person to make one), whether or not
conditional, shall have been made known to ACE Hi or shall have been publicly
disclosed and thereafter (x) this Agreement is terminated by Buyer pursuant
to
Section
11.1(d)
or
Section
11.1(h)
hereof
and (y) within twelve (12) months of such termination ACE Hi or AREH
executes any ACE Hi Acquisition Agreement or any person consummates any Takeover
Proposal, (ii) this Agreement is terminated by ACE Hi with respect to the ACE
Lo
Purchase pursuant to Section
11.1(g)
hereof,
or (iii) this Agreement is terminated by Buyer pursuant to Section
11.1(f),
then in
each case ACE Hi shall pay Buyer a fee equal to Ten Million Dollars
($10,000,000) (the “Termination
Fee”),
payable by wire transfer of same day funds. Payment of the Termination Fee
to
Buyer pursuant to (A) clause (i) above shall be made concurrently with the
earlier of the consummation of the Takeover Proposal or the execution of the
ACE
Hi Acquisition Agreement, (B) clause (ii) above shall be made concurrently
with
termination of this Agreement and (C) clause (iii) above shall be made within
two (2) business days of termination of this Agreement.
In no
event will Buyer be entitled to receive the Termination Fee more than
once.
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(c) ACE
Hi
acknowledges that the agreement contained in Section
9.11(b)
is an
integral part of the transactions contemplated by this Agreement, and that,
without this agreement, Buyer would not enter into this Agreement. Accordingly,
if ACE Hi fails promptly to pay any amount due pursuant to this Section
9.11,
and, in
order to obtain such payment, Buyer commences a suit that results in a judgment
against ACE Hi for the payments set forth in this Section
9.11,
ACE Hi
shall pay to Buyer its costs and expenses (including attorneys’ fees and
expenses) in connection with such suit, together with interest on the amount
of
the fee at the prime rate of Citibank N.A. in effect on the date such payment
was required to be made plus 2% per annum; provided that,
if ACE
Hi prevails in such suit and is determined not to owe any amounts to Buyer
pursuant to this Section
9.11,
Buyer
shall pay to ACE Hi its costs and expenses (including attorneys’ fees and
expenses) in connection with defending such suit.
Section
9.12 Casualty
and Condemnation.
(a) If,
before the Closing, one or more of the Properties suffer damage, then the
Closing shall proceed as scheduled and the applicable Seller shall, as of the
Closing Date, (i) promptly pay to Buyer all insurance proceeds received by
the applicable Seller or its Affiliates, if any, with respect to such damage,
destruction or other loss, less expenses incurred in collection of any proceeds
applied to any physical restoration of the Properties and (ii) assign to Buyer
all rights of such Seller and its Affiliates, if any, against third parties
with
respect to any causes of action, whether or not litigation has commenced as
of
the Closing Date, in connection with such damage, destruction or other loss.
Between the date of the casualty and the Closing, Buyer will have the right
to
direct negotiations with the applicable insurance carriers of any of the Selling
Parties with respect to any repairs (including the cost thereof) to be made,
but
shall not have the right to settle any such claim without Seller’s prior written
consent. After the Closing, Buyer shall have the right to negotiate and settle
with any insurance carriers of any of the Selling Parties with respect to which
there is potential coverage for such damage, destruction or loss, provided
that the
applicable Seller shall have the right to consult with Buyer with respect to
such negotiations or settlements.
(b) In
the
event a condemnation proceeding or payment in lieu of condemnation occurs
relative to any part of the Properties prior to the Closing Date, all payments
relative to such condemnation (the “Condemnation
Amount”)
shall
be paid by the applicable Seller to Buyer at the Closing, or the rights to
the
Condemnation Amount shall be assigned to Buyer at the Closing, or, at the
applicable Seller’s election, the applicable Seller’s portion of the Purchase
Price shall be reduced by the Condemnation Amount.
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Section
9.13 Conversion
and Repayment of 3% Notes Prior to Closing.
Prior
to Closing, AREH shall, or shall cause its Affiliates who are holders of the
3%
Notes (including without limitation, AREP Sands and its Affiliates) to, demand
payment of all of the 3% Notes in shares of ACE Hi Common Stock in accordance
with the terms of the Indenture by delivering a notice to ACE Hi pursuant to
Section 301(f) of the Indenture (the “Demand
Notice”).
Following its receipt of the Demand Notice, ACE Hi shall take all actions and
execute all proper certificates and instruments to acknowledge satisfaction
and
discharge of the Indenture prior to the Closing and cause, prior to the Closing,
the release of all liens and security interests in any of the assets of ACE
Lo,
and the extinguishment of the guarantee given by ACE Lo in respect of the 3%
Notes, including delivering or causing to be delivered to the Trustee (a)
sufficient shares of ACE Hi Common Stock to satisfy the rights of holders of
the
3% Notes to obtain the appropriate number of shares of ACE Hi Common Stock
in
respect of any payment pursuant to the Demand Notice and (b) an officers’
certificate and an opinion of counsel, each stating that all conditions
precedent provided for in the Indenture relating to the satisfaction and
discharge of the Indenture have been complied with.
Section
9.14 MLK
Street Widening Project.
(a) ACE
Lo
has delivered to the CRDA a letter dated as of July 17, 2006, a copy of which
has been provided to Buyer, pursuant to which ACE Lo formalized its application
to the CRDA for the reservation of a certain portion of the CRDA Funds for
direct investment in the MLK Street Widening Project. Such reservation, and
various components of the MLK Street Widening Project, were approved by the
CRDA
by Resolution No. 06-54, dated July 18, 2006.
(b) The
ACE
Selling Parties hereby agree not to take any further actions with regard to
the
MLK Street Widening Project (including without limitation entering into an
“investment agreement” with the CRDA with respect thereto) or the acquisition of
certain real estate in the City of Atlantic City, State of New Jersey adjacent
to the Casino Property (including, without limitation, that property commonly
known as the Old Post Office (the “Old
Post Office Land”
and,
together with the Improvements now or hereafter located thereon, the
“Old
Post Office Site”),
without first obtaining Buyer’s written approval thereof.
(c) ACE
Hi
shall permit Buyer to participate in any further discussions with the CRDA
regarding the investment agreement with the CRDA, the MLK Street Widening
Project and ACE Lo’s acquisition of the Old Post Office Site, including an
opportunity to negotiate with the CRDA regarding the scope of the MLK Street
Widening Project.
Section
9.15 [Intentionally
Omitted.]
Section
9.16 Real
Property Tax Contests.
(a) ACE
Hi
shall have irrevocable control over any Real Property Tax Contest, including
selecting counsel (“Counsel”)
and
expert witnesses (“Experts”)
to
represent ACE Lo in any proceedings and determining in its sole discretion
whether such Real Property Tax Contest shall be undertaken, continued or
discontinued by way of judicial or administrative proceedings, appeal,
compromise, settlement or otherwise. ACE Hi’s right to control any Real Property
Tax Contest shall include, without limitation, the right to direct ACE Lo to
(i) settle any Real Property Tax Contest, (ii) appeal (or otherwise
seek further review by an appellate court of) any decision or determination
of
any judicial or administrative body related to any Real Property Contest, and
(iii) decline to take any further action following any judgment, order or
decision of a judicial or administrative body. Notwithstanding the foregoing,
ACE Hi agrees that it shall not settle any Real Property Tax Contest, without
Buyer’s prior written consent, unless the aggregate amount of the Real Property
Tax Refund to be received pursuant to the Real Property Tax Events equals or
exceeds Twenty Million Dollars ($20,000,000) (without regard to the amount
of
fees of, and the costs and expenses incurred by, Counsel and
Experts).
-71-
(b) ACE
Hi,
on the one hand, and ACE Lo and Buyer, on the other hand, shall be responsible
for one-half (½) of the hourly fees (but excluding any contingent fees) of, and
the costs and expenses actually incurred by, Counsel and Experts from and after
the Measurement Date in connection with any Real Property Tax Contest.
(c) Following
the Closing, (i) Buyer shall (or Buyer shall cause ACE Lo to) promptly notify
ACE Hi after the receipt of and provide copies of any correspondence or other
documents related to any Real Property Tax Contest, (ii) Buyer shall cause
ACE Lo and/or Counsel to execute any documents reasonably necessary with respect
to any Real Property Tax Contest (including without limitation filings of
pleadings in any court of competent jurisdiction, powers of attorney, settlement
agreements, stipulations and consents to the entry of any judgments or orders)
and (iii) Buyer shall (or shall cause ACE Lo to) provide written notice to
ACE Hi as promptly as reasonably practicable prior to changing the record owner
of the Casino Property and cooperate with ACE Hi in connection with any
substitution of parties in order to protect any claim with respect to the Real
Property Tax Contests.
(d) The
amount of any Real Property Tax Refund shall be (i) first, reduced by the amount
of any contingent fees payable to Counsel, (ii) second, retained by Buyer
until Buyer has received an aggregate amount of Real Property Tax Refunds equal
to Ten Million Dollars ($10,000,000), (iii) third, paid to ACE Hi as provided
in
the immediately following sentence until ACE Hi has received an aggregate amount
of Real Property Tax Refunds equal to Ten Million Dollars ($10,000,000), and
(iv) fourth, split between Buyer and ACE Hi equally, and ACE Hi’s one-half
(½) share paid to ACE Hi as provided in the immediately following sentence. On
the later of (x) the Closing or (y) ten (10) business days following ACE
Hi’s delivery of written notice to Buyer of the occurrence of any Real Property
Tax Event (together with a copy of the evidence thereof), Buyer shall (or Buyer
shall cause ACE Lo to) pay any amounts required to be paid pursuant to this
Section
9.16(d)
by wire
transfer of immediately available funds.
(e) If
Buyer
or ACE Lo receives any cash payments, including interest, pursuant to a judgment
of a judicial or administrative body relating to a Real Property Tax Contest
prior to a Real Property Tax Event, such cash payments shall be allocated and
paid in accordance with Section
9.16(d)
hereof.
At the time of a Real Property Tax Event with respect to such Real Property
Tax
Contest, there shall be an accounting by the parties to determine whether the
allocation of such payments pursuant to the preceding sentence was correct,
and
whether any monies are due to ACE Hi or alternatively, if ACE Hi must return
to
ACE Lo, with interest thereon at the actual rate charged to ACE Lo, any excess
monies received by it in the event the amount received pursuant to the Real
Property Tax Event is modified downward.
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(f) The
parties hereto acknowledge and agree that, for purposes of determining whether
credits shall be included in the calculation of any Real Property Tax Refund,
such credits shall be taken into account whether or not they are used and
whether or not they could be used, including in particular by reason of the
fact
that such credits may no longer be usable by ACE Lo, Buyer or any Affiliate
of
Buyer, or any transferee therefrom or successor thereto, if (i) ACE Lo does
not continue to be the record owner of the Casino Property or (ii) ACE Lo
does not continue to be the named party in the Real Property Tax Contests.
Section
9.17 Title
to Properties; “As-Is” Physical Condition of Improvements.
(a) Title
to Properties.
In
connection with the execution of this Agreement, Buyer has received from the
title company (i) the Pro Forma Title Policies and (ii) the Preliminary
Certifications and Reports. The Pro Forma Title Policies are subject only to
the
permitted exceptions to title for the Properties set forth on Schedule B-2
to
each of the Pro Forma Title Policies attached as Exhibit
I-1
or
Exhibit
I-2
hereto
(collectively, the “Permitted
Exceptions”).
At
least ten (10) days prior to the Closing, Sellers agree to deliver to the title
company the customary indemnities (e.g., mechanics’ lien) and affidavits in the
forms attached as exhibits to the Preliminary Certifications and Reports, and
to
deliver such other documents and take such actions as necessary to cause the
satisfaction of the requirements contained in Schedule B-1 to each of the
Preliminary Certifications and Reports.
(b) “As-Is”
Physical Condition of Improvements.
Buyer
or its Representatives have had the opportunity to fully examine and inspect
the
physical condition of the Improvements prior to the execution of this Agreement,
and subject to the representations and warranties in ARTICLE
IV,
ARTICLE
V,
ARTICLE
VI
and
ARTICLE
VII
hereof
and this Section
9.17(b),
Buyer
agrees to accept the physical condition of the Improvements in an “AS-IS”
condition. Buyer agrees that, except for the specific and express
representations and warranties in ARTICLE
IV,
ARTICLE
V,
ARTICLE
VI
and
ARTICLE
VII
hereof,
Buyer is not relying upon any representations, statements or warranties of
any
Representative of any Seller as to the physical condition of the Improvements.
To the extent not covered by the representations and warranties made in
ARTICLE
IV,
ARTICLE
V,
ARTICLE
VI
and
ARTICLE
VII
hereof,
Buyer waives any right to assert any claim against Sellers, at Law or in equity,
relating to the physical condition of the Improvements.
Section
9.18 Estoppel
Certificates.
Sellers
shall (a) deliver to the lessor under each of the leases which are Assumed
ACE
Lo Contracts or AREH Occupancy Agreements, estoppel certificates and lessor
consents certified to Buyer and Buyer’s lenders under its credit facility, which
provide for, among other things, a mortgage of lessee’s leasehold interest in
such ACE Leased Property or Adjacent Leased Property, as applicable, in a form
reasonably acceptable to Buyer and Buyer’s lenders under its credit facility,
(b) deliver to Buyer any such estoppel certificates or lessor consents obtained
from such lessors and (c) at Buyer’s request, deliver to such lessors any
follow-up requests reasonably requested by Buyer in a form provided by Buyer
to
Sellers. Buyer shall provide Sellers with the forms it wishes to use within
thirty (30) days after this Agreement is executed. The failure to obtain any
such consents or estoppel certificates shall not be a breach of Sellers’
covenants, obligations or representations or warranties or a failure of any
of
Buyer’s conditions to close under this Agreement.
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Section
9.19 Cooperation
on Tax Matters.
(a) The
parties agree that the Traymore Price shall be allocated to the Traymore Site,
and that, subject to such allocation, the Purchase Price (together with the
applicable liabilities of the Companies and any other relevant items) shall
be
allocated among (i) the Interests and (ii) the assets of the Companies as
set forth on Schedule
9.19
attached
hereto (the “Purchase
Price Allocation”),
and
if such schedule is not attached to this Agreement upon its execution, the
parties will cooperate with mutual good faith effort to agree upon and attach
such schedule hereto after execution of this Agreement and prior to the Closing.
The parties hereto shall use the Purchase Price Allocation for all reporting
purposes having to do with federal, state and local Taxes. The parties shall
cooperate in connection with the preparation of, and shall timely file, any
forms required to be filed under Section 1060 of the Code and any corresponding
provision of state or local Tax law. Each of the parties agrees to file all
Tax
Returns and determine all Taxes (including, without limitation, for purposes
of
Section 1060 of the Code) in accordance with and based upon the Purchase Price
Allocation. Buyer
and
Sellers shall promptly inform one another of any challenge by any Governmental
Entity to any allocation made pursuant to this Section
9.19(a)
and
shall consult and keep one another informed with respect to the status of,
and
any discussion, proposal or submission with respect to, such
challenge.
(b) Sellers
shall prepare (or cause to be prepared), consistent with the past practices
and
customs of, or with respect to, the applicable Companies (unless a contrary
position is required by applicable Law), and timely file (or cause to be timely
filed) with the appropriate Governmental Entity, all Income Tax Returns of,
or
with respect to, the applicable Companies relating to Pre-Closing Tax Periods
and all Non-Income Tax Returns of, or with respect to, the applicable Companies
that are required to be filed on or before the Closing Date. Refunds of Taxes
paid by ACE Lo before the Measurement Date with respect to any Pre-Measurement
Date Tax Period of ACE Lo, if received by ACE Lo or by Buyer on or after the
Closing Date, shall be paid to ACE Hi; provided,
however,
that
the foregoing shall not apply to (i) any such refund to which Section
9.16
applies,
or (ii) any such refund to the extent that such refund is in respect of an
item already included in any positive adjustment to the Purchase Price, or
other
credit hereunder, for the benefit of ACE Hi. If any such refund described in
clause (ii) of the preceding sentence is received by ACE Hi on or after the
Closing Date, such refund, up to the amount of the positive adjustment, shall
be
paid by ACE Hi to ACE Lo. Refunds of Taxes paid by ACE Lo on or after the
Measurement Date with respect to any Post-Measurement Date Tax Period of ACE
Lo,
if received by ACE Hi, shall be paid by ACE Hi to ACE Lo. Refunds of Taxes
paid
by any of the MLK Entities before the Closing Date with respect to any
Pre-Closing Tax Period of such MLK Entity, if received by such MLK Entity or
by
Buyer on or after the Closing Date, shall be paid to AREH; provided, however,
that the foregoing shall not apply to any such refund to the extent that such
refund is in respect of an item already included in any positive adjustment
to
the Purchase Price, or other credit hereunder, for the benefit of AREH. If
any
such refund described in the proviso of the preceding sentence is received
by
AREH on or after the Closing Date, such refund, up to the amount of the positive
adjustment, shall be paid by AREH to the applicable MLK Entity. Refunds of
Taxes
paid by any of the MLK Entities on or after the Closing Date with respect to
any
Post-Closing Tax Period of such MLK Entity, if received by AREH, shall be paid
by AREH to such MLK Entity. To the extent required by the Traymore Purchase
Agreement, any refunds of real property Taxes paid with respect to the Traymore
Site for periods prior to May 18, 2006, if received by Boardwalk, Buyer or
AREH
shall be paid to Boardwalk Regency Corp. Refunds of Taxes paid by Boardwalk
with
respect to any Tax Period of Boardwalk, if received by AREH, shall be paid
by
AREH to Boardwalk, except to the extent provided for in the preceding sentence.
Except to the extent required by Law, (i) ACE Lo shall not file any amended
Tax
Return for any Pre-Measurement Date Tax Period and (ii) none of the MLK Entities
shall file any amended Tax Return for any Pre-Closing Tax Period, in each case
without the applicable Seller’s consent, which consent shall not be unreasonably
withheld or delayed.
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(c) Buyer
shall prepare (or cause to be prepared) and timely file (or cause to be timely
filed) with the appropriate Governmental Entity all Income Tax Returns of,
or
with respect to, the Companies relating to Post-Closing Tax Periods and all
Non-Income Tax Returns of, or with respect to, the Companies that are required
(with all extensions) to be filed after the Closing Date. Except to the extent
required by Law, once filed, Measurement Date Straddle Period Tax returns of
ACE
Lo and Closing Date Straddle Period Tax Returns of any MLK Entity shall not
be
amended, in each case, without the applicable Seller’s consent, which consent
shall not be unreasonably withheld or delayed.
(d) Sellers
and Buyer shall, and shall cause their respective Affiliates to, reasonably
cooperate in preparing and filing all Tax Returns, including maintaining and
making available to each other all records or information and personnel that
may
be relevant for the preparation of any Tax Returns, the determination of amounts
due or payable hereunder in respect of Taxes, any audit or other examination
by
any Governmental Entity, the filing of any claim for a refund of Tax or for
the
allowance of any Tax credit, or any judicial or administrative proceedings
relating to liability for Taxes with respect to all Tax Periods. Sellers and
Buyer agree to (i) retain (or cause to be retained) all books and records with
respect to Tax matters pertinent to any of the Companies relating to any
Pre-Closing Tax Period until the applicable statute of limitations with respect
to Taxes for, or with respect to, such Company has expired and to abide by
(or
cause to be abided by) all record retention agreements entered into with any
Governmental Entity; and (ii) allow (or cause to be allowed) any party, at
times and dates mutually acceptable to the parties, to inspect, review and
make
copies of such records as such party may deem necessary or appropriate from
time
to time, such activities to be conducted during normal business hours at such
party’s expense.
(e) Following
the Closing, Buyer shall prepare (or cause to be prepared) and timely file
(or
cause to be timely filed) with the appropriate Governmental Entity any Tax
Returns required to be filed by Buyer in respect of the Casino Mansion Taxes
and
the Adjacent Property Mansion Taxes and shall timely pay to the appropriate
Governmental Entity the Casino Mansion Taxes and the Adjacent Property Mansion
Taxes.
Section
9.20 Like-Kind
Exchange.
(a) Buyer
or
Sellers, or any of them, may elect to effect the transfer and conveyance of
any
of the assets of the Companies as part of a tax-deferred exchange under Section
1031 of the Code (a “Section
1031 Exchange”).
If
Buyer or Sellers, or any of them, so elects (an “Electing
Party”),
such
Electing Party shall provide notice to Sellers (if the Electing Party is Buyer)
or Buyer (if the Electing Party is a Seller) (“Non-Electing
Party”)
of its
election, and thereafter such Electing Party:
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(i) may
at
any time at or prior to Closing assign its rights and obligations under this
Agreement to a “qualified intermediary” as defined in Treasury Regulation
Section 1.1031(k)−1(g)(4), subject to all of the Non-Electing Parties’ rights
and obligations hereunder; and
(ii) shall
promptly provide written notice of such assignment to the Non-Electing
Parties.
(b) The
Non-Electing Parties shall cooperate with an Electing Party’s reasonable
requests intended to allow such Electing Party to effect the Section 1031
Exchange; provided, however, that the Non-Electing Parties’ obligations to
cooperate with such Electing Party shall be limited and conditioned as
follows:
(i) the
Non-Electing Party shall receive written notice from the Electing Party at
least
three (3) business days prior to the Closing Date, which shall identify the
parties involved in such Section 1031 Exchange, enclose all documents for which
the Non-Electing Parties’ signatures shall be required, and instruct the
Non-Electing Parties as to any changed manner of payment of the Purchase Price,
if any (including having such payment be made to a “qualified intermediary”) or
other requested changes;
(ii) the
Electing Party shall pay for any and all reasonable additional costs and
expenses incurred by the Non-Electing Parties in connection with accommodating
the Section 1031 Exchange;
(iii) the
Electing Party shall not be relieved of any of its obligations under this
Agreement by reason of the Section 1031 Exchange; and
(iv) the
Electing Party’s failure to effectuate any intended Section 1031 Exchange shall
not relieve such Electing Party from its obligations to consummate the
transactions contemplated by this Agreement and the consummation of such Section
1031 Exchange shall not be a condition precedent to such Electing Party’s
obligations under this Agreement.
(c) The
Electing Party hereby indemnifies and agrees to defend, and hold the
Non-Electing Parties harmless from and against any claims, costs, damages,
expenses, liabilities and losses incurred by, claimed against or suffered by
it
arising out of such Electing Party’s Section 1031 Exchange.
(d) Any
election permitted under this Section
9.20
is
expressly conditioned upon the following: that such election (i) shall have
no
negative effect on securing any necessary consent or approval hereunder; (ii)
will not delay the Closing Date; and (iii) will not result in any additional
material cost or liability to the Non-Electing Parties.
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Section
9.21 Employee
Matters. ACE
Hi,
as the sole manager of ACE Lo, shall adopt resolutions terminating each Plan
sponsored or maintained by ACE Lo that is intended to satisfy the requirements
of Sections 401(a) and 401(k) of the Code, with the effective date of such
termination being the day before the Closing. Such resolutions shall be in
form
and content reasonably satisfactory to Buyer. Before the effective date of
such
resolutions, ACE Lo will amend any such Plan intended to satisfy the
requirements of Sections 401(a) and 401(k) of the Code (other than a Plan which
is a prototype plan) to the extent necessary to enable such Plan to satisfy
the
requirements of Sections 401(a) and 401(k) of the Code through the effective
date of its termination.
Section
9.22 Final
MEPA Adjustment.
Within
fifteen (15) business days following ACE Lo’s receipt of the final determination
from a Multiemployer Plan, an arbitrator, or a court of competent jurisdiction
of ACE Lo’s multiemployer plan withdrawal liability incurred in connection with
the cessation of the Casino Business (the “Final
MEPA Determination”),
Buyer
shall deliver to ACE Hi a notice setting forth (a) the amount of the Final
MEPA
Determination (together with any backup or supporting data used in such
determination) and (b) Buyer’s calculation of the Multiemployer Plan
Liabilities, as prepared by an actuarial firm retained by Buyer. If ACE Hi
shall
disagree with Buyer’s calculation of the Multiemployer Plan Liabilities, it
shall, within thirty (30) business days after its receipt of Buyer’s estimate,
notify Buyer of such disagreement in writing, setting forth the particulars
of
such disagreement. Buyer and ACE Hi shall resolve such disagreements in
accordance with the procedures set forth in Section
2.7(c)
hereof,
except that references to the Auditor shall be replaced with an actuarial firm
jointly selected by Buyer’s actuarial firm and ACE Hi’s actuarial firm. Within
ten (10) business days of the final determination of the Multiemployer Plan
Liabilities pursuant to this Section
9.22,
the
result of (i) the Multiemployer Plan Liabilities minus
(ii) the
Estimated Multiemployer Plan Liabilities (which may be a positive or negative
number) shall be paid (A) by ACE Hi to Buyer (if such difference is a
positive amount) in cash by wire transfer of immediately available funds to
an
account designated by Buyer by written notice to ACE Hi or (ii) by Buyer to
ACE
Hi (if such difference is a negative amount) in cash by wire transfer of
immediately available funds to an account designated by ACE Hi by written notice
to Buyer.
ACE Hi
and Buyer shall cooperate with each other with respect to notice to, or the
determination by any Multiemployer Plan of any withdrawal liability, and any
notice or other communication to such Multiemployer Plan by ACE Hi, ACE Lo
or
Buyer shall be subject to the review and approval (not to be unreasonably
withheld or delayed) of Buyer or ACE Hi, as the case may be.
Section
9.23 Sale
of Warehouse Property.
At ACE
Hi’s sole discretion, prior to the Closing ACE Lo shall either (a) distribute
the Warehouse Property and/or the Warehouse Agreement to ACE Hi as a
distribution-in-kind at any time, or (b) sell the Warehouse Property and/or
the
Warehouse Agreement to a third party pursuant to the Warehouse Sale Agreement
or
otherwise, and distribute the net cash proceeds of such sale, less any and
all
transfer Taxes to the extent such Taxes are properly payable by ACE Lo, fees
and
costs of ACE Lo, to ACE Hi within 10 business days of the completion of such
sale;
provided,
however,
that if
ACE Lo shall not have sold the Warehouse Property and/or the Warehouse Agreement
as of immediately prior to the Closing, ACE Hi shall cause ACE Lo to distribute
the Warehouse Property and/or the Warehouse Agreement as a distribution-in-kind
to ACE Hi concurrently with the Closing.
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Section
9.24 City-Wide
Progressives Refund. In
the
event that ACE Lo shall be entitled to funds as a result of participation in
City-Wide Progressive Jackpots based upon: (i) over funding of jackpots;
(ii) distribution of reserved administration costs; or (iii) other similar
items, in each case in respect of or deriving from amounts paid in by ACE Lo
prior to the Measurement Date (“City-Wide
Progressives Refund”),
ACE
Lo shall (and, following the Closing, Buyer shall cause ACE Lo to) use
commercially reasonable efforts to collect such City-Wide Progressive Refunds
and shall pay to ACE Hi, in cash by wire transfer of immediately available
funds, all City-Wide Progressive Refunds. ACE Lo shall (and, following the
Closing, Buyer shall cause ACE Lo to) make such payment to ACE Hi: (i) at
the Closing if ACE Lo receives any City-Wide Progressive Refund at any time
prior to Closing; or (ii) in all other instances, within ten (10) business
days
following ACE Lo’s or Buyer’s receipt of any City-Wide Progressive
Refund.
Section
9.25 Termination
of Related Party Contracts.
Buyer
and the Selling Parties hereby acknowledge and agree that, as of the Closing,
all Contracts and other arrangements, whether written or oral, to which any
Company is a party or pursuant to which any of the Companies’ assets are bound
under which any Affiliates of the Selling Parties (other than such Companies)
provide or receive any direct benefits or payments shall be terminated and
of no
further force or effect. The Selling Parties shall take any and all actions
reasonably necessary or appropriate to effectuate the terminations of the
Contracts and other arrangements described in the preceding sentence, including
without limitation the Contracts listed on Schedule
9.2(a)(i)(I)
attached
hereto.
Section
9.26 Refund
of 2006 NJSEA Payment.
Following the Closing, in the event that ACE Lo receives a refund of all or
any
portion of the 2006 NJSEA Payment in cash from the NJSEA (the “2006
NJSEA Refund”),
then
ACE Lo shall (or Buyer shall cause ACE Lo to), within ten (10) business days
following ACE Lo’s receipt of the 2006 NJSEA Refund, pay to ACE Hi, in cash by
wire transfer of immediately available funds to an account designated by ACE
Hi
by written notice to Buyer, an amount equal to (a) the 2006 NJSEA Refund
multiplied
by
(b) the
ACE Hi NJSEA Ratio.
Section
9.27 Post-Closing
Assumed Lease Payment.
Buyer
shall promptly pay to ACE Hi any payments of rent and/or deposits received
by
Buyer or any of its Affiliates (including following the Measurement Date, ACE
Lo) under the Assumed Leases attributable to periods on or prior to the
Measurement Date by wire transfer of immediately available funds to an account
designated in writing by ACE Hi to Buyer.
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Section
9.28 Severance
Payments; Outplacement Services.
(a) Buyer
shall pay the Agreed Severance Amount as follows: (a) each individual listed
on
Schedule 2.1(b)(v)
attached
hereto shall be paid the amounts as provided for in the agreements or order
listed on Schedule 2.1(b)(v),
and (b)
the Covered Casino Employees shall be paid two (2) weeks salary, as
proportionately adjusted for part-time status.
(b) At
the
Closing, ACE Hi shall pay to ACE Lo for payment (and ACE Lo shall pay) to each
Covered Casino Employee that has been employed at the Casino Property for at
least two (2) full years, one (1) week salary for each full year (beyond such
two (2) full years) that such Covered Casino Employee has been employed at
the
Casino Property through the Closing Date. By way of example, any full-time
Covered Casino Employee that has been employed at the Casino Property for
three (3) full years as of date of termination shall be paid two (2) weeks
salary pursuant to Section
9.28(a)
and one
(1) week salary pursuant to this Section
9.28(b).
(c) Buyer
shall pay such additional amounts (the “Agreed
Stay-Put Bonuses”)
to the
Covered Casino Employees in the job categories described on Schedule
9.28(c)
(the
“Stay-Put
Casino Employees”)
as are
necessary in order to provide each Stay-Put Casino Employee with a minimum
of
four (4) weeks salary pursuant to this Section
9.28.
By way
of example, a full-time Stay-Put Casino Employee that has been employed at
the
Casino Property for three (3) full years as of the date of termination shall
be
paid (i) two (2) weeks salary pursuant to Section
9.28(a)
hereof,
plus
(ii) one (1) week salary pursuant to Section
9.28(b)
hereof
and plus
(iii) an
additional one (1) week salary pursuant to this Section
9.28(c).
In
contrast, a full-time Stay-Put Casino Employee that has been employed at the
Casino Property for five (5) full years as of the date of termination shall
be
paid (A) two (2) weeks salary pursuant to Section
9.28(a)
hereof,
plus
(B) three (3) weeks salary pursuant to Section
9.28(b)
hereof
and plus
(C) no
amounts pursuant to this Section
9.28(c).
(d) Following
the Casino Shutdown, ACE Lo shall (and following the Closing, Buyer shall cause
ACE Lo to) use commercially reasonable efforts to arrange job fairs, resume
writing workshops and other outplacement services for Covered Casino
Employees.
(e) For
purposes of this Section
9.28,
a
“Covered
Casino Employee”
means
any non-union Casino Employee (other than the individuals listed on Schedule 2.1(b)(v)
attached
hereto) who (i) has been employed at the Casino Property for at least six (6)
months and (ii) has continued to be employed at the Casino Property through
the
Closing (or, in the case of particular employees that Buyer identifies are
necessary to remain employed following the Closing, such later date as Buyer
shall specify at Closing (which shall not be later than thirty (30) days
following the Closing)).
ARTICLE
X
CONDITIONS
TO CLOSING
Section
10.1 Conditions
to Each Party’s Obligation to Effect the Closing.
The
respective obligations of each party to this Agreement to effect the Closing
is
subject to the satisfaction of each of the following conditions on or prior
to
the Closing Date, any of which may be waived in whole or in part to the extent
permitted by applicable Law in a writing executed by all of the parties
hereto:
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(a) No
Injunctions.
No
Governmental Entity shall have enacted, issued, promulgated, enforced or entered
any order, executive order, stay, decree, judgment or injunction or statute,
rule or regulation, whether temporary, preliminary or permanent, which is in
effect and prevents or prohibits the Closing or makes it illegal for any party
hereto to perform its obligations hereunder
(a
“Restraint”);
provided,
however,
that if
this condition would not be satisfied as of the Scheduled Closing Date then
in
effect, then the Scheduled Closing Date shall automatically be extended until
the tenth (10th) business day following the satisfaction or waiver of this
condition, but not later than September 3, 2007 (the “Outside
Date”);
and
provided further,
in the
event that, as of such Outside Date, this condition would not be satisfied,
then
the Outside Date shall be automatically extended by three (3)
months.
(b) HSR
Act.
Any
applicable waiting periods, together with any extensions thereof, under the
HSR
Act and the antitrust or competition Laws of any other applicable jurisdiction
shall have expired or been terminated.
(c) Surrender
of Gaming License.
ACE Lo
shall have surrendered to the New Jersey Casino Control Commission its gaming
licenses to own and operate the Casino Business in the State of New Jersey.
(d) Cessation
of Operations.
The ACE
Selling Parties shall have ceased all gaming activities at the Casino Property
and the Madison House.
Section
10.2 Additional
Conditions to Obligations of Buyer.
The
obligation of Buyer to effect the Closing is subject to the satisfaction of
each
of the following conditions on or prior to the Closing Date, any of which may
be
waived in whole or in part in writing exclusively by Buyer; provided,
however,
that
notwithstanding anything to the contrary in this Agreement (but subject to
the
following proviso), any conditions to the Buyer’s obligations hereunder which
have not been satisfied by reason of any breach of a representation, warranty
or
covenant which may be satisfied by the payment of money by the Selling Parties,
shall be deemed satisfied upon payment to the Escrow Agent of such amount
pursuant to an escrow agreement substantially in the form attached hereto as
Exhibit
L
(the
“Closing
Condition Escrow Agreement”)
executed and delivered by each of ACE Hi, AREH, Buyer and the Escrow Agent
pending the agreement of the Buyer and the Selling Parties as to the amount
of
any such payment due to the Buyer or upon receipt of a final and non-appealable
order issued by a court of competent jurisdiction as to the disposition of
such
amount; provided further,
that
the waiver of any condition based on the accuracy of any representation or
warranty, or on the performance of or compliance with any covenant or
obligation, will not affect the right to indemnification, reimbursement, or
other remedy pursuant to Section
12.2
or
otherwise based on such representations, warranties, covenants and
obligations:
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(a) Representations
and Warranties.
(i) Each
of
the representations and warranties of the ACE Selling Parties in ARTICLE
IV
hereof
and the AREH Selling Parties in ARTICLE
VI
hereof
shall be true and correct in all respects at and as of the Closing as if made
at
and as of such time (except to the extent expressly made as of an earlier date,
in which case as of such earlier date).
(ii) Buyer
shall have received certificates signed on behalf of each Selling Party by
an
executive officer of such party to the effect of subclause (i) of this
Section
10.2(a).
(b) Performance
of Obligations.
Each of
the Selling Parties shall have performed
(i) in
all
material respects all covenants, agreements and obligations (other than
representations and warranties made by the Selling Parties in this Agreement)
set forth in Section 9.1(a), 9.2(a)(i)(H(II)), 9.2(a)(ii)(A-J, L-N, P, Q(I),
S,
U, W, Y and AA), 9.2(b)(i)(H)(I), 9.2(b)(ii)(A-G, I-K, M, N(I), P and R), 9.5,
9.13, 9.14(b), 9.25 and 9.28(b) hereof; and
(ii) in
all
respects all other covenants, agreements and obligations (other than
representations and warranties made by the Selling Parties in this Agreement)
set forth in this Agreement other than those set forth in Section
9.4
hereof
and other than those set forth in subclause (i) above, except where the failure
to perform such other covenants, agreements or obligations would not,
individually or in the aggregate, result in a Material Adverse
Effect.
Buyer
shall have received certificates signed on behalf of each Selling Party by
an
executive officer of such party to such effect.
(c) Closing
Deliveries.
Sellers
shall have delivered to Buyer the documents and agreements set forth in
Section
2.9(a)(i)
through (iv) hereof and, solely with respect to the Casino Land, Section
2.9(a)(v) hereof and Section
2.9(b)
(i)
through (iv) hereof and, solely with respect to the Traymore Land, Section
2.9(b)(v) hereof.
(d) Title.
Buyer
shall have received title policies conforming to the Pro Forma Title Policies
issued by a nationally recognized title insurance company for the Casino
Land
and
Traymore Land.
(e) Bankruptcy.
No
action or proceeding shall have been commenced by or against either of the
ACE
Selling Parties under the U.S. Federal bankruptcy code or any state Law for
the
relief of debtors or for the enforcement of the rights of creditors (and in
the
case of an involuntary case or proceeding, remains undismissed and unstayed
for
a period of 90 days).
(f) Liens.
No Lien
other than those relating to GB Claims shall have attached to ACE Lo’s interest
in the Casino Property, ACE Hi’s interest in the ACE Lo Equity Interests,
Boardwalk’s interest in the Traymore Site or AREH’s interest in the Boardwalk
Equity Interests; provided
that
this condition shall be deemed to be satisfied with respect to any Lien that
has
been bonded or discharged or that constitutes a Permitted
Encumbrance.
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(g) Requisite
Stockholder Approval.
The
Requisite Stockholder Approval shall have been obtained and shall be valid
and
in full force and effect.
(h) Conversion
of 3% Notes; Repayment of Indebtedness; Release of Liens and
Guarantees.
Buyer
shall have received satisfactory evidence that, prior to Closing: (i) all
of the 3% Notes shall have been converted into ACE Hi Common Stock, (ii) the
Flatiron Financing Agreement shall have been terminated and be of no further
force and effect; (iii) the Drawbridge Loan Documents shall have been
terminated and be of no further force and effect; (iv) all other Indebtedness
(other than the MLK Indebtedness) shall have been paid off in full; (v) all
Liens other than those relating to GB Claims on the assets of ACE Lo or the
AREH
Subs under or in respect of the 3% Notes, the Drawbridge Loan Documents or
any
other Indebtedness of any Person (other than the MLK Indebtedness) shall have
been released, and (vi) all guarantees entered into by ACE Lo in connection
with
the 3% Notes, the Drawbridge Loan Documents or any other Indebtedness of any
Person shall have been extinguished and released.
(i) Termination
of ACE Lo 401(k) Plan.
ACE Hi
shall have adopted resolutions terminating the ACE Lo 401(k) Plan in accordance
with Section
9.21
hereof.
The
parties acknowledge the indemnification of Buyer regarding GB Claims set forth
in this Agreement and the ability of Buyer to utilize the GB Indemnification
Escrow as provided herein. The existence of the GB Claims or Liens relating
thereto and any lawsuit, action or assertion by or on behalf of the GB Parties,
other than a Restraint, whether or not they would constitute a breach of a
representation, warranty, covenant or failure of a condition to Buyer’s
obligation to close hereunder, shall not constitute the failure of a condition
to Buyer’s obligation to close hereunder unless there is a failure to satisfy
the condition set forth: (a) in Section
10.2(a)(i)
hereof
by reason of a material breach of the representation and warranty in the first
sentence in Section
4.3(c)
hereof
or (b) in Section
10.2(d)
hereof.
Section
10.3 Additional
Conditions to Obligations of Sellers.
The
obligations of Sellers to effect the Closing are subject to the satisfaction
of
each of the following conditions on or prior to the Closing Date, any of which
may be waived in whole or in part in writing exclusively by Sellers:
(a) Representations
and Warranties.
The
representations and warranties of Buyer contained in this Agreement shall be
true and correct (without giving effect to any limitation as to “materiality” or
“Material Adverse Effect” set forth therein) at and as of the Closing as if made
at and as of such time (except to the extent expressly made as of an earlier
date, in which case as of such earlier date), except where the failure of such
representations and warranties to be true and correct would not, individually
or
in the aggregate, result in a Buyer Material Adverse Effect. Sellers
shall have received a certificate signed on behalf of Buyer by an executive
officer of such party to such effect.
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(b) Performance
of Obligations of Buyer.
Buyer
shall have performed
(i) in
all
material respects all covenants, agreements and obligations (other than
representations and warranties made by Buyer in this Agreement) set forth in
Section 9.1(d) and 9.28(a) hereof, and
(ii) in
all
respects all other covenants, agreements and obligations (other than
representations and warranties made by Buyer in this Agreement) set forth in
this Agreement other than those set forth in subclause (i) above, except where
the failure to perform such other covenants, agreements or obligations would
not, individually or in the aggregate, result in a Material Adverse
Effect.
Sellers
shall have received a certificate signed on behalf of Buyer by an executive
officer of such party to such effect.
(c) Closing
Deliveries.
Buyer
shall have delivered to Sellers the payments, documents and agreements set
forth
in Section
2.9(c)
hereof.
ARTICLE
XI
TERMINATION
Section
11.1 Termination.
This
Agreement may be terminated (and such termination shall have the effects set
forth in Section
11.2
hereof)
at any time prior to the Closing by written notice by the terminating party
to
the other party (except in the case of termination pursuant to Section
11.1(a)
hereof,
which requires mutual agreement of all parties or pursuant to Section
11.1(i)
hereof,
which termination shall be automatic):
(a) by
mutual
written consent of Buyer and Sellers whether or not the Agreement has been
approved by the respective directors and stockholders of such
parties;
(b) by
either
Buyer or Sellers, if the transactions contemplated hereby shall not have been
consummated on or prior to the Outside Date; provided,
however,
that
the right to terminate this Agreement under this Section
11.1(b)
shall
not be available to any party whose failure to fulfill any obligation under
this
Agreement has been the primary cause of or resulted in the failure of the
Closing to occur on or before the Outside Date;
(c) by
either
Buyer or Sellers, if any Restraint prohibiting or otherwise preventing the
purchase of the ACE Lo Equity Interests, the Boardwalk Equity Interests, the
Casino Property or the Traymore Site shall be in effect and shall have become
final and nonappealable; provided,
that,
the
party seeking to terminate this Agreement pursuant to this Section
11.1(c)
shall
have used its commercially reasonable efforts to prevent the entry of and to
remove such Restraint and that the right to terminate this Agreement under
this
Section
11.1(c)
shall
not be available to any party whose failure to fulfill any obligation under
this
Agreement has been the primary cause of, or materially contributed to,
the
action resulting in such Restraint;
(d) by
Buyer,
if any Selling Party has breached any representation, warranty, covenant or
agreement on the part of such Selling Party set forth in this Agreement which
(i) would result in a failure of a condition set forth in Section
10.2(a)
or (b)
hereof and (ii) is not cured in all material respects within sixty (60) calendar
days after written notice thereof; provided,
however,
that if
such breach cannot reasonably be cured within such sixty (60) day period but
can
be reasonably cured prior to the Outside Date, and such Selling Party is
diligently proceeding to cure such breach, this Agreement may not be terminated
pursuant to this Section
11.1(d);
provided,
further,
that
Buyer’s right to terminate this Agreement under this Section
11.1(d)
shall
not be available if, at the time of such intended termination, Sellers have
the
right to terminate this Agreement under Section
11.1(e)
hereof;
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(e) by
Sellers, if Buyer has breached any representation, warranty, covenant or
agreement on the part of Buyer set forth in this Agreement which (i) would
result in a failure of a condition set forth in Section
10.3(a)
or (b)
hereof and (ii) is not cured in all material respects within sixty (60)
calendar days after written notice thereof; provided,
however,
that if
such breach cannot reasonably be cured within such sixty (60) day period but
can
be reasonably cured prior to the Outside Date, and Buyer is diligently
proceeding to cure such breach, this Agreement may not be terminated pursuant
to
this Section
11.1(e);
provided,
further,
that
Sellers’ right to terminate this Agreement under this Section
11.1(e)
shall
not be available if, at the time of such intended termination, Buyer has the
right to terminate this Agreement under Section
11.1(d),
Section
11.1(f)
or
Section
11.1(h)
hereof;
(f) by
Buyer,
in the event that AREP Sands does not execute and adopt the Stockholder Consent
within one (1) business day following the execution of this
Agreement;
(g) by
ACE Hi
with respect to the ACE Lo Purchase only, in accordance with Section
9.4(b);
provided that,
in
order for the termination of this Agreement pursuant to this Section
11.1(g)
to be
deemed effective, ACE Hi shall have complied with Section
9.4
and with
applicable requirements, including the payment of the Termination Fee, of
Section
9.11;
(h) by
Buyer,
in the event of a material breach of Section
9.4;
or
(i) automatically,
if Buyer does not deliver a written notice to elect to effect a Revival pursuant
to Section
9.4(e)(iii)
hereof
within the time period specified therein.
Section
11.2 Effect
of Termination.
(a) Liability.
In the
event of any termination of this Agreement
(i) by
ACE
Hi, pursuant to Section
11.1(g)
hereof,
this Agreement shall immediately become void as between Buyer and the ACE
Selling Parties and there shall be no further liability or obligation as between
Buyer and the ACE Selling Parties, or its or their respective Affiliates or
Representatives, provided that,
notwithstanding such termination, this Agreement shall remain in full force
and
effect as between Buyer and the AREH Selling Parties as and to the extent
contemplated in Section
9.4(e)(ii)
hereof
with respect to the AREH Subs Purchase,
(ii) pursuant
to Section
11.1(i)
hereof,
this Agreement shall immediately become void as between Buyer and the Selling
Parties and there shall be no further liability or obligation as between Buyer
and the Selling Parties, or its or their respective Affiliates or
Representatives,
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(iii) by
either
Buyer or any Seller, pursuant to any other provision of Section
11.1
hereof
(i.e.,
other
than pursuant to Section
11.1(g)
hereof
or automatically pursuant to Section
11.1(i)
hereof),
this Agreement shall immediately become void and there shall be no further
liability or obligation on the part of Buyer, any Selling Party, or its or
their
respective Affiliates or Representatives.
Notwithstanding
anything to the contrary in this Section
11.2(a),
(A) to
the extent that any such termination results from the breach by a party hereto
of any of its representations, warranties, covenants or agreements set forth
in
this Agreement, no termination of this Agreement pursuant to Section
11.1
hereof
shall relieve any party of liability for a breach of any provision of this
Agreement occurring before such termination and (B) Section
9.4
and
Section
9.11
hereof,
this Section
11.2
and
ARTICLE
XIII
hereof
shall remain in full force and effect notwithstanding any termination hereunder.
In the event that this Agreement is terminated, Buyer will redeliver all
documents, work papers and other materials of the ACE Selling Parties or the
Selling Parties, as applicable, relating to the transactions contemplated
herein, whether obtained before or after the execution hereof, in accordance
with the terms of the Confidentiality Agreement.
(b) Deposit.
Within
three (3) business days following any termination of this Agreement, but subject
to the following sentence, Buyer shall deliver written instructions to the
Escrow Agent to release from the Deposit Escrow and pay to Buyer the Deposit
(including any interest earned thereon); provided that,
in the
event of a termination with respect to the ACE Lo Purchase only and not the
AREH
Subs Purchase pursuant to Section
11.1(g)
hereof,
Buyer shall deliver written instructions to the Escrow Agent to release from
the
Deposit Escrow and pay to Buyer a portion of the Deposit corresponding to the
proportion of the entire Purchase Price represented by the Closing ACE Purchase
Price (including any interest earned thereon). Notwithstanding the foregoing
sentence, if (i) all of the conditions to Buyer’s obligation to close under
Section
10.1
and
Section
10.2
hereof
shall have been satisfied (other than those conditions to be satisfied at the
Closing), and Buyer fails to close within the time required by this Agreement,
(ii) the condition to the parties’ obligations to close under Section
10.1(b)
shall
not have been satisfied due to Buyer’s failure to use best efforts to cause the
expiration or termination of any appliacable waiting periods, together with
any
extensions thereof, under the HSR Act in accordance with Section
9.7(b)
hereof,
(iii) the condition to Buyer’s obligation to close under Section
10.2(d)
shall
not have been satisfied due to Buyer’s failure to pay the fees of the title
insurance company, or (iv) the Sellers’ obligations to close under Section
10.3(c)
hereof
shall not have been satisfied due to Buyer’s failure to pay the Purchase Price
at the Closing, then ACE Hi shall be entitled to receive the Deposit (without
any interest earned thereon) and Buyer and ACE Hi shall deliver joint written
instructions to the Escrow Agent to (A) release from the Deposit Escrow and
pay to ACE Hi, the Deposit (without giving effect to the interest earned
thereon) and
(B) release from the Deposit Escrow and pay to Buyer, any interest earned
on the Deposit, all pursuant to this Section
11.2(b)
and the
Deposit Escrow Agreement.
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ARTICLE
XII
SURVIVAL;
INDEMNIFICATION
Section
12.1 Survival
of Representations, Warranties, Covenants and Agreements.
The
representations and warranties made by Sellers and, prior to the Closing, the
Companies in this Agreement or any certificate delivered by Sellers (or, prior
to the Closing, the Companies) pursuant hereto shall survive the Closing until
(and claims based upon or arising out of such representations and warranties
may
be asserted at any time before but in no event after) the date that is
twelve (12) months following the Closing Date; provided,
however,
(i) the
representations and warranties made by the applicable Selling Parties in
Section
4.3
and
Section
6.3
hereof
shall survive the Closing until the later of (x) eighteen (18) months following
the Closing or (y) the satisfaction of the Holdback Condition, and (ii)
there shall be no limitation on the time within which notice of a claim based
on
fraud on the part of any party hereto may be made. The
termination of the representations and warranties to the extent provided herein
shall not affect a party in respect of any claim made by such party in
reasonable detail in a writing received by the Indemnifying Party prior to
the
expiration of the applicable survival period provided herein.
The
covenants and agreements of the parties contained in this Agreement shall
survive the Closing in perpetuity; provided that
claims
based upon or arising out of the Selling Parties’ covenants in Section 9.1 and
Section
9.2
hereof
must be made by the Indemnified Parties in reasonable detail in a writing
received by the applicable Indemnifying Party prior to the date that is twelve
(12) months following the Closing. The
Indemnifying Parties’ indemnification obligations pursuant to Section
12.2(a)(iii),
Section
12.2(b)(iii),
Section
12.3(a)
and
Section
12.3(b)
hereof
(other than with respect to obligations arising under Section
9.22,
which
shall survive the Closing until ten (10) days following the final determination
of the Multiemployer Plan Liabilities under Section
9.22)
and
Buyer’s indemnification obligations pursuant to Section
12.3(c)
hereof
shall expire on the date that is eighteen (18) months from the Closing Date;
provided,
however,
that
the expiration of such indemnification obligations shall not affect an
Indemnified Party or Seller Indemnified Party (with respect to their
indemnification rights under Section
12.3(c))
in
respect of any claim made by such party in reasonable detail in a writing
received by the Indemnifying Party or Buyer, as applicable, prior to the
expiration of such eighteen (18) month period
(or the
applicable period described above with respect to obligations arising under
Section
9.22
hereof).
Section
12.2 Indemnification.
(a) Indemnification
by ACE Hi.
Subject
to the provisions of Section
12.4
and
Section 12.7 hereof, from and after the Closing, ACE Hi shall indemnify, defend,
save and hold harmless Buyer and its Affiliates (including, without limitation,
Buyer and the Companies), each of their respective direct or indirect parent
entities, officers, members, partners, directors and employees (and in the
case
of clause (iv) below, Buyer’s Representatives), and each of the heirs,
executors, successors and assigns of any of the foregoing (each individually,
an
“Indemnified
Party”
and,
collectively, the “Indemnified
Parties”),
against any losses, claims, damages, liabilities and expenses whenever arising
or incurred (including, without limitation, amounts paid for reasonable
attorneys’ fees and expenses and costs of suit), whether or not involving a
third party claim (hereinafter “Losses”),
asserted under any Federal or state statute or regulation, or at common law
whether in tort, contract, legal or equitable, or on any other basis, arising
out of or resulting from:
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(i) any
breach of any representation or warranty made by the ACE Selling Parties, or
either of them, in this Agreement (other than any breach of Section
5.8
hereof),
to the extent not included or taken into account in the calculations of the
Closing ACE Purchase Price pursuant to ARTICLE
II
hereof;
(ii) any
breach of any covenant or agreement made, or to be performed, by the ACE Selling
Parties, or either of them, in this Agreement (other than any breach of Sections
9.16 or 9.19 or hereof);
(iii) the
ACE
Indemnified Liabilities, to the extent not included or taken into account in
the
calculations of the Closing ACE Purchase Price pursuant to ARTICLE
II
hereof;
(iv) any
action, suit or proceeding against Buyer, any other Indemnified Party or ACE
Lo
in respect of the GB Claims;
or
(v) any
GB
Resale Payment.
(b) Indemnification
by AREH.
Subject
to the provisions of Section
12.4
and
Section 12.7 hereof, from and after the Closing, AREH (together with ACE Hi,
each individually, an “Indemnifying
Party”
and,
collectively, the “Indemnifying
Parties”)
shall
indemnify, defend, save and hold harmless the Indemnified Parties from and
against any and all Losses asserted under any Federal or State statute or
regulation, or at common law whether in tort, contract, legal or equitable,
or
on any other basis, incurred in connection with, arising out of or resulting
from:
(i) any
breach of any representation or warranty made by the AREH Selling Parties,
or
any of them, in this Agreement (other than any breach of Section
7.4
hereof),
to the extent not included or taken into account in the calculations of the
AREH
Closing Payment;
(ii) any
breach of any covenant or agreement made, or to be performed, by the AREH
Selling Parties, or any of them, in this Agreement (other than any breach of
Sections 9.16 or 9.19 hereof);
(iii) the
AREH
Indemnified Liabilities, to the extent not included or taken into account in
the
calculations of the AREH Closing Payment;
(iv) any
action, suit or proceeding against Buyer, any other Indemnified Party or ACE
Lo
in respect of the GB Claims;
(v) any
GB
Resale Payment;
or
(vi) any
breach of any representation or warranty made by the ACE Selling Parties in
Section
4.3
hereof.
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(c) The
parties hereto hereby acknowledge and agree that for purposes of this
ARTICLE
XII,
in the
event any representation or warranty of the ACE Selling Parties in ARTICLE
IV
or
ARTICLE
V
hereof
or the AREH Selling Parties in ARTICLE
VI
or
ARTICLE
VII
hereof
shall have been breached (taking into account any and all “Material Adverse
Effect,” “materiality” and similar exceptions and qualifiers set forth in any
such representations and warranties), solely for purposes of determining the
amount of Losses resulting therefrom, any and all “Material Adverse Effect”
qualifiers set forth in any such representations and warranties shall be
disregarded.
(d) Notwithstanding
anything to the contrary contained in this Agreement, the indemnification
obligations of the Indemnifying Parties in Section
12.2(a)
and
Section
12.2(b)
hereof
shall not apply to any particular Loss until ninety (90) days after the
applicable Indemnified Party has filed a claim with respect to such insured
Loss
for reimbursement under its title insurance policy(ies) and/or any other
applicable insurance policies. Each Indemnified Party covenants to use
commercially reasonable efforts to obtain reimbursement from such insurer(s)
for
any such insured Losses. Any indemnified Loss under Section
12.2(a)
or
Section
12.2(b)
shall be
reduced by the amount, if any, of the Indemnified Party’s recovery under such
insurance policies.
Section
12.3 Tax
Indemnity.
(a) Indemnification
by ACE Hi.
Subject
to the provisions of Section
12.4
and
Section 12.7 hereof, from and after the Closing, ACE Hi shall indemnify, defend,
save and hold harmless the Indemnified Parties (including, without limitation,
ACE Lo) from and against any and all Losses incurred in connection with, arising
out of, resulting from or incident to:
(i) Non-Income
Taxes of ACE Lo (or any of its predecessors) for all Pre-Measurement Date Tax
Periods;
(ii) Income
Taxes of, or with respect to, ACE Hi or any of its Affiliates, in which it
has a
direct or indirect equity interest, including without limitation, (A) all such
Taxes arising out of or in connection with the sale of the ACE Lo Equity
Interests or other transactions contemplated by this Agreement occurring on
or
before the Closing, and (B) with respect to the income, business or activities
of ACE Lo, for all Pre-Closing Tax Periods;
(iii) any
breach of any covenant or agreement made, or to be performed, by ACE Hi or
any
of its Affiliates, in which it has a direct or indirect equity interest, in
Section
9.19;
or
(iv) any
breach of any representation or warranty or the inaccuracy of any representation
or warranty, made in Section
5.8.
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(b) Indemnification
by AREH.
Subject
to the provisions of Section
12.4
and
Section 12.7 hereof, from and after the Closing, AREH shall indemnify, defend,
save and hold harmless the Indemnified Parties (including, without limitation,
the AREH Subs) from and against any and all Losses incurred in connection with,
arising out of, resulting from or incident to:
(i) Non-Income
Taxes of the MLK Entities for all Pre-Closing Tax Periods;
(ii) Income
Taxes of, or with respect to, AREH or any of its Affiliates (other than ACE
Hi
and its Subsidiaries), including without limitation, (A) all such Taxes arising
out of or in connection with the sale of the AREH Subs Equity Interests or
other
transactions contemplated by this Agreement occurring on or before the Closing
and (B) with respect to the income, business or activities of the AREH
Subs, for all Pre-Closing Tax Periods;
(iii) any
breach of any covenant or agreement made, or to be performed, by AREH or any
of
its Affiliates (other than ACE Hi and its Subsidiaries) in Section
9.19;
or
(iv) any
breach of any representation or warranty or the inaccuracy of any representation
or warranty, made in Section
7.4.
(c) Indemnification
by Buyer.
Subject
to the provisions of Section
12.4
hereof,
from and after the Closing, Buyer shall indemnify, defend, save and hold
harmless Sellers and their Affiliates (each individually, a “Seller
Indemnified Party”
and
collectively, the “Seller
Indemnified Parties”)
from
and against any and all Losses incurred in connection with, arising out of,
resulting from or incident to:
(i) Non-Income
Taxes of (A) ACE Lo for all Post-Measurement Date Tax Periods, (B) the MLK
Entities for all Post-Closing Tax Periods, and (C) Boardwalk for all Tax
Periods; and Income Taxes of, or with respect to (including without limitation
with respect to the income, business, or activities of), ACE Lo and each of
the
AREH Subs for all Post-Closing Tax Periods;
(ii) any
breach of any covenant or agreement made, or to be performed, by Buyer or any
of
its Affiliates in Section
9.19;
or
(iii) Taxes
for
which Buyer is responsible under Section 9.11.
(d) Amount
of Taxes.
For
purposes of this Section
12.3,
Taxes
shall include the amount of Taxes which would have been paid but for the
application of any credit or net operating loss or capital loss deduction
attributable to, as applicable, either Post-Measurement Date Tax Periods or
Post-Closing Tax Periods.
(e) Closing
Date Straddle Period.
In the
case of any Closing Date Straddle Period:
(i) real
and
personal property Taxes or other Taxes levied on a per diem basis (collectively,
“Per
Diem Taxes”)
of any
of the Companies for a Pre-Closing Tax Period shall be equal to the amount
of
such Per Diem Taxes for the entire Closing Date Straddle Period multiplied
by a
fraction, the numerator of which is the number of calendar days during the
Closing Date Straddle Period that are in the Pre-Closing Tax Period and the
denominator of which is the total number of calendar days in the Closing Date
Straddle Period; and
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(ii) Taxes
of
any of the Companies (other than Per Diem Taxes) for any Pre-Closing Tax Period
shall be computed as if such Tax Period ended as of the end of the day on the
Closing Date.
In
the
case of any Measurement Date Straddle Period, analogous principles to the
foregoing shall apply.
(f) Certain
Procedures.
(i) All
claims for indemnification under this Section
12.3
shall be
asserted and resolved pursuant to the provisions of Section
12.4,
except
to the extent that the following clause (ii),
(iii)
or
(iv)
requires
otherwise.
(ii) The
applicable Seller and Buyer shall jointly control all proceedings taken in
connection with any claim made by any Governmental Entity, which if successful
might result in an indemnity payment under this Section
12.3
(a
“Tax
Claim”)
relating to Taxes of the applicable Company or Companies for, as applicable,
a
Measurement Date Straddle Period or a Closing Date Straddle Period. A party
shall promptly notify the other party if it decides not to control the defense
or settlement of any Tax Claim that it is entitled to control pursuant to this
Section
12.3(f)(ii),
and the
other party shall thereupon be permitted to defend and settle such proceeding
in
its sole and absolute discretion.
(iii) Sellers
and Buyer shall reasonably cooperate with each other in contesting any Tax
Claim. Such cooperation shall include the retention and, upon the request of
the
party or parties controlling proceedings relating to such Tax Claim, the
provision to such party or parties of records and information that are
reasonably relevant to such Tax Claim, and making employees available on a
mutually convenient basis to provide additional information or explanation
of
any material provided hereunder or to testify at proceedings relating to such
Tax Claim.
(iv) Any
indemnity payment required to be made by any party under this Section
12.3
shall be
due and payable from such party to the party being indemnified or the applicable
Governmental Entity, as applicable, in immediately available funds no later
than
one (1) business day before the date on which the related Taxes are required
to
be paid to the relevant Governmental Entity.
Section
12.4 Procedures
Relating to Indemnification.
(a) Notice
of Asserted Liability.
With
respect to third party claims, all claims for indemnification by any Indemnified
Party or Seller Indemnified Party under this Section
12.4
shall be
asserted and resolved as follows: promptly after discovery of or receipt by
an
Indemnified Party or a Seller Indemnified Party of notice of any demand, claim
or circumstances, which, with the lapse of time, are reasonably expected to
give
rise to a claim or the commencement (or the threatened commencement) of any
action, proceeding or investigation (an “Asserted
Liability”),
that
may result in Losses which are subject to indemnification hereunder, the
Indemnified Party or Seller Indemnified Party, as applicable, shall give written
notice thereof (the “Claims
Notice”)
to the
applicable Indemnifying Party or Buyer, as applicable. The Claims Notice shall
describe the Asserted Liability in reasonable detail, to the extent possible,
and shall indicate the amount (estimated, if necessary, and to the extent
feasible) of the Losses that have been or may be suffered by the Indemnified
Party or Seller Indemnified Party, as applicable. The failure of an Indemnified
Party or Seller Indemnified Party, as applicable, to provide a Claims Notice
with reasonable promptness shall not affect any indemnification obligations
hereunder except to the extent that the applicable Indemnifying Party or Buyer,
as applicable, is actually and materially prejudiced thereby.
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(b) Opportunity
to Defend.
(i) An
Indemnifying Party may elect to compromise or defend, at its own expense and
by
its own counsel, any Asserted Liability; provided,
however,
that
counsel for such Indemnifying Party shall be approved by the Indemnified Party
(whose approval shall not unreasonably be withheld or delayed). If such
Indemnifying Party elects to compromise or defend such Asserted Liability,
it
shall, within thirty (30) days (or sooner, if the nature of the Asserted
Liability so requires), notify the Indemnified Party of its intent to do so,
in
which case it shall have the sole right and authority to control any such
compromise or defense, and the Indemnified Party shall cooperate, at the expense
of such Indemnifying Party, in the compromise of, or defense against, such
Asserted Liability. If such Indemnifying Party elects not to compromise or
defend the Asserted Liability or fails to notify the Indemnified Party of its
election within such thirty (30) day period, such Indemnified Party may pay,
compromise or defend such Asserted Liability with counsel reasonably acceptable
to such Indemnifying Party (at the Indemnifying Parties’ sole cost and expense
in the event that the Indemnifying Parties are determined to be liable
hereunder). Notwithstanding the foregoing, neither the Indemnifying Parties
nor
the Indemnified Party may settle or compromise any claim over the objection
of
the other; provided,
however,
that if
the claim is for money damages only, the Indemnifying Parties can settle or
compromise any such claim solely for money damages without the consent of the
Indemnified Party provided it pays or otherwise satisfies the money damages
in
full, in which case the Indemnifying Parties can settle or compromise any such
claim without the consent of the Indemnified Party. No settlement or compromise
may be entered into by an Indemnifying Party without an unconditional and full
release of the Indemnified Parties reasonably acceptable to their counsel.
If an
Indemnifying Party elects to defend any claim, the Indemnified Party shall
make
available to such Indemnifying Party such non-privileged books, records or
other
documents within its control that are necessary or appropriate for such defense
(in the judgment of counsel engaged by such Indemnifying Party).
(ii) The
Indemnified Parties have the right to employ their own counsel in any compromise
of, or defense against, any Asserted Liability, or in connection with an
Indemnified Party’s provision of reasonable cooperation and assistance to such
Indemnifying Party or such Indemnifying Party’s counsel as provided above, but
the fees, expenses and other charges of such counsel employed by the Indemnified
Party will be at the expense of the Indemnified Party (and shall not constitute
Losses hereunder) unless (A) the employment of counsel by the Indemnified Party
has been authorized in writing by an Indemnifying Party, (B) the Indemnifying
Parties have not in fact employed counsel to compromise or defend against the
Asserted Liability within the period provided in Section
12.4(b)(i)
hereof
or (C) the provisions of Section 12.4(b)(iii) below are applicable. It is
understood that the Indemnifying Parties shall not, in connection with any
proceeding or related proceedings in the same jurisdiction, be liable for the
reasonable fees, disbursements and other charges of more than one separate
firm
(plus, if required, one separate firm admitted to practice in a local
jurisdiction) at any one time retained by the Indemnified Party unless the
employment of more than one counsel has been authorized in writing by an
Indemnifying Party.
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(iii) Notwithstanding
anything to the contrary in this Agreement, in the event there is a conflict
of
interest between any of the Indemnifying Parties and the Indemnified Parties
with respect to the defense of any Asserted Liability arising under Section
12.2(a)(iv)
or
Section
12.2(b)(iv)
hereof,
the Indemnified Parties shall have the right to participate in the defense
(subject to the rights of the Indemnifying Parties pursuant to Section
12.4(b)(i) above), with one counsel selected by the Indemnified Parties and
at
the Indemnifying Parties’ expense (with advancement of expenses pursuant to
Section
12.4(d)
hereof),
any such Asserted Liability arising under Section
12.2(a)(iv)
or
Section
12.2(b)(iv)
hereof.
(c) Notice
of Direct Claim.
In the
event that in the reasonable judgment of Buyer, after consultation with Buyer’s
outside legal counsel, an Indemnified Party has a claim for indemnification
that
does not involve a third party (a “Direct
Claim”),
the
Indemnified Party shall provide a written notice to the Indemnifying Parties
of
such Direct Claim with reasonable promptness, specifying, to the extent known,
the nature and circumstances of such Direct Claim and the amount (estimated,
if
necessary, and to the extent feasible) of the Losses incurred or reasonably
expected to be incurred in respect of such Direct Claim (a “Payment
Request”);
provided,
however,
the
failure of an Indemnified Party to provide such Payment Request with reasonable
promptness shall not adversely affect any indemnification obligations hereunder
except to the extent that the Indemnifying Parties are actually and materially
prejudiced thereby.
(d) Advancement
of Expenses.
The
right to indemnification of Losses conferred by Section
12.2
hereof
shall include, solely for Asserted Liabilities under Section
12.2(a)(iv)
or
Section
12.2(b)(iv),
the
right to have the applicable Indemnifying Party pay the Indemnified Party’s
expenses in any action, proceeding or investigation in which (i) such
Indemnifying Party elects not to compromise or defend such Asserted Liability,
(ii) such Indemnifying Party fails to notify the Indemnified Party of its
election within the thirty (30) day period contemplated in Section
12.4(b)(i)
or
(iii) the Indemnified Party is entitled to reimbursement pursuant to
Section
12.4(b)(iii),
in each
case as such expenses are suffered or incurred and in advance of such action’s,
proceeding’s or investigation’s final disposition. Any such advance shall be
subject to an undertaking by or on behalf of an Indemnified Party, which need
not be secured and shall be accepted without reference to such Indemnified
Party’s financial ability to make repayment, to make repayment to repay all
advanced expenses if it shall ultimately be determined by a final, nonappealable
decision rendered by a court of competent jurisdiction over the parties that
such Indemnified Party is not entitled to be indemnified by the Indemnifying
Parties.
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Section
12.5 Contribution.
(a) If
the
indemnification provided for in Section
12.2
hereof
is not enforceable under applicable Law, then the Indemnifying Parties, in
lieu
of indemnifying such Indemnified Parties, shall to the full extent permissible
under applicable Law (but in all events subject to the terms and limitations
of
this ARTICLE
XII,
including without limitation, Section
12.7
hereof)
contribute to the Losses incurred by such Indemnified Parties in connection
with
any claim relating to an indemnifiable event under this Agreement, in such
proportion as is deemed fair and reasonable in light of all of the circumstances
of such action, suit or proceeding in order to reflect the relative fault of
the
Indemnifying Parties (and their officers, directors, employees and agents),
on
one hand, and the Indemnified Parties, on the other hand, in connection with
the
events or transactions from which such action, suit or proceeding arose;
provided,
however,
that if
the foregoing allocation is not permitted by applicable Law, then such
allocation shall be adjusted as appropriate to reflect not only the relative
fault of the Indemnifying Parties (and their officers, directors, employees
and
agents), on one hand, and the Indemnified Parties, on the other hand, but also
the relative benefits received by such parties in connection therewith as well
as any other relevant equitable considerations. For purposes of this
Section
12.5,
the
relative fault of the Indemnifying Parties (and their directors, officers,
employees and agents), on one hand, and the Indemnified Parties, on the other
hand, in connection with the events or transactions giving cause to such action,
suit or proceeding shall be determined by reference to, among other things,
the
degree to which their liability is primary or secondary and the degree to which
their conduct is active or passive.
In no
event shall any Indemnified Party be entitled to collect or receive
indemnification or contribution in an aggregate amount greater than would be
applicable if the indemnification provided for in Section
12.2
hereof
was enforceable under applicable Law.
(b) The
Indemnifying Parties hereby agree to fully indemnify and hold the Indemnified
Parties harmless from any claims of contribution or indemnification which may
be
brought by officers, directors, employees or agents of the Indemnifying Parties
or persons who were officers, directors, employees or agents of ACE Lo prior
to
the Measurement Date for actions, suits or proceedings arising from or relating
to events occurring prior to the Measurement Date.
Section
12.6 Payment
of Damages.
An
Indemnified Party shall be paid in cash by an Indemnifying Party the amount
to
which such Indemnified Party may become entitled by reason of the provisions
of
this ARTICLE
XII,
within
fifteen (15) days after such amount is determined either by mutual agreement
of
the parties or on the date on which both such amount and an Indemnified Party’s
obligation to pay such amount have been determined by a final, nonappealable
judgment of a court or administrative body having jurisdiction over such
proceeding.
Section
12.7 Limitations
on Indemnity.
(a) Other
than in respect of a claim for indemnification based on fraud on the part of
any
Indemnifying Party hereto, for which there shall be no limitations on the amount
of Losses recoverable through the indemnification provisions hereunder, no
Indemnified Party shall seek, or be entitled to seek or obtain, indemnification
from the Indemnifying Parties, for any amounts, in the aggregate, in excess
of
the sum of (x) the Closing ACE Purchase Price plus
(y) cash amounts paid by Buyer to ACE Hi following the Closing pursuant to
Section
9.16
(Real
Property Tax Refund), Section
9.19(b)
(Tax
Refunds), and Section
9.24
(City-Wide Progressives Refund) hereof (collectively, (x) and (y) are referred
to as the “ACE
Hi
Cap”)
plus
(z) the
AREH Purchase Price; provided,
however,
that:
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(i) no
Indemnified Party shall seek, or be entitled to seek or obtain, indemnification
from AREH pursuant to Section
12.2(b)(vi)
hereof
for any amount, in the aggregate, in excess of One Hundred Thirty-Five Million
Dollars ($135,000,000);
(ii) no
Indemnified Party shall seek, or be entitled to seek or obtain, indemnification
from ACE Hi pursuant to Section
12.2(a)
or
Section
12.3(a)
hereof
for any amount, in the aggregate, in excess of the ACE Hi Cap;
(iii) no
Indemnified Party shall seek, or be entitled to seek or obtain, indemnification
from the Indemnifying Parties pursuant to Section
12.2(a)(i)
or
Section
12.2(b)(i)
hereof
until the aggregate amount of Losses arising under such Sections, taken
together, exceed Five Hundred Thousand Dollars ($500,000) (the “Indemnification
Floor”);
provided,
however,
that if
the aggregate amount of such Losses arising under Section
12.2(a)(i)
and
Section
12.2(b)(i)
hereof
exceed the amount of the Indemnification Floor, the Indemnified Parties shall
only be entitled to seek indemnification from the Indemnifying Parties for
the
amount of such Losses in excess of the Indemnification Floor;
and
(iv) to
the
extent that any matter is indemnified by both ACE Hi and AREH pursuant to this
ARTICLE
XII,
the
Indemnified Parties shall not be entitled to collect twice.
(b) In
calculating the amount of any Losses payable to an Indemnified Party hereunder,
the amount of the Losses (i) shall not be duplicative of any adjustments to
the
Purchase Price pursuant to ARTICLE
II
hereof,
(ii) shall not be duplicative of any other Losses for which an indemnification
claim has been made and (iii) shall be computed net of any amounts actually
recovered by such Indemnified Party under any insurance policy with respect
to
such Losses (net of any costs and expenses incurred in obtaining such insurance
proceeds). If an Indemnifying Party pays an Indemnified Party for a claim and
subsequently insurance proceeds in respect of such claim is collected by the
Indemnified Parties, then the Indemnified Party promptly shall remit the
insurance proceeds (net of any costs and expenses incurred in obtaining such
insurance proceeds) to the Indemnifying Party. The Indemnified Parties shall
use
commercially reasonable efforts to obtain from any applicable insurance company
any insurance proceeds in respect of any claim for which the Indemnified Parties
seek indemnification under this ARTICLE
XII.
(c) No
Selling
Party shall be liable to any Indemnified Party, and Buyer shall not be liable
to
any Selling Party, for indirect, special, incidental, consequential or punitive
losses or damages (including, without limitation, consequential losses or
damages measured by lost profits) claimed by such Indemnified Party or Selling
Party, as applicable, under the terms of this Agreement; provided that
nothing
in this Section
12.7(c)
shall
prevent any Indemnified Party or Selling Party, as applicable, from recovering
amounts paid for indirect, special, incidental, consequential or punitive losses
or damages to a “Covered
Third Party.”
A
“Covered
Third Party”
means
any third party (other than an Indemnified Party or a Selling Party) having
claims (i) against any of the Selling Parties as of the Measurement Date
(including, without limitation, the GB Parties with respect to the GB Claims),
(ii) as a result of any breach of any of the Selling Parties of their respective
covenants or agreements under this Agreement other than the covenants and
agreements under this ARTICLE
XII
or
(iii) as a GB Party against Buyer in respect of the GB Claims. For the
avoidance of doubt, any counterparty to any Contract entered into (x) by Buyer
and its Affiliates or any other Indemnified Party after the date hereof or
(y)
by ACE Lo after the Closing Date is not a “Covered
Third Party”
with
respect to claims arising out of such Contract. It is the intention of the
parties hereto, by this limitation, to limit damage claims between the parties
hereto to direct damages, so that, for example, if it was determined that as
a
result of the GB Claims, Buyer was not entitled to any of the property acquired
under this Agreement, Losses of the Indemnified Parties would include the direct
damages incurred in an amount equal to the payment Buyer made to the Selling
Parties for property Buyer did not receive, but would not include any amounts
that Buyer might owe to its lenders with respect to its future development
activities on the Properties, whether as a result of any undertaking to such
lenders or damages that Buyer may incur as a result of a breach or cross default
under its financing arrangements, or any business interference losses or costs
or losses due to any delays of or interference with Buyer’s planned development
activities for indirect, special, incidental, consequential or punitive damages
(including, without limitation, consequential damages measured by lost profits)
suffered by such parties.
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(d) Buyer
and
the Selling Parties hereby acknowledge and agree that (i) Buyer’s Losses
shall not include any direct Losses (i.e., damages other than indirect, special,
incidental, consequential or punitive damages (including, without limitation,
consequential damages measured by lost profits)) claimed against such
Indemnified Party in connection with Contracts relating to Buyer’s future
development activities on the Properties entered into by Buyer or any of its
Affiliates (including ACE Lo) following the Closing Date and prior to the date
that is two (2) years following the Closing Date, (ii) Buyer’s Losses may,
if otherwise indemnified under and not excluded from the Indemnifying Parties’
indemnification obligations under this Agreement, include
any such
direct Losses claimed against the Indemnified Parties in connection with
Contracts relating to Buyer’s future development activities on the Properties
entered into by Buyer or any of its Affiliates (including ACE Lo) on or after
the date that is two (2) years following the Closing Date and (iii) Buyer’s
Losses shall not in any event include direct Losses claimed against any
Indemnified Parties by lenders (or other financing sources) to Buyer or an
Affiliate of Buyer.
Section
12.8 Exclusive
Remedy.
Except
in the cases of (a) fraud and (b) Section
9.16
hereof,
in which cases the Indemnified Parties reserve any and all rights and remedies
available to them, after the Closing, the indemnities provided in this
ARTICLE
XII
shall
constitute the sole and exclusive remedy of any Indemnified Party (but not
the
Selling Parties) for Losses arising out of, resulting from or incurred in
connection with any claims regarding matters arising under or otherwise relating
to this Agreement; provided,
however;
that
this exclusive remedy for Losses does not preclude any party from bringing
an
action for specific performance, including the right to seek a mandatory
injunction or other equitable relief to require a party to close the purchase
or
sale, as applicable, as contemplated herein, or otherwise seek to require a
party to perform its obligations under this Agreement.
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Section
12.9 Treatment
of Indemnification Payments.
All
indemnification payments made pursuant to this ARTICLE
XII
shall be
treated by the parties for Income Tax purposes as adjustments to the Purchase
Price, unless otherwise required by applicable Law. The liabilities in respect
of which such indemnification payments are made shall, if applicable, be treated
for Income Tax purposes as additional applicable liabilities for purposes of
the
Purchase Price Allocation.
Section
12.10 Certain
Claims.
For the
avoidance of doubt, the ACE Closing Price Adjustments contain accruals for
various liabilities. To the extent any claim for indemnification under this
Article XII relates to a claim for which an accrual has been made pursuant
to
the ACE Closing Price Adjustments, the amount of such accrual shall be taken
into account to reduce the Losses of the Indemnified Parties in respect thereof
and the Indemnifying Party shall have all right to defend such claims in
accordance with section 12.4(b) notwithstanding such accruals.
ARTICLE
XIII
MISCELLANEOUS
Section
13.1 Definitions.
(a) For
purposes of this Agreement, the term:
“3%
Notes”
means
the 3% Notes due September 29, 2008, issued by ACE Hi under the
Indenture.
“2004
GB Restructuring”
means
the restructuring transactions consummated by GB ACE Hi and the ACE Selling
Parties in July 2004 which, among other things, resulted in the transfer of
the
Casino Property and Casino Business from GB Holdings to ACE Hi and from ACE
Hi
to ACE Lo.
“Accounts
Receivable”
means
all accounts receivable, including gaming receivables, of the Casino Business,
net of reserves determined in accordance with past practices; provided that,
additional reserves shall be established as appropriate to ensure that no single
customer represents more than 10% of the net gaming receivables of the Casino
Business.
“ACE
Indemnified Liabilities”
means
any and all liabilities or obligations of ACE Lo, whether disclosed or
undisclosed, existing before and remaining after the Measurement Date, other
than the Assumed ACE Liabilities. Without limiting the foregoing, the following
liabilities and obligations of ACE Lo shall be expressly included in the ACE
Indemnified Liabilities: (i) obligations under Contracts other than the
Assumed ACE Lo Contracts and other than Contracts entered into by ACE Lo
following the Measurement Date not in violation of the provisions of this
Agreement; (ii) all costs and expenses relating to or arising out of the
employment or termination of employment of the Casino Employees for all periods
before the Measurement Date (including, but not limited to, all payroll taxes
and payments due under all collective bargaining agreements), but specifically
excluding any Assumed ACE Liabilities, (iii) all costs, expenses,
contributions, and liabilities arising out of or relating to all Plans for
periods before the Measurement Date, but specifically excluding any Assumed
ACE
Liabilities, (iv) the Certain Employee Liabilities, to the extent not
reflected in the determination of the Closing ACE Purchase Price pursuant to
ARTICLE
II
hereof,
but specifically excluding any Assumed ACE Liabilities, (v) any costs or
liability involved in providing COBRA coverage or benefits relating to a
“covered employee” or “qualified beneficiary” arising from or out of a
“qualifying event” (as such terms are defined in Section 4980B of the Code) that
occurs prior to the Measurement Date; (vi) any liability arising under Section
4064 of ERISA on account of the termination under Sections 4041(c) or 4042
of
ERISA of any defined benefit plan subject to Title IV of ERISA that is
sponsored, maintained, or contributed to by any of the ACE Selling Parties
or
their ERISA Affiliates, which such termination occurs within five (5) plan
years
of such plan following the Closing; and (vii) the Multiemployer Plan
Liabilities. Nothing that has been taken into account in the calculation of
the
Closing ACE Purchase Price pursuant to ARTICLE
II
hereof
shall be considered an ACE Indemnified Liability.
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“Advance
Room Deposits”
means
all advance reservation cash deposits and pre-payments for rooms in advance
of
actual stays occurring after the Measurement Date.
“Affiliate”
means,
with respect to any Person, any other Person that directly or indirectly,
through one or more intermediaries, controls, is controlled by, or is under
common control with, such first-mentioned Person. As used herein, “control”
means
the right to exercise, directly or indirectly, more than fifty percent (50%)
of
the voting power of the stockholders, members or owners and, with respect to
any
individual, partnership, trust or other entity or association, the possession,
directly to cause the direction of the management or actions of the controlled
entities.
“Applicable
Bankruptcy Case”
means
the Bankruptcy Case or any other bankruptcy proceeding of any Person or entity
which has a direct or indirect ownership interest in the Casino Land and/or
the
Traymore Land (including without limitation ACE Hi or ACE Lo).
“Applicable
Court”
means
the Bankruptcy Court or any other court in the Bankruptcy Case or any bankruptcy
proceeding arising out of or relating to the GB Claims.
“AREH
Indemnified Liabilities”
means
any and all liabilities or obligations of the AREH Subs, whether disclosed
or
undisclosed, existing before and remaining after the Closing, other than the
Assumed AREH Subs Liabilities. Without limiting the foregoing, the following
liabilities and obligations of the AREH Subs shall be expressly included in
the
AREH Indemnified Liabilities: (i) the obligations of the AREH Subs under
Contracts other than the Assumed AREH Subs Contracts.
“A(a)s
of the date hereof”
or
words of similar import means the date that this Agreement is executed by the
parties hereto as set forth on the cover of this Agreement.
“Assumed
ACE Lo Contracts”
means
those Contracts listed on Schedule
IV.
“Assumed
ACE Liabilities”
means
(i) obligations, costs and liabilities arising on or after the Measurement Date
under the Assumed ACE Lo Contracts; (ii) severance payments to Casino
Employees arising out of terminations of employment of Casino Employees on
or
after the Measurement Date in an aggregate amount up to (but not exceeding)
the
Agreed Severance Amount; (iii) obligations, costs or liability involved in
providing COBRA coverage or benefits relating to a “covered employee” or
“qualified beneficiary” arising from or out of a “qualifying event” (as such
terms are defined in Section 4980B of the Code) that occurs on or after the
Measurement Date; (iv) all costs, expenses, contributions, and liabilities
arising out of or relating to all Plans for periods on or after the Measurement
Date; and (v) all other obligations, costs or liabilities arising on or after
the Measurement Date (provided that the foregoing clauses (iv) and (v) shall
not
relieve any of the ACE Selling Parties from any liability they may have to
Buyer
under this Agreement arising under any covenant or agreement made, or to be
performed, by such ACE Selling Parties, or either of them, in this
Agreement).
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“Assumed
AREH Subs Contracts”
means
those Contracts listed on Schedule
V.
“Assumed
AREH Subs Liabilities”
means
obligations under the Assumed AREH Subs Contracts.
“Bankruptcy
Case”
means
that certain voluntary petition for relief filed by GB Holdings on September
29,
2005, under Chapter 11 of Title 11 of the United States Code with the Bankruptcy
Court, Case No. 05-42736JHW, in which GB Holdings is currently operating as
a
debtor in possession, and any and all appeals and related proceedings (including
without limitation those relating to any Federal or state avoiding statute,
in a
non-bankruptcy court).
“Bankruptcy
Court”
means
the United States Bankruptcy Court for the District of New Jersey hearing GB
Holdings bankruptcy case (Case No. 05-42736, Chief Judge Wizmur).
“BEC”
means
Building Exchange Company, a Virginia corporation.
“Boardwalk
Equity Interests”
means
the membership interests of Boardwalk.
“Brighton
Park Agreements”
means
(i) the Brighton Park Improvements Agreement dated as of November 5, 1987,
by
and between Greate Bay and Claridge, (ii) the Brighton Park Development
Agreement dated as of November 9, 1987, by and among Greate Bay, Claridge and
the City of Atlantic City, (iii) the Brighton Park Maintenance Agreement
dated as of November 9, 1987, by and among Claridge, Greate Bay and the City
of
Atlantic City, (iv) Landscaping Services Agreement dated May 8, 1996, by and
between Brighton Park Maintenance Corporation and Atlantic City Special
Improvement District, (v) Cleaning Services Agreement dated May 24, 1996, by
and
between Brighton Park Maintenance Corporation and Atlantic City Special
Improvement District, and (vi) Security Services Agreement dated May 1, 1996,
by
and between Brighton Park Maintenance Corporation and Atlantic City Special
Improvement District.
“business
day”
means
any Monday through Friday, inclusive, other than any such days that financial
institutions within the State of New York are authorized or required to close;
provided,
however,
any
reference in this Agreement to any day other than a business day shall be deemed
a reference to a calendar day.
“Buyer
Material Adverse Effect”
means
any change, event, violation, inaccuracy, state of facts, circumstances or
effect (any such item an “Effect”)
that
prevents or impairs in any material respect the ability of Buyer to perform
its
obligations under this Agreement or prevents or materially delays the
consummation by Buyer of any of the transactions contemplated
hereby.
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“Claridge”
means
Claridge at Park Place, Inc.
“Closing
Date Straddle Period”
means
any Tax Period beginning before the Closing Date and ending after the Closing
Date.
“Code”
means
the Internal Revenue Code of 1986, as amended, or any successor provisions.
“Contract”
means
any agreement, contract, lease, service contract, equipment lease, sign lease,
software license agreement, power of attorney, note, loan, evidence of
indebtedness, purchase order, letter of credit, settlement agreement, franchise
agreement, undertaking, covenant not to compete, employment agreement, license,
instrument, obligation, commitment, understanding, policy, purchase and sales
order, quotation and other executory commitment to which any Person is a party
or to which any of the assets of such Person are subject, whether oral or
written, express or implied, other than a Plan or Multiemployer
Plan.
“CRDA”
means
the New Jersey Casino Reinvestment Development Authority.
“CRDA
Funds”
means
(i) those alternative investment tax payments paid by ACE Lo or its
predecessors-in-interest to the New Jersey State Treasurer and currently held
in
escrow pending the direction by ACE Lo of such payments to the CRDA for (A)
purchase of CRDA bonds, (B) direct investment approved by the CRDA or (C)
partial payment of the investment alternative tax imposed under N.J.S.A.
5:12-144.1a.(1), all in accordance with the requirements of N.J.S.A.
5:12-144.1a.(2), (ii) that portion allocable to ACE Lo of the “Casino Capital
Construction Fund” created pursuant to N.J.S.A. 5:12-173.22, (iii) that portion
allocable to ACE Lo of the “Atlantic City Expansion Fund” created pursuant to by
N.J.S.A. 5:12-173.22a, and (iv) that portion allocable to ACE Lo of the
“Casino Boardwalk Revitalization Fund” funded in accordance with Section 3 of
that certain Casino Parking Fee Agreement dated February 1, 2005 by and among
CRDA, ACE Lo and various third-party casino licensees, to the extent of funds
available for direction by ACE Lo for “eligible economic development
projects.”
“Customer
Data”
means
all customer databases, customer lists, historical records of customers and
any
other customer information collected and used by ACE Lo or its Affiliates in
connection with marketing and promoting the Casino Business.
“DGCL”
means
the General Corporation Law of the State of Delaware, as amended.
“Drawbridge”
means
Drawbridge Special Opportunities Fund LP, a national banking
association.
“Drawbridge
Loan Documents”
means
(i) the Note and Mortgage Modification Agreement dated as of November 30, 2005,
by and among ACE Hi, as borrower, ACE Lo, as guarantor, and Drawbridge, as
lender; (ii) the Loan and Security Agreement dated as of November 12, 2004,
by
and among ACE Hi, as borrower, ACE Lo, as guarantor, and Fortress, as lender;
(iii) the First Mortgage and Security Agreement dated as of November 12,
2004, by and between ACE Lo, as mortgagor, and Fortress, as mortgagee, with
respect to the Casino Property; (iv) the Guaranty dated as of November 12,
2004, by ACE Lo to and for the benefit of Fortress; and (v) the Assignment
and
Acceptance Agreement dated as of November 12, 2004 (and recorded on November
18,
2004, in the office of the Clerk of Atlantic County in Volume 11883, Instrument
No. 2004113011), by and between Fortress and Drawbridge.
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“Environmental
Laws”
means
all applicable and legally enforceable foreign, federal, state and local
statutes or laws, judgments, orders, regulations, licenses, permits, rules
and
ordinances relating to pollution or protection of health or the environment,
including, but not limited to the Federal Water Pollution Control Act (33 U.S.C.
§1251 et
seq.),
Resource Conservation and Recovery Act (42 U.S.C. §6901 et
seq.),
Safe
Drinking Water Act (42 U.S.C. §3000(f) et
seq.),
Toxic
Substances Control Act (15 U.S.C. §2601 et
seq.),
Clean
Air Act (42 U.S.C. §7401 et
seq.),
Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C.
§9601 et
seq.)
and
other similar state and local statutes, in effect as of the date hereof.
“Environmental
Liabilities”
means
any and all liabilities (including, without limitation, all reasonable fees,
disbursements and expenses of counsel, expert and consulting fees and costs
of
investigations and feasibility studies and responding to government requests
for
information or documents, clean-up fees), fines, penalties, restitution and
monetary sanctions and interest, whether accrued, direct or indirect, known
or
unknown, absolute or contingent, liquidated or unliquidated and past, present
or
future, resulting from any claim or demand, by any Person or entity, under
or
pursuant to any Environmental Law, or arising, directly or indirectly, from
the
presence, release, discharge, disposal, generation, treatment, storage,
emission, migration or use of any Hazardous Substance.
“Equity
Interest”
means
any share, capital stock, partnership, limited liability membership or similar
ownership interest in any entity, and any option, warrant, right or security
(including debt securities) convertible, exchangeable or exercisable
therefor.
“Escrow
Agent”
means
JPMorgan Chase Bank N.A., a national bank association incorporated under the
laws of the United States of America, or any successor escrow agent, or such
other escrow agent mutually agreed to by Buyer and Sellers.
“Exchange
Act”
means
the Securities Exchange Act of 1934, as amended.
“Final
Determination”
means
a
judgment of a judicial or administrative body relating to a Real Property Tax
Contest that has become final and non-appealable, including without limitation
the expiration of the time to seek certification to the Supreme Court of New
Jersey or, if such application is filed, the denial of such application.
“Flatiron
Indebtedness”
means
the obligations of ACE Lo pursuant to the Short-Term Insurance Premium Financing
Agreement dated as of January 1, 2006, by and between ACE Lo and Flatiron
Capital Corporation.
“Fortress”
means
Fortress Credit Corp., a Delaware corporation.
“Front
Money”
means
all money stored on deposit at the Casino Property cage belonging to, and stored
in an account for, any Person.
“GAAP”
means
United States generally accepted accounting principles as in effect from time
to
time.
-100-
“Gaming
Authorities”
means
those federal, state, local and other governmental, regulatory and
administrative authority, agency, board and officials responsible for, or
involved in, the regulation of gaming or gaming activities or the sale of liquor
in any jurisdiction, including, without limitation, within the State of New
Jersey, specifically, the New Jersey Casino Control Commission, the New Jersey
Division of Gaming Enforcement, and all other state and local regulatory and
licensing bodies with authority over gaming in the State of New Jersey and
its
political subdivisions.
“Gaming
Laws”
mean
all laws pursuant to which any Gaming Authority possesses regulatory, licensing
or permit authority over gaming within the State of New Jersey, including,
without limitation, the New Jersey Casino Control Act and the rules and
regulations promulgated thereunder, as amended from time to time.
“GB
Claims”
means
(i) any and all claims related to GB Holdings, ACE Hi, ACE Lo or any of their
respective Affiliates arising out of or related to events occurring prior to
or
through the Closing, whether brought before the Closing or thereafter, held
by
any of the GB Parties against any of the ACE Selling Parties, Buyer or any
other
Indemnified Party, (ii) any action, claim, suit, investigation or proceeding,
actual or threatened, and all appeals arising therefrom, arising out of or
relating to the 2004 GB Restructuring, including without limitation (A) any
action, claim, suit, investigation, or proceeding seeking a payment of money
(including without limitation an increase in the Purchase Price), or (B) a
transfer of all or a portion of the assets of the ACE Selling Parties, or either
of them, under any avoiding statute, whether arising under Federal or state
Law,
(iii) any proceedings in the Bankruptcy Case, including without limitation
pre-
or post- confirmation proceedings in the Chapter 11 case and all proceedings
in
the event the Bankruptcy Case is converted to Chapter 7, or (iv) the production
of documents, giving of any deposition testimony, any Bankruptcy Rule 2004
examinations, or any other proceeding or litigation involving or relating to
the
assets of the ACE Selling Parties, or either of them, arising from the actions
of the GB Parties in their capacity as such, even though no claim is made
against Buyer or any other Indemnified Party or ACE Lo and neither ACE Lo,
Buyer
nor any other Indemnified Party is a party to such proceeding or litigation.
“GB
Holdings”
means
GB Holdings, Inc., a Delaware corporation.
“GB
Parties”
means
(i) Greate Bay or GB Holdings; (ii) so long as GB Holdings is a debtor in a
bankruptcy case pending before the Bankruptcy Court, the GB Holdings bankruptcy
estate and its official committee of general unsecured creditors in its
bankruptcy case; (iii) the equityholders of GB Holdings; (iv) the creditors
of GB Holdings; and (v) any other person or entity which is granted
standing by the Bankruptcy Court to prosecute any of the GB Claims including,
but not limited to, a liquidation or litigation trust created pursuant to a
plan
of reorganization in GB Holdings chapter 11 proceedings confirmed by the
Bankruptcy Court which acquires the right to prosecute such GB
Claims.
“GB
Property”
means
GB Property Funding Corp., a Delaware corporation.
“GB
Resale Payment”
means
any payment made by Buyer to acquire any property acquired by Buyer under this
Agreement, directly or indirectly, if following the Closing such property is
resold by order of an Applicable Court, but only to the extent that such payment
exceeds any portion of the purchase price refunded or otherwise paid to Buyer
in
connection with or as a result of a resale of such property, including without
limitation, pursuant to a post-Closing auction or other proceeding by, or
approved or required by, an Applicable Court or conducted pursuant to or in
furtherance of the terms of a plan of reorganization in an Applicable Bankruptcy
Case, including by a Chapter 7 or 11 trustee or a liquidating or creditors
trust
established in an Applicable Bankruptcy Case, in each case as ordered or
approved by an Applicable Court. For example, if the original purchase price
for
the Casino Property was equal to Two Hundred Million Dollars ($200,000,000),
and
an Applicable Court reacquired the Casino Property but refunded to Buyer the
original purchase price of Two Hundred Million Dollars ($200,000,000) paid
by
Buyer, then in the event that Buyer later acquired the Casino Property at a
post-Closing auction for a purchase price of Two Hundred Fifty Million Dollars
($250,000,000), the “GB Resale Payment” would equal Fifty Million Dollars
($50,000,000).
-101-
“Governmental
Consents”
means
all notices, reports, filings, consents, registrations, approvals, permits
or
authorizations required to be made prior to the Closing by Buyer and the Selling
Parties or any of their respective Affiliates with, or obtained prior to the
Closing by Buyer and the Selling Parties or any of their respective Affiliates
from, any Governmental Entity in connection with the execution and delivery
of
this Agreement and the consummation of the transactions contemplated hereby
(and
shall include the expiration or termination of the waiting period under the
HSR
Act).
“Grant
and Donations Agreement”
means
the Grant and Donations Agreement dated as of April 2004, by and between the
CRDA, the NJSEA, ACE Lo and the other New Jersey casino licensees.
“Greate
Bay”
means
Greate Bay Hotel and Casino, Inc., a New Jersey corporation.
“Hazardous
Substance”
means
any pollutant, chemical, substance and any toxic, infectious, carcinogenic,
reactive, corrosive, ignitable or flammable chemical, chemical compound, or
hazardous substance, material or waste, whether solid, liquid or gas, that
is
subject to regulation, control or remediation under applicable Environmental
Laws, including without limitation, any quantity of friable asbestos, urea
formaldehyde foam insulation, PCBs, crude oil or any fraction thereof, all
forms
of natural gas, petroleum products or by-products or derivatives.
“Holdback
Condition”
means
the first to occur of any of the following:
(i) a
release, in favor of Buyer, the other Indemnified Parties and ACE Lo, of any
and
all GB Claims, which release shall either (A) be executed by each of the GB
Parties which holds or has an interest in the GB Claims as of the date such
release is executed, (B) be contained in a plan of reorganization confirmed
by a
final, non-appealable order of the Bankruptcy Court or another court of
competent jurisdiction, or (C) be contained in another court order entered
by,
or a stipulation approved by, such a court that binds all of the GB Parties
that
hold or have an interest in the GB Claims as of the date such court order or
stipulation;
-102-
(ii) entry
of
a final non-appealable judgment or order of the Bankruptcy Court or another
court of competent jurisdiction that binds all of the GB Parties that hold
or
have an interest in the GB Claims as of the date of such judgment or order
determining (A) that neither Buyer, any other Indemnified Party nor ACE Lo
shall be liable in respect of any GB Claims, or (B) the amount of Buyer’s,
any other Indemnified Party’s and/or ACE Lo’s liability in respect of the GB
Claims, and the payment by ACE Hi, AREH or AREH’s Affiliates of such amount in
full;
(iii) entry
of
a final non-appealable order of the Bankruptcy Court or another court of
competent jurisdiction (A) allowing the Purchase to proceed according to the
terms and conditions specified in this Agreement and that the same be
consummated free and clear of any of the GB Claims or (B) determining after
the Closing that the Purchase is free and clear of any of the GB Claims;
(iv) the
consent of Buyer (which shall not be unreasonably withheld or delayed) upon
presentation to Buyer of evidence that reflects the full satisfaction of the
GB
Claims by a means other than those specified herein; or
(v) the
expiration of all statutes of limitations applicable to the GB Claims.
“Improvements”
means,
as it relates to any Company, all buildings, structures and other similar
improvements and fixtures owned by the relevant entity and placed on, attached
to, or located on the Casino Land or Adjacent Land, as applicable.
“Income
Tax”
means
(i) any federal, state, local or foreign income Tax, alternative minimum
Tax or other similar Tax (but only if determined with respect to net income),
and (ii) the New Jersey Corporation Business Tax (including any alternative
minimum assessment).
“Income
Tax Return”
means
any Tax Return relating to Income Taxes.
“Indebtedness”
means,
as of any date, without duplication, (i) all indebtedness of such Person for
borrowed money (other than chip and token liability incurred in the ordinary
course of such Person’s business), (ii) all obligations of such Person for the
deferred purchase price of property or services (other than trade payables
and
accrued expenses that are current liabilities), (iii) all obligations of
such Person evidenced by notes, bonds, debentures or other similar instruments,
(iv) all indebtedness created or arising under any conditional sale or other
title retention agreement with respect to property acquired by such Person
(even
though the rights and remedies of the seller or lender under such agreement
in
the event of default are limited to repossession or sale of such property),
(v)
all capital lease obligations of such Person, (vi) all obligations of such
Person, contingent or otherwise, as an account party or applicant under
acceptance, letter of credit or similar facilities, (vii) all obligations of
such Person, contingent or otherwise, to purchase, redeem, retire or otherwise
acquire for value any Equity Interests of such Person, (viii) all guarantee
obligations of such Person in respect of obligations of the kind referred to
in
clauses (i) through (vii) above, (ix) all obligations of the kind referred
to in
clauses (i) through (viii) above secured by (or for which the holder of such
obligation has an existing right, contingent or otherwise, to be secured by)
any
Lien on property (including, without limitation, accounts and contract rights)
owned by such Person, whether or not such Person has assumed or become liable
for the payment of such obligation, in the case of clause (ix) above, other
than
Permitted Encumbrances.
-103-
“Indenture”
means
that certain Indenture dated as of July 22, 2004, by and among ACE Hi, as
issuer, ACE Lo, as guarantor, and Wells Fargo Bank, National Association, as
trustee (“Trustee”),
relating to the 3% Notes.
“Intellectual
Property”
means
all intellectual property or other proprietary rights, including all patents,
patent applications, inventions (whether or not patentable), processes,
products, technologies, discoveries, copyrightable and copyrighted works, trade
secrets, trademarks, trademark registrations and applications, domain names,
service marks, service mark registrations and applications, trade names, trade
secrets, know-how, trade dress, copyright registrations, customer lists,
confidential marketing and customer information, licenses, confidential
technical information, and all documentation thereof, and the goodwill
symbolized thereby.
“Inventory”
means
inventory held for sale to customers or delivery to customers as gifts
(specifically excluding slot machine parts, tables, linens, china, silver,
glass, paper, uniforms and similar items), net of reserves for outdated or
damaged goods and inventory shrinkage.
“IRS”
means
the Internal Revenue Service, a division of the United States Treasury
Department, or any successor thereto.
“knowledge”
of a particular fact or matter means that a Person is actually aware of such
fact or other matter after reasonable inquiry. When used in the phrase
“knowledge of the ACE Selling Parties” or “the ACE Selling Parties’ knowledge”
and words of similar import, “knowledge” means the knowledge of Richard P.
Brown, Denise Barton, Nancy Axilrod and Douglas Niethold. When used in the
phrase “knowledge of the AREH Selling Parties” or “the AREH Selling Parties’
knowledge” and words of similar import, “knowledge” means the knowledge of
Felicia Buebel and Hillel Moerman.
“Law”
means
any foreign or domestic law, statute, code, ordinance, rule, regulation, order,
judgment, writ, stipulation, award, injunction, decree or arbitration award,
policies, guidance, court decision, rule of common law or finding, including,
without limitation, the Gaming Laws.
“Leases”
means
any leases, subleases, occupancy and concession agreements affecting the
Properties.
“Legal
Proceeding”
means
any action, arbitration, audit, hearing, investigation, 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.
“License
Agreement”
means
the License Agreement dated as of July 14, 2004, by and between Las Vegas Sands,
Inc., a Nevada corporation, as licensor, and Greate Bay, as licensee, as amended
by the Assignment and Assumption Agreement dated as of July 14, 2004, by and
between Greate Bay, as assignor, and ACE Lo, as assignee.
-104-
“Licensed
Intellectual Property”
means
all Intellectual Property that is used by ACE Lo in the conduct of the Casino
Business pursuant to a license, consent or authorization from a third
party.
“Liens”
means
any mortgage, pledge, lien, security interest, conditional or installment sale
agreement or other similar encumbrances that is a lien under applicable Law.
“Madison
House Hotel”
means
the hotel known as the “Madison House” operated by ACE Lo pursuant to the
Madison House Lease.
“Madison
House Lease”
means
the Lease dated as of December 18, 2000, by and among Madison House Group,
L.P.,
a New Jersey limited partnership, as landlord, and Greate Bay, as tenant, as
assigned by Greate Bay to ACE Lo by the Assignment of Lease dated July 22,
2004,
and recorded July 22, 2004 in the office of the Clerk/Register of Atlantic
County in deed book 7791, page 1.
“Material
Adverse Effect”
means,
when used in connection with any Selling Party, any Effect that (i) is
materially adverse to the assets, properties, capitalization or condition
(including any changes in liabilities or other balance sheet entries, but
excluding any deterioration or adverse developments in operating results) of
such Person and its Subsidiaries, taken as a whole, but excluding any of the
foregoing resulting from (A) changes or conditions generally affecting the
U.S.
economy or financial markets or generally affecting the industry in which the
applicable Person or any of its Subsidiaries operates (in each case, to the
extent not disproportionately affecting the applicable Person as compared to
other gaming companies), (B) any change in state Law, as long as such
change in Law does not reduce or alter the scope, manner of operation, type,
nature or timing of any permitted gaming activities which the applicable Person
or its Subsidiaries are permitted to conduct and as long as such change in
Law
does not disproportionately affect the applicable Person as compared to other
gaming companies in the state and (C) any change or effect resulting from
compliance with the terms of this Agreement or (ii) prevents or impairs in
any material respect the ability of such Person to perform its obligations
under
this Agreement or prevents or materially delays the consummation by such Person
of any of the transactions contemplated hereby.
“Measurement
Date Straddle Period”
means
any Tax Period beginning before the Measurement Date and ending after the
Measurement Date.
“MLK
Indebtedness”
means
any unpaid amounts as of the Closing Date under the purchase money mortgage
in
the original principal amount of One Million Seven Hundred Fifty Thousand
Dollars ($1,750,000) by Boardwalk in favor of John Schultz (“Schultz”)
in
respect a portion of the MLK Land pursuant to the Agreement of Purchase and
Sale
dated as of March 2006, by and between Boardwalk and Schultz.
“MLK
Street Widening Project”
means
a
project to be undertaken by the CRDA and funded through the application of
CRDA
Funds that may provide, among other things, for the widening of that street
located in Atlantic City, New Jersey identified as Dr. Martin Luther King,
Jr.
Boulevard, between Atlantic Avenue and Pacific Avenue, in a manner consistent
with the prior widening of Dr. Martin Luther King, Jr. Boulevard between Absecon
Boulevard/Route 30 and Atlantic Avenue, including the purchase of property,
demolition of structures, design and construction of road improvements and
such
other activities as may required to complete such project.
-105-
“NJSEA”
means
the New Jersey Sports & Exposition Authority.
“Non-Income
Tax”
means
any Tax other than an Income Tax.
“Non-Income
Tax Return”
means
any Tax Return relating to a Non-Income Tax.
“Notes
Payable”
means
(i) all indebtedness of ACE Lo for borrowed money (other than chip and token
liability incurred in the ordinary course of the Casino Business), (ii) all
obligations of ACE Lo for the deferred purchase price of property or services
(other than trade payables and accrued expenses that are current liabilities),
(iii) all obligations of ACE Lo evidenced by notes, bonds, debentures or other
similar instruments (other than promissory notes required pursuant to this
Agreement), (iv) all capital lease obligations of ACE Lo and (v) all guarantee
obligations of ACE Lo in respect of obligations of the kind referred to in
clauses (i) through (iv) above.
“Owned
Intellectual Property”
means
all Intellectual Property owned by ACE Lo.
“Permitted
Encumbrances”
means
(i) the Permitted Exceptions, (ii) matters disclosed by (A) the ALTA/ACSM
Land Title Survey by Pennoni Associates Inc., dated September 14, 2000, GRBA
#
1300.001.01, (B) the Property Survey Plan by Arthur W. Ponzio Co. &
Associates, Inc., dated July 12, 2005, last revised May 9, 2006, Project #27869
(Block 48 Lots 11, 12, 13, 19 and Block 49 Lot 12), (C) the Property Survey
Plan
by Arthur W. Ponzio Co. & Associates, Inc., dated July 12, 2005, last
revised May 9, 2006, Project #27869 (Block 48 Lots 14, 25 and Block 1 Lot 111),
(D) ATLA/ACSM Property Survey by Arthur W. Ponzio Co. & Associates, Inc.,
dated April 19, 2006, last revised April 30, 2006, Project #28397, (E) the
Property Survey Plan by Arthur W. Ponzio Co. & Associates, Inc., dated April
28, 2006, last revised May 9, 2006, Project #27869 (Block 47 Lots 13-18), (F)
ATLA/ACSM Property Survey by Arthur W. Ponzio Co. & Associates, Inc., dated
May 4, 2006, last revised May 17, 2006, Project #28416, and (G) ALTA Survey
by
Arthur W. Ponzio Co. & Associates, Inc., dated July 10, 2006 (unsigned by
Ponzio), Project #28522, (iii) the mortgage securing the MLK Indebtedness,
and
(iv) matters created or caused by Buyer.
“Person”
means
an individual, corporation, limited liability company, partnership, association,
trust, unincorporated organization, other entity or “group”
(as
defined in Rule 13d−5(b)(1) under the Exchange Act).
“Personal
Property”
means
all office, hotel, casino, showroom, restaurant, bar, convention, meeting and
other furniture, furnishings, appliances, equipment, equipment manuals, slot
machines, gaming tables and gaming paraphernalia (including parts or inventories
thereof), gaming chips and tokens (including, without limitation, (i) slot
machine tokens not currently in circulation, and (ii) reserve chips, if any,
not
currently in circulation), passenger/delivery vehicles, computer hardware,
point
of sale equipment, telephone numbers, two-way security radios and base station,
maintenance equipment, tools, signs and signage, office supplies, cleaning
supplies in unopened cases or bulk containers or packages, linens (sheets,
towels, blankets, napkins), uniforms, silverware, glassware, chinaware, pots,
pans and utensils, and food, beverage and alcoholic beverage inventories owned
by ACE Lo and located at the Casino Property or used in the Casino Business.
-106-
“Post-Closing
Tax Period”
means
any Tax Period ending after the Closing Date, other than that portion of any
Closing Date Straddle Period ending on the Closing Date.
“Post-Measurement
Date Tax Period”
means
any Tax Period ending after the Measurement Date, other than that portion of
any
Measurement Date Straddle Period ending on the Measurement Date.
“Pre-Closing
Tax Period”
means
any Tax Period ending on or before the Closing Date and that portion of any
Closing Date Straddle Period ending on the Closing Date.
“Pre-Measurement
Date Tax Period”
means
any Tax Period ending on or before the Measurement Date and that portion of
any
Measurement Date Straddle Period ending on the Measurement Date.
“Qualified
Exchange Accommodation Agreements”
means
(A) the Qualified Exchange Accommodation Agreement dated as of May 17,
2006, by and among BEC, Boardwalk and AREH; (B) the Promissory Note dated as
of
May 17, 2006, from BEC payable to AREH in the aggregate principal amount of
$61,850,000; (C) the Nominee Agreement dated as of May 17, 2006, by and
between Boardwalk, BEC and AREH; and (D) the Lease dated as of May 17,
2006, by and between AREH and Boardwalk.
“Real
Property Tax Contest”
or
“Real
Property Tax Contests”
means
a
claim or claims (including an appeal or appeals of any judgment, order, decision
or determination of a judicial or administrative body) by ACE Lo relating to
real property tax assessment(s) imposed by the City of Atlantic City with
respect to the Casino Property for any Tax years (or portion thereof) beginning
after 1995 and ending on the Measurement Date.
“Real
Property Tax Event”
means
a
Final Determination or the execution of a Real Property Tax Settlement Agreement
with respect to any Real Property Tax Contest followed by the entry of a
judgment issued pursuant to the Real Property Tax Settlement Agreement that
has
become final and non-appealable, including without limitation the expiration
of
the time to seek certification to the Supreme Court of New Jersey or, if such
application is filed, the denial of such application.
“Real
Property Tax Refund”
means
the sum, including interest, of (i) the aggregate amount (without discount)
of
(A) any cash payments and (B) the face value of any credits against real
property Taxes due with respect to the Casino Property (and any other Properties
to which the credits are applicable) for periods following the Measurement
Date
allowed in lieu of cash payment refunds of Taxes paid in periods prior to the
Measurement Date to be received by ACE Lo, Buyer or any Affiliate of Buyer
or
any transferee therefrom or successor thereto pursuant to any Real Property
Tax
Event, to the extent such cash payments or credits are to be either received
or
available during the period beginning on the Measurement Date and ending on
the
fifth (5th)
anniversary of the Closing, and (ii) the present value of any cash payments
and
credits against real property Taxes due with respect to the Casino Property
(and
any other Properties to which the credits are applicable) for periods following
the Measurement Date allowed in lieu of cash payment refunds of Taxes paid
in
periods prior to the Measurement Date to be received by ACE Lo, Buyer or any
Affiliate of Buyer or any transferee therefrom or successor thereto pursuant
to
any Real Property Tax Event, to the extent such cash payments or credits are
to
be either received or available in periods following the fifth (5th)
anniversary of the Closing, discounted to present value based on the projected
utilization of such credits at the then current real property Tax rate at a
discount rate of eight percent (8%) per annum.
-107-
“Real
Property Tax Settlement Agreement”
means
any written agreement with a municipal, state or administrative authority
settling a Real Property Tax Contest.
“Release”
means
any spilling, leaking, emitting, discharging, depositing, escaping, leaching,
dumping, or other releasing of a Hazardous Substance into the environment,
whether intentional or unintentional.
“Securities
Act”
means
the Securities Act of 1933, as amended.
“Specified
Intellectual Property”
means
Customer Data, the right to use the “Sands” name and the right to use the
“Madison House” name.
“Subsidiary”
means,
with respect to any Person, any corporation or other organization, whether
incorporated or unincorporated, of which (i) such Person or any other Subsidiary
of such Person is a general partner or managing member or (ii) at least 50%
of
the securities or other Equity Interests having by their terms voting power
to
elect a majority of the board of directors or others performing similar
functions with respect to such Person, corporation or other organization that
is, directly or indirectly, owned or controlled by such party or by any one
or
more of its Subsidiaries, or by such party and one or more of its Subsidiaries.
“Tax
Period”
means
any period prescribed by any Governmental Entity for which a Tax Return is
required to be filed or a Tax is required to be paid.
“Tax
Return”
means
any report, return (including any information return), claim for refund,
election, estimated Tax filing or payment, request for extension, document,
declaration or other information or filing required to be supplied to any
Governmental Entity with respect to Taxes, including attachments thereto and
amendments thereof.
“Taxes”
means
any and all taxes, charges, fees, levies, tariffs, duties, liabilities,
impositions or other assessments of any kind (together with any and all
interest, penalties, additions to tax and additional amounts imposed with
respect thereto) imposed by any Tax authority or other Governmental Entity,
including, without limitation, income, gross receipts, profits, gaming, excise,
real or personal property, environmental, sales, use, value-added, ad valorem,
withholding, social security, retirement, employment, unemployment, workers’
compensation, occupation, service, license, net worth, capital stock, payroll,
franchise, gains, stamp, transfer and recording taxes, and shall include any
liability for the Taxes of any other Person under Treasury Regulation Section
1.1502−6 (or any similar provision of state, local, or foreign Law), or as a
transferee or successor, by contract, or otherwise.
-108-
“Traymore
Call Agreement”
means
the Call Agreement dated as of June 5, 2006, by and between AREH and ACE Lo.
“Traymore
Call Right”
means
ACE Lo’s right to require AREH to sell to ACE Lo the Boardwalk Equity Interests
pursuant to the Traymore Call Agreement.
“Traymore
Call Termination Date”
means
5:00 p.m. New York Time on June 5, 2007, which represents the date and time
at
which the “Call Right” under the Traymore Call Agreement shall expire if it
remains unexercised at such time.
“Traymore
Closing Costs”
means
all costs and expenses actually incurred by AREH and its Affiliates in
connection with the acquisition, ownership and financing of the Traymore Site
including, without limitation, legal fees, title insurance costs, recording
fees, transfer or similar taxes, and survey and inspection costs.
“Traymore
Operating Expenses”
means
all costs and expenses actually incurred by AREH and its affiliates in owning
or
operating the Traymore.
“Traymore
Price”
means
an amount equal to the result of (i) the sum of (A) the price allocated pursuant
to the Traymore Purchase Agreement to the Traymore Site of $61 million (subject
to adjustment for pro rated rents, utilities and assessments), plus
(B) the
Traymore Closing Costs and plus
(C) the
Traymore Operating Costs, plus,
in each
case, interest thereon at the rate of 8% per annum from the date such costs
are
incurred, calculated on the basis of a 360 day year, through and including
the
Closing Date, minus
(ii) any
revenues received by Boardwalk or AREH with respect to the Traymore Site through
and including the Closing Date (but excluding any amounts received pursuant
to
the Qualified Exchange Agent Agreements).
“Traymore
Purchase Agreement”
means
the agreement dated November 28, 2005, by and among Martial Development Corp.,
a
New Jersey Corporation, Boardwalk Regency Corporation, a New Jersey corporation
and Boardwalk.
“Warehouse
Property”
means
the real estate situated in the Township of Little Egg Harbor, New Jersey,
more
particularly described in the Warehouse Sale Agreement, together with the
Improvements nor or hereafter located thereon.
“Warehouse
Sale Agreement”
means
the Contract for the Sale/Purchase of Sale dated as of May 27, 2003, as amended,
by and between ACE Lo and Brookside Point, L.L.C.
“WARN
Act”
means
the Worker Adjustment and Restraining Notification Act of 1988, or any similar
state or local statute or ordinance.
(b) The
following are defined elsewhere in this Agreement, as indicated
below:
|
Terms
|
Cross
Reference in
Agreement
|
|
|
2006
NJSEA Payment
|
Section
2.1(b)(ii)
|
|
|
2006
NJSEA Refund
|
Section
9.26
|
|
|
ACE
Closing Payment
|
Section
2.5(c)
|
-109-
|
Terms
|
Cross
Reference in
Agreement
|
|
ACE
Closing Payment Escrow
|
Section
2.5(b)
|
|
|
ACE
Closing Payment Escrow Agreement
|
Section
2.5(b)
|
|
|
ACE
Closing Price Adjustment
|
Section
2.1(b)(i)
|
|
|
ACE
Determination Date
|
Section
2.7(c)
|
|
|
ACE
Disclosure Letter
|
ARTICLE
IV
|
|
|
ACE
Hi
|
Preamble
|
|
|
ACE
Hi NJSEA Payment
|
Section
2.1(b)(ii)
|
|
|
ACE
Hi Acquisition Agreement
|
Section
9.4(b)
|
|
|
ACE
Hi Common Stock
|
Section
4.5
|
|
|
ACE
Hi NJSEA Ratio
|
Section
2.1(b)(ii)
|
|
|
ACE
Leased Property
|
Section
5.14(a)
|
|
|
ACE
Lo
|
Preamble
|
|
|
ACE
Lo Equity Interests
|
Recitals
|
|
|
ACE
Lo Material Contracts
|
Section
5.3(a)
|
|
|
ACE
Lo Purchase
|
Recitals
|
|
|
ACE
Lo Pro Forma Title Policies
|
Section
5.14(b)
|
|
|
ACE
Lo Promissory Note
|
Section
9.1(d)
|
|
|
ACE
Owned Property
|
Section
5.14(a)
|
|
|
ACE
Permits
|
Section
5.15(b)
|
|
|
ACE
Purchase Price Adjustment
|
Section
2.7(d)
|
|
|
ACE
Real Property
|
Section
7.10(a)
|
|
|
ACE
Selling Parties
|
Preamble
|
|
|
Additional
Land
|
Recitals
|
|
|
Additional
Land Purchases
|
Recitals
|
|
|
Additional
Properties
|
Recitals
|
|
|
Adjacent
Land
|
Recitals
|
|
|
Adjacent
Leased Property
|
Section
7.10(a)
|
|
|
Adjacent
Owned Property
|
Section
7.10(a)
|
|
|
Adjacent
Property Mansion Taxes
|
Section
2.2(b)(i)
|
|
|
Adjacent
Properties
|
Section
7.10(a)
|
|
|
Adjacent
Real Property
|
Section
7.10(a)
|
|
|
Agreed
Severance Amount
|
Section
2.1(b)(v)
|
|
|
Agreed
Stay-Put Bonuses
|
Section
9.28(c)
|
|
|
Agreement
|
Preamble
|
|
|
Alternative
Proposal Period
|
Section
9.4(a)
|
|
|
Antitrust
Division
|
Section
9.7(b)
|
|
|
AREH
|
Preamble
|
|
|
AREH
Closing Payment
|
Section
2.6(c)
|
|
|
AREH
Closing Payment Escrow
|
Section
2.6(b)
|
|
|
AREH
Closing Payment Escrow Agreement
|
Section
2.6(b)
|
|
|
AREH
Determination Date
|
Section
2.8(b)
|
|
|
AREH
Disclosure Letter
|
ARTICLE
VI
|
|
|
AREH
Purchase Price
|
Section
2.2(a)
|
|
|
AREH
Purchase Price Adjustment
|
Section
2.8(c)
|
-110-
|
Terms
|
Cross
Reference in
Agreement
|
|
AREH
Selling Parties
|
Preamble
|
|
|
AREH
Subs
|
Preamble
|
|
|
AREH
Subs Contracts
|
Section
7.2
|
|
|
AREH
Subs Equity Interests
|
Recitals
|
|
|
AREH
Subs Purchase
|
Recitals
|
|
|
AREH
Subs Prorations
|
Section
2.2(b)(ii)
|
|
|
AREH
Subs Takeover Proposal
|
Section
9.4(f)(iv)
|
|
|
AREH
Subs Pro Forma Title Policies
|
Section
7.10(b)
|
|
|
AREP
Sands
|
Section
9.4(d)(i)
|
|
|
Asserted
Liability
|
Section
12.4(a)
|
|
|
Audit
Procedures
|
Section
2.7(c)
|
|
|
Auditor
|
Section
2.7(c)
|
|
|
Base
AREH Purchase Price
|
Section
2.2(a)(i)
|
|
|
Boardwalk
|
Preamble
|
|
|
Buyer
|
Preamble
|
|
|
Buyer
Disclosure Letter
|
ARTICLE
VIII
|
|
|
Casino
Business
|
Recitals
|
|
|
Casino
Employees
|
Section
9.1(a)
|
|
|
Casino
Land
|
Recitals
|
|
|
Casino
Mansion Taxes
|
Section
2.1(b)(vi)
|
|
|
Casino
Property
|
Section
5.14(a)
|
|
|
Casino
Shutdown
|
Section
9.1(b)
|
|
|
Casino
Shutdown Plan
|
Section
9.1(b)
|
|
|
Certain
Employee Liabilities
|
Section
2.1(b)(vii)
|
|
|
City-Wide
Progressives Refund
|
Section
9.24
|
|
|
Claims
Notice
|
Section
12.4(a)
|
|
|
Closing
|
Section
1.2
|
|
|
Closing
ACE Purchase Price
|
Section
2.1(a)(i)
|
|
|
Closing
Date
|
Section
1.2
|
|
|
COBRA
|
Section
5.5(e)
|
|
|
commercially
reasonable efforts
|
Section
9.7(f)
|
|
|
Companies
|
Preamble
|
|
|
Competing
AREH Offer
|
Section
9.4(e)(ii)
|
|
|
Condemnation
Amount
|
Section
9.12(b)
|
|
|
Confidentiality
Agreement
|
Section
9.6(a)
|
|
|
Consent
|
Section
4.2(c)
|
|
|
Counsel
|
Section
9.16(a)
|
|
|
Covered
Casino Employee
|
Section
9.28(e)
|
|
|
CRDA
Price
|
Section
2.1(b)(ix)
|
|
|
Demand
Notice
|
Section
9.13
|
|
|
Deposit
|
Section
2.3(a)
|
|
|
Deposit
Escrow Agreement
|
Section
2.3(a)
|
|
|
Direct
Claim
|
Section
12.4(c)
|
|
|
Discharged
ACE Indemnified Liabilities
|
Section
2.1(b)(xi)
|
-111-
|
Terms
|
Cross
Reference in
Agreement
|
|
EBITDA
Bonuses
|
Section
2.1(b)(xii)
|
|
|
Electing
Party
|
Section
9.20(a)
|
|
|
Employee
Benefit Plans
|
Section
5.5(a)
|
|
|
Employment
Laws
|
Section
5.6(a)
|
|
|
ERISA
|
Section
5.5(a)
|
|
|
ERISA
Affiliate
|
Section
5.5(a)
|
|
|
Escrow
Gaming Amounts
|
Section
2.1(b)(xviii)
|
|
|
Estimated
ACE Closing Price Adjustment
|
Section
2.1(b)(xiii)
|
|
|
Estimated
Adjacent Property Mansion Taxes
|
Section
2.2(b)(iv)
|
|
|
Estimated
AREH Subs Prorations
|
Section
2.2(b)(iii)
|
|
|
Estimated
Casino Mansion Taxes
|
Section
2.1(b)(xv)
|
|
|
Estimated
Certain Employee Liabilities
|
Section
2.1(b)(xvi)
|
|
|
Estimated
Multiemployer Plan Liabilities
|
Section
2.1(b)(xvii)
|
|
|
Experts
|
Section
9.16(a)
|
|
|
Final
ACE Closing Schedule
|
Section
2.7(b)
|
|
|
Final
AREH Closing Schedule
|
Section
2.8(a)
|
|
|
Final
MEPA Determination
|
Section
9.22
|
|
|
FTC
|
Section
9.7(b)
|
|
|
Gaming
Liabilities
|
Section
2.1(b)(xviii)
|
|
|
GB
Indemnification Escrow Agreement
|
Section
2.4
|
|
|
GB
Indemnification Escrow Amount
|
Section
2.4
|
|
|
GB
Date
|
Section
2.4
|
|
|
GB
Judgment
|
Section
2.4(d)(ii)
|
|
|
Governmental
Entity
|
Section
4.2(c)
|
|
|
HSR
Act
|
Section
4.2(c)
|
|
|
Indemnification
Floor
|
Section
12.7(a)
|
|
|
Indemnified
Party
|
Section
12.2(a)
|
|
|
Indemnifying
Party
|
Section
12.2(b)
|
|
|
Initial
ACE Purchase Price
|
Section
2.1(a)(i)
|
|
|
Inspection
|
Section
9.6
|
|
|
Intellectual
Property Agreements
|
Section
5.7(a)
|
|
|
Interests
|
Recitals
|
|
|
Losses
|
Section
12.2(a)
|
|
|
Measurement
Date
|
Section
2.1(b)(xix)
|
|
|
Measurement
Period
|
Section
2.1(b)(xx)
|
|
|
MEPA
Adjustment Amount
|
Section
9.22
|
|
|
MLK
I
|
Preamble
|
|
|
MLK
II
|
Preamble
|
|
|
MLK
III
|
Preamble
|
|
|
MLK
Entities
|
Preamble
|
|
|
MLK
Land
|
Recitals
|
|
|
MLK
Letter
|
Recitals
|
|
|
MLK
Price
|
Section
2.2(b)(v)
|
|
|
MLK
Properties
|
Recitals
|
-112-
|
Terms
|
Cross
Reference in
Agreement
|
|
Multiemployer
Plan
|
Section
5.5(a)
|
|
|
Multiemployer
Plan Liabilities
|
Section
2.1(b)(xxi)
|
|
|
NJSEA
|
Section
9.26
|
|
|
Non-Electing
Party
|
Section
9.20(a)
|
|
|
Non-Refundable
Date
|
Section
11.2(b)
|
|
|
Notice
|
Section
12.4
|
|
|
Old
Post Office Land
|
Section
9.14
|
|
|
Old
Post Office Site
|
Section
9.14
|
|
|
Outside
Date
|
Section
10.1(a)
|
|
|
Outstanding
Chip & Ticket-In/Ticket-Out Liabilities
|
Section
2.1(b)(xviii)
|
|
|
Payment
Request
|
Section
12.4(c)
|
|
|
PBGC
|
Section
5.5(g)
|
|
|
Per
Diem Taxes
|
Section
12.3(e)(i)
|
|
|
Permitted
Exceptions
|
Section
9.17(a)
|
|
|
Plans
|
Section
5.5(a)
|
|
|
Preliminary
ACE Closing Schedule
|
Section
2.5(a)
|
|
|
Preliminary
AREH Closing Schedule
|
Section
2.6(a)
|
|
|
Pro
Forma Title Policies
|
Section
7.10(b)
|
|
|
Progressive
Gaming Liabilities
|
Section
2.1(b)(xviii)
|
|
|
Properties
|
Recitals
|
|
|
Purchase
|
Recitals
|
|
|
Purchase
Price
|
Section
2.2(a)
|
|
|
Purchase
Price Allocation
|
Section
9.19(a)
|
|
|
Registrations
|
Section
5.7(a)
|
|
|
Required
Gaming Liabilities
|
Section
2.1(b)(xviii)
|
|
|
Requisite
Stockholder Approval
|
Section
4.5
|
|
|
Representatives
|
Section
9.6(a)
|
|
|
Restaurant
Costs
|
Section
2.2(b)(vi)
|
|
|
Restaurant
Land
|
Recitals
|
|
|
Restaurant
Purchase
|
Recitals
|
|
|
Restaurant
Purchase Price
|
Section
2.2(b)(vi)
|
|
|
Restaurant
Site
|
Recitals
|
|
|
Restraint
|
Section
10.1(a)
|
|
|
Section
1031 Exchange
|
Section
9.20(a)
|
|
|
Sellers
|
Preamble
|
|
|
Selling
Parties
|
Preamble
|
|
|
Stay-Put
Casino Employees
|
Section
9.28(c)
|
|
|
Stockholder
Consent
|
Section
9.5
|
|
|
Subsidy
Notice
|
Section
9.26
|
|
|
Subsidy
Payment
|
Section
9.26
|
|
|
Superior
Proposal
|
Section
9.4(d)(ii)
|
|
|
Takeover
Proposal
|
Section
9.4(d)(i)
|
|
|
Tax
Claim
|
Section
12.3(f)(i)
|
|
|
Termination
Fee
|
Section
9.11(b)
|
-113-
|
Terms
|
Cross
Reference in
Agreement
|
|
Traymore
Land
|
Recitals
|
|
|
Traymore
Site
|
Recitals
|
|
|
WARN
Act Notice
|
Section
9.1(a)
|
|
|
WARN
Act Notice Date
|
Section
9.1(a)
|
Section
13.2 Governing
Law; Consent to Jurisdiction.
(a) This
Agreement and the transactions contemplated hereby, and all disputes between
the
parties under or related to the Agreement or the facts and circumstances leading
to its execution, whether in contract, tort or otherwise, shall be governed
by,
and construed in accordance with, the Laws of the State of Delaware (without
giving effect to choice of Law principles thereof).
(b) Each
of
the parties irrevocably agrees that any legal action or proceeding with respect
to this Agreement or for recognition and enforcement of any judgment in respect
hereof brought by the other party hereto or its successors or assigns shall
be
brought and determined exclusively in the Delaware Court of Chancery (and if
the
Delaware Court of Chancery shall be unavailable, any court of the State of
Delaware or the federal court of the United States of America sitting in the
State of Delaware), and each of the parties hereby irrevocably submits with
regard to any such action or proceeding for itself and in respect to its
property, generally and unconditionally, to the exclusive jurisdiction of the
aforesaid courts. Each of the parties hereby irrevocably waives, and agrees
not
to assert, by way of motion, as a defense, counterclaim or otherwise, in any
action or proceeding with respect to this Agreement, (i) any claim that it
is
not personally subject to the jurisdiction of the above-named courts for any
reason other than the failure to lawfully serve process, (ii) that it or its
property is exempt or immune from jurisdiction of any such court or from any
legal process commenced in any such court (whether through service of notice,
attachment prior to judgment, attachment in aid of execution of judgment,
execution of judgment or otherwise), and (iii) to the fullest extent permitted
by applicable Law, that (A) the suit, action or proceeding in any such court
is
brought in an inconvenient forum, (B) the venue of such suit, action or
proceeding is improper and (C) this Agreement, or the subject matter hereof,
may
not be enforced in or by any such court. Process in any such suit, action or
proceeding may be served on any party anywhere in the world, whether within
or
without the jurisdiction of the above-named courts. Without limiting the
foregoing, each party agrees that service of process on such party as provided
in Section
13.3
hereof
shall be deemed effective service of process on such party.
-114-
Section
13.3 Notices.
All
notices and other communications hereunder shall be in writing and shall be
deemed given if delivered personally, telecopied (which is confirmed) or mailed
by registered or certified mail (return receipt requested) to the parties at
the
following addresses (or at such other address for a party as shall be specified
by like notice):
| (a) |
if
to Buyer, to
|
Pinnacle
Entertainment, Inc.
3800
Howard Hughes Parkway
Suite
1800
Las
Vegas, Nevada 89109
Telecopy
No.: (702) 784-7778
Attention: John
A.
Godfrey, Esq.
with
a
copy to:
Irell
& Manella LLP
1800
Avenue of the Stars, Suite 900
Los
Angeles, California 90067
Telecopy
No: (310) 203-7199
Attention: C.
Kevin
McGeehan
Ashok
Mukhey
| (b) |
if
to the ACE Selling Parties before the Closing, to
|
Atlantic
Coast Entertainment Holdings, Inc.
Indiana
Avenue and Brighton Park
Atlantic
City, NJ 08401
Telecopy
No: (609) 441-4937
Attention: Richard
P. Brown
Nancy
Axilrod, Esq.
with
a
copy to:
Katten
Muchin Rosenman LLP
575
Madison Avenue
New
York,
NY 10022-2585
Telecopy
No: (212) 940-8776
Attention: Joel
A.
Yunis, Esq.
Evan
L.
Greebel, Esq.
-115-
if
to the
ACE Selling Parties after the Closing, to
Atlantic
Coast Entertainment Holdings, Inc.
c/o
American Real Estate Holdings Limited Partnership
White
Plains Plaza
445
Hamilton Avenue
Suite
1210
White
Plains, NY 10601
Telecopy
No: (914) 614-7001
Attention: Felicia
Buebel, Esq.
with
a
copy to:
Katten
Muchin Rosenman LLP
575
Madison Avenue
New
York,
NY 10022-2585
Telecopy
No: (212) 940-8776
Attention: Joel
A.
Yunis, Esq.
Evan
L.
Greebel, Esq.
| (c) |
if
to the AREH Selling Parties, to
|
American
Real Estate Holdings Limited Partnership
White
Plains Plaza
445
Hamilton Avenue
Suite
1210
White
Plains, NY 10601
Telecopy
No: (914) 614-7001
Attention: Felicia
Buebel, Esq.
Section
13.4 Interpretation.
When a
reference is made in this Agreement to Sections, Exhibits or Schedules, such
reference shall be to a Section or Exhibit or Schedule of this Agreement unless
otherwise indicated. All Exhibits and Schedules of this Agreement, including
without limitation, the ACE Disclosure Letter, the AREH Disclosure Letter and
the Buyer Disclosure Letter are incorporated herein by reference. The table
of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words “include,”
“includes”
or
“including”
are
used in this Agreement they shall be deemed to be followed by the words
“without
limitation.”
The
phrase “made available” in this Agreement shall mean that the information
referred to has been made
available
if
requested by the party to whom such information is to be made available. Each
of
Buyer and the Selling Parties will be referred to herein individually as a
“party”
and
collectively as “parties”
(except
where the context otherwise requires).
-116-
Section
13.5 Headings.
The
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this
Agreement.
Section
13.6 Entire
Agreement.
This
Agreement and all documents and instruments referred to herein constitute the
entire agreement and supersede all prior agreements and understandings, both
written and oral, among the parties with respect to the subject matter hereof
(provided that the Confidentiality Agreement shall remain in full force and
effect after the Closing or upon termination of this Agreement). Each party
hereto agrees that, except for the representations and warranties contained
in
this Agreement and the respective Disclosure Letters, none of Buyer nor any
of
the Selling Parties makes any other representations or warranties, and each
hereby disclaims any other representations and warranties made by itself or
any
of its respective Representatives or other representatives, with respect to
the
execution and delivery of this Agreement or the transactions contemplated
hereby, notwithstanding the delivery or disclosure to any of them or their
respective Representatives of any documentation or other information with
respect to any one or more of the foregoing.
Section
13.7 Severability.
If any
term or other provision of this Agreement is invalid, illegal or incapable
of
being enforced by any rule of Law or public policy, all other conditions and
provisions of this Agreement shall nevertheless remain in full force and effect
so long as the economic or legal substance of the transactions contemplated
hereby is not affected in any manner materially adverse to any party. Upon
such
determination that any term or other provision is invalid, illegal or incapable
of being enforced, the parties hereto shall negotiate in good faith to modify
this Agreement so as to effect the original intent of the parties as closely
as
possible in an acceptable manner to the end that transactions contemplated
hereby are fulfilled to the extent possible.
Section
13.8 Assignment.
Neither
this Agreement nor any of the rights, interests or obligations hereunder shall
be assigned by operation of law (including without limitation, by merger or
consolidation) or otherwise by any of the parties without the prior written
consent of the other parties, except that (a) Buyer may, without the prior
written consent of any other party hereto, transfer or assign its right to
purchase any of the Interests to one or more of its direct or indirect
Subsidiaries, written notice of which shall be given to the Selling Parties
at
the time of such transfer or assignment, provided that no such transfer or
assignment shall relieve Buyer of any of its agreements or obligations hereunder
and (b) either Buyer or Sellers may assign their rights under this Agreement
pursuant to Section
9.20
hereof.
Any assignment in violation of this Section
13.8
shall be
void.
Subject
to the preceding sentences, this Agreement will be binding upon, inure to the
benefit of and be enforceable by, the parties and their respective successors
and permitted assigns.
Section
13.9 Parties
in Interest; No Third Party Beneficiaries.
This
Agreement shall be binding upon and inure solely to the benefit of each party
hereto and their respective successors and assigns, and nothing in this
Agreement, express or implied is intended to or shall confer upon any other
Person any right, benefit or remedy of any nature whatsoever under or by reason
of this Agreement; provided,
however,
AREH
and its Affiliates (other than GB Holdings and the GB Parties) shall be entitled
to the benefits of, and the right to enforce, this Agreement with respect to
the
post-Closing obligations of the parties hereunder.
-117-
Section
13.10 Counterparts.
This
Agreement may be executed by facsimile and/or in one or more counterparts,
and
by the different parties hereto in separate counterparts, each of which when
executed shall be deemed to be an original but all of which taken together
shall
constitute one and the same agreement.
Section
13.11 Mutual
Drafting.
Each
party hereto has participated in the drafting of this Agreement, which each
party acknowledges is the result of extensive negotiations between the parties.
In the event of any ambiguity or question of intent arises, this Agreement
shall
be construed as if drafted jointly by the parties and no presumption or burden
of proof shall arise favoring or disfavoring any party by virtue of the
authorship of any of the provisions of this Agreement.
Section
13.12 Amendment.
This
Agreement may not be amended except by an instrument in writing signed on behalf
of Buyer and Sellers.
Section
13.13 Extension;
Waiver.
At any
time prior to the Closing, Buyer and any of the Selling Parties by action taken
or authorized by their respective boards of directors or other duly authorized
action may, to the extent legally allowed (i) extend the time for or waive
the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties made by any
of
the other parties hereto contained herein or in any document delivered pursuant
hereto and (iii) waive compliance with any of the agreements or conditions
required to be performed by any of the other parties hereto contained herein.
Any agreement on the part of a party hereto to any such extension or waiver
shall be valid only if set forth in a written instrument signed on behalf of
such party.
Section
13.14 Termination
of Traymore Call Agreement.
The
parties hereto hereby acknowledge and agree that the Traymore Call Agreement
shall automatically terminate on and as of the closing of the sale of both
of
(but not only one of) the following: (x) the ACE Lo Equity Interests to Buyer
pursuant to the ACE Lo Purchase and (y) the AREH Subs Equity Interests to
Buyer pursuant to the AREH Subs Purchase.
[SIGNATURE
PAGE FOLLOWS]
-118-
IN
WITNESS WHEREOF, the undersigned have caused this Agreement to be signed by
their respective duly authorized officers as of the date first written above.
|
“BUYER”
PINNACLE
ENTERTAINMENT, INC.
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||
|
By:
|
/s/ | |
|
Name:
|
||
|
Its:
|
||
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“ACE
HI”
ATLANTIC
COAST ENTERTAINMENT
HOLDINGS,
INC.
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By:
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/s/ | |
|
Name:
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||
|
Its:
|
||
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“ACE
LO”
ACE
GAMING, LLC
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||
| By: |
Atlantic Coast Entertainment Holdings,
Inc.,
sole member
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By:
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/s/ | |
|
Name:
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||
|
Its:
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||
-119-
|
“AREH”
AMERICAN
REAL ESTATE HOLDINGS
LIMITED
PARTNERSHIP
|
||
| By: |
American Property Investors, Inc.,
general partner
|
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By:
|
/s/ | |
|
Name:
|
||
|
Its:
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||
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“BOARDWALK”
AREP
BOARDWALK PROPERTIES LLC
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||
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By:
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/s/ | |
|
Name:
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||
|
Its:
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“MLK
ENTITIES”
AREH
MLK LLC
|
|||
| By: |
American Real Estate
Holdings
Limited Partnership, sole
member
|
||
| By: |
American Property Investors, Inc.,
general partner
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||
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By:
|
/s/ | ||
|
Name:
|
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||
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Its:
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-120-
|
PSW
PROPERTIES LLC
MITRE
ASSOCIATES LLC
|
|||
| By: |
Draper Associates LLC, sole
member
|
||
| By: |
American Real Estate
Holdings
Limited Partnership, sole
member
|
||
| By: |
American Property Investors, Inc.,
general
partner
|
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By:
|
/s/ | ||
|
Name:
|
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||
|
Its:
|
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-121-
STOCKHOLDERS
AGREEMENT
THIS
STOCKHOLDERS AGREEMENT is made and entered into as of September 3, 2006 (this
"Agreement")
among
Pinnacle Entertainment, Inc., a Delaware corporation ("Parent"),
American Real Estate Holdings Limited Partnership, a Delaware limited
partnership ("AREH"),
and
AREP Sands Holding, LLC, a Delaware limited liability company ("AREP Sands")
(AREH and AREP Sands are each referred to herein as an "Icahn Affiliated Party"
and, collectively, as the "Icahn Affiliated Parties").
WHEREAS,
Parent, Atlantic Coast Entertainment Holdings, Inc., a Delaware corporation
(the
"Company"
or
"ACE
Hi"),
ACE
Gaming, LLC, a New Jersey limited liability company ("ACE
Lo"),
AREH,
AREP Boardwalk Properties LLC, a Delaware limited liability company
("Boardwalk"),
PSW
Properties LLC, a Delaware limited liability company ("MLK
I"),
AREH
MLK LLC, a Delaware limited liability company ("MLK
II"),
Mitre
Associates LLC, a Delaware limited liability company ("MLK
III"
and,
together with Boardwalk, MLK I and MLK II, the "AREH
Subs"),
are
entering into an Acquisition Agreement dated as of the date hereof (as the
same
may be amended or supplemented to reflect any Increased Parent Transaction
(as
defined in Section 5(a) below), the "Acquisition
Agreement");
capitalized terms used but not defined herein shall have the meanings set forth
in the Acquisition Agreement;
WHEREAS,
the Icahn Affiliated Parties collectively Beneficially Own (as defined below)
an
aggregate of 6,344,074 shares of common stock, $0.01 par value per share, of
the
Company ("Company
Common Stock"),
consisting of 4,029,084 shares of Company Common Stock and 2,314,990 shares
of
Company Common Stock issuable upon conversion of $35,124,000 in aggregate
principal amount of 3% Notes of the Company due July 22, 2008 ("3%
Notes"),
representing in the aggregate approximately 63.44% of the outstanding shares
of
Company Common Stock on a Fully Diluted Basis (as defined in Section 5). The
Icahn Affiliated Parties do not Beneficially Own any of the warrants to purchase
Company Common Stock at $0.01 per share ("Warrants");
WHEREAS,
each Icahn Affiliated Party which is a record owner of shares of Company Common
Stock (individually, a "Stockholder",
and,
collectively, the "Stockholders")
is the
record owner of shares of Company Common Stock set forth opposite its name
on
Schedule 1 hereto (such shares of Company Common Stock, together with any other
shares of capital stock of the Company acquired by the Stockholder after the
date hereof and during the term of this Agreement, being collectively referred
to herein as the "Subject
Shares"
of the
Stockholder);
WHEREAS,
each Icahn Affiliated Party which is a record holder of Warrants, other rights
to acquire shares of Company Common Stock or 3% Notes is the record holder
of
such securities set forth opposite its name on Schedule 1 hereto (such Warrants,
other rights and 3% Notes, together with any other securities or other interests
in securities of the Company (other than the Subject Shares) acquired by such
Icahn Affiliated Party after the date hereof and during the term of this
Agreement, being collectively referred to herein as the "Other
Subject Securities"
of such
Icahn Affiliated Party);
WHEREAS,
the Icahn Affiliated Parties Beneficially Own 7,748,744 shares of common stock,
$.01 par value per share (the "GB
Common Stock"),
of GB
Holdings, Inc. ("GB
Holdings"),
representing approximately 77.5% of the outstanding shares of GB Holdings'
common stock. On September 29, 2005, GB Holdings filed a voluntary petition
for
relief under Chapter 11 of Title 11 of the United States Code with the United
States Bankruptcy Court for the District of New Jersey (the "Bankruptcy
Court"),
Case
No. 05-42736JHW, and is currently operating as a debtor in possession in such
Chapter 11 case. Such Chapter 11 case of GB Holdings, and any all appeals and
related proceedings (including without limitation those relating to any Federal
or state avoiding statute, in a non-bankruptcy court), is referred to herein
as
the "Bankruptcy
Case";
WHEREAS,
each Icahn Affiliated Party which is a record holder of GB Holdings common
stock
is the record holder of such securities set forth opposite its name on Schedule
1 hereto; and
WHEREAS,
as a condition to its willingness to enter into the Acquisition Agreement,
Parent has requested that each Icahn Affiliated Party enter into this
Agreement.
NOW,
THEREFORE, the parties hereto agree as follows:
SECTION 1. Representations
and Warranties of Icahn Affiliated Parties.
The
Icahn Affiliated Parties jointly and severally represent and warrant to Parent
as of the date hereof as follows:
(a) Organization;
Authority; Execution and Delivery; No Conflicts; Enforceability.
Each
Icahn Affiliated Party (if not a natural person) is duly organized, validly
existing and in good standing under the laws of the jurisdiction in which it
is
organized. Each Icahn Affiliated Party has all requisite power and authority
to
execute and deliver this Agreement and (if it is a Stockholder) the Written
Consent of the Holders of Common Stock of the Company attached hereto as Exhibit
A (the "Stockholder Consent") and to perform its obligations hereunder and
comply with the terms hereof. The execution and delivery by each Icahn
Affiliated Party of this Agreement and the Stockholder Consent (if it is a
Stockholder) and the performance of its obligations hereunder and compliance
with the terms hereof have been duly authorized by all necessary action on
the
part of such Icahn Affiliated Party. Each Icahn Affiliated Party has duly
executed and delivered this Agreement, and this Agreement constitutes the legal,
valid and binding obligation of such Icahn Affiliated Party, enforceable against
such Icahn Affiliated Party in accordance with its terms. The execution and
delivery by each Icahn Affiliated Party of this Agreement and the Stockholder
Consent (if it is a Stockholder) do not, and the performance of its obligations
hereunder and compliance with the terms hereof will not, conflict with, or
result in any violation of, or default (with or without notice or lapse of
time,
or both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or loss of a material benefit under, or result
in
the creation of any Lien (other than Liens created pursuant to this Agreement)
upon any of the assets of such Icahn Affiliated Party under, any provision
of
(i) any organizational documents of such Icahn Affiliated Party,
(ii) any Contract to which such Icahn Affiliated Party is a party or by
which assets of such Icahn Affiliated Party are bound or (iii) subject to
the filings and other matters referred to in the next sentence, any provision
of
any Judgment or Law applicable to such Icahn Affiliated Party or the assets
of
such Icahn Affiliated Party, other than, in the case of clauses (ii) and (iii)
above, any such items that, individually or in the aggregate, have not
materially impaired or delayed, and are not reasonably likely to materially
impair or delay, such Icahn Affiliated Party’s ability to perform its
obligations hereunder or comply with the terms hereof. No Consent of, or
registration, declaration or filing with, any Governmental Entity is required
to
be obtained or made by or with respect to each Icahn Affiliated Party in
connection with the execution, delivery and performance of this Agreement or
the
execution and delivery of the Stockholder Consent (if it is a Stockholder)
or
the performance of its obligations hereunder or the compliance with the terms
hereof other than (x) the filing with the SEC of such reports under the Exchange
Act as may be required in connection with this Agreement and (y) such other
Consents, registrations, declarations or filings that are contemplated by the
Acquisition Agreement or the failure of which to obtain or make are not,
individually or in the aggregate, reasonably likely to materially impair or
delay such Icahn Affiliated Party’s ability to perform its obligations hereunder
or comply with the terms hereof.
-2-
(b) The
Subject Shares, Other Subject Securities and GB Holdings
Securities.
Each
Stockholder is the record and Beneficial Owner of, or is the trustee of a trust
that is the record holder of, and whose beneficiaries are the Beneficial Owners
of, and has good and marketable title to, the Subject Shares set forth opposite
its name on Schedule 1 attached hereto, free and clear of any Liens (other
than Liens created pursuant to the terms of this Agreement or arising under
federal or state securities Laws). Each Stockholder does not own, of record
or
Beneficially, any shares of capital stock of the Company other than the Subject
Shares set forth opposite its name on Schedule 1 attached hereto. Each
Stockholder does not own, of record or beneficially, any other securities of
or
interests in the Company, or any options, warrants, convertible securities,
exchangeable securities or other similar rights entitling the holder thereof
to
acquire shares of capital stock of the Company, other than the Subject Shares
and the Other Subject Securities set forth opposite its name on Schedule 1
attached hereto. The Other Subject Securities are not entitled to vote on the
approval of the Acquisition Agreement or the Purchase. Each Stockholder has
the
sole right to vote such Subject Shares, and none of such Subject Shares is
subject to any voting trust or other agreement, arrangement or restriction
with
respect to the voting of such Subject Shares, except as contemplated by this
Agreement. The Icahn Affiliated Parties and any Affiliates of Icahn do not
own,
of record or Beneficially, any shares of capital stock or other securities
of or
interests in the Company or GB Holdings other than the capital stock, other
securities and interests set forth on Schedule 1 attached hereto and a loan
made
by AREH to GB Holdings in the original principal amount of
$1,200,000.
(c) The
authorized capital stock of the Company consists of 10,000,000 shares of Company
Common Stock, and 5,000,000 shares of preferred stock, par value $.01 per share
(“Company
Preferred Stock”
and,
together with the Company Common Stock, the “Company
Capital Stock”).
As of
the date hereof, (i) 6,912,016 shares of
Company Common Stock were issued and outstanding, (ii) no shares of Company
Common Stock were held by the Company in its treasury, and (iii) no shares
of
Company Preferred Stock were issued or outstanding or reserved for issuance
or
were held by the Company in its treasury. As of the date of this Agreement,
other than Warrants to acquire 619,096 shares of Company Common Stock and
$37,458,970 in aggregate principal amount of 3% Notes which are convertible
into
2,468,886 shares of Company Common Stock, there are no (i) options,
warrants or other rights, agreements, arrangements or commitments of any kind
relating to issued or unissued Company Capital Stock, (ii) securities
convertible into or exchangeable for Company Capital Stock,
(iii) obligations of the Company or any of its Affiliates to issue or sell
any Company Capital Stock, or (iv) bonds, debentures, notes or other
indebtedness of Company Capital Stock having voting rights (or convertible
into
securities having such rights) issued and outstanding.
The
Icahn Affiliated Parties own of record a majority of the outstanding shares
of
Company Common Stock.
-3-
SECTION 2. Representations
and Warranties of Parent.
Parent
hereby represents and warrants to the Icahn Affiliated Parties as follows:
Parent is duly organized, validly existing and in good standing under the laws
of the State of Delaware. Parent has all requisite corporate power and authority
to execute and deliver this Agreement and to consummate the transactions
contemplated by the Acquisition Agreement. The execution and delivery by Parent
of this Agreement and consummation of the transactions contemplated by the
Acquisition Agreement have been duly authorized by all necessary action on
the
part of Parent. Parent has duly executed and delivered this Agreement, and
this
Agreement constitutes the legal, valid and binding obligation of Parent,
enforceable against Parent in accordance with its terms. The execution and
delivery by Parent of this Agreement do not, and the consummation of the
transactions contemplated by the Acquisition Agreement and compliance with
the
terms hereof will not, conflict with, or result in any violation of, or default
(with or without notice or lapse of time, or both) under, or result in the
creation of any Lien upon any of the properties or assets of Parent under,
any
provision of (i) any organizational documents of Parent, (ii) any
Contract to which Parent is a party or by which any assets of Parent are bound
or (iii) subject to the filings and other matters referred to in the next
sentence, any provision of any Judgment or Law applicable to Parent or the
assets of Parent, other than, in the case of clauses (ii) and (iii) above,
any
such items that, individually or in the aggregate, have not, and are not
reasonably likely to, materially impair or delay Parent’s ability to consummate
the transactions contemplated by the Acquisition Agreement. No Consent of,
or
registration, declaration or filing with, any Governmental Entity is required
to
be obtained or made by or with respect to Parent in connection with the
execution, delivery and performance of this Agreement or the consummation of
the
transactions contemplated by the Acquisition Agreement, other than such
Consents, registrations and filings contemplated by the Acquisition
Agreement.
SECTION 3. Consent,
Irrevocable Proxy and Related Covenants Relating to Stockholders.
Each
Stockholder covenants and agrees as follows, and the Icahn Affiliated Parties
jointly and severally covenant and agree that they will cause each Stockholder
to perform the following:
(a) Immediately
following the execution and delivery of this Agreement, each Stockholder shall,
in accordance with Section 228 of the Delaware General Corporation Law, consent
to the approval and adoption of the Acquisition Agreement and the transactions
contemplated thereby by delivering to the Company the Stockholder Consent in
respect to all of the Subject Shares set forth next to the name of the
Stockholder on Schedule 1. Subject to any right of termination pursuant to
an
ACE Lo Termination (as defined below), such consent shall be
irrevocable.
-4-
(b) Each
Stockholder hereby grants to Parent an irrevocable proxy to exercise, at any
time and from time to time, solely in order to approve the Acquisition Agreement
and the transactions contemplated thereby and the form, terms and provisions
thereof and the consummation by the Company and ACE Lo of the transactions
contemplated thereby, including the Purchase,: (i) all rights and powers of
such
Stockholder with respect to its Subject Shares to vote, give approvals,
consents, call meetings, give, receive and waive notices of meetings, and grant
proxies to others; and (ii) without limitation of the rights and powers referred
to in the preceding clause (i), all voting, approval, consent and waiver rights
and powers that such Stockholder possesses or may in the future possess as
record owner or Beneficial Owner of its Subject Shares, provided,
however,
that
until such time as the Stockholders have delivered to Parent the Stockholder
Consent with respect to a majority of the outstanding shares of Company Common
Stock, each Stockholder's irrevocable proxy grant to Parent shall include the
power to exercise voting power with respect to such Stockholder's Subject Shares
to prevent any other action, including any other merger and any consolidation,
sale of assets or securities, reorganization or recapitalization, liquidation
or
winding up of the Company or ACE Lo or any other extraordinary transaction
involving the Company or ACE Lo or any other corporate action the consummation
of which could reasonably be expected to, directly or indirectly, frustrate
the
purposes of, or prevent or delay the consummation of, the transactions
contemplated by this Agreement or the Acquisition Agreement. By giving this
proxy such Stockholder hereby revokes all other proxies granted by such
Stockholder to vote any of its Subject Shares solely with respect to the
foregoing matters. The power and authority hereby conferred shall not be
terminated by any act of such Stockholder or by operation of law, by lack of
appropriate power or authority or by the occurrence of any other event or events
except the Closing or an ACE Lo Termination and shall be binding upon all such
Stockholder's beneficiaries, distributees, successors, assigns and legal
representatives. If, after execution of this Agreement, such Stockholder shall
cease to have appropriate power or authority, Parent is nevertheless authorized
and directed to vote the Stockholder's Subject Shares in accordance with the
terms of this Agreement as if such lack of appropriate power or authority had
not occurred and regardless of notice thereof. This proxy is irrevocable, is
coupled with an interest and is granted in consideration of Parent's entering
into the Acquisition Agreement. This proxy and all rights and powers conferred
by this paragraph shall terminate upon the earlier to occur of (x) the
Closing and (y) an ACE Lo Termination.
(c) If
the
proxy granted in this Section 3 is invalid or is ineffective for any reason,
each Stockholder hereby irrevocably agrees to vote, give approvals, consents,
call meetings, give, receive and waive notices of meetings, and grant proxies
to
others in such manner as Parent may, in its sole discretion, deem necessary
or,
in Parent's reasonable discretion, desirable in order to secure the consent,
adoption and approval by the stockholders of the Company of the Acquisition
Agreement and the form, terms and provisions thereof and the consummation by
the
Company of the transactions contemplated thereby, including the Purchase. The
obligations of each Stockholder and all rights and powers conferred under this
Section 3(c) shall terminate upon the earlier to occur of (x) the Closing
and (y) an ACE Lo Termination.
(d) Each
Stockholder agrees that Parent may deliver a copy of this Agreement to the
Secretary of the Company and to any inspector or judges of elections, transfer
agents, registrars or others to whom Parent wishes to give notice of the rights
hereby granted.
-5-
SECTION 4. Covenants
of Icahn Affiliated Parties.
The
Icahn Affiliated Parties jointly and severally covenant and agree as
follows:
(a) At
any
meeting of stockholders of the Company or at any adjournment thereof or in
any
other circumstances upon which an Icahn Affiliated Party’s vote, consent or
other approval is sought, such Icahn Affiliated Party agrees not to grant a
proxy to any person to vote in favor of, and such Icahn Affiliated Party shall
vote or consent (or cause to be voted or a consent given) the Subject Shares
and
Other Subject Securities of such Icahn Affiliated Parties against, (i) any
Takeover Proposal, and (ii) any amendment of the Company's certificate of
incorporation or bylaws or ACE Lo's operating agreement or other proposal or
transaction involving the Company, ACE Lo, any AREH Sub or any subsidiary
thereof, which amendment or other proposal or transaction in any manner is
reasonably likely to impede, frustrate, prevent, delay or nullify any provision
of the Acquisition Agreement, the Purchase or the consummation of any of the
transactions contemplated hereby or thereby or change in any manner the voting
rights of any class of Company capital stock. Each Icahn Affiliated Party shall
not commit or agree to take any action inconsistent with the foregoing. The
obligations of each Icahn Affiliated Party and all rights and powers conferred
under this Section 4(a) shall terminate upon the earlier to occur of (x) the
Closing and (y) an ACE Lo Termination.
(b) Except
as
contemplated by this Agreement, no Icahn Affiliated Party shall be restricted
from voting in favor of, against or abstaining with respect to any matter
presented to the stockholders or other securityholders of the
Company.
(c) In
any
circumstance in which an Icahn Affiliated Party’s or its Affiliate's vote,
consent or other approval is sought with respect to the AREH Subs, such Icahn
Affiliated Party agrees not to, and shall cause its Affiliate not to, grant
a
proxy to any person to vote in favor of, and such Icahn Affiliated Party shall
vote or consent (or cause to be voted or a consent given) any interests held
by
such Icahn Affiliated Parties or Affiliates against, (i) any AREH Subs
Takeover Proposal, and (ii) any amendment of the AREH Subs' respective
operating agreement or other organizational documents or other proposal or
transaction involving the Company, ACE Lo, any AREH Sub or any subsidiary
thereof, which amendment or other proposal or transaction in any manner is
reasonably likely to impede, frustrate, prevent, delay or nullify any provision
of the Acquisition Agreement, the Purchase or the consummation of any of the
transactions contemplated hereby or thereby or change in any manner the voting
rights of any class of Company capital stock. Each Icahn Affiliated Party shall
(and shall cause any of its Affiliates) not commit or agree to take any action
inconsistent with the foregoing. The obligations of each Icahn Affiliated Party
and all rights and powers conferred under this Section 4(c) shall terminate
upon
the earlier to occur of (x) the Closing and (y) a Complete Termination (as
defined below).
(d) Prior
to
the Closing, the Icahn Affiliated Parties shall cause each of AREH's
wholly-owned subsidiaries that hold 3% Notes (the "Applicable
Subsidiaries")
to
convert the 3% Notes it holds into equity securities of the Company and to
deliver a Demand Payment Notice (as defined in that certain indenture governing
the 3% Notes, dated as of July 22, 2004, by and among the Company, ACE Lo and
Wells Fargo Bank, National Association, as Trustee (the “Indenture”))
in
order to cause the conversion of all 3% Notes held by others, in each case,
in
accordance with the terms of the Indenture (the "Conversion").
-6-
(e) Other
than pursuant to the Conversion, until after the earlier of the Closing or
an
ACE Lo Termination, each Icahn Affiliated Party shall not (and shall cause
its
Affiliates not to) directly or indirectly (i) sell, transfer, pledge,
assign or otherwise dispose of (including by gift) (collectively, "Transfer"),
or
enter into any Contract, option or other arrangement with respect to the
Transfer of, or any profit sharing arrangement relating to, any Subject Shares,
any Other Subject Securities or any securities or interests such Icahn
Affiliated Party and its Affiliates owns or holds in GB Holdings, Boardwalk
or
the AREH Subs to or with any person other than pursuant to the Acquisition
Agreement or (ii) enter into any voting arrangement, whether by proxy,
voting agreement or otherwise, with respect to any Subject Shares or any Other
Subject Securities or any securities or interests it owns or holds in GB
Holdings, Boardwalk or the AREH Subs and shall not commit or agree to take
any
of the foregoing action, other than, in each case, any of the foregoing actions
that, individually or in the aggregate, are not reasonably likely to impair
or
delay, such Icahn Affiliated Party’s or its Affiliates' ability to perform its
obligations hereunder or comply with the terms hereof. The parties hereto hereby
acknowledge and agree that financing activities by the Icahn Affiliated Parties,
whether or not secured, that do not involve the direct Transfer of Subject
Shares or Other Subject Securities are not restricted by this Sections
(provided, however, that a foreclosure or other exercise of a secured party's
right to take title to or dispose of collateral involving Subject Shares or
Other Subject Shares shall be considered a direct Transfer).
The
obligations of each Icahn Affiliated Party and all rights and powers conferred
under this Section 4(e) shall terminate upon the earlier to occur of (x) the
Closing and (y) an ACE Lo Termination.
(f) Each
Icahn Affiliated Party acknowledges the terms and conditions of Section 9.4
(No
Solicitation) of the Acquisition Agreement and agrees to comply with such terms
and conditions to the extent applicable to such Icahn Affiliated
Party.
(g) Subject
to the actions permitted to be taken in accordance with Section 9.4 of the
Acquisition Agreement:
Each
Icahn Affiliated Party shall use commercially reasonable efforts (it being
understood that in no event shall such commercially reasonable efforts obligate
any Icahn Affiliated Party to pay money) to take, or cause to be taken, all
actions, and to do, or cause to be done, and to assist and cooperate with the
other parties in doing, all things reasonably requested by Parent from the
Icahn
Affiliated Party in its capacity as a stockholder or other interestholder of
the
Company to consummate and make effective, in the most expeditious manner
reasonably practicable, the Purchase and the other transactions contemplated
hereby and by the Acquisition Agreement as in effect on the date hereof. In
its
capacity as a stockholder or other interestholder in GB Holdings, each Icahn
Affiliated Party shall (and shall cause its Affiliates to) refrain from taking
any action in the Bankruptcy Case for the purpose or with the intent of
impeding, frustrating, preventing, delaying or nullifying any provision of
the
Acquisition Agreement or the Purchase or the consummation of any of the
transactions contemplated hereby or thereby. In addition, each Icahn
Affiliated Party agrees not to (and shall cause its Affiliates not to) authorize
the filing of a bankruptcy petition by the Company or ACE Lo and not to directly
or indirectly cause an involuntary bankruptcy petition to be filed against
the
Company or ACE Lo. The
obligations of each Icahn Affiliated Party and all rights and powers conferred
under this Section 4(g) shall terminate upon the earlier to occur of (x) the
Closing and (y) an ACE Lo Termination.
-7-
(h) The
Icahn
Affiliated Parties, on the one hand, and Parent and/or any of its Affiliates,
on
the other hand, shall not issue any press release or make any other public
statement with respect to the Purchase or any transaction contemplated hereby
or
by the Acquisition Agreement, except after having provided the other the
reasonable opportunity for review and comment on such press release or other
public statement by, the other party to the extent practicable, except as any
party, after consultation with counsel, determines is required by applicable
law
or applicable rule or regulation of any national securities exchange on such
party's securities are listed; provided that the provisions of this paragraph
shall not require prior consultation with respect to any disclosure containing
the same or substantially similar information which the other party previously
had the opportunity to review.
(i) Each
Icahn Affiliated Party hereby consents to and approves the actions taken by
the
Board of Directors of the Company in approving the Acquisition Agreement, the
sale of substantially all the assets contemplated therein and the other
transactions contemplated thereby.
SECTION 5. Payments
to Parent in the Event of an Alternative Disposition.
(a) If:
(A) the
Acquisition Agreement is terminated pursuant to an ACE Lo Termination or a
Complete Termination (i) by the Company pursuant to Section 11.1(g) of the
Acquisition Agreement, (ii) by Parent pursuant to Section 11.(d) or Section
11.1(h) of the Acquisition Agreement, or (iii) by either Parent or the Sellers
pursuant to Section 11.1(b) or 11.1(c), and,
in the
case of a termination described in clauses (i), (ii) or (iii), within twelve
(12) months following such termination, the Company, ACE Lo, the AREH Subs,
and/or any Icahn Affiliated Party or any of their Affiliates enters into a
definitive agreement with respect to a Superior Proposal, Takeover Proposal
and/or an AREH Subs Takeover Proposal (provided however that such requirement
shall also be deemed satisfied in the event of a termination of the Acquisition
Agreement described in clause (i) (I) in the event that the definitive agreement
with respect to the Superior Proposal giving rise to such termination is entered
into at any time following such termination but is not consummated and within
twelve (12) months following the termination of the definitive agreement
relating to such Superior Proposal the Company enters into any definitive
agreement with respect to a Superior Proposal, Takeover Proposal and/or AREH
Subs Takeover Proposal, or (II) in the event that the Company does not enter
into the definitive agreement with respect to the Superior Proposal giving
rise
to such termination, but within twelve (12) months following the termination
of
discussions with the other party regarding such Superior Proposal (but in the
case of this clause (II), in no event later than twenty-four (24) months
following the termination of the Acquisition Agreement described in clause
(i)
above) the Company enters into any definitive agreement with respect to a
Superior Proposal, Takeover Proposal and/or AREH Subs Takeover Proposal)
and
the
transactions contemplated by such Superior Proposal, Takeover Proposal and/or
AREH Subs Takeover Proposal (any such transaction, a “Third
Party Transaction”)
are
consummated, or
(B) prior
to
the earlier of (x) the Closing or (y) an ACE Lo Termination or a Complete
Termination, an Applicable Court determines that GB Holdings is deemed to own
(either directly or through one or more wholly-owned and/or majority-controlled
subsidiaries or through nominees) the Casino Land and/or the Traymore Land
and a
Takeover Proposal and/or an AREH Subs Takeover Proposal (substituting GB
Holdings for ACE Hi and ACE Lo in such definitions if applicable) in lieu of
the
Acquisition Agreement is (i) approved or required by an order of, or pursuant
to
an approved process (including without limitation an auction) ordered by, an
Applicable Court and consummated or (ii) consummated pursuant to or in
furtherance of the terms of a plan of reorganization in an Applicable Bankruptcy
Case, including pursuant to any process (including without limitation an
auction) conducted by a Chapter 7 or 11 trustee or a liquidating or creditors
trust established in an Applicable Bankruptcy Case, whether by reorganization,
recapitalization, dissolution, liquidation or otherwise (any such transaction,
a
“Bankruptcy
Court Transaction”),
or
-8-
(C) (i)
Parent matches or exceeds the terms of a Superior Proposal pursuant to Section
9.4(b) of the Acquisition Agreement or (ii) for any other reason (including
without limitation pursuant to an auction or other proceeding by, or approved
or
required by, an Applicable Court or conducted pursuant to or in furtherance
of
the terms of a plan of reorganization in an Applicable Bankruptcy Case,
including by a Chapter 7 or 11 trustee or a liquidating or creditors trust
established in an Applicable Bankruptcy Case, whether by reorganization,
recapitalization, dissolution, liquidation or otherwise), Parent increases
the
purchase consideration paid for the Purchase or other acquisition of the
Properties (or entities owning the Properties) (any such transaction in clause
(i) or (ii), an “Increased
Parent Transaction”
and
together with any Third Party Transaction and any Bankruptcy Court Transaction,
an “Alternative
Disposition”)
and
the
transactions contemplated by such Increased Parent Transaction are
consummated,
then
the
Icahn Affiliated Parties shall, jointly and severally, pay to Parent (in
accordance with Section 5(c)) an aggregate amount in cash equal to the Excess
Profit (as defined below), if any, realized by the Icahn Affiliated Parties
and
their Affiliates from the consummation of the applicable Alternative
Disposition. The Excess Profit shall be paid to Parent irrespective of any
amounts Parent receives as a consequence of breakup or termination fees, if
any,
they receive pursuant to the Acquisition Agreement, except that such fees are
permitted to be included in the costs and expenses to be deducted from the
calculation of the Excess Profit below to the extent that such fees are paid
by
ACE Hi out of the proceeds of such Alternative Disposition.
(b) For
purposes of this Section 5, the following terms shall have the meanings set
forth below:
"Alternative
Disposition Consideration"
means,
without duplication, the portion of the purchase price (as finally determined
under the applicable definitive documents relating to such Alternative
Disposition) that would be received directly or indirectly, by the Icahn
Affiliated Parties and their Affiliates in respect of their debt claims and
equity interests in the Company, ACE Lo and GB Holdings or any
successor-in-interest or assignee of the foregoing pursuant to such Alternative
Disposition (w) determined on a Fully-Diluted Basis (as defined below), (x)
assuming the Company, ACE Lo, GB Holdings and any other entity holding such
consideration were liquidated (disregarding any equitable subordination of
interests or claims) immediately following the consummation of such Alternative
Disposition, (y) after deduction of reasonable costs and expenses (but excluding
income taxes of the security holders), and (z) valuing any non-cash
consideration at its Fair Market Value (as defined below) on the date of such
consummation; provided,
however,
that in
no event shall GB Holdings be deemed to be an Affiliate of any Icahn Affiliated
Parties. In the event that any Icahn Affiliated Parties or any of their
Affiliates is the acquirer in an Alternative Disposition, the Fair Market Value
of any continuing ownership interest in the entity or entities that result
from
such Alternative Disposition held by any Icahn Affiliated Parties or any of
their Affiliates, together with any consideration conveyed by the acquirer,
shall be considered Alternative Disposition Consideration realized by the Icahn
Affiliated Parties and their Affiliates from such Alternative
Disposition.
An
"Applicable
Court"
shall
mean the Bankruptcy Court or any other court in the Bankruptcy Case or any
bankruptcy proceeding arising out of or relating to the GB Claims.
An
"Applicable
Bankruptcy Case"
shall
mean any of the Bankruptcy Case or any bankruptcy proceeding of any person
or
entity which has a direct or indirect ownership interest in the Casino Land
and/or the Traymore Land (including without limitation the Company or ACE
Lo).
-9-
"Baseline
Amount"
shall
mean, without duplication, the portion of the Purchase Price (as defined in
the
form of Acquisition Agreement entered into on the date hereof, the “Initial
Acquisition Agreement”))
(subject to all adjustments provided in the Initial Acquisition Agreement)
that
would have been received, directly or indirectly, by the Icahn Affiliated
Parties and their Affiliates in respect of their debt claims and equity
interests in the Company, ACE Lo and GB Holdings or any successor-in-interest
or
assignee of the foregoing pursuant to the consummation of the transactions
contemplated by the Initial Acquisition Agreement (had such transactions been
consummated on November 15, 2006 (w) determined on a Fully-Diluted Basis, (x)
assuming the Company, ACE Lo, GB Holdings and any other entity holding such
consideration were liquidated (disregarding any equitable subordination of
interests or claims) immediately following the consummation of such Alternative
Disposition, (y) after deduction of reasonable costs and expenses and payments
to creditors (but excluding income taxes of the security holders), and (z)
valuing any non-cash consideration at its Fair Market Value on the date of
such
consummation; provided,
however,
that in
no event shall GB Holdings be deemed to be an Affiliate of any Icahn Affiliated
Parties. To
the
extent that such Alternative Disposition involves only the Casino Property
(or
ACE Lo) or portion thereof or only the Traymore Property (or Boardwalk) or
portion thereof, then the Baseline Amount shall be adjusted to correspond to
that portion of the Purchase Price in the Initial Acquisition Agreement
corresponding to the Closing Ace Purchase Price or portion thereof or the AREH
Purchase Price or portion thereof, as applicable.
"Excess
Profit"
means
the amount by which the Alternative Disposition Consideration exceeds the
Baseline Amount (but not less than zero) calculated consistent with the
methodology set forth in Schedule 2 hereto.
"Fair
Market Value"
means,
with respect to any non-cash consideration consisting of:
(i) securities
listed on a national securities exchange or traded on the Nasdaq National
Market, an amount equal to the average closing price per share of such security
as reported on such exchange or Nasdaq National Market for the ten trading
days
prior to the date of determination; and
(ii) consideration
which is other than securities of the form specified in clause (i) above, an
amount determined by a nationally recognized independent investment banking
firm
mutually agreed upon by the parties within 10 business days of the event
requiring selection of such banking firm; provided,
however,
that if
the parties are unable to agree within two business days after the date of
such
event as to the investment banking firm, then the parties shall each select
one
firm, and those firms shall select a third investment banking firm, which third
firm shall make such determination, provided
further,
that
the reasonable and customary fees and expenses of all such investment banking
firms shall be borne equally by Parent, on the one hand, and the Stockholders,
on the other hand. The determination of the Fair Market Value of any non-cash
consideration by the investment banking firm shall be binding upon the
parties.
"Fully-Diluted
Basis"
shall
mean the equity interests of the Company, ACE Lo and GB Holdings held by the
Icahn Affiliated Parties and their Affiliates assuming that all outstanding
Warrants of all holders thereof were exercised and that all options, other
rights (other than the Warrants), convertible securities and exchangeable
securities (including, without limitation, the 3% Notes) in the Company, ACE
Lo
and GB Holdings or any successor-in-interest or assignee of the foregoing
outstanding on the date of consummation of the Alternative Disposition were
exercised or converted into or exchanged for equity interests in the Company,
ACE Lo and GB Holdings, in each case in accordance with the terms of such
securities.
(c) Calculation
and Payment of Excess Profit.
-10-
(i) Within
three business days after the consummation of a Third Party Transaction or
a
Bankruptcy Court Transaction or concurrently with the consummation of an
Increased Parent Transaction, as the case may be, the Icahn Affiliated Parties
shall (i) pay to Parent the Icahn Affiliated Parties’ good faith estimate of the
Excess Profit (the “Estimated
Excess Profit”),
if
any, payable under this Section 5, by wire transfer of same day funds to an
account designated by Parent to the Icahn Affiliated Parties in writing prior
to
the date of such payment and (ii) provide to Parent a written statement
substantially in the form of Schedule 2 hereto illustrating the Icahn Affiliated
Parties’ calculation of the Estimated Excess Profit, which calculation shall be
performed on a basis consistent with Schedule 2 hereto. Within three business
days following the date on which the purchase price payable pursuant to the
applicable Alternative Disposition is finally determined under the applicable
definitive documents relating to such Alternative Disposition (the “Final
Purchase Price”),
the
Icahn Affiliated Parties shall provide to Parent a written statement (the
“IAP
Final Statement”)
substantially in the form of Schedule 2 hereto illustrating the Icahn Affiliated
Parties’ calculation of the final Excess Profit (the “IAP
Final Excess Profit”)
based
on the Final Purchase Price, which calculation shall be performed on a basis
consistent with Schedule 2 hereto.
(ii) If
Parent
shall disagree with the calculation of the IAP Final Excess Profit, it shall,
within thirty (30) business days after its receipt of the IAP Final Statement,
notify the Icahn Affiliated Parties of such disagreement in writing, setting
forth in detail the particulars of such disagreement. In the event that Parent
does not provide such notice of disagreement within such thirty (30) business
day period, Parent shall be deemed to have accepted the IAP Final Statement
and
the calculation of the IAP Final Excess Profit set forth therein, which shall
be
final, binding and conclusive for purposes of this Section 5 with respect to
the
payment of any Excess Profit. In the event any such notice of
disagreement is timely provided, Parent and the Icahn Affiliated Parties, in
conjunction with their respective independent accounting firms, shall use
commercially reasonable efforts for a period of ten (10) business days (or
such
longer period as they may mutually agree) to resolve any disagreements with
respect to the calculation of the Excess Profit. If, at the end of such period,
they are unable to resolve such disagreements, then an independent accounting
firm of recognized national standing with no existing relationship with any
of
the parties and which Parent and the Icahn Affiliated Parties shall not have
otherwise retained on other matters prior to the resolution of the IAP Final
Excess Profit or, to the extent Parent and the Icahn Affiliated Parties cannot
agree on such independent accounting firm, an arbitrator from the National
Panel
of Professional Accounting and Related Services Disputes of the American
Arbitration Association selected by the mutual agreement of Parent and the
Icahn
Affiliated Parties (the “Auditor”;
provided, however, if Parent and ACE Hi have selected an Auditor pursuant to
the
Acquisition Agreement, then such Auditor shall be the Auditor under this
Agreement) shall resolve any remaining disagreements provided, that if Parent
and the Icahn Affiliated Parties cannot mutually agree on an Auditor, any
remaining disagreements shall be resolved by a court of competent jurisdiction
in accordance with Section 8(l) hereof. For the avoidance of doubt, the
following procedures by the Auditor shall only be applicable if Parent and
the
Icahn Affiliated Parties mutually agree on the selection of an Auditor. The
parties and the Auditor shall agree on reasonable procedures for determining
the
disputed line items; provided,
that,
that
such procedures shall include the following: (i) each of Parent, on the one
hand, and the Icahn Affiliated Parties, on the other hand, shall have the right
to make one (1) written submission to the Auditor regarding the disputed line
items submitted to the Auditor, (ii) each party shall have the right to make
one
(1) written submission to the Auditor in response to the other party’s written
submission in subclause (i), (iii) the Auditor may submit follow-up questions
to
either party, and such parties shall have the right to respond to such
questioning by the Auditor, (iv) each party shall have the right to submit
one
written response to the other party’s response to the Auditor pursuant to
subclause (iii), and (v) copies of all written materials submitted to the
Auditor (and summaries of all discussions with the Auditor) shall be promptly
provided to the other party. The Auditor shall promptly deliver to Parent,
on
the one hand, and the Icahn Affiliated Parties, on the other hand, its
determination in writing, which determination shall be made subject to the
definitions and principles set forth in this Agreement and shall select either
the position of Parent, on the one hand, or the Icahn Affiliated Parties, on
the
other hand, and no compromise position, with respect to each of the disputed
line items submitted to the Auditor. The Auditor shall determine as promptly
as
practicable whether the IAP Final Statement and the calculation of the IAP
Final
Excess Profit set forth therein was prepared in accordance with the standards
set forth in this Agreement and, only with respect to the disagreements
submitted to the Auditor, whether and to what extent (if any) the Estimated
Excess Profit requires adjustment. The Auditor shall promptly deliver to Parent
and the Icahn Affiliated Parties its determination in writing, which
determination shall be made subject to the definitions and principles set forth
in this Agreement, and shall be (x) consistent with either the position of
Parent or the Icahn Affiliated Parties or (y) between the positions of
Parent and the Icahn Affiliated Parties (the amount of Excess Profit, if any,
as
finally determined pursuant to this Section 5(c)(ii), the “Final
Excess Profit”).
The
fees and expenses of the Auditor shall be paid one-half by Parent and one-half
by the Icahn Affiliated Parties. The determination of the Auditor shall be
final, binding and conclusive for purposes of this Section 5 and enforceable
as
an arbitration award, and shall represent the exclusive remedy with respect
to
the determination of any Excess Profit. The date on which the Excess Profit
is
finally determined in accordance with this Section 5(c) is hereinafter referred
to as the “Excess
Profit Determination Date.”
-11-
(iii) Within
three business days of the Excess Profit Determination Date, the amount (which
may be a positive or negative number) equal to
(x) the
Final Excess Profit, minus
(y) the
Estimated Excess Profit (such amount, the “Excess
Profit Adjustment”)
shall
be
paid (A) from Parent to the Icahn Affiliated Parties (if the Excess Profit
Adjustment is a negative amount), in cash by wire transfer of immediately
available funds to an account designated in writing by the Icahn Affiliated
Parties to Parent prior to the date of such payment or (B) from
the
Icahn Affiliated Parties to Parent (if the Excess Profit Adjustment is a
positive amount), in cash by wire transfer of immediately available funds to
an
account designated in writing by Parent to the Icahn Affiliated Parties prior
to
the date of such payment.
SECTION 6. Termination.
This
Agreement, other than Section 4(c) and Section 5 hereof, shall terminate
upon the earliest of (i) the Closing and (ii) an ACE Lo Termination,
other than with respect to the liability of any party for breach hereof prior
to
such termination. Section 4(c) shall terminate upon the earliest of (i) the
Closing and (ii) a Complete Termination. Section 5 hereof shall terminate
upon the expiration of all rights thereunder.
SECTION 7. Additional
Matters.
(a) The
Icahn
Affiliated Parties shall, from time to time, execute and deliver, or cause
to be
executed and delivered, such additional or further consents, documents and
other
instruments as Parent may reasonably request for the purpose of effectively
carrying out the transactions contemplated by this Agreement and the Acquisition
Agreement.
(b) No
person
executing this Agreement who is or becomes during the term hereof a director
or
officer of the Company makes any agreement or understanding herein in his or
her
capacity as such director or officer of the Company. Each Stockholder signs
solely in its capacity as the record holder and Beneficial Owner of, or the
trustee of a trust whose beneficiaries are the Beneficial Owners of, the
Stockholder’s Subject Shares and/or Other Subject Securities and nothing herein
shall limit or affect any actions taken by any Stockholder in his capacity
as an
officer or director of the Company to the extent specifically permitted by
the
Acquisition Agreement.
SECTION 8. General
Provisions.
(a) Definition
of Beneficially Own or Beneficial Ownership.
For
purposes of this Agreement, the terms "Beneficially Own" or "Beneficial
Ownership" or variants thereof with respect to any securities shall mean having
"beneficial ownership" of such securities (as determined pursuant to Rule 13d-3
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"))
including pursuant to any agreement, arrangement or understanding, whether
or
not in writing. Without duplicative counting of the same securities by the
same
holder, securities Beneficially Owned by a Person shall include securities
Beneficially Owned by all other Persons (who are Affiliates of such Person
excluding officers and directors of the Company) who together with such Person
would constitute a "group" within the meaning of Section 13(d)(3) of the
Exchange Act.
(b) Amendments.
This
Agreement may not be amended except by an instrument in writing signed by each
of the parties hereto.
(c) Notice.
All
notices and other communications hereunder shall be in writing and shall be
deemed given if delivered personally or sent by overnight courier (providing
proof of delivery) to Parent in accordance with Section 13.3 of the
Acquisition Agreement and to the Stockholders at their respective addresses
set
forth on Schedule 1 hereto (or at such other address for a party as shall be
specified by like notice).
-12-
(d) Interpretation.
When a
reference is made in this Agreement to a Section or Schedule, such reference
shall be to a Section of, or Schedule to, this Agreement unless otherwise
indicated. The headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include", "includes" or "including" are used
in
this Agreement, they shall be deemed to be followed by the words "without
limitation". The words "hereby", "hereof", "herein" and "hereunder" and words
of
similar import when used in this Agreement shall refer to this Agreement as
a
whole and not to any particular provision of this Agreement. The words "date
hereof" shall refer to the date of this Agreement. The term "or" is not
exclusive. The word "extent" in the phrase "to the extent" shall mean the degree
to which a subject or other thing extends, and such phrase shall not mean simply
"if". The definitions contained in this Agreement are applicable to the singular
as well as the plural forms of such terms. Any agreement or instrument defined
or referred to herein or in any agreement or instrument that is referred to
herein means such agreement or instrument as from time to time amended, modified
or supplemented unless otherwise specified. References to a person are also
to
its permitted successors and assigns.
(e) Severability.
If any
term or other provision of this Agreement is invalid, illegal or incapable
of
being enforced by any rule or Law, or public policy, all other conditions and
provisions of this Agreement shall nevertheless remain in full force and effect
so long as the economic or legal substance of the transactions contemplated
hereby is not affected in any manner materially adverse to any party. Upon
such
determination that any term or other provision is invalid, illegal or incapable
of being enforced, the parties hereto shall negotiate in good faith to modify
this Agreement so as to effect the original intent of the parties as closely
as
possible in an acceptable manner to the end that transactions contemplated
hereby are fulfilled to the extent possible.
(f) Counterparts.
This
Agreement may be executed in one or more counterparts, all of which shall be
considered one and the same agreement. This Agreement shall become effective
against any Stockholder when one or more counterparts have been executed by the
Stockholder and delivered to Parent. In respect of each Stockholder, this
Agreement shall become effective against Parent when one or more counterparts
have been signed by Parent and delivered to each Stockholder. Each party need
not sign the same counterpart.
(g) Trust
Funds.
In the
event that any party hereto should receive any funds that are to be paid to
another party pursuant to the terms of this Agreement, then the receiving party
shall hold such funds in trust for the benefit of the party entitled to receive
such funds and shall promptly pay such funds to the party entitled to receive
such funds in accordance with this Agreement.
(h) Recapitalization.
In the
event of a stock dividend or distribution, or any change in the Subject Shares
or Other Subject Securities by reason of any split-up, recapitalization,
combination, merger, consolidation, exchange of securities or the like, or
change or exchange ordered by any Applicable Court, the terms "Subject Shares"
and "Other Subject Securities" shall include, without limitation, all such
stock
dividends and distributions and any securities, interests or claims into which
for which any or all of the Subject Shares or Other Subject Securities (or
any
class thereof) may be changed or exchanged as may be appropriate to reflect
such
event (the "New Interests") and all obligations in this Agreement, including
the
obligation to grant a security interest, shall relate to the New Interests,
to
the extent applicable.
(i) Entire
Agreement; No Third-Party Beneficiaries.
This
Agreement (i) constitutes the entire agreement and supersedes all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof and (ii) is not intended to confer
upon any person other than the parties hereto any rights or remedies
hereunder.
(j) Governing
Law.
This
Agreement shall be governed by, and construed in accordance with, the laws
of
the State of Delaware regardless of the laws that might otherwise govern under
applicable principles of conflicts of law thereof.
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(k) Assignment.
Neither
this Agreement nor any of the rights, interests or obligations hereunder shall
be assigned by any of the parties without the prior written consent of the
other
parties, except that (a) Parent may, without such prior written consent of
any
other party hereto, transfer or assign its rights hereunder (including without
limitation its right to receive Excess Profits) to one or more of its direct
or
indirect subsidiaries, written notice of which shall be given to the Icahn
Affiliated Parties, provided
that no
transfer or assignment shall relieve Parent from any of its agreements or
obligations hereunder. Any assignment in violation of this Section 8(k) shall
be
void. Subject to the preceding sentences, this Agreement will be binding upon,
inure to the benefit of, and be enforceable by, the parties and their respective
successors and assigns.
(l) Enforcement.
The
parties agree that irreparable damage would occur in the event that any of
the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent breaches
of
this Agreement and to enforce specifically the terms and provisions of this
Agreement in any Delaware state court or any Federal court located in the State
of Delaware, this being in addition to any other remedy to which they are
entitled at Law or in equity. In addition, each of the parties hereto
(i) consents to submit itself to the personal jurisdiction of any Delaware
state court or any Federal court located in the State of Delaware in the event
any dispute arises out of this Agreement or any transaction contemplated hereby,
(ii) agrees that it will not attempt to deny or defeat such personal
jurisdiction by motion or other request for leave from any such court,
(iii) agrees that it will not bring any action relating to this Agreement
or any transaction in any court other than a Delaware state court or any Federal
court sitting in the State of Delaware and (iv) waives any right to trial
by jury with respect to any claim or proceeding related to or arising out of
this Agreement or any transaction contemplated hereby.
(m) Definition
of "ACE Lo Termination" and "Complete Termination".
For
purposes of this Agreement, the term "ACE Lo Termination" shall mean either
(i)
a termination of the Acquisition Agreement in accordance with its terms as
between Buyer and the ACE Selling Parties pursuant to Section 11.1(g) of the
Acquisition Agreement or (ii) a Complete Termination. For purposes of this
Agreement, the term "Complete Termination" shall mean a termination of the
Acquisition Agreement in accordance with its terms as between Buyer and the
Selling Parties pursuant to any provision of Section 11.1 of the Acquisition
Agreement other than Section 11.1(g) thereof. In the event that Buyer elects
to
effect a Revival pursuant to Section 9.4(e)(iii) of the Acquisition Agreement,
then the rights and obligations of Parent and the Icahn Affiliated Entities
under this Agreement shall also be reinstated in full, to the extent possible,
on the same terms and conditions as in this Agreement, modified as appropriate
to reflect changes in the timing and circumstances surrounding the transaction,
and the parties shall enter into appropriate documents and agreements for such
reinstatement as promptly as practicable.
[SIGNATURE
PAGE FOLLOWS]
-14-
IN
WITNESS WHEREOF, each party has duly executed this Agreement, all as of the
date
first written above.
| PINNACLE ENTERTAINMENT, INC. | |
| By: /s/ Daniel R. Lee | |
| Name: Daniel R. Lee | |
| Title: Chief Executive Officer |
[SIGNATURE
PAGE TO STOCKHOLDERS
AGREEMENT]
S-1
| ICAHN AFFILIATED PARTIES | |
| AMERICAN REAL ESTATE HOLDINGS | |
| LIMITED PARTNERSHIP | |
| By: American Property Investors, Inc., | |
|
general
partner
|
|
| By: /s/ Hillel Moerman | |
|
Name: Hillel
Moerman
|
|
|
Its:
CFO
|
|
| AREP SANDS HOLDING, LLC | |
|
By:
American
Real Estate Holdings
|
|
| Limited Partnership, sole member | |
|
By: American
Property Investors, Inc.,
general partner
|
|
| By: /s/ Hillel Moerman | |
| Name: Hillel Moerman | |
| Its: CFO |
[SIGNATURE
PAGE TO STOCKHOLDERS AGREEMENT]
S-2
EXHIBIT
A
WRITTEN
CONSENT
OF
THE
HOLDERS
OF COMMON STOCK
OF
ATLANTIC
COAST ENTERTAINMENT HOLDINGS, INC.
Dated
as
of [ ], 2006
Pursuant
to Section 228 of the General
Corporation
Law of the State of Delaware
The
undersigned, the holder of record of 4,029,084
shares
of
Common Stock, $0.01 par value per share (the "Company Common Stock"), of
Atlantic Coast Entertainment Holdings, Inc., a Delaware corporation (the
"Company"), representing at least a majority of the issued and outstanding
shares of Company Common Stock, hereby consents to the adoption of the following
resolutions without a meeting pursuant to Section 228(a) of the Delaware General
Corporation Law with the intent that said resolutions shall be as valid and
effectual as if they had been adopted and ratified at a formal meeting of
stockholders duly convened, which consent will be effective when the minimum
number of shares required to approve the action are obtained:
WHEREAS,
the Board of Directors of the Company (the "Board") has approved and the parties
have entered into that certain Acquisition Agreement dated as of September
3,
2006 by and among Pinnacle Entertainment, Inc., a Delaware corporation
("Parent"), the Company, ACE Gaming, LLC, a New Jersey limited liability company
("ACE Lo") and American Real Estate Holdings Limited Partnership, a Delaware
limited partnership ("AREH"), AREP Boardwalk Properties LLC, a Delaware limited
liability company ("Boardwalk"), PSW Properties LLC, Delaware limited liability
company ("MLK I"), AREH MLK LLC, a Delaware limited liability company ("MLK
II"), Mitre Associates LLC, a Delaware limited liability company ("MLK III"),
pursuant to which the Company will sell substantially all of its assets to
Parent or its assignee (the "Proposed Purchase");
A-1
WHEREAS,
reference is made to the Stockholders Agreement by and among Parent and the
Stockholders of the Company party thereto (the "Stockholders
Agreement");
NOW,
THEREFORE, BE IT RESOLVED that the form, terms and provisions of the executed
Acquisition Agreement, in the form attached hereto as Exhibit A, are hereby
approved and adopted in all respects, and that the Proposed Purchase described
therein is hereby approved;
RESOLVED
FURTHER, that the number of shares of Common Stock of the Company set forth
in
the preamble above are owned of record by the undersigned on the date of this
consent and that this consent is being given with respect to all of the shares
of Common Stock of the Company set forth in the preamble above;
RESOLVED
FURTHER, that the directors and officers of the Company be, and they are or
any
one of them is, hereby authorized, empowered and directed, from time to time,
in
the name and on behalf of the Company under its seal, if desired, to execute,
make oath to, acknowledge and deliver, any and all agreements, orders,
directives, certificates, notices, assignments and other documents, instruments
and papers and to take or cause to be taken such steps as they may determine
to
be necessary, appropriate or advisable to carry out the intent and purposes
of
the foregoing resolutions, such determination to be evidenced conclusively
by
the execution and delivery of such documents and the taking of such
steps.
This
action by written consent may be signed in counterparts, each of which shall
be
deemed an original, and all of which together shall constitute one instrument.
This action shall be delivered, by hand or by certified or registered mail,
return receipt requested, to the Company by delivery to its registered office
in
the State of Delaware, to the Company's principal place of business or to an
officer or agent of the Company having custody of the book in which proceedings
of meetings of stockholders of the Company are recorded, pursuant to Section
228(a) of the General Corporation Law of the State of Delaware and shall be
effective as of the date of such delivery.
*
* * *
*
[THE
REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
A-2
IN
WITNESS WHEREOF, the undersigned has executed this Written Consent as of the
date first set forth above.
| AREP SANDS HOLDING, LLC | |
| By: | |
| Name: | |
| Its: | |
A-3
Exhibit
A
A-4
Exhibit
99.1
 |
SANDS
CASINO HOTEL
Indiana
Avenue & Brighton Park
Atlantic
City, New Jersey 08401
|
FOR
FURTHER INFORMATION:
Atlantic
Coast Entertainment Holdings, Inc.:
George
Toth (President, The Sands)
(609)
441-4000
Pinnacle
Entertainment:
Lewis
Fanger (Investors)
Pauline
Yoshihashi (Media)
(702)
784-7777
PINNACLE
ENTERTAINMENT AGREES TO PURCHASE
SANDS/TRAYMORE
SITE IN ATLANTIC CITY, N.J.
Plans
Major New Resort Along The Boardwalk
LAS
VEGAS, September 5, 2006 - Pinnacle Entertainment, Inc. (NYSE: PNK) and Atlantic
Coast Entertainment Holdings, Inc. ("ACE Hi") today said they have signed a
definitive agreement under which Pinnacle agreed to purchase the entities that
own The Sands and Traymore sites in Atlantic City, N.J. from entities affiliated
with financier Carl Icahn for approximately $250 million, plus an additional
$20
million for certain tax-related benefits and additional real estate. Together,
the land being acquired comprises approximately 18 contiguous acres at the
heart
of Atlantic City, with extensive frontage along the Boardwalk, Pacific Avenue
and Brighton Park. Pinnacle plans to design and build an entirely new casino
hotel on the site, which would be among the largest and most spectacular resorts
in the region.
As
part
of the agreement, Pinnacle required that the sellers proceed to close the
existing hotel-casino, which is anticipated to occur within approximately 70
days of the signing of the agreement. The closure will facilitate the
construction of a new, much larger facility as quickly as possible. The
26-year-old Sands, which was one of the first gaming resorts to open in Atlantic
City, is one of the city’s smallest properties.
“Atlantic
City is one of the top U.S. gaming destinations, and we’re looking forward to
being a part of the world-famous Boardwalk,” said Daniel R. Lee, Pinnacle’s
Chairman and Chief Executive Officer. “This major new resort will be a key
component in our plan to build a national network of gaming properties. It
will
also help extend our development pipeline and our Company’s
growth through 2010 and beyond. In connection with our longstanding interest
in
Atlantic City, we submitted our initial license application in New Jersey
several months ago. The regulatory investigation is ongoing.
“The
success of recent Atlantic City developments has proven that customers in the
Northeast respond positively to state-of-the-art gaming resort design and
amenities,” Mr. Lee continued. “While we regret the necessity of closing the
Sands to create an exciting new resort, we look forward to working with gaming
regulators, state and local authorities on this project to create more jobs,
tax
revenues and other lasting benefits for the region.”
Under
Federal law, employees soon will receive 60 days’ notice of the expected
closing. Among its provisions for employees, the agreement provides for
severance benefits in accordance with union agreements, as well as severance
pay
for nonunion employees who stay through the 60-day closing period.
Mr.
Icahn
stated, “After spending many months reviewing various projects for this
property, it became patently clear that a shutdown of The Sands was necessary
and inevitable to make room for a great new casino. We also concluded that
this
was the most propitious time to undertake this shutdown given the robust
employment environment in Atlantic City. This new casino will be a great plus
for Atlantic City and the state of New Jersey.” Mr. Icahn has seen to it that
ACE Hi, the parent company of The Sands, although not legally required, will
fund an additional one week of severance for eligible employees for each year
of
service over two years. In addition, through his negotiations with Pinnacle,
Pinnacle has agreed that full-time employees who have been with The Sands for
at
least six months will be eligible for two weeks’ severance funded by Pinnacle.
Pinnacle also has agreed to provide outplacement services to all Sands
employees, and those willing to relocate will be considered for positions at
other properties operated by Pinnacle or Mr. Icahn.
The
transaction is subject to the satisfaction of customary closing conditions.
The
transaction is not subject to financing. The majority stockholder of ACE Hi,
AREP Sands Holding, LLC, which owns approximately 58% of the outstanding stock
of ACE Hi, has delivered a stockholder written consent approving the sale of
The
Sands. AREP Sands is a wholly-owned subsidiary of American Real Estate Holdings
Limited Partnership ("AREH").
The
acquisition agreement contains non-solicitation, fiduciary out and termination
fee provisions. ACE Hi is not permitted to solicit other acquisition proposals,
but for 45 days may negotiate with anyone that submits unsolicited proposals
if
the ACE Hi board believes that such a proposal is, or is reasonably likely
to
result in, a proposal that is more favorable to the ACE Hi stockholders. If
within such 45-day period, the ACE Hi board determines that an alternative
proposal is more favorable to the ACE Hi stockholders, ACE Hi is permitted
to
terminate the acquisition agreement with Pinnacle upon payment of a $10 million
termination fee. In addition, entities affiliated with Mr. Icahn, including
AREH
and AREP Sands, have agreed to pay to Pinnacle all of any additional value
received by such entities through an overbid.
Pinnacle
expects to close its purchase of The Sands/Traymore site by the end of the
year.
About
Atlantic Coast Entertainment Holdings, Inc.
Atlantic
Coast Entertainment Holdings, Inc. (“Atlantic Holdings”) is a Delaware
corporation formed in October 2003. ACE Gaming, LLC, a New Jersey limited
liability company and wholly-owned subsidiary of Atlantic Holdings, is the
owner
and operator of The Sands Hotel and Casino in Atlantic City, New
Jersey.
About
Pinnacle Entertainment
Pinnacle
Entertainment owns and operates casinos in Nevada, Louisiana, Indiana,
Argentina, and the Bahamas, owns a hotel in Missouri, and owns a casino site
and
has significant insurance claims related to a hurricane-damaged casino and
hotel
complex previously operated in Biloxi, Mississippi. Pinnacle also has two casino
development projects in the St. Louis, Missouri area, which are dependent upon
final approval by the Missouri Gaming Commission.
Atlantic
Holdings Forward-Looking Statement
This
release contains certain “forward-looking statements” within the meaning of the
Private Securities Litigation Reform Act of 1995, many of which are beyond
the
ability of AREH or ACE Hi to control or predict. Forward-looking statements
may
be identified by words such as “expects,” “anticipates,” “intends,” “plans,”
“believes,” “seeks,” “estimates,” “will” or words of similar meaning and
include, but are not limited to, statements about the expected future business
and financial performance of AREH or ACE Hi and their subsidiaries. AREH and
ACE
Hi undertake no obligation to publicly update or review any forward-looking
information, whether as a result of new information, future developments or
otherwise.
Pinnacle
Forward-Looking Statement
All
statements included in this press release, other than historical information
or
statements of historical fact, are "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995. These
forward-looking statements, including statements regarding Pinnacle's pending
acquisition of The Sands, the development opportunities associated with the
acquisition of The Sands, other current and potential future development
opportunities and anticipated opening dates, are based on Pinnacle management's
current expectations and are subject to risks, uncertainties and changes in
circumstances that could significantly affect future results. Accordingly,
Pinnacle cautions that the forward-looking statements contained herein are
qualified by important factors that could cause actual results to differ
materially from those reflected by such statements. Such factors include, but
are not limited to: (a) the risk that the acquisition does not close, (b) the
risk that new projects and expansions could strain Pinnacle's financial
resources and might not provide for a sufficient return, if any (c) significant
competition facing Pinnacle in all of its markets, (d) many construction-related
factors could prevent Pinnacle from completing its construction and development
projects within budget and on time; and (e) other risks, including those as
may
be detailed from time to time in Pinnacle's filings with the Securities and
Exchange Commission ("SEC"). For more information on the potential factors
that
could affect Pinnacle's financial results and business, review Pinnacle's
filings with the SEC, including its Annual Report on Form 10-K, its Quarterly
Reports on Form 10-Q and its Current Reports on Form 8-K.
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