Exhibit 10.1
ASSET PURCHASE AGREEMENT
dated as of November 28, 2005
by and among
HARRAH’S OPERATING COMPANY, INC.
(Solely for the purposes of Section 12.16 hereof)
FLAMINGO-LAUGHLIN, INC.,
BOARDWALK REGENCY CORPORATION,
MARTIAL DEVELOPMENT CORPORATION
and
AREP BOARDWALK LLC
and
AREP LAUGHLIN CORPORATION

 

--------------------------------------------------------------------------------

 

TABLE OF CONTENTS

                      Page    
ARTICLE I
           
 
           
PURCHASE AND SALE OF ASSETS
           
 
        Section 1.1  
Purchase and Sale of Assets
    1   Section 1.2  
Excluded Assets
    3   Section 1.3  
Assumed Liabilities
    5   Section 1.4  
Excluded Liabilities
    6   Section 1.5  
Retention and Removal of Excluded Assets
    8   Section 1.6  
Assignability and Consents
    9   Section 1.7  
Other Assets; Other Property
    10      
 
           
ARTICLE II
           
 
           
PURCHASE PRICE AND DEPOSIT
           
 
        Section 2.1  
Purchase Price
    10   Section 2.2  
Deposit
    11   Section 2.3  
Allocation of Purchase Price
    11   Section 2.4  
Initial Estimated Adjustments
    13   Section 2.5  
Final Working Capital Adjustment
    14   Section 2.6  
Final Traymore Adjustment
    15      
 
           
ARTICLE III
           
 
           
ADJUSTMENTS
           
 
        Section 3.1  
Property Taxes
    16      
 
           
ARTICLE IV
           
 
           
CLOSING
           
 
        Section 4.1  
Closing
    17   Section 4.2  
Deliveries at Closing
    19      
 
           
ARTICLE V
           
 
           
REPRESENTATIONS AND WARRANTIES OF SELLERS
           
 
        Section 5.1  
Organization of Seller
    22   Section 5.2  
Authority; No Conflict; Required Filings and Consents
    22   Section 5.3  
Financial Statements
    24  

i

--------------------------------------------------------------------------------

 

                      Page Section 5.4  
Flamingo Real Estate
    24   Section 5.5  
Intellectual Property
    24   Section 5.6  
Agreements, Contracts and Commitments
    24   Section 5.7  
Litigation
    25   Section 5.8  
Environmental Matters
    25   Section 5.9  
Permits; Compliance with Laws
    26   Section 5.10  
Labor Matters
    26   Section 5.11  
Employee Benefits
    27   Section 5.12  
Brokers
    27   Section 5.13  
Insurance
    27   Section 5.14  
Personal Property
    27   Section 5.15  
Assets
    28   Section 5.16  
Condemnation Proceedings
    28   Section 5.17  
Fee Ownership
    28   Section 5.18  
Solvency
    28   Section 5.19  
Special Assessments
    28   Section 5.20  
Traymore Condemnation
    28   Section 5.21  
Traymore Litigation
    28   Section 5.22  
Traymore Leases
    28   Section 5.23  
Options
    28   Section 5.24  
Service Contracts
    28   Section 5.25  
Compliance With Laws
    28   Section 5.26  
Traymore Environmental Matters
    29   Section 5.27  
Absence of Certain Changes or Events
    29   Section 5.28  
Transactions with Directors, Officers and Other Affiliates
    30   Section 5.29  
Absence of Undisclosed Liabilities
    30   Section 5.30  
Tax Matters
    30      
 
           
ARTICLE VI
           
 
           
REPRESENTATIONS AND WARRANTIES OF BUYERS
           
 
        Section 6.1  
Organization
    30   Section 6.2  
Authority; No Conflict; Required Filings and Consents
    31   Section 6.3  
Brokers
    32   Section 6.4  
Financing
    32   Section 6.5  
Licensability of Principals
    32   Section 6.6  
Compliance with Gaming Laws
    32   Section 6.7  
Litigation
    33   Section 6.8  
Inspection
    33   Section 6.9  
Employee Benefits
    33      
 
           
ARTICLE VII
           
 
           
COVENANTS
           
 
        Section 7.1  
Conduct of Business
    34  

ii

--------------------------------------------------------------------------------

 

                      Page Section 7.2  
Cooperation; Notice; Cure
    36   Section 7.3  
No Solicitation
    36   Section 7.4  
Employee Matters
    36   Section 7.5  
Access to Information and the Properties
    39   Section 7.6  
Governmental Approvals
    41   Section 7.7  
Publicity
    44   Section 7.8  
Further Assurances and Actions
    44   Section 7.9  
Transfer Taxes; HSR Filing Fee
    45   Section 7.10  
Accounts Receivable; Accounts Payable
    45   Section 7.11  
Reservations; Chips; Front Money; Guests; Keys
    46   Section 7.12  
Insurance Policies
    47   Section 7.13  
Certain Transactions
    47   Section 7.14  
Insurance; Casualty and Condemnation
    47   Section 7.15  
License of Excluded Software
    48   Section 7.16  
Non-Solicitation
    49   Section 7.17  
Termination of Billboard Lease
    49   Section 7.18  
No Control
    49   Section 7.19  
Estoppel Certificate
    49   Section 7.20  
2005 Audited Financial Statements
    49      
 
           
ARTICLE VIII
           
 
           
CONDITIONS TO CLOSING
           
 
        Section 8.1  
Conditions to Each Party’s Obligation to Effect the Closing
    50   Section 8.2  
Additional Conditions to Obligations of Buyers
    50   Section 8.3  
Additional Conditions to Obligations of Sellers
    51      
 
           
ARTICLE IX
           
 
           
TERMINATION AND AMENDMENT
           
 
        Section 9.1  
Termination
    51   Section 9.2  
Effect of Termination
    53   Section 9.3  
Application of the Deposit; Liquidated Damages
    53      
 
           
ARTICLE X
           
 
           
SURVIVAL; INDEMNIFICATION
           
 
        Section 10.1  
Survival of Representations, Warranties, Covenants and Agreements
    54   Section 10.2  
Indemnification
    54   Section 10.3  
Interpretation
    56   Section 10.4  
Procedure for Claims between Parties
    56   Section 10.5  
Defense of Third Party Claims
    56   Section 10.6  
Limitations on Indemnity
    57   Section 10.7  
Payment of Damages
    58  

iii

--------------------------------------------------------------------------------

 

                      Page Section 10.8  
Exclusive Remedy
    58   Section 10.9  
Treatment of Indemnification Payments
    58      
 
           
ARTICLE XI
           
 
           
PROPERTY
           
 
        Section 11.1  
As Is
    58   Section 11.2  
Title to Casino Land
    59   Section 11.3  
Title to the Traymore Site Land
    61      
 
           
ARTICLE XII
           
 
           
MISCELLANEOUS
           
 
        Section 12.1  
Definitions
    61   Section 12.2  
Governing Law; Consent to Jurisdiction; Waiver of Trial by Jury
    73   Section 12.3  
Notices
    74   Section 12.4  
Interpretation
    76   Section 12.5  
Headings
    76   Section 12.6  
Entire Agreement; No Third Party Beneficiaries
    76   Section 12.7  
Severability
    77   Section 12.8  
Assignment
    77   Section 12.9  
Parties of Interest
    77   Section 12.10  
Counterparts
    77   Section 12.11  
Mutual Drafting
    77   Section 12.12  
Amendment
    78   Section 12.13  
Extension; Waiver
    78   Section 12.14  
Time of Essence
    78   Section 12.15  
Disclosure Letters
    78   Section 12.16  
Guarantee
    78      
 
        EXHIBITS  
 
           
 
        Exhibit A  
Deposit Escrow Agreement
        Exhibit B  
Form of Bill of Sale and Assignment
        Exhibit C  
Form of Assignment and Assumption Agreement—Assumed Contracts and Assumed
Liabilities
        Exhibit D  
Forms of Non-Foreign Affidavits
        Exhibit E  
Form of Confirmation of Transfer of Guest Items
        Exhibit F  
Form of Confirmation of Transfer of Guest Baggage
        Exhibit G  
Form of Bill of Sale—Passenger/Delivery Vehicles
        Exhibit H  
Form of Grant, Bargain, Sale Deed (Flamingo)
        Exhibit I  
Form of Bargain and Sale Deed (Boardwalk)
        Exhibit J  
Form of Trademark License Agreement
        Exhibit K  
Excluded Software License Agreement
        Exhibit L  
Form of Assignment and Assumption Agreement—Traymore Lease
       

iv

--------------------------------------------------------------------------------

 

ASSET PURCHASE AGREEMENT
     THIS ASSET PURCHASE AGREEMENT (this “Agreement”) is made and entered into
as of November 28, 2005, by and among Harrah’s Operating Company, Inc.
(“Harrah’s”), Flamingo-Laughlin, Inc., a Nevada corporation (“Flamingo”),
Martial Development Corp., a New Jersey corporation, Boardwalk Regency
Corporation, a New Jersey corporation (together, “Boardwalk,” and with Flamingo,
each a “Seller” and collectively, the “Sellers”) and AREP Laughlin Corporation,
a Delaware corporation (“Flamingo Buyer”) and AREP Boardwalk LLC, a Delaware
limited liability company (“Boardwalk Buyer” and with Flamingo Buyer, each a
“Buyer” and collectively, the “Buyers”). Capitalized terms used herein and not
otherwise defined shall have the meanings set forth in Section 12.1 hereof.
     WHEREAS, Flamingo owns and operates the Casino Property (commonly known as
Flamingo Laughlin) and Boardwalk owns the Traymore Site; and
     WHEREAS, Flamingo Buyer desires to purchase Flamingo’s interest in the
Casino Property and assume certain Liabilities related thereto and Boardwalk
Buyer desires to purchase Boardwalk’s interest in the Traymore Site and assume
certain Liabilities related thereto, all on the terms and subject to the
conditions set forth herein;
     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 ASSETS
     Section 1.1 Purchase and Sale of Assets.
     (a) Upon the terms and subject to the conditions set forth in this
Agreement, at the Closing, Flamingo shall sell, convey, assign and transfer to
Flamingo Buyer, and Flamingo Buyer shall purchase and acquire from Flamingo, all
of Flamingo’s right, title and interest in and to Flamingo’s assets, properties
and rights, tangible and intangible, of every type and description, wherever
located, in each case which are used or employed primarily in connection with
the Casino Property, including without limitation, Flamingo’s assets, properties
and rights set forth below, but excluding the Flamingo Excluded Assets and
except as set forth on the Detailed Balance Sheet (the “Flamingo Purchased
Assets”):
          (i) the Casino Property, including the Casino Land;
          (ii) all items of the type designated to be transferred to Flamingo
Buyer on the Detailed Balance Sheet, including without limitation, all cash and
cash equivalent balances of Flamingo and outstanding accounts receivable as of
the Closing Date;

 

--------------------------------------------------------------------------------

 

          (iii) the Assumed Contracts, including the Material Assumed Contracts;
          (iv) the Acquired Personal Property;
          (v) the Transferred Intellectual Property;
          (vi) the Books and Records;
          (vii) the Transferred Data;
          (viii) the Governmental Approvals, and pending applications therefor,
to the extent transferable by Law, all of which are set forth on
Section 1.1(a)(viii) of the Flamingo Disclosure Letter;
          (ix) the Transferred Employee Records;
          (x) the Flamingo Customer List, the Affiliate Customer List and the
Flamingo Databases;
          (xi) all assets to which Buyer is entitled under the proration and
adjustment provisions of Article III hereof.
     (b) Upon the terms and subject to the conditions set forth in this
Agreement, at the Closing, Boardwalk shall sell, convey, assign and transfer to
Boardwalk Buyer, and Boardwalk Buyer shall purchase and acquire from Boardwalk,
all of Boardwalk’s right, title and interest in and to Boardwalk’s assets,
properties and rights, tangible and intangible, of every type and description,
wherever located, in each case which are used or employed primarily in
connection with the Traymore Site, including without limitation, Boardwalk’s
assets, properties and rights set forth below, but excluding the Boardwalk
Excluded Assets (the “Boardwalk Purchased Assets,” and together with the
Flamingo Purchased Assets, the “Purchased Assets”):
          (i) the land located in the City of Atlantic City, Atlantic County,
New Jersey known and designated as Lots 13 through 18 in Block 47, Lots 11
through 14, 19 and 25 in Block 48, and Lot 12 in Block 49 (the “Traymore Site
Land”);
          (ii) all buildings, structures and other improvements now or hereafter
located on the Traymore Site Land (collectively, the “Traymore Site
Improvements”);
          (iii) the Traymore Contracts;
          (iv) any and all (A) drawings, specifications, surveys, architectural,
engineering, soils, seismic, geological and environmental reports, studies and
certificates, and other technical descriptions in Boardwalk’s possession
relating to the Boardwalk Purchased Assets (collectively, the “Traymore Plans”),
(B) third-party warranties, guaranties and indemnities relating to the Boardwalk
Purchased Assets (collectively, the “Traymore Warranties”), (C) all licenses,
permits, governmental approvals, utility commitments, utility rights,
development rights or approvals or other similar rights relating to the
Boardwalk Purchased Assets, all of which are set forth on Section 1.1(b)(iv)

2

--------------------------------------------------------------------------------

 

of the Boardwalk Disclosure Letter (collectively, the “Traymore Licenses”) and
(D) any and all books and records relating exclusively to the Boardwalk
Purchased Assets, including without limitation, any rent rolls;
          (v) all right, title and interest, if any, of Boardwalk in and to any
land lying in the bed of any street, road, highway or avenue, open or proposed,
in front of or adjoining all or any part of the Traymore Site Land and in all
strips, gores or rights-of-way, riparian rights and easements; and
          (vi) all other property, real, personal or mixed, owned or held by
Boardwalk (or Boardwalk’s representatives) which relates, in any way, to the
design, construction, ownership, use, leasing, advertising, maintenance or
operation of the Boardwalk Purchased Assets.
     Section 1.2 Excluded Assets.
     (a) Notwithstanding anything to the contrary contained in this Agreement,
from and after the Closing, Flamingo shall retain all of its right, title and
interest in and to each and all of the following assets, except as may otherwise
be set forth on the Detailed Balance sheet (the “Flamingo Excluded Assets”):
          (i) all items of the type designated to be retained by Flamingo on the
Detailed Balance Sheet;
          (ii) the Excluded Contracts;.
          (iii) any rights, claims, causes of action and credits (including all
indemnities, warranties and similar rights) in favor of Flamingo or any of its
Affiliates or Representatives to the extent relating to (A) any other Flamingo
Excluded Asset or (B) any Flamingo Excluded Liability;
          (iv) the corporate charter or other organizational documents, minute
and stock books and records, corporate seals, Tax Returns (including supporting
schedules) of Flamingo or any of its Affiliates;
          (v) all of its human resources and other employee-related files and
records, other than the Transferred Employee Records;
          (vi) all indebtedness or accounts payable owing from any Affiliate of
Flamingo to Flamingo, all of which are set forth on Section 1.2(a)(vi) of the
Flamingo Disclosure Letter;
          (vii) subject to Section 3.1 hereof, any refund, credit, claim or
entitlement with respect to Taxes of Flamingo or its Affiliates, or with respect
to the Flamingo Purchased Assets, to the extent attributable to Tax periods (or
portions thereof) ending on or before the Closing Date;
          (viii) the Excluded Personal Property;

3

--------------------------------------------------------------------------------

 

          (ix) the Excluded Intellectual Property;
          (x) the Customer Database;
          (xi) the Excluded Software;
          (xii) all assets and properties of Flamingo neither used primarily in
connection with the business operated at the Casino Property nor located at the
Casino Property and all assets and properties owned by Affiliates of Flamingo
(other than the CS3 Assets) to the extent such assets and properties are not
used primarily in connection with the business operated at the Casino Property;
          (xiii) all data, files and other materials located on any storage
device (including such data, files and/or materials located on personal
computers and servers) located at the Casino Property other than the Books and
Records, the Flamingo Customer List, the Affiliate Customer List and the
Transferred Data;
          (xiv) all assets to which Flamingo is entitled under the proration and
adjustment provisions of Article III hereof;
          (xv) the Total Rewards and any player loyalty or rewards program of
Harrah’s or its Affiliates; and
          (xvi) any assets set forth on Section 1.2(a)(xvi) of the Flamingo
Disclosure Letter.
     (b) Notwithstanding anything to the contrary contained in this Agreement,
from and after the Closing, Boardwalk shall retain all of its right, title and
interest in and to each and all of the following assets (the “Boardwalk Excluded
Assets” and together with the Flamingo Excluded Assets, the “Excluded Assets”):
          (i) all assets and properties of Boardwalk not located at the Traymore
Site, including, without limitation, the Other Assets and Other Property; and
all assets and properties owned by Affiliates of Boardwalk;
          (ii) the Other Assets and Other Property;
          (iii) the corporate charter or other organizational documents, minute
and stock books and records, corporate seals, Tax Returns (including supporting
schedules) of Boardwalk or any of its Affiliates;
          (iv) subject to Section 3.1 hereof, any refund, credit, claim or
entitlement with respect to Taxes of Boardwalk or its Affiliates, or with
respect to the Boardwalk Purchased Assets, to the extent attributable to Tax
periods (or portions thereof) ending on or before the Closing Date;
          (v) all assets to which Boardwalk is entitled under the proration and
adjustment provisions of Article III hereof; and

4

--------------------------------------------------------------------------------

 

          (vi) any assets set forth on Section 1.2(b) of the Boardwalk
Disclosure Letter.
     Section 1.3 Assumed Liabilities.
     (a) Upon the terms and subject to the conditions set forth in this
Agreement, as of the Closing Date, Flamingo Buyer agrees to assume, satisfy,
perform, pay, discharge and be solely responsible for the following Liabilities
of Flamingo (the “Flamingo Assumed Liabilities”):
          (i) all Liabilities of the type designated on the Detailed Balance
Sheet as being assumed by Buyer;
          (ii) all Liabilities to the extent solely relating to, or arising in
respect of, (A) the Flamingo Purchased Assets accruing, arising out of, or
relating to events, occurrences, acts or omissions happening from and after the
Closing Date and (B) all Assumed Contracts which were not fully performed and
were not required to have been so performed, prior to the Closing Date;
          (iii) all Liabilities with respect to entertainment, hotel, dining and
other reservations made by patrons relating to the Casino Property from and
after the Closing;
          (iv) except as provided for in Sections 3.1 and 7.9, all Liabilities
for Taxes arising from and attributable to the ownership of any portion of the
Flamingo Purchased Assets from and after the Closing Date and any Taxes that are
included in the calculation of the Final Working Capital Adjustment;
          (v) (A) all Liabilities relating to Transferred Employees accruing
from and after the Closing Date and (B) all obligations and Liabilities relating
to severance provided for in Section 7.4(c) hereof;
          (vi) all Liabilities of Buyer pursuant to the proration and adjustment
provisions of Article III hereof;
          (vii) all Liabilities with respect to claims, acts, omissions, events
or occurrences relating to the Flamingo Purchased Assets, which occur or arise
on or after the Closing Date;
          (viii) all Liabilities under Environmental Laws, including without
limitation Environmental Liabilities, relating to, resulting from, caused by or
arising out of ownership, operation or control of the Casino Property, whether
arising before or after the Closing Date, including, without limitation, any
Liability relating to contamination or exposure to Hazardous Substances at or
attributable to the Casino Property, but excluding the Flamingo Excluded
Environmental Liabilities; and
          (ix) to the extent lawfully transferable, all obligations, commitments
and Liabilities under any Governmental Approvals assigned to Buyer pursuant to
Section 1.1(a)(vii) hereof to the extent arising on or after the Closing Date.

5

--------------------------------------------------------------------------------

 

     (b) Upon the terms and subject to the conditions set forth in this
Agreement, as of the Closing Date, Boardwalk Buyer agrees to assume, satisfy,
perform, pay, discharge and be solely responsible for all Liabilities of
Boardwalk, of any kind of nature whatsoever, whether known or unknown, fixed or
contingent, but including, without limitation, and except for the Boardwalk
Excluded Liabilities (the “Boardwalk Assumed Liabilities,” and together with the
Flamingo Assumed Liabilities, the “Assumed Liabilities”):
          (i) except as provided for in Sections 3.1 and 7.9, all Liabilities
for Taxes arising from and attributable to the ownership of any portion of the
Boardwalk Purchased Assets from and after the Closing Date and any Taxes that
are included in the calculation of the Final Working Capital Adjustment;
          (ii) all Liabilities of Buyer pursuant to the proration and adjustment
provisions of Article III hereof;
          (iii) all Liabilities with respect to (A) claims, acts, omissions,
events or occurrences relating to the Boardwalk Purchased Assets, which occur or
arise on or after the Closing Date and (B) all Traymore Contracts and Traymore
Leases which were not fully performed and were not required to have been so
performed, prior to the Closing Date;
          (iv) all Liabilities under Environmental Laws, including without
limitation Environmental Liabilities, relating to, resulting from, caused by or
arising out of ownership, operation or control of the Traymore Site, whether
arising before or after the Closing Date, including, without limitation, any
Liability relating to contamination or exposure to Hazardous Substances at or
attributable to the Traymore Site, but excluding the Boardwalk Excluded
Environmental Liabilities; and
          (v) to the extent lawfully transferable, all obligations, commitments
and Liabilities under any Governmental Approvals assigned to Buyer pursuant to
Section 1.1(b)(iv) hereof to the extent arising on or after the Closing Date.
     Section 1.4 Excluded Liabilities.
     (a) Flamingo Buyer shall not assume, or in any way be liable or responsible
for any Liabilities of Flamingo, other than the Flamingo Assumed Liabilities
(collectively, the “Flamingo Excluded Liabilities”). Without limiting the
generality of the foregoing, Flamingo Buyer shall not assume any of the
following, all of which shall be Flamingo Excluded Liabilities for purposes of
this Agreement:
          (i) any Liability in respect of any Flamingo Excluded Asset;
          (ii) all Liabilities of the type designated to be retained by Flamingo
on the Detailed Balance Sheet;
          (iii) all Liabilities set forth on Section 1.4(a) of the Flamingo
Disclosure Letter;

6

--------------------------------------------------------------------------------

 

          (iv) all indebtedness or accounts payable owing from Flamingo to any
Affiliate of Flamingo;
          (v) all Pre-Closing Tax Liabilities;
          (vi) all Pre-Closing Employee Liabilities;
          (vii) all Liabilities under Environmental Laws for (i) matters set
forth at Sections 5.8(1), (2) and (3) of the Flamingo Disclosure Letter or
(ii) any tort claim made prior to the expiration of the applicable statute of
limitations which is directly related to contamination or exposure to Hazardous
Substances at the Casino Property, but, if and only if, such contamination or
exposure occurred solely prior to Closing (collectively, the “Flamingo Excluded
Environmental Liabilities”);
          (viii) all Liabilities of Flamingo pursuant to the proration and
adjustment provisions of Article III hereof; and
          (ix) all Liabilities of Flamingo that (A) by their terms should have
been performed on or prior to the Transfer Time, and/or (B) relate to events or
circumstances, including claims, pending or threatened litigation, acts,
omissions, events or occurrences relating to the Flamingo Purchased Assets,
arising on or prior to the Transfer Time, in each case, other than the Flamingo
Assumed Liabilities.
     (b) Boardwalk shall retain and shall be responsible for each of the
following Liabilities (collectively, the “Boardwalk Excluded Liabilities”),
including, without limitation:
          (i) any Liability in respect of any Boardwalk Excluded Asset,
including the Other Assets and the Other Property;
          (ii) all Liabilities set forth on Section 1.4(b) of the Boardwalk
Disclosure Letter;
          (iii) all indebtedness or accounts payable owing from Boardwalk to any
Affiliate of Seller;
          (iv) all Pre-Closing Tax Liabilities;
          (v) all Liabilities under Environmental Laws for matters set forth on
Section 5.26 of the Boardwalk Disclosure Letter (the “Boardwalk Excluded
Environmental Liabilities”);
          (vi) all Liabilities of Boardwalk pursuant to the proration and
adjustment provisions of Article III hereof; and
          (vii) all Liabilities of Boardwalk that (A) by their terms should have
been performed on or prior to the Transfer Time, and/or (B) relate to events or
circumstances, including claims, pending or threatened litigation, acts,
omissions, events or occurrences relating to the Boardwalk Purchased Assets,
arising on or prior to the

7

--------------------------------------------------------------------------------

 

Transfer Time, in each case, other than the Boardwalk Assumed Liabilities
specifically enumerated in Section 1.3(b)(i) through (v).
     Section 1.5 Retention and Removal of Excluded Assets.
     (a) Notwithstanding anything to the contrary contained in this Agreement,
each Seller and their respective Affiliates may retain and use, at their own
expense, archival copies of, with respect to Flamingo, all Assumed Contracts and
all other documents or materials transferred hereunder (but excluding the
Flamingo Customer List), and with respect to Boardwalk, all Traymore Contracts
and all other documents or materials transferred hereunder, in each case, which
any such Seller in good faith determines is reasonably likely to be needed in
connection with the defense (or any counterclaim, cross-claim or similar claim
in connection therewith) of any suit, claim, action, proceeding or investigation
against or by such Seller or any of its Affiliates pending or threatened as of
the Closing Date; or (ii) any such Seller in good faith determines is reasonably
likely to be needed in connection with any filing, report, or investigation to
or by any Governmental Authority. Notwithstanding the above, Flamingo and its
Affiliates shall retain the Affiliate Customer List, which Flamingo and its
Affiliates shall retain unlimited rights to use in perpetuity in connection with
its marketing and loyalty programs and otherwise.
     (b) All items located at each Seller’s Property that constitute Excluded
Assets may be removed on or prior to the Closing Date and, subject to the
immediately succeeding sentence, within thirty (30) days after the Closing Date
by such Seller, its Affiliates, the owners of the Excluded Assets, or their
respective Representatives, with the removing party making all repairs
necessitated by such removal, but without any obligation on the part of such
Seller, its Affiliates, or any removing party to replace any item so removed.
Sellers hereby reserve unto themselves and their Affiliates and the owners of
the Excluded Assets, and their respective Representatives, a right of entry into
each Seller’s Property at reasonable times after the Closing Date and within
such thirty (30) day period to effect such removal; provided that following the
Closing each Seller provide the applicable Buyer with reasonable prior written
notice of the times at which such Seller proposes to effect such removal and;
provided, further, that such Buyer may, promptly upon receipt of any such
notice, designate an alternative reasonable time to effect such removal if such
Buyer in good faith determines that the time proposed by Seller would materially
interfere with such Buyer’s operation of the Purchased Assets. All risk of loss
relative to any Excluded Assets that are located on any Seller’s Property after
the Closing Date shall remain with such Seller.
     (c) Flamingo recognizes that Flamingo Buyer will be replacing the Excluded
Software at the Casino Property and that Flamingo Buyer intends that its
replacement software will be operational as of, or promptly after, the Closing
Date and, with respect to any Excluded Software that may be licensed to Flamingo
Buyer pursuant to the Excluded Software License Agreement, prior to the
expiration or earlier termination of such Excluded Software License Agreement.
Subject to Sections 1.6(c) and 7.15 hereof, Flamingo agrees to cooperate
reasonably with Flamingo Buyer in Flamingo Buyer’s efforts to effect the
transition from Excluded Software to replacement software, including but not
limited to assisting Flamingo Buyer with an assignment or transfer of any
applicable Excluded Contracts with InfoGenesis; provided that: (i) there shall
be no material interference with Flamingo’s operation of the Casino Property
before

8

--------------------------------------------------------------------------------

 

the Closing Date; (ii) there shall be no out-of-pocket cost or expense incurred
by Flamingo or any of its Affiliates in connection with such cooperation,
including any costs associated with wages for Flamingo’s employees or agents who
will be assisting in the process; (iii) Flamingo shall not be required to reveal
proprietary information to Buyer (except as otherwise agreed to by the parties
in any Excluded Software License) and (iv) with respect to the assignment or
transfer of any InfoGenesis Excluded Contract, Flamingo shall not be required to
assign any such agreement if such assignment would make Flamingo Buyer and any
Affiliates of Flamingo co-parties to the same agreement. Flamingo shall
uninstall Excluded Software at the Casino Property that is now installed on
personal computers at the Casino Property on or immediately prior to the Closing
Date (except as otherwise agreed to by the parties in any Excluded Software
License Agreement).
     Section 1.6 Assignability and Consents.
     (a) Prior to Closing, Buyers and Sellers shall all cooperate and be
responsible for obtaining any necessary consents to assign the Purchased Assets,
including the Assumed Contracts, which for the purposes of this Section 1.6(a)
shall be deemed to include the Traymore Contracts, from any Seller to any Buyer
at the Closing, and all costs (including legal fees) related to such process
shall be borne one half by the applicable Buyer and one half by the applicable
Seller. Notwithstanding anything to the contrary contained in this Agreement, if
the sale, conveyance, assignment, attempted sale, conveyance, assignment or
transfer to Buyers of any Purchased Asset is, by its terms, nonassignable
without the consent of a third party (other than an Affiliate of any Seller, in
which case the applicable Seller covenants and agrees to cause such Affiliate to
render such consent) and such authorizations, approvals, consents or waivers
shall not have been obtained prior to the Closing Date (each, a “Non-Assignable
Asset”), in either case, subject to the other provisions of this Section 1.6 and
subject to Section 8.2(c) and the receipt of any consents, waivers,
authorizations or approvals set forth on Section 8.2(c) of the Buyer Disclosure
Letter, the Closing shall proceed, but the Closing shall not constitute the
sale, conveyance, assignment, transfer or delivery of any such Non-Assignable
Asset, and this Agreement shall not constitute a sale, conveyance, assignment,
transfer or delivery of any such Non-Assignable Asset unless and until such
authorization, approval, consent or waiver is obtained. After the Closing, the
applicable Seller and the applicable Buyer shall use commercially reasonable
efforts to obtain any such authorizations, approvals, consents or waivers
related to the Non-Assignable Assets, and the applicable Buyer and the
applicable Seller shall cooperate with each other in any arrangement
commercially reasonable to provide that the applicable Buyer shall receive the
interest of such Seller in the benefits under any such Non-Assignable Asset
until such time as such third party consent, approval or waiver shall have been
obtained, and such Buyer and such Seller shall cooperate with the other party in
any such commercially reasonable arrangement, including performance by the
applicable Seller as agent if commercially reasonable to such Seller, and, in
such case, the applicable Buyer shall be liable to such Seller in a fashion
equivalent to what such Buyer’s Liabilities would be under any such
Non-Assignable Asset as if it were assigned. The applicable Seller shall
promptly pay over to the applicable Buyer the net amount (after out-of-pocket
expenses) of all payments received by it in respect of all of its Non-Assignable
Assets. In complying with the foregoing, no Seller shall be required, in any
manner, to waive, relinquish or forego any right or claim available to such
Seller with respect to any such Non-Assignable Asset in order to provide such
assignment, transfer or benefit. Each Buyer understands and agrees that the
assignment of certain Contracts

9

--------------------------------------------------------------------------------

 

as contemplated hereunder may require the delivery by such Buyer of certain
deposits to the third parties that are party to such Contracts and that each
Buyer shall be responsible for the timely delivery of such deposits in
accordance with requirements of such third parties.
     (b) Once authorization, approval or waiver of or consent for the sale,
conveyance, assignment or transfer of any such Non-Assignable Asset is obtained,
the applicable Seller shall convey, assign, transfer and deliver any such
Non-Assignable Asset at no additional cost to the applicable Buyer, and such
Non-Assignable Asset shall thereafter constitute a Purchased Asset.
Notwithstanding anything to the contrary contained in this Agreement, the
applicable Buyer shall assume all Liabilities in respect of any Non-Assignable
Asset to the extent such Liabilities constitute Assumed Liabilities hereunder if
it is receiving the benefits thereof in accordance with Section 1.6(a);
provided, further, that the parties hereto shall also be liable to each other
for performing their respective obligations under the arrangements described in
Section 1.6(a) hereof.
     (c) Buyers understand and agree that (i) subject to Seller obligations set
forth in this Section 1.6(a), it is solely Buyers’ responsibility to obtain any
and all Contracts necessary to conduct business at the Properties from and after
the Closing Date, including, without limitation, with respect to the Casino
Property and replacement software license agreements for the software which will
replace the Excluded Software and (ii) except as set forth in
Sections 1.1(a)(vii) and 1.1(b)(iv) hereof, no licenses or permits will be
transferred by Sellers in connection with the sale of the Purchased Assets and
Buyers shall therefore be responsible for obtaining any new or other licenses
and permits for the operation of the Properties.
     Section 1.7 Other Assets; Other Property. Buyers agree and acknowledge that
in addition to owning the Boardwalk Purchased Assets, Boardwalk owns and
operates the hotel casino commonly known as Caesars Atlantic City (the “Other
Property”) and owns certain other assets that are not located at the Traymore
Site (collectively, the “Other Assets”). Notwithstanding anything to the
contrary contained in this Agreement, the parties hereto agree that:
(i) Boardwalk is not making any representations or warranties with respect to
the Other Property or the Other Assets; (ii) Boardwalk is not assigning or
transferring any assets or properties related solely to the Other Assets or the
Other Property; and (iii) neither Boardwalk nor Buyer is assuming or incurring
any obligations or Liabilities under this Agreement with respect to the Other
Property and Other Assets, nor are the Other Assets or the Other Property
subject to any restrictions by virtue of the Agreement.
ARTICLE II
PURCHASE PRICE AND DEPOSIT
     Section 2.1 Purchase Price. In consideration for the sale and transfer of
the Flamingo Purchased Assets and the Boardwalk Purchased Assets, as provided
for herein, at the Closing, Buyers shall deliver or cause to be delivered by
electronic transfer of immediately available funds to an account designated by
each of the Sellers to Buyers in writing at least two (2) business days prior to
the Closing Date, an aggregate of One Hundred Seventy Million United States
Dollars ($170,000,000), PLUS OR MINUS the Working Capital Adjustment, if any, as
provided for in Sections 2.4(a) and 2.5 hereof, PLUS OR MINUS the Traymore
Adjustment, if any, provided for in Sections 2.4(b) and 2.6 hereof
(collectively, the “Purchase Price”); provided,

10

--------------------------------------------------------------------------------

 

however, that for the avoidance of doubt, a portion of the Purchase Price shall
be paid by the release of the Deposit to Sellers pursuant to Section 2.2(a) and
the terms of the Deposit Escrow Agreement. At Closing, in lieu of the final full
Working Capital Adjustment, the Purchase Price shall be calculated using the
Initial Working Capital Adjustment as determined in accordance with
Section 2.4(a) hereof, with subsequent final adjustment as provided for in
Section 2.5(c) hereof and in lieu of the final full Traymore Adjustment, the
Purchase Price shall be calculated using the Initial Traymore Adjustment as
determined in accordance with Section 2.4(b) hereof, with subsequent final
adjustment as provided for in Section 2.6(c) hereof.
     Section 2.2 Deposit.
     (a) On the date hereof, Buyers shall deposit Twelve Million United States
Dollars ($12,000,000) (such amount, including the interest accrued thereon and
any additional funds deposited by Buyers with the Escrow Agent pursuant to
Section 4.1, the “Deposit”) with Lawyers Title of Nevada, Inc. (the “Escrow
Agent”) pursuant to an escrow agreement dated as of the date hereof and attached
hereto as Exhibit A (the “Deposit Escrow Agreement”) executed and delivered by
Sellers, Buyers and the Escrow Agent. At the Closing, the Deposit shall be
credited against the Purchase Price and the Deposit shall be promptly released
and paid by the Escrow Agent to Sellers pursuant to this Section 2.2(a) and the
terms of the Deposit Escrow Agreement. Upon the termination of this Agreement,
the Deposit shall be payable pursuant to Section 9.3 hereof, and thereafter
shall be promptly released by the Escrow Agent to Buyers or Sellers, as
applicable, pursuant to Section 9.3 hereof and the terms of the Deposit Escrow
Agreement.
     (b) Each Seller and each Buyer 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 consummate the
purchase and sale contemplated herein, or otherwise to distribute and pay the
funds held in escrow as provided in this Agreement and the Deposit Escrow
Agreement; provided that such escrow instructions are consistent with the terms
of this Agreement 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 the parties
hereto to the contrary which acknowledges this Section 2.2(b).
     Section 2.3 Allocation of Purchase Price.
     (a) No later than sixty (60) days following the Closing, Flamingo Buyer
shall prepare a draft schedule allocating a portion of the Purchase Price (as
determined for federal income tax purposes, including any Flamingo Assumed
Liabilities that are required to be treated as part of such portion of the
Purchase Price for federal income tax purposes) among the Flamingo Purchased
Assets (and any other assets that are considered to be acquired for federal
income tax purposes) on or prior to the Closing Date in accordance with
Section 1060 of the Code and the Treasury Regulations thereunder and applicable
Law (the “Flamingo Purchase Price Allocation”) and provide such schedule to
Flamingo for review and comment. Flamingo and Flamingo Buyer shall use
commercially reasonable efforts to agree upon the final Flamingo Purchase Price

11

--------------------------------------------------------------------------------

 

Allocation and if Flamingo Buyer and Flamingo are unable to resolve such
disagreement within ten (10) days following Flamingo Buyer’s submission of the
draft allocation schedule to Flamingo, then any disputed matter(s) will be
finally and conclusively resolved by an independent accounting firm of
recognized national standing with no existing relationship with either party
that is mutually selected by Flamingo Buyer and Flamingo (the “Auditor”) as
promptly as practicable, and such resolution(s) will be reflected on the
Flamingo Purchase Price Allocation. The fees and expenses of the Auditor shall
be borne equally by Flamingo Buyer and Flamingo. Except as required by any
applicable Law, Flamingo Buyer and Flamingo agree to (a) be bound by the
Flamingo Purchase Price Allocation, (b) act in accordance with the Flamingo
Purchase Price Allocation in the filing of all Tax Returns (including, without
limitation, filing IRS Form 8594 (and any supplemental or amended Form 8594)
with their United States federal income Tax Return for the taxable year that
includes the Closing Date) and in the course of any Tax audit, Tax review or Tax
litigation relating thereto, and (c) take no position and cause its Affiliates
to take no position inconsistent with the Flamingo Purchase Price Allocation for
Tax purposes, unless otherwise required pursuant to a “determination” within the
meaning of Section 1313(a) of the Code. Flamingo Buyer and Flamingo shall
promptly inform one another of any challenge by any Governmental Authority to
any allocation made pursuant to this Section 2.3(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) No later than sixty (60) days following the Closing, Boardwalk Buyer
shall prepare a draft allocation schedule of a portion of the Purchase Price (as
determined for federal income tax purposes, including any Boardwalk Assumed
Liabilities that are required to be treated as part of such portion of the
Purchase Price for federal income tax purposes) among the Boardwalk Purchased
Assets (and any other assets that are considered to be acquired for federal
income tax purposes) on or prior to the Closing Date in accordance with
Section 1060 of the Code and the Treasury Regulations thereunder and applicable
Law (the “Boardwalk Purchase Price Allocation”) and provide such schedule to
Boardwalk for review and comment. Boardwalk Buyer and Boardwalk shall use
commercially reasonable efforts to agree upon the final Boardwalk Purchase Price
Allocation and if Boardwalk Buyer and Boardwalk are unable to resolve such
disagreement within ten (10) days following Boardwalk Buyer’s submission of the
draft allocation schedule to Boardwalk, then any disputed matter(s) will be
finally and conclusively resolved by the Auditor as promptly as practicable, and
such resolution(s) will be reflected on the Boardwalk Purchase Price Allocation.
The fees and expenses of the Auditor shall be borne equally by Boardwalk Buyer
and Boardwalk. Except as required by any applicable Law, Boardwalk Buyer and
Boardwalk agree to (a) be bound by the Boardwalk Purchase Price Allocation,
(b) act in accordance with the Boardwalk Purchase Price Allocation in the filing
of all Tax Returns (including, without limitation, filing IRS Form 8594 (and any
supplemental or amended Form 8594) with their United States federal income Tax
Return for the taxable year that includes the Closing Date) and in the course of
any Tax audit, Tax review or Tax litigation relating thereto, and (c) take no
position and cause its Affiliates to take no position inconsistent with the
Boardwalk Purchase Price Allocation for Tax purposes, unless otherwise required
pursuant to a “determination” within the meaning of Section 1313(a) of the Code.
Boardwalk Buyer and Boardwalk shall promptly inform one another of any challenge
by any Governmental Authority to any allocation made pursuant to this
Section 2.3(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.

12

--------------------------------------------------------------------------------

 

     (c) No less than fourteen (14) days prior to the Closing (i) Flamingo Buyer
shall determine and submit to Flamingo for review and approval, which approval
will not be unreasonably withheld, all information required for completion of
the State of Nevada Declaration of Value Form including the value of real estate
(including, but not limited to, any real property or interests therein and
buildings) relating to the Casino Property and (ii) Boardwalk Buyer shall
determine and submit to Boardwalk for review and approval, which approval will
not be unreasonably withheld, the value of real estate (including, but not
limited to, any real property or interests therein and buildings) relating to
the Traymore Site. Such values shall be determinative for purposes of the
Flamingo Purchase Price Allocation and the Boardwalk Purchase Price Allocation.
To the extent that the applicable Buyer and the applicable Seller cannot agree
upon these values, any disputed matter(s) will be finally and conclusively
resolved by the Auditor as promptly as practicable and in any event prior to the
Closing Date.
     Section 2.4 Initial Estimated Adjustments.
     (a) At least five (5) business days prior to the Closing Date, Flamingo
shall deliver to Flamingo Buyer a statement of Working Capital substantially in
the form of the Detailed Balance Sheet (the “Pre-Closing Working Capital
Statement”). The Pre-Closing Working Capital Statement shall be prepared on a
basis consistent with the accounting policies, practices, procedures and
principles used in preparing the Detailed Balance Sheet. The Pre-Closing Working
Capital Statement will contain a good faith estimate of the amount of Working
Capital of Flamingo on the Closing Date (the “Pre-Closing Working Capital”).
Flamingo and Flamingo Buyer each shall bear its own expenses in the preparation
and review of the Pre-Closing Working Capital Statement. The “Initial Working
Capital Adjustment” (which may be a positive or negative number) shall equal the
Pre-Closing Working Capital. On or about the Transfer Time, Flamingo shall
conduct a cash count and a drop of 100 percent of the gaming device “hoppers”
and Flamingo shall provide reasonable advance notice to Flamingo Buyer thereof
and a representative of Flamingo Buyer may, subject to applicable Gaming Laws,
if any, be present to observe such hopper drop if it so elects. Such cash count
and hopper drop shall be used in the preparation of the Working Capital
Statement.
     (b) At least five (5) business days prior to the Closing Date, Boardwalk
shall deliver to Boardwalk Buyer a written closing statement (an “Estimated
Closing Statement”) setting forth a good faith estimated accounting for the
Traymore Site of the items set forth in subclauses (i) through (iii) of this
Section 2.4(b) and Section 3.1 hereof, which amount may be a positive or
negative number and shall be deemed the “Initial Traymore Adjustment.” Boardwalk
and Boardwalk Buyer each shall bear its own expenses in the preparation and
review of the Estimated Closing Statement.
          (i) Utilities. Utility meters will be read, to the extent that the
utility company will do so, during the daylight hours on the Closing Date (or as
near as practicable prior thereto), with charges to that time paid by Boardwalk
and charges thereafter paid by Boardwalk Buyer. Prepaid utility charges shall be
adjusted on the Estimated Closing Statement. Charges for utilities which are
un-metered, or the meters for which have not been read on the Closing Date, will
be prorated between Boardwalk Buyer and Boardwalk as of the Transfer Time.
Boardwalk or Boardwalk Buyer, as appropriate, shall, upon receipt, submit a copy
of the utility billings for any such charges

13

--------------------------------------------------------------------------------

 

to the other party and such party shall pay its pro-rata share of such charges
to the other party within seven (7) days from the date of any such request.
          (ii) Traymore Contracts and Traymore Leases. All income and expenses
pursuant to the Traymore Contracts and Traymore Leases will be prorated between
Boardwalk Buyer and Boardwalk as of the Closing Date on the Estimated Closing
Statement. Any amounts received by Boardwalk Buyer under its Traymore Contracts
and Traymore Leases related to any period prior to the Closing shall be promptly
paid to Boardwalk without set-off of any kind whatsoever as promptly as
possible. Any amounts received by any Seller under the Traymore Contracts and
Traymore Leases related to any period after the Closing shall be promptly paid
to Boardwalk Buyer without set-off of any kind whatsoever as promptly as
possible. All security deposits held by Boardwalk for the account of tenants
shall be transferred to Boardwalk Buyer on the Estimated Closing Statement. All
security deposits of Boardwalk held by any landlord shall be transferred to
Boardwalk Buyer and credited to Boardwalk on the Estimated Closing Statement.
          (iii) Assessments. Assessments, if any, shall be paid and allowed by
Boardwalk on account of the Purchase Price, if the improvement or work has been
commenced on or before the Closing Date. If the Traymore Site or any part
thereof is subject to an assessment or assessments which are payable in annual
installments, all unpaid installments of any such assessment which are to become
due and payable after the Closing shall be deemed to be liens on the Traymore
Site and shall be paid and discharged by Boardwalk at or prior to Closing.
Unconfirmed assessments, if any, shall be paid by Boardwalk at or prior to
Closing. Any assessments for work commenced after the Closing Date shall be the
sole responsibility of Boardwalk Buyer.
     Section 2.5 Final Working Capital Adjustment.
     (a) As soon as reasonably practicable following the Closing Date, but in no
event more than sixty (60) days after the Closing Date, Flamingo Buyer shall
cause to be prepared and delivered to Flamingo a statement of Working Capital of
Flamingo substantially in the form of the Pre-Closing Working Capital Statement
and the Detailed Balance Sheet (the “Working Capital Statement”). The Working
Capital Statement shall be prepared on a basis consistent with the accounting
policies, practices, procedures and principles used in preparing the Detailed
Balance Sheet. The Working Capital Statement will contain the amount of Working
Capital as of the Closing Date (the “Closing Date Working Capital”). Flamingo
Buyer shall give Flamingo reasonable prior written notice of any cash counts and
physical inventories that will be taken by Flamingo Buyer in connection with its
preparation of the Working Capital Statement. Notwithstanding any provision of
this Agreement to the contrary, Flamingo shall, subject to applicable Gaming
Laws, if any, be permitted to have a representative of Flamingo present to
observe such cash counts and physical inventories if it so elects. Flamingo
Buyer and Flamingo each shall bear its own expenses in the preparation and
review of the Working Capital Statement. Subject to applicable Law, Flamingo
Buyer will provide Flamingo reasonable access to any of Flamingo Buyer or Casino
Property records not otherwise available to Flamingo as a result of the
transactions contemplated by this Agreement, to the extent reasonably related to
the preparation of the Working Capital Statement and the calculation of Closing
Date Working Capital.

14

--------------------------------------------------------------------------------

 

     (b) If Flamingo shall disagree with the calculation of Closing Date Working
Capital or any element of the Working Capital Statement relevant thereto, it
shall, within twenty (20) business days after its receipt of the Working Capital
Statement, notify Flamingo Buyer of such disagreement in writing, setting forth
in detail the particulars of such disagreement. In connection therewith and
subject to applicable Law, Flamingo Buyer will provide Flamingo reasonable
access to any of Flamingo Buyer’s records not otherwise available to Flamingo as
a result of the transactions contemplated by this Agreement, to the extent
reasonably related to Flamingo’s review of the Working Capital Statement and the
calculation of Closing Date Working Capital. In the event that Flamingo does not
provide such notice of disagreement within such twenty (20) business day period,
Flamingo shall be deemed to have accepted the Working Capital Statement and the
calculation of the Closing Date Working Capital delivered by Flamingo Buyer,
which shall be final, binding and conclusive for purposes of this Agreement and
not subject to any further recourse by Flamingo under any provision hereof,
including Article X hereof. In the event any such notice of disagreement is
timely provided, Flamingo Buyer and Flamingo, in conjunction with their
respective independent accounting firms, shall use reasonable best 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 Closing
Date Working Capital. If, at the end of such period, they are unable to resolve
such disagreements, then the Auditor shall resolve any remaining disagreements.
The Auditor shall determine as promptly as practicable whether the Working
Capital Statement 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) Closing Date Working Capital
requires adjustment. The Auditor shall promptly deliver to Flamingo Buyer and
Flamingo its determination in writing, which determination shall be made subject
to the definitions and principles set forth in this Agreement, and shall be
(i) consistent with either the position of Flamingo or Flamingo Buyer or
(ii) between the positions of Flamingo and Flamingo Buyer. The fees and expenses
of the Auditor shall be paid one-half by Flamingo Buyer and one-half by
Flamingo. The determination of the Auditor shall be final, binding and
conclusive for purposes of this Agreement and not subject to any further
recourse by Flamingo Buyer or Flamingo under any provision hereof, including
Article X. The date on which Closing Date Working Capital is finally determined
in accordance with this Section 2.5 is hereinafter referred to as the “Flamingo
Determination Date.”
     (c) Within ten (10) business days of the Flamingo Determination Date, the
amount (which may be a positive or negative number) equal to (i) the Closing
Date Working Capital MINUS (ii) the Pre-Closing Working Capital (the “Final
Working Capital Adjustment”) shall be paid in cash by wire transfer of
immediately available funds from Flamingo Buyer to Flamingo (if the Final
Working Capital Adjustment is a positive amount), or from Flamingo to Flamingo
Buyer (if the Final Working Capital Adjustment is a negative amount).
     Section 2.6 Final Traymore Adjustment.
     (a) As soon as reasonably practicable following the Closing Date, but in no
event more than thirty (30) days after the Closing Date, Boardwalk Buyer shall
prepare and deliver to Boardwalk a final accounting of the items set forth in
subclauses (i) through (iii) of Section 2.4(b) and Section 3.1 hereof (a “Final
Closing Statement”) as of the Closing Date which shall set forth the “Actual
Traymore Adjustment,” which may be a positive or negative number.

15

--------------------------------------------------------------------------------

 

Notwithstanding the above, final adjustments with respect to real and personal
property Taxes may continue to be made pursuant to Section 3.1 hereof.
     (b) If Boardwalk shall disagree with the calculation of Final Closing
Statement, it shall, within ten (10) business days after its receipt of the
Final Closing Statement, notify Boardwalk Buyer of such disagreement in writing,
setting forth in detail the particulars of such disagreement. In connection
therewith and subject to applicable Law, Boardwalk Buyer will provide Boardwalk
reasonable access to any of Boardwalk Buyer’s records not otherwise available to
Boardwalk, to the extent reasonably related to Boardwalk’s review of the Final
Closing Statement. In the event that Boardwalk does not provide such notice of
disagreement within such ten (10) business day period, Boardwalk shall be deemed
to have accepted the Final Closing Statement, which shall be final, binding and
conclusive for purposes of this Agreement and not subject to any further
recourse by Boardwalk under any provision hereof, including Article X hereof. In
the event any such notice of disagreement is timely provided, Boardwalk Buyer
and Boardwalk, in conjunction with their respective independent accounting
firms, shall use reasonable best 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 Final Closing Statement. If, at the end of such period, they
are unable to resolve such disagreements, then the Auditor shall resolve any
remaining disagreements. The Auditor shall promptly deliver to Boardwalk Buyer
and Boardwalk its determination in writing, which determination shall be made
subject to the terms of this Agreement, and shall be (i) consistent with either
the position of Boardwalk or Boardwalk Buyer or (ii) between the positions of
Boardwalk and Boardwalk Buyer. The fees and expenses of the Auditor shall be
paid one-half by Boardwalk Buyer and one-half by Boardwalk. The determination of
the Auditor shall be final, binding and conclusive for purposes of this
Agreement and not subject to any further recourse by Boardwalk Buyer or
Boardwalk under any provision hereof, including Article X. The date on which
Final Closing Statement is finally determined in accordance with this
Section 2.6 is hereinafter referred to as the “Boardwalk Determination Date.”
     (c) Within ten (10) business days of the Boardwalk Determination Date, the
amount (which may be a positive or negative number) equal to (i) the Initial
Traymore Adjustment MINUS (ii) the Actual Traymore Adjustment (the “Final
Traymore Adjustment”) shall be paid in cash by wire transfer of immediately
available funds from Boardwalk Buyer to Boardwalk (if the Traymore Adjustment is
a positive amount), or from Boardwalk to Boardwalk Buyer (if the Traymore
Adjustment is a negative amount).
ARTICLE III
ADJUSTMENTS
     Section 3.1 Property Taxes. As of the Closing, with respect to both the
Flamingo Purchased Assets and Boardwalk Purchased Assets, all real and personal
property Taxes for Tax periods beginning before and ending on or after the
Closing Date shall be prorated separately on a per diem basis as of the Closing
Date using the latest available rates and assessments, and each Seller shall be
responsible for only such Seller’s proportionate share of its property Taxes
(which shall be determined on a per diem basis from the beginning of the
relevant Tax period through the Closing Date). Buyers shall provide a copy of
each final tax bill to each Seller within seven

16

--------------------------------------------------------------------------------

 

(7) days of its receipt of such bill, and such Seller shall pay to the
applicable Buyer such Seller’s proportionate share of property Taxes shown on
such final tax bill within fourteen (14) days of the applicable Buyer’s receipt
of such bill. Any Tax refunds, credits, claims, entitlements or rebates
attributable to Tax periods (or portions thereof) ending on or before the
Closing Date shall be the property of the applicable Seller, and the applicable
Buyer shall pay promptly to such Seller any such amounts that it receives. With
the exception of the Pre-Closing Tax Liabilities, all Taxes becoming a Lien on
any of the assets of any Seller on or after the Closing Date or which become due
and payable on or after the Closing Date (other than those that are prorated
pursuant to this Section 3.1) shall be paid solely by the applicable Buyer.
ARTICLE IV
CLOSING
     Section 4.1 Closing.
     (a) Unless this Agreement is earlier terminated pursuant to Article IX
hereof, the closing of the transactions contemplated by this Agreement,
including the purchase and sale of the Flamingo Purchased Assets and the
Boardwalk Purchased Assets (the “Closing”), shall take place on the third
business day following satisfaction or waiver of the conditions set forth in
Article VIII hereof (other than those conditions to be satisfied or waived at
the Closing), at 9:00 a.m., New York City time, at the offices of Skadden, Arps,
Slate, Meagher & Flom LLP, unless another time and place are agreed to by the
parties (the “Closing Date”), provided, however, in the event one or both
Buyers, or, if applicable, a Third Party Operator, has not obtained all
Necessary Gaming Approvals and all the other conditions set forth in
Article VIII hereof have been satisfied or waived, the Closing shall take place
on the fifth business day following Buyer’s receipt of the Necessary Gaming
Approvals, subject to Buyers’ and Sellers’ right to terminate this Agreement
pursuant to Section 9.1 hereof; provided, further, that the Closing Date shall
not be after that date which is 120 days following the date hereof (the “Initial
Outside Date”), unless Buyers deposit with the Escrow Agent an additional Three
Million Four Hundred Thousand Dollars ($3,400,000) (which amount shall be
included in the Deposit for all purposes of this Agreement), in which case, the
Initial Outside Date shall be extended to the earlier of (A) five (5) business
days after all Necessary Gaming Approvals have been received and (B) 30 days
after the Initial Outside Date (the “First Extended Outside Date”); provided,
further, that if (i) all Necessary Gaming Approvals have not been received on or
before five (5) business days before the First Extended Outside Date and
(ii) Buyers deposit with the Escrow Agent an additional Three Million Four
Hundred Thousand Dollars ($3,400,000) (which amount shall be included in the
Deposit for all purposes of this Agreement), the First Extended Outside Date
shall be extended to the earlier of (A) five (5) business days after all
Necessary Gaming Approvals have been received and (B) 30 days after the First
Extended Outside Date (the “Second Extended Outside Date”); provided, further,
that if (i) all Necessary Gaming Approvals have not been received on or before
five (5) business days before the Second Extended Outside Date and (ii) Buyers
deposit with the Escrow Agent an additional Three Million Four Hundred Thousand
Dollars ($3,400,000) (which amount shall be included in the Deposit for all
purposes of this Agreement), the Second Extended Outside Date shall be extended
to the earlier of (A) five (5) business days after all Necessary Gaming
Approvals have been received and (B) 30 days after the Second Extended Outside
Date (the “Third Extended Outside Date”); provided, further, that

17

--------------------------------------------------------------------------------

 

if (i) all Necessary Gaming Approvals have not been received on or before five
(5) Business Days before the Third Extended Outside Date and (ii) Buyers deposit
with the Escrow Agent an additional Three Million Four Hundred Thousand Dollars
($3,400,000) (which amount shall be included in the Deposit for all purposes of
this Agreement), the Third Extended Outside Date shall be extended to the
earlier of (A) five (5) business days after all Necessary Gaming Approvals have
been received and (B) 30 days after the Third Extended Outside Date (the “Fourth
Extended Outside Date”); provided, further, that if (i) all Necessary Gaming
Approvals have not been received on or before five (5) Business Days before the
Fourth Extended Outside date and (ii) Buyers deposit with the Escrow Agent an
additional Three Million Four Hundred Thousand Dollars ($3,400,000) (which
amount shall be included in the Deposit for all purposes of this Agreement), the
Fourth Extended Outside Date shall be extended to the earlier of (A) five
(5) Business Days after all Necessary Gaming Approvals have been received and
(B) 30 days after the Fourth Extended Outside Date (the “Fifth Extended Outside
Date”); provided, further, that if (i) all Necessary Gaming Approvals have not
been received on or before five (5) Business Days before the Fifth Extended
Outside date and (ii) Buyers deposit with the Escrow Agent an additional Five
Million One Hundred Thousand Dollars ($5,100,000) (which amount shall be
included in the Deposit for all purposes of this Agreement), the Fifth Extended
Outside Date shall be extended to the earlier of (A) five (5) Business Days
after all Necessary Gaming Approvals have been received and (B) 30 days after
the Fifth Extended Outside Date (the “Sixth Extended Outside Date”); provided,
further, that if (i) all Necessary Gaming Approvals have not been received on or
before five (5) Business Days before the Sixth Extended Outside date and
(ii) Buyers deposit with the Escrow Agent an additional Five Million One Hundred
Thousand Dollars ($5,100,000) (which amount shall be included in the Deposit for
all purposes of this Agreement), the Sixth Extended Outside Date shall be
extended to the earlier of (A) five (5) Business Days after all Necessary Gaming
Approvals have been received and (B) 30 days after the Sixth Extended Outside
Date (the “Seventh Extended Outside Date”); provided, further, that if (i) all
Necessary Gaming Approvals have not been received on or before five (5) Business
Days before the Seventh Extended Outside date and (ii) Buyers deposit with the
Escrow Agent an additional Five Million One Hundred Thousand Dollars
($5,100,000) (which amount shall be included in the Deposit for all purposes of
this Agreement), the Seventh Extended Outside Date shall be extended to the
earlier of (A) five (5) Business Days after all Necessary Gaming Approvals have
been received and (B) 30 days after the Seventh Extended Outside Date (the
“Eighth Extended Outside Date”). If on the Eighth Extended Outside Date, the
Buyers have not received all Necessary Gaming Approvals and the Buyers have not
retained a Third Party Operator in accordance with the terms of Section 7.6(a)
hereof, Buyers shall not have an obligation to consummate the transactions
contemplated hereby and Buyers or Sellers shall have the right to terminate the
Agreement pursuant to Section 9.1(b), subject to the provisions thereof.
     (b) Subject in all cases to the terms of Section 4.1(a) above, in the event
that the Buyer retains a Third Party Operator in accordance with the terms of
Section 7.6(a) hereof, and such Third Party Operator has not obtained all
Necessary Gaming Approvals and all the other conditions set forth in
Article VIII hereof have been satisfied or waived, the Closing shall take place
on the fifth business day following such Third Party Operator’s receipt of the
Necessary Gaming Approvals, subject to Buyers’ and Sellers’ right to terminate
this Agreement pursuant to Section 9.1 hereof; provided, further, that the Buyer
shall have the option to extend the Closing Date after the Eighth Extended
Outside Date if Buyers deposit with the Escrow Agent an additional Five Million
One Hundred Thousand Dollars ($5,100,000) (which amount shall be

18

--------------------------------------------------------------------------------

 

included in the Deposit for all purposes of this Agreement), in which case, the
Eighth Outside Date shall be extended to the earlier of (A) five (5) business
days after all Necessary Gaming Approvals have been received by the Third Party
Operator and (B) 30 days after the Eighth Extended Outside Date (the “Ninth
Extended Outside Date”); provided, further, that if (i) all Necessary Gaming
Approvals have not been received by the Third Party Operator on or before five
(5) business days before the Ninth Extended Outside Date and (ii) Buyers deposit
with the Escrow Agent an additional Five Million One Hundred Thousand Dollars
($5,100,000) (which amount shall be included in the Deposit for all purposes of
this Agreement), the Ninth Extended Outside Date shall be extended to the
earlier of (A) five (5) business days after all Necessary Gaming Approvals have
been received by the Third Party Operator and (B) 30 days after the First
Extended Outside Date (the “Tenth Extended Outside Date”); provided, further,
that if (i) all Necessary Gaming Approvals have not been received by the Third
Party Operator on or before five (5) business days before the Tenth Extended
Outside Date and (ii) Buyers deposit with the Escrow Agent an additional Five
Million One Hundred Thousand Dollars ($5,100,000) (which amount shall be
included in the Deposit for all purposes of this Agreement), the Tenth Extended
Outside Date shall be extended to the earlier of (A) five (5) business days
after all Necessary Gaming Approvals have been received and (B) 30 days after
the Tenth Extended Outside Date (the “Eleventh Extended Outside Date”). If on
the Eleventh Extended Outside Date, the Third Party Operator has not received
all Necessary Gaming Approvals, Buyers shall not have an obligation to
consummate the transactions contemplated hereby and Buyers or Sellers shall have
the right to terminate the Agreement pursuant to Section 9.1(b), subject to the
provisions thereof.
     (c) In no event shall (x) the sale of the Flamingo Purchased Assets be
consummated without the simultaneous consummation of the sale of the Boardwalk
Purchased Assets, or (y) the sale of the Boardwalk Purchased Assets be
consummated without the simultaneous consummation of the sale of the Flamingo
Purchased Assets. Notwithstanding anything to the contrary in the foregoing, for
the purpose of the Working Capital Adjustment and prorations contemplated
hereby, the Closing shall be deemed to occur at the Transfer Time.
     Section 4.2 Deliveries at Closing. The following will be executed and
delivered by the Buyers and/or the Sellers, as applicable, at or prior to the
Closing:
     (a) Grant, Bargain, Sale Deed. Flamingo shall execute, acknowledge and
deliver to Flamingo Buyer, a Grant, Bargain, Sale Deed in the form attached as
Exhibit H.
     (b) State of Nevada Declaration of Value Form. Flamingo Buyer and Flamingo
shall complete, execute and deliver a State of Nevada Declaration of Value Form.
     (c) Bill of Sale and Assignment. Flamingo shall execute and deliver to
Flamingo Buyer, and Flamingo Buyer shall execute an acceptance of, a Bill of
Sale and Assignment substantially in the form attached as Exhibit B, which form
may be modified to the extent required by local Law, conveying to Flamingo Buyer
free and clear of all Liens, except Permitted Encumbrances, (A) the Acquired
Personal Property, (B) the Transferred Intellectual Property, (C) the Books and
Records, (D) any Governmental Approvals, and pending applications thereof, to
the extent transferable by Law, (E) the Transferred Employee Records, (F) all
items of the type designated to be transferred to Flamingo Buyer on the Detailed
Balance

19

--------------------------------------------------------------------------------

 

Sheet; (G) all assets to which Flamingo Buyer is entitled under the proration
and adjustment provisions of Article III hereof; (H) the Flamingo Plans; and
(I) all other Flamingo Purchased Assets but excluding the Flamingo Excluded
Assets.
     (d) Assumed Contracts; Assumed Liabilities. Flamingo Buyer and Flamingo
shall execute and deliver an Assignment and Assumption Agreement – Assumed
Contracts and Assumed Liabilities in the form attached as Exhibit C, which form
may be modified to the extent required by local Law, to transfer the Flamingo
Assumed Liabilities and Assumed Contracts to Flamingo Buyer, and Flamingo Buyer
agrees to execute and deliver such other assumption agreements or other
documents reasonably required by any Person to effectuate the assumption of the
Flamingo Assumed Liabilities and the Flamingo Purchased Assets, and Flamingo
agrees to execute and deliver such other assignment agreements or other
documents reasonably required by any Person to effectuate the assignment of the
Flamingo Assumed Contracts and the Flamingo Purchased Assets.
     (e) Purchase Price. Buyers shall deliver or cause to be delivered to
Sellers cash in the amount of the Purchase Price (less the Deposit) in
accordance with Section 2.1.
     (f) Escrow Notices. Buyers and Sellers shall deliver all written notices to
the Escrow Agent as required under the Deposit Escrow Agreement to permit the
Escrow Agent’s release of the Deposit as of Closing.
     (g) Closing Escrow Agreement. If any of Buyers or Sellers so requests,
Buyers, Sellers, and the Escrow Agent shall execute and deliver, not later than
two (2) business days prior to the Closing, a closing escrow agreement (in form
and substance reasonably acceptable to Buyers, Sellers and the Escrow Agent),
providing for the appointment and responsibilities of such escrow agent with
respect to implementation of the Closing.
     (h) Buyer Certificates. Buyers shall deliver to Sellers the certificates
required by Sections 8.3(b) and (c) hereof.
     (i) Seller Certificates. Sellers shall deliver to Buyers the certificates
required by Sections 8.2(a) and (b) hereof.
     (j) Flamingo Customer List; Affiliate Customer List. Flamingo shall deliver
to Flamingo Buyer the Flamingo Customer List and Affiliate Customer List.
Flamingo and Flamingo Buyer shall cooperate with each other’s reasonable
requests for assistance in the solicitation of required customers’ consents for
the transfer of the Affiliate Customer List, including without limitation
cooperation in a mailing approximately forty-five (45) days prior to the Closing
to solicit any consents (or “opt-out” notices to the extent available under
applicable Law) reasonably required by either such Seller or Buyer of the
customers on the Affiliate Customer List.
     (k) Non-Foreign Affidavit. Sellers shall execute and deliver to Buyers
Non-Foreign Affidavits in the form attached as Exhibit D.
     (l) Transfer of Guest Safe Deposit Items. Flamingo Buyer and Flamingo shall
confirm the transfer of guest safe deposit box contents and the contents of the
main safe

20

--------------------------------------------------------------------------------

 

controlled by Flamingo belonging to guests of the Casino Property (excluding
safes located in guest rooms) by executing and delivering a Confirmation of
Transfer of Guest Items in the form attached as Exhibit E, which form may be
modified to the extent required by local Law.
     (m) Transfer of Guest Baggage. Flamingo Buyer and Flamingo shall confirm
the transfer of guest baggage entrusted to Flamingo by executing and delivering
a Confirmation of Transfer of Guest Baggage in the form attached as Exhibit F,
which form may be modified to the extent required by local Law.
     (n) Vehicle Titles. Flamingo shall execute and deliver to Flamingo Buyer
certificates of titles, endorsed for transfer to Flamingo Buyer, for its
Passenger/Delivery Vehicles along with a Bill of Sale—Passenger/Delivery
Vehicles therefore in the form attached as Exhibit G which form may be modified
to the extent required by local Law.
     (o) License Agreement. Flamingo Buyer and Flamingo or the appropriate
Affiliates of Flamingo shall execute and deliver a license agreement for the
Flamingo System Marks, in the form attached hereto as Exhibit J (the “Flamingo
License Agreement”).
     (p) Deed. Boardwalk shall execute, acknowledge and deliver to Boardwalk
Buyer a Bargain and Sale Deed with Covenant As To Grantor’s Acts in the form
attached hereto as Exhibit I.
     (q) Bill of Sale and Assignment. Boardwalk shall execute and deliver to
Boardwalk Buyer, and Boardwalk Buyer shall execute an acceptance of, a Bill of
Sale and Assignment substantially in the form attached as Exhibit B, which form
may be modified to the extent required by local Law, conveying to Boardwalk
Buyer free and clear of any Liens, other than the Traymore Permitted
Encumbrances (A) the Traymore Plans, (B) the Traymore Warranties, (C) the
Traymore Licenses and (D) all other Boardwalk Purchased Assets but excluding the
Boardwalk Excluded Assets.
     (r) Traymore Contracts; Assumed Liabilities. Boardwalk Buyer and Boardwalk
shall execute and deliver a Assignment and Assumption Agreement – Assumed
Contracts and Assumed Liabilities in the form attached as Exhibit C, which form
may be modified to the extent required by local Law, to transfer the Boardwalk
Assumed Liabilities and Traymore Contracts to Boardwalk Buyer, and Boardwalk
Buyer agrees to execute and deliver such other assumption agreements or other
documents reasonably required by any Person to effectuate the assumption of the
Boardwalk Assumed Liabilities applicable to the Traymore Site and the Boardwalk
Purchased Assets, and Boardwalk agrees to execute and deliver such other
assignment agreements or other documents reasonably required by any Person to
effectuate the assignment of the Traymore Contracts.
     (s) Tax Bills. Boardwalk will deliver to Boardwalk Buyer the most recent
tax bills for the Traymore Site.
     (t) Releases. Boardwalk will deliver to Boardwalk Buyer payoff letters or
releases with respect to any mortgages or Liens encumbering the Traymore Site,
except for Permitted Traymore Encumbrances.

21

--------------------------------------------------------------------------------

 

     (u) Residency Certification. Boardwalk will deliver to Boardwalk Buyer an
executed State of New Jersey Residency Certification Form GIT/REP-3.
     (v) Assignment and Assumption of Traymore Leases. Boardwalk Buyer and
Boardwalk shall execute and deliver a Assignment and Assumption Agreement –
Leases in the form attached as Exhibit L, which form may be modified to the
extent required by local Law, to transfer the Traymore Leases to Boardwalk
Buyer.
     (w) Other Documents. Buyers and Sellers shall each deliver any other
documents, instruments or agreements which are reasonably requested by the other
party that are reasonably necessary to consummate the transactions contemplated
hereby and have not previously been delivered and any documents reasonably
required by Buyers’ title company in order to insure title, including delivery
to Buyer’s title company of such affidavits of title relating to the Casino
Property and the Traymore Site in form and substance reasonably satisfactory to
Buyer’s title company or otherwise reasonably necessary to consummate the
transaction contemplated hereby.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF SELLERS
     Flamingo represents and warrants to Buyers with respect to itself only and
to the Flamingo Purchased Assets and the Flamingo Assumed Liabilities, except as
set forth herein and in the Disclosure Letter delivered by Flamingo to Buyers on
the date of this Agreement (the “Flamingo Disclosure Letter”) as set forth in
Sections 5.1 through 5.16 and 5.27 through 5.30, provided, however, that neither
Flamingo nor any of its Affiliates (other than Boardwalk) is making any
representations or warranties with respect to Boardwalk or the Boardwalk
Purchased Assets or Boardwalk Assumed Liabilities. Boardwalk represents and
warrants to Buyers with respect to itself only and to the Boardwalk Purchased
Assets and the Boardwalk Assumed Liabilities, except as set forth herein and in
the Disclosure Letter delivered by Boardwalk to Buyers on the date of this
Agreement (the “Boardwalk Disclosure Letter”), as set forth in Sections 5.1,
5.2, 5.12 and 5.17 through 5.30, provided, however, that neither Boardwalk nor
any of its Affiliates (other than Flamingo) is making any representations or
warranties with respect to Flamingo or the Flamingo Purchased Assets or Flamingo
Assumed Liabilities:
     Section 5.1 Organization of Seller. Such Seller is duly organized and
validly existing under the laws of its state of incorporation and has all
requisite power and authority to carry on its business as now being conducted.
Such Seller 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 Seller Material Adverse Effect. Such Seller does not
have any subsidiaries and does not hold or own any interests or investments in
any Person, other than interests or investments which constitute cash or cash
equivalents. Copies of the organizational documents of such Seller have been
made available to Buyers, and such copies are accurate and complete copies of
such organizational documents as in effect on the date hereof.
     Section 5.2 Authority; No Conflict; Required Filings and Consents.

22

--------------------------------------------------------------------------------

 

     (a) Such Seller has all requisite power and authority to enter into this
Agreement and the other agreements contemplated hereby and to consummate the
transactions to which it is a party that are contemplated by this Agreement and
the other agreements contemplated hereby. The execution and delivery of this
Agreement and the other agreements contemplated hereby by such Seller and the
consummation by it of the transactions to which it is a party that are
contemplated by this Agreement and the other agreements contemplated hereby have
been duly authorized by all necessary action on the part of such Seller and no
other proceedings or actions on the part of such Seller are necessary to
authorize such execution, delivery and performance. Each of this Agreement and
the other agreements contemplated hereby have been, or will be prior to Closing,
as applicable, duly executed and delivered by such Seller, and assuming this
Agreement and the other agreements contemplated hereby constitute, or will
constitute prior to Closing, as applicable, the valid and binding obligation of
Buyers, constitute, or will constitute prior to Closing, as applicable, the
valid and binding obligation of such Seller, enforceable against such Seller in
accordance with their 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 and the other agreements
contemplated hereby by such Seller, and the consummation by such Seller of the
transactions contemplated by this Agreement and the other agreements
contemplated hereby will not, (i) conflict with, or result in any violation or
breach of, any provision of the organization documents of such Seller,
(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 bond, mortgage, indenture, Assumed Contract or Lease to which such Seller is
a party or by which such Seller may be bound, or (iii) subject to the
governmental filings and other matters referred to in Section 5.2(e) 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 such Seller, except in the case of clauses (ii) and (iii) 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
Seller Material Adverse Effect or (y) would not materially impair or delay the
Closing.
     (c) No consent, approval, order or authorization of, or registration,
declaration or filing with, any court, administrative agency, commission, Gaming
Authority or other governmental authority or instrumentality (“Governmental
Entity”) is required by or with respect to such Seller in connection with the
execution and delivery of this Agreement and the other agreements contemplated
hereby by such Seller or the consummation by such Seller of the transactions to
which it is a party that are contemplated by this Agreements and the other
agreements contemplated hereby, 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, (iii) such consents, approvals, orders, authorizations,
permits, filings, declarations or registrations related to, or arising out of,
compliance with statutes, rules or regulations regulating the consumption, sale
or serving of

23

--------------------------------------------------------------------------------

 

alcoholic beverages or the renaming or rebranding of the operations at the
Property owned and operated by such Seller, and (iv) such other material
filings, consents, approvals, orders, authorizations, permits, registrations and
declarations as may be required under the Laws of any jurisdiction in which each
such Seller conducts any business or owns any assets.
     Section 5.3 Financial Statements. Section 5.3 of the Flamingo Disclosure
Letter contains a true and complete copy of (i) the unaudited balance sheets,
statements of income, cash flow statements and all other financial information
relating to the business operated at the Casino Property as of each of
December 31, 2003 and December 31, 2004 and for the twelve (12) month periods
ending December 31, 2003 and December 31, 2004, and (ii) unaudited balance
sheets and the related statement of income (but not to include statement of cash
flow) as of September 30, 2005 and for the nine months ended September 30, 2005
(collectively, the “Financial Information”). Except as noted therein and except
for normal period-end adjustments and the lack of footnotes, the Financial
Information was prepared in accordance with generally accepted accounting
principles in effect at the time of such preparation applied on a consistent
basis throughout the periods involved (except as may be indicated in the notes
to such financial statements) and fairly present, in all material respects, the
consolidated financial position and results of operations of the Casino Property
as of such date, subject to normally recurring year-end audit adjustments (which
will not be material individually or in the aggregate).
     Section 5.4 Flamingo Real Estate.
     (a) Section 5.4(a) of the Flamingo Disclosure Letter contains a complete
and accurate list of all real property owned by Flamingo (the “Casino Land”).
Flamingo holds valid fee simple title to the Casino Land, free and clear of all
Liens except Permitted Encumbrances.
     (b) Flamingo leases no real property.
     (c) Flamingo has not received written notice of, nor does Flamingo have any
knowledge of, any Legal Proceeding pending (and, to the knowledge of Flamingo,
threatened) relating to the Casino Land, which would be reasonably likely to
interfere in any material respects with the use, ownership, improvement,
development and/or operation of the Casino Land.
     Section 5.5 Intellectual Property. With the exception of the Excluded
Intellectual Property, Section 5.5 of the Flamingo Disclosure Letter lists all
(i) trademark and service mark registrations and applications and web domain
URLs that are included in the Transferred Intellectual Property and
(ii) trademark, service mark and trade name license agreements which are
included in the Transferred Intellectual Property.
     Section 5.6 Agreements, Contracts and Commitments. Section 5.6 of the
Flamingo Disclosure Letter sets forth a complete and correct list and, if such
Contract is not in writing, a description of any material terms thereof, of each
of the Material Assumed Contracts, in each case as in effect on the date hereof.
Flamingo has delivered to Flamingo Buyer true and complete copies of all
Material Assumed Contracts as in effect on the date hereof. Each Material
Assumed Contract is valid and binding upon Flamingo (and, to Flamingo’s
knowledge, on all other parties thereto), in accordance with its terms and is in
full force and effect, (ii) there is no

24

--------------------------------------------------------------------------------

 

breach or violation of or default by Flamingo under any Material Assumed
Contract, whether or not such breach, violation or default has been waived,
(iii) to Flamingo’s knowledge there is no breach or violation of or default by
any other Person under any Material Assumed Contract, (iv) Flamingo has
performed all obligations required to be performed by Flamingo under any
Material Assumed Contract and (v) no event has occurred with respect to
Flamingo, 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 of its Material Assumed Contracts, except, with respect
to this Section 5.6, as would not, individually or in the aggregate, be
reasonably likely to have a Seller Material Adverse Effect.
     Section 5.7 Litigation. There are no pending Legal Proceedings that have
been commenced by or against Flamingo or that otherwise relate to or may affect
the Flamingo Purchased Assets or Flamingo Assumed Liabilities, and to the
knowledge of Flamingo, no such Legal Proceeding has been threatened, and no
event has occurred or circumstance exists that may give rise to or serve as a
basis for the commencement of any such Legal Proceeding, except for matters that
fall into any of the following categories regardless of any overlap among said
categories: (i) any matters listed in Section 5.7 of the Flamingo Disclosure
Letter; and (ii) in any event matters that would not be, individually or in the
aggregate, reasonably likely to have a Seller Material Adverse Effect.
     Section 5.8 Environmental Matters. Except as set forth in Section 5.8 of
the Flamingo Disclosure Letter:
     (a) To Flamingo’s knowledge, (i) the Casino Property is and has been
maintained and operated in compliance with all Environmental Laws, and
(ii) Flamingo is, and at all times has been, in material compliance with, and
has not been and is not in violation of or liable under, any Environmental Law.
     (b) To Flamingo’s knowledge, no Releases of any Hazardous Substance or
existence of any conditions of mold in violation of Environmental Laws have
occurred on the Casino Property, and, to Flamingo’s knowledge, there does not
exist on the Casino Property any material Environmental Condition which requires
remediation or other corrective action pursuant to any applicable Environmental
Law.
     (c) Accurate and complete copies of all environmental reports, tests,
studies, investigations and surveys performed on or with respect to the Casino
Property or any other Flamingo Purchased Assets by or on behalf of Flamingo have
been provided to Flamingo Buyer.
     (d) Flamingo has not received any actual or threatened written order,
citation, directive, inquiry, notice, summons warning or other communication
from (i) any Governmental Entity or private citizen acting in the public
interest with respect to the Casino Property, or (ii) the current or prior owner
or operator of any portion of the Casino Property, of any alleged, actual or
potential violation or failure to comply with any Environmental Law, of any
alleged, actual or potential material Environmental Condition, or of any actual
or threatened material obligation to undertake or bear the cost of any
Environmental Liability with respect to any portion of the Casino Property.

25

--------------------------------------------------------------------------------

 

     (e) There are no pending or, to the knowledge of Flamingo, material claims
threatened in writing, Encumbrances, or other restrictions of any nature,
resulting from any Environmental Condition or arising under or pursuant to any
Environmental Law, with respect to or affecting any of the Casino Property.
     (f) To Flamingo’s knowledge, there are no underground or above-ground
storage tanks at or under the Casino Property.
     (g) To Flamingo’s knowledge and except as would not be reasonably likely to
have a Seller Material Adverse Effect, Flamingo has not used, treated, stored or
disposed of any Hazardous Substances at the Casino Property in violation of any
applicable Environmental Law.
     Section 5.9 Permits; Compliance with Laws.
     (a) Flamingo and, to Flamingo’s knowledge, each of its 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 conduct
the business and operations conducted at the Casino Property, each of which is
in full force and effect in all material respects (the “Seller Permits”) and, to
Flamingo’s 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 Seller Permit that
currently is in effect. Flamingo, and to Flamingo’s knowledge, each of its
directors, officers, key employees and Persons performing management functions
similar to officers, in each case whose position is related to the Casino
Property, are in compliance in all material respects with the terms of the
Seller Permits. To Flamingo’s knowledge, the businesses conducted by Flamingo at
the Casino Property are not being conducted in violation of any applicable Law
of any Governmental Entity (including, without limitation, any Gaming Laws).
Flamingo has not received a notice of any investigation or review by any
Governmental Entity with respect to Flamingo or the Casino Property that is
pending, and, to the knowledge of Flamingo, no material investigation or review
is threatened, nor has any Governmental Entity indicated any intention to
conduct the same. Notwithstanding anything contained in this Section 5.9, the
representations contained herein do not concern Environmental Laws, which are
the subject of the representations in Section 5.8.
     (b) Neither Flamingo nor, to Flamingo’s knowledge, any of its directors,
officers, key employees or Persons performing management functions similar to
officers, in each case whose position is related to the Casino Property, 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 $50,000 or more, in the
aggregate. To Flamingo’s 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.
     Section 5.10 Labor Matters. Except as set forth on Section 5.10 of the
Flamingo Disclosure Letter, Flamingo is not a party to any collective bargaining
agreement applicable to

26

--------------------------------------------------------------------------------

 

Property Employees and to the knowledge of Flamingo, there are no activities or
proceedings of any labor union to organize any non-unionized Property Employees.
There are no unfair labor practice charges, complaints or petitions for
elections or other Legal Proceedings or Orders pending against Flamingo before
the National Labor Relations Board, or any similar labor relations governmental
bodies, or, of which Flamingo has received notice, and there is no strike,
slowdown, work stoppage or lockout, or, to the knowledge of the Flamingo, threat
thereof, by or with respect to any Property Employees.
     Section 5.11 Employee Benefits.
     (a) Section 5.11 of the Flamingo Disclosure Letter sets forth an accurate
and complete list of all (i) “employee welfare benefit plans,” within the
meaning of Section 3(1) of the Employee Retirement Income Security Act of 1974,
as amended, and the rules and regulations thereunder (“ERISA”); (ii) “employee
pension benefit plans,” within the meaning of Section 3(2) of ERISA; and
(iii) bonus, stock option, stock purchase, restricted stock, incentive, fringe
benefit, profit-sharing, pension or retirement, deferred compensation, medical,
life insurance, disability, accident, salary continuation, severance, accrued
leave, vacation, sick pay, sick leave, supplemental retirement and unemployment
benefit plans, programs, arrangements, commitments and/or practices (whether or
not insured) for employees of Flamingo at the Casino Property (the “Property
Employees”) (all of the foregoing plans, programs, arrangements, commitments,
practices and Contracts referred to in (i), (ii) and (iii) above are referred
to, the “Flamingo Benefit Plans”).
     (b) True and complete copies of the Flamingo Benefit Plans which shall
include (i) all plan descriptions and summary plan descriptions for which
Flamingo is required to prepare, file and distribute plan descriptions and
summary plan descriptions, (ii) all summaries and descriptions furnished to
participants and beneficiaries for which a plan description or summary plan
description is not required, and (iii) all insurance policies purchased by or to
provide benefits under any Flamingo Benefit Plans have been made available by
Flamingo to Flamingo Buyer.
     Section 5.12 Brokers. Except for CB Richard Ellis (the “Broker”) with
respect to the Casino Property, neither Flamingo, Boardwalk nor any of their
respective 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. Flamingo
shall be solely obligated to pay Broker any and all fees, commissions and finder
fees in connection with this transaction.
     Section 5.13 Insurance. The insurance policies maintained by Flamingo or
its Affiliates in respect of the Casino Property are in full force and effect.
To the knowledge of Flamingo and its Affiliates, it has not received any written
notice from any insurance carrier which has issued a policy of insurance with
respect to the Casino Property of any material defects of deficiencies or
requesting the performance of any material repairs, alterations or other work
with respect to the Casino Property.
     Section 5.14 Personal Property. Except for Permitted Encumbrances, Flamingo
has good and valid title to, or an adequate leasehold interest in, or other
legal right to, all material

27

--------------------------------------------------------------------------------

 

tangible personal property necessary to conduct its business as presently
conducted free and clear of all Liens, excluding the Excluded Personal Property.
Notwithstanding anything contained in this Section 5.14, the representations
contained herein do not concern the Casino Land or Intellectual Property, which
are the subject of the representations in Sections 5.4 and 5.5 hereof,
respectively.
     Section 5.15 Assets. Except as set forth in Section 5.15 of the Flamingo
Disclosure Letter, and except for the Flamingo Excluded Assets, the Flamingo
Purchased Assets constitute all of the assets, properties and rights which are
used in the operation of the Casino Property.
     Section 5.16 Condemnation Proceedings. There are no pending or, to
Flamingo’s knowledge, threatened judicial proceedings seeking to condemn any
portion of the Casino Property. Flamingo has not entered into any agreement in
lieu of condemnation therefor.
     Section 5.17 Fee Ownership. Boardwalk is the sole fee owner of the Traymore
Site, and holds fee simple title to the Traymore Site, free and clear of all
Liens except the Traymore Permitted Encumbrances.
     Section 5.18 Solvency. Boardwalk is not in the hands of a receiver, and
Boardwalk has not committed any act of bankruptcy or insolvency.
     Section 5.19 Special Assessments. No special assessments have been levied
or are threatened or pending against all or any part of the Traymore Site.
     Section 5.20 Traymore Condemnation. Boardwalk has no knowledge of any
pending or threatened condemnation or similar proceedings affecting all or any
part of the Traymore Site.
     Section 5.21 Traymore Litigation. Except as set forth in Section 5.21 of
the Boardwalk Disclosure Letter, there are no material Legal Proceedings of any
nature pending or, to Boardwalk’s knowledge, threatened against Boardwalk, as it
relates to the Boardwalk Purchased Assets.
     Section 5.22 Traymore Leases. Except as set forth in Section 5.22 of the
Boardwalk Disclosure Letter, there are no Leases giving any person or entity any
rights to use, occupy or operate on the Traymore Site or any portion thereof or
otherwise affecting or relating to the Traymore Site (the “Traymore Leases”).
     Section 5.23 Options. There are no options or other written agreements with
respect to the sale of all or any part of the Traymore Site, and no person or
entity has any option, right of first refusal or right of first offer to
purchase all or any part of the Traymore Site.
     Section 5.24 Service Contracts. Except for the Traymore Contracts, there
are no service contracts, maintenance contracts, management agreements or other
contracts or agreements affecting or relating to the Traymore Site.
     Section 5.25 Compliance With Laws. To Boardwalk’s knowledge, the use and
occupancy by Boardwalk of the Traymore Site is in compliance with all applicable
Laws of any Governmental Entity. Boardwalk has not received any notice from any
Governmental Authority

28

--------------------------------------------------------------------------------

 

having jurisdiction over the Traymore Site advising that the Traymore Site or
any use or occupancy thereof is in violation of any applicable law, ordinance or
regulation, including without limitation any zoning or other municipal
ordinance. Notwithstanding anything contained in this Section 5.25, the
representations contained herein do not concern Environmental Laws, which are
the subject of the representations in Section 5.26.
     Section 5.26 Traymore Environmental Matters.
     (a) To Boardwalk’s knowledge, there does not exist on the Traymore Site any
material Environmental Condition which requires remediation or other corrective
action pursuant to any applicable Environmental Law.
     (b) Accurate and complete copies of all environmental reports, tests,
studies, investigations and surveys performed on or with respect to the Traymore
Site or any other Boardwalk Purchased Assets by or on behalf of Boardwalk have
been provided to Boardwalk Buyer.
     (c) Boardwalk has not received any actual or threatened written order,
citation, directive, inquiry, notice, summons warning or other communication
from (i) any Governmental Entity or private citizen acting in the public
interest with respect to the Traymore Site, or (ii) the current or prior owner
or operator of any portion of the Traymore Site, of any alleged, actual or
potential violation or failure to comply with any Environmental Law, of any
alleged, actual or potential material Environmental Condition, or of any actual
or threatened material obligation to undertake or bear the cost of any
Environmental Liability with respect to any portion of the Traymore Site.
     (d) To Boardwalk’s knowledge, there are no underground or above-ground
storage tanks at or under the Traymore Site.
     (e) To Boardwalk’s knowledge and except as would not be reasonably likely
to have a Seller Material Adverse Effect, Boardwalk has not used, treated,
stored or disposed of any Hazardous Substances at the Traymore Site in violation
of any applicable Environmental Law.
     Section 5.27 Absence of Certain Changes or Events. Since December 31, 2004
until the date hereof, and except as set forth on Section 5.27 of the Flamingo
Disclosure Letter or the Boardwalk Disclosure Letter, as applicable,
     (a) there has not been any event or change which, individually or in the
aggregate, has had or is reasonably likely to have a Seller Material Adverse
Effect; and
     (b) each Seller has operated the Purchased Assets, as applicable, in the
Ordinary Course of Business consistent with past practice and such Seller has
not (i) incurred any material obligation or material liability (whether
absolute, accrued, contingent or otherwise) relating to its use, possession, or
operation of the Purchased Assets, except in the Ordinary Course of Business
consistent with past practice; (ii) mortgaged, pledged or subjected to any
material Lien any of the Purchased Assets, except for Permitted Encumbrances;
(iii) sold or transferred any of the material assets of the Business or canceled
any material debts or material claims or waived any material rights of the
Business, except, in the case of the sale or transfer of assets, in the

29

--------------------------------------------------------------------------------

 

Ordinary Course of Business consistent with past practice; or (iv) entered into
any agreement or made any commitment to do any of the foregoing.
     Section 5.28 Transactions with Directors, Officers and Other Affiliates.
Except as set forth in Section 5.28 of the Flamingo Disclosure Letter or the
Boardwalk Disclosure Letter, as applicable, no Seller is a party to any Contract
as it relates to the Flamingo Purchased Assets or the Boardwalk Purchased Assets
with any of the directors, officers, Affiliates or present or former
stockholders of any Seller 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 $1,000 at any given time or (vii) provides or receives any other
material benefit or payment. No director, officer, stockholder, member or other
Affiliate of such Seller or any Affiliate of any of the foregoing Persons owns
or has any material rights in or to any of the Purchased Assets.
     Section 5.29 Absence of Undisclosed Liabilities. Except for indebtedness
and liabilities incurred since December 31, 2004 until the date hereof in the
Ordinary Course of Business consistent with past practice, to the knowledge of
Seller, such Seller has no material indebtedness or material Liabilities,
absolute or contingent, known or unknown, individually or in the aggregate, in
each case relating to the Purchased Assets, which were required to be shown in
the Financial Information and is not shown or provided for on the face of the
Financial Information or has otherwise been disclosed to the applicable Buyer in
writing.
     Section 5.30 Tax Matters. Except as disclosed in Section 5.30 of the either
the Boardwalk Disclosure Letter or the Flamingo Disclosure Letter; (i) the
Sellers (and the Tax group of which Sellers are members) have timely filed all
Tax Returns required to be filed with respect to the Purchased Assets for Tax
periods ending on or prior to the Closing Date and (ii) all Taxes with respect
to the Purchased Assets (whether or not shown on any Tax Return with respect to
the Purchased Assets) owed by the Sellers (and the Tax group of which Sellers
are members) required to be paid with respect to Tax periods ending on or prior
to the Closing Date have been timely paid or are being presently contested in
good faith.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF BUYERS
     Each Buyer represents and warrants to Flamingo and Boardwalk, except as set
forth herein and in the Disclosure Letter delivered by Buyers to each of
Flamingo and Boardwalk on the date of this Agreement (the “Buyer Disclosure
Letter”), as follows:
     Section 6.1 Organization. Each Buyer is duly organized and validly existing
under the laws of Delaware and has all requisite power and authority to carry on
its business as now being conducted. Each Buyer is, in all material respects,
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 Buyer

30

--------------------------------------------------------------------------------

 

Material Adverse Effect. Copies of the organizational documents of such Buyer
have been made available to Sellers, and such copies are accurate and complete
copies of such organizational documents as in effect on the date hereof.
     Section 6.2 Authority; No Conflict; Required Filings and Consents.
     (a) Each Buyer has all requisite power and authority to enter into this
Agreement and the other agreements contemplated herby and to consummate the
transactions contemplated by this Agreement and the other agreements
contemplated hereby. The execution and delivery of this Agreement and the other
agreements contemplated hereby and the consummation by each Buyer of the
transactions to which it is a party that are contemplated by this Agreement and
the other agreements contemplated hereby by such Buyer have been duly authorized
by all necessary action on the part of such Buyer and no other proceedings or
actions on the part of such Buyer are necessary to authorize such execution,
delivery and performance. Each of this Agreement and the other agreements
contemplated hereby have been, or will be at Closing, as applicable, duly
executed and delivered by each Buyer and, assuming this Agreement and the other
agreements contemplated hereby constitute, or will constitute at Closing, as
applicable, the valid and binding obligation of Sellers and Harrah’s,
constitute, or will constitute prior to Closing, as applicable, the valid and
binding obligation of Such Buyer, enforceable against each Buyer in accordance
with their 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 each Buyer and the
other agreements contemplated hereby by such Buyer does not, and the
consummation by each Buyer of the transactions to which it is a party that are
contemplated by this Agreement and the other agreements contemplated hereby will
not, (i) conflict with, or result in any violation or breach of, any provision
of the organizational documents of such 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 such Buyer is a party
or by which it or any of its properties or assets may be bound, or (iii) 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 any permit,
concession, franchise, license, judgment, or Law applicable to such 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 any Buyer in connection with the execution and delivery of this
Agreement by each Buyer or the consummation by each Buyer of the 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

31

--------------------------------------------------------------------------------

 

Gaming Laws, (iii) such consents, approvals, orders, authorizations, permits,
filings, declarations or registrations related to, or arising out of, compliance
with statutes, rules or regulations regulating the consumption, sale or serving
of alcoholic beverages or the renaming or rebranding of the operations at the
Property, and (iv) such other material filings, consents, approvals, orders,
authorizations, permits, registrations and declarations as may be required under
the Laws of any jurisdiction in which Seller conducts any business or owns any
assets.
     Section 6.3 Brokers. No Buyer nor any of their respective 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 6.4 Financing. Each Buyer will have available to it on the Closing
Date sufficient funds to enable such Buyer to pay the applicable Purchase Price,
and all fees and expenses necessary or related to the consummation of the
transactions contemplated by this Agreement. Each Buyer is, and at all times
prior to Closing shall be, solvent.
     Section 6.5 Licensability of Principals. No Buyer nor any of their
respective Representatives or Affiliates has ever been denied, or had revoked, a
gaming license by a Governmental Entity or Gaming Authority. Each Buyer and each
of its respective Representatives and Affiliates is in good standing in each of
the jurisdictions in which such Buyer or any of its respective Affiliates owns
or operates gaming facilities. To each Buyer’s knowledge, there are no facts,
which if known to the Gaming Authorities, would (a) be reasonably likely to
result in the denial, revocation, limitation or suspension of a Gaming Approval
or (b) result in a negative outcome to any finding of suitability proceedings
currently pending, or under the suitability proceedings necessary for
acquisition of a Gaming Approval for the consummation of this Agreement.
     Section 6.6 Compliance with Gaming Laws.
     (a) Except as would not reasonably be expected to have a Buyer Material
Adverse Effect, each Buyer, and to each Buyer’s knowledge, each of its
directors, officers and Persons performing management functions similar to
officers, (i) holds all material Gaming Approvals necessary to conduct the
business and operations of such Buyer, each of which is in full force and effect
in all respects (the “Buyer Permits”); (ii) knows of no event that 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 Buyer Permit that currently is in effect; (iii) is in
compliance, in all material respects, with the terms of the Buyer Permits that
are currently in effect; (iv) has not received written notice of any
investigation or review by any Gaming Authority with respect to such Buyer or
any of its Affiliates that is pending; and (v) knows of no material
investigation or review that has been threatened by any Gaming Authority.
     (b) Except as would not reasonably be expected to have a Buyer Material
Adverse Effect, each Buyer, and to each Buyer’s knowledge, each of its
directors, officers and Persons performing management functions similar to
officers has not (i) 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 which did or would be reasonably likely to result in fines or
penalties of $50,000 or more;

32

--------------------------------------------------------------------------------

 

and (ii) suffered a suspension or revocation of any Buyer Permit. Except as
would not reasonably be expected to have a Buyer Material Adverse Effect, to
Buyer’s knowledge, there are no facts which, if known to any Gaming Authority
will or would reasonably be expected to result in the revocation, limitation or
suspension of a Gaming Approval, or any Gaming Approval held by its managers,
members, officers, key employees or Persons performing management functions
similar to an officer or partner or limited partner under any Gaming Laws.
     Section 6.7 Litigation. There are no actions, claims, suits or proceedings
pending or, to Buyer’s knowledge, threatened against Buyer before any
Governmental Entity, which, if determined adversely, would reasonably be
expected to result in a Buyer Material Adverse Effect.
     Section 6.8 Inspection. Each Buyer acknowledges that it is familiar with
the Purchased Assets and Assumed Liabilities and has had the opportunity,
directly or through its representatives to inspect the Purchased Assets and
Assumed Liabilities and conduct due diligence activities. Without limitation of
the foregoing, Buyers acknowledge that the Purchase Price has been negotiated
based on Buyers’ express agreement that there would be no contingencies
(financial or otherwise) to Closing other than the conditions set forth in
Article VIII hereof and that, except as expressly set forth to the contrary in
this Agreement, including, without limitation Article V hereof, Buyers are
purchasing the Purchased Assets and Assumed Liabilities on an “As Is, Where Is”
basis. Buyers acknowledge and agree that, except as expressly set forth to the
contrary in this Agreement, including, without limitation Articles V and XI
hereof, Buyers are not relying upon any representations, statements, or
warranties (oral or written, implied or express) of any officer, employee, agent
or Representative of any Seller, or any salesperson or broker (if any) involved
in this transaction as to the Purchased Assets and Assumed Liabilities. Except
as expressly set forth to the contrary in this Agreement, including, without
limitation Articles V and XI hereof, (i) Buyers are taking the Purchased Assets
in an “As Is, Where Is” condition, and (ii) neither Seller makes any warranties,
representations or promises with respect to the physical condition of the
Purchased Assets, their value or their suitability for Buyer’s intended use or
any other use. Further, without limiting any representation, warranty or
covenant of any Seller expressly set forth herein and subject to the conditions
to Closing set forth in Article VIII hereof, Buyer acknowledges that it has
waived and hereby waives as a condition to Closing any further due diligence
reviews, inspections or examinations with respect to the Purchased Assets and
Assumed Liabilities, including, without limitation, with respect to engineering,
environmental, title, survey, financial, operational, regulatory and legal
compliance matters.
     Section 6.9 Employee Benefits.
     (a) Section 6.9 of the Flamingo Buyer Disclosure Letter sets forth an
accurate and complete list, as of the date hereof, of all (i) “employee welfare
benefit plans,” within the meaning of Section 3(1) of the Employee Retirement
Income Security Act of 1974, as amended, and the rules and regulations
thereunder (“ERISA”); (ii) “employee pension benefit plans,” within the meaning
of Section 3(2) of ERISA; and (iii) bonus, stock option, stock purchase,
restricted stock, incentive, fringe benefit, profit-sharing, pension or
retirement, deferred compensation, medical, life insurance, disability,
accident, salary continuation, severance, accrued leave, vacation, sick pay,
sick leave, supplemental retirement and unemployment benefit plans, programs,
arrangements, commitments and/or practices (whether or not insured) for

33

--------------------------------------------------------------------------------

 

employees of Flamingo Buyer (all of the foregoing plans, programs, arrangements,
commitments, practices and Contracts referred to in (i), (ii) and (iii) above
are referred to, the “Buyer Benefit Plans”).
     (b) True and complete copies of the Buyer Benefit Plans (which shall
include (i) all plan descriptions and summary plan descriptions for which
Flamingo Buyer is required to prepare, file and distribute plan descriptions and
summary plan descriptions, (ii) all summaries and descriptions furnished to
participants and beneficiaries for which a plan description or summary plan
description is not required, and (iii) all insurance policies purchased by or to
provide benefits under any Buyer Benefit Plans have been made available by
Flamingo Buyer to Flamingo.
ARTICLE VII
COVENANTS
     Section 7.1 Conduct of Business.
     (a) During the period from the date of this Agreement and continuing until
the earlier of the termination of this Agreement or the Closing, subject to the
limitations set forth below, Flamingo shall (except to the extent that Flamingo
Buyer shall otherwise consent in writing, which consent may not be unreasonably
withheld), with respect to the Casino Property only, carry on its business in
the Ordinary Course of Business and, to the extent consistent with the operation
of the Casino Property in the Ordinary Course of Business, use its commercially
reasonable efforts consistent with past practices and policies to preserve
intact the Casino Property’s present relationships with customers, suppliers,
distributors, and others having business dealings with it. Without limiting the
generality of the foregoing, except as expressly contemplated by this Agreement
or as disclosed on Section 7.1 of the Flamingo Disclosure Letter, during the
period from the date of this Agreement and continuing until the earlier of the
termination of this Agreement or the Closing, without the written consent of
Flamingo Buyer (which consent shall not be unreasonably withheld), Flamingo
agrees, only as it relates to the Flamingo Purchased Assets, that it shall not:
          (i) sell, pledge, lease, dispose of or grant (collectively,
“Transfer”), or otherwise authorize the Transfer of any of the Flamingo
Purchased Assets except for Transfers of current assets, equipment and other
non-current assets in the Ordinary Course of Business in connection with the
operation of the Casino Property; provided that in no event shall the aggregate
amount of such Transfers exceed Two Hundred Thousand Dollars ($200,000);
          (ii) incur any material Liabilities that are Assumed Liabilities,
except in the Ordinary Course of Business; provided that in no event shall the
aggregate amount of such Liabilities incurred exceed Two Hundred Thousand
Dollars ($200,000);
          (iii) modify, amend or terminate any of the Material Assumed Contracts
or waive, release or assign any rights or claims, except in the Ordinary Course
of Business or as required by applicable Law;

34

--------------------------------------------------------------------------------

 

          (iv) except in the Ordinary Course of Business, subject the Flamingo
Purchased Assets to a Lien or Encumbrance, other than Permitted Encumbrances;
          (v) fail to maintain the existing insurance coverage relating to the
Flamingo Purchased Assets (however, in the event any such coverage shall be
terminated or lapse, Flamingo may procure substantially similar substitute
insurance policies which in all material respects are in at least such amounts
and against such risks as are currently covered by such policies);
          (vi) award or increase any bonuses, salaries, or other compensation,
except in the Ordinary Course of Business, to any Property Employee, or enter
into any employment, severance, or similar Assumed Contract with any Property
Employee, except in the Ordinary Course of Business, or transfer any Property
Employee to an Affiliate of the Seller;
          (vii) enter into, amend or terminate or provide notice of termination
of any Assumed Contract or transaction involving a total commitment by or to
Flamingo in excess of One Hundred Thousand Dollars ($100,000) per month, unless
such Assumed Contract is cancelable without premium or penalty upon thirty
(30) days notice; provided, however, that Flamingo may enter into the following
agreements without any consent from Flamingo Buyer: (A) any advance booking
contract that does not involve a room block commitment in excess of Two Thousand
(2000) room nights; and (B) purchase orders entered into in the Ordinary Course
of Business; or
          (viii) enter into a Contract to do any of the foregoing, or to
authorize or announce an intention to do any of the foregoing.
     (b) During the period from the date of this Agreement and continuing until
the earlier of the termination of this Agreement or the Closing, Boardwalk
agrees, only as it relates to the Boardwalk Purchased Assets, that, except as
otherwise consented to by Boardwalk Buyer which consent shall not be
unreasonably withheld, it shall:
          (i) maintain the Traymore Site in its present condition, ordinary wear
and tear excepted;
          (ii) maintain commercially reasonable limits of casualty, liability
and hazard insurance with respect to the Traymore Site; and
          (iii) operate and manage the Traymore Site in the same manner done by
Boardwalk prior to the date of this Agreement.
     (c) It is agreed and understood that if Buyer does not grant or deny
consent to a proposed action with respect to this Section 7.1(a) or (b) within
five (5) business days of its receipt of a second written request by Flamingo or
Boardwalk to take such action, Buyer shall be deemed to have consented to the
taking of such action by Flamingo or Boardwalk notwithstanding any other
provision of Section 7.1(a) or (b) hereof.

35

--------------------------------------------------------------------------------

 

     (d) No action taken by Flamingo to reduce the amount of any prepaids
designated as to be retained by Seller on the Detailed Balance Sheet shall be
deemed a violation of this Section 7.1.
     Section 7.2 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, Flamingo, Boardwalk and Buyers 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. Flamingo, Boardwalk
and Buyers 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 Flamingo,
Boardwalk or Buyers 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 VIII hereof of this Agreement, as
applicable. Nothing contained in Section 7.1 hereof shall prevent Sellers from
giving such notice, using such efforts or taking any action to cure or curing
any such event, transaction or circumstance. No notice given pursuant to this
Section 7.2 shall have any effect on the representations, warranties, covenants
or agreements contained in this Agreement for purposes of determining
satisfaction of any condition contained herein; provided, however, that for
purposes of seeking indemnification pursuant to Article X hereunder, the
representations and warranties made by the Sellers shall be deemed for all such
purposes to include and reflect such notices, supplements and amendments as of
the date hereof and at all times thereafter, including the Closing Date.
     Section 7.3 No Solicitation. Subject to obligations imposed by applicable
Law, prior to the earlier of the Closing and the termination of this Agreement
in accordance with Section 9.1 hereof, Flamingo and Boardwalk shall not,
directly or indirectly, through any of its Affiliates, officers, directors,
employees, financial advisors, agents or other representatives (collectively,
“Representatives”) (a) solicit or initiate any inquiries or proposals that
constitute, or could reasonably be expected to lead to, an Acquisition Proposal
or (b) engage in negotiations with any Person (or group of Persons) other than
Buyers or their respective Affiliates concerning, or provide any non-public
information to any person or entity relating to, any Acquisition Proposal.
     Section 7.4 Employee Matters.
     (a) On or prior to the Closing Date, Flamingo Buyer shall extend offers of
employment, effective as of the Closing Date, to all of the Property Employees
with such offers being on terms and conditions of employment comparable to the
terms and conditions of employment as those provided by Flamingo to each such
Property Employee immediately prior to the Closing Date, other than the Property
Employees that are set forth on Section 7.4(a) of the Flamingo Disclosure Letter
(collectively, the “Retained Employees”). The Property Employees who accept
Flamingo Buyer’s offers of employment shall commence employment with Flamingo
Buyer effective as of the Closing Date and are hereinafter collectively referred
to as the “Transferred Employees.”

36

--------------------------------------------------------------------------------

 

     (b) Subject to the terms and conditions of any applicable collective
bargaining agreement which is currently in effect or which may be in effect at
any time in the future, for a period of at least one (1) year immediately
following the Closing Date, Flamingo Buyer shall provide benefits to each
Transferred Employee, which benefits are and shall be no less favorable in the
aggregate than the benefits provided by Flamingo to such Transferred Employees
on the date hereof; provided, that Flamingo Buyer may provide such benefits
pursuant to the Buyer Benefit Plans.
     (c) For a period of at least one (1) year immediately following the Closing
Date, Flamingo Buyer agrees to pay severance to all Transferred Employees who
are terminated by Flamingo Buyer after the Closing Date in accordance with
Flamingo’s severance policy terms as of the date hereof, identified on
Section 5.11 of the Flamingo Disclosure Letter.
     (d) With respect to any employee or employee benefit plan, program or
arrangement maintained by Flamingo Buyer (including any severance plan), for all
purposes, a Transferred Employee’s service with Flamingo shall be treated as
service with Flamingo Buyer; provided, however, that such service need not be
recognized to the extent that such recognition would result in any duplication
of benefits.
     (e) Flamingo Buyer shall waive, or cause to be waived, any pre-existing
condition limitation under any welfare benefit plan maintained by Flamingo Buyer
or any of its Affiliates in which Transferred Employees (and their eligible
dependents) will be eligible to participate from and after the Closing, except
to the extent such pre-existing condition limitation would have been applicable
under the comparable Flamingo welfare benefit plan immediately prior to the
Closing. Flamingo Buyer shall recognize the dollar amount of all expenses
incurred by each Transferred Employee (and his or her eligible dependents)
during the calendar year in which the Closing occurs for purposes of satisfying
such year’s deductible and co-payment limitations under the relevant welfare
benefit plans in which they will be eligible to participate from and after the
Closing, to the extent such deductibles and co-payments credits are permitted by
Flamingo Buyer’s benefit plans.
     (f) Flamingo Buyer shall not, at any time during the ninety (90) days
following the Closing Date, effectuate a “plant closing” or “mass layoff,” as
those terms are defined in the WARN Act, affecting in whole or in part any site
of employment, facility, operating unit or employee of Flamingo, without
complying with the notice requirements and other provisions of the WARN Act.
Flamingo Buyer agrees that from and after the Closing Date, Flamingo Buyer shall
be responsible for any notification required under the WARN Act with respect to
the Transferred Employees.
     (g) Effective as of the Closing Date, Flamingo Buyer shall establish or
designate a defined contribution retirement plan which is qualified or eligible
for qualification under Section 401(a) of the Code (the “Buyer 401(k) Plan”).
Subject to the terms and conditions of any applicable collective bargaining
agreement which is currently in effect or which may be in effect at any time in
the future, each Transferred Employee who participates in the Caesars
Entertainment 401(k) Savings Plan (the “Seller 401(k) Plan”) who satisfies the
eligibility requirements of the Buyer 401(k) Plan shall become eligible to
participate in the Buyer 401(k) Plan on the date he or she becomes an employee
of Flamingo Buyer and shall be credited with

37

--------------------------------------------------------------------------------

 

eligibility service and vesting service for all periods of service with Flamingo
or any other entity if so credited with such service under the Seller 401(k)
Plan. As soon as practicable after the Closing Date, Flamingo shall cause the
trustees of the Seller 401(k) Plan to transfer to the trustees or other funding
agent of the Buyer 401(k) Plan, the amounts representing the account balances of
the Transferred Employees (including the appropriate net investment return
thereon and any participant loans made to any Transferred Employees), said
amounts to be established as account balances or accrued benefits of the
Transferred Employees under the Buyer 401(k) Plan. Each such transfer shall
comply with Section 414(l) of the Code and the requirements of ERISA and the
regulations promulgated thereunder. The assets to be transferred pursuant to
this Section 7.4(g) shall be in cash, or to the extent mutually agreed upon by
Flamingo and Flamingo Buyer or as required by Law, in kind; provided, however,
that any participant loans of a Transferred Employee shall be transferred in
kind. At the time and to the extent that assets held in the trust with respect
to the Seller 401(k) Plan are paid to the trust under the Buyer 401(k) Plan
pursuant to this Section 7.4(g), the Buyer 401(k) Plan shall assume all
liabilities of the Seller 401(k) Plan, for the payment of benefits transferred
to the trust under the Buyer 401(k) Plan, and such transfer shall be in full
discharge of all obligations of the Seller 401(k) Plan in respect thereof;
provided, however, neither Flamingo Buyer nor the Buyer 401(k) Plan shall assume
any liability for failing to properly value the accounts of Transferred
Employees under the Seller 401(k) Plan or for any other matter relating to the
administration or the investment of the assets of the Seller 401(k) Plan.
     (h) As of the Closing Date, Flamingo Buyer shall be substituted for
Flamingo as the contributing employer under each “multiemployer pension plan”
(within the meaning of Section 3(37) of ERISA) to which Flamingo contributes
with respect to the business conducted by Flamingo at the Casino Property (each,
a “Substituted Multiemployer Pension Plan”). It is the intent of the parties to
satisfy the provisions of Section 4204 of ERISA with respect to any obligation
that Flamingo may have under each Substituted Multiemployer Pension Plan.
Therefore, Flamingo and Flamingo Buyer agree as follows: (i) from and after the
Closing Date, Flamingo Buyer shall continue making contributions to each
Substituted Multiemployer Pension Plan with respect to the Property Employees in
accordance with the terms of any applicable collective bargaining agreement
obligating Flamingo to make contributions to such Substituted Multiemployer
Pension Plan for substantially the same number of contribution base units for
which Flamingo has an obligation to contribute to such Substituted Multiemployer
Pension Plan; (ii) unless exempt under Pension Benefit Guaranty Corporation
Regulations Section 4204.11 or Section 4204.21, Flamingo Buyer shall post a bond
or hold in escrow in favor of the respective Substituted Multiemployer Pension
Plan for a period of five (5) plan years commencing with the first plan year
beginning after the Closing Date in an amount and form that satisfies the
requirements of Section 4204(a)(1)(B) of ERISA; (iii) in the event that Flamingo
Buyer withdraws in a complete or partial withdrawal under Section 4201 of ERISA
from the respective Substituted Multiemployer Pension Plan during the first five
(5) plan years beginning after the Closing Date, and Flamingo Buyer fails to
make any withdrawal liability payments when due, Flamingo shall be secondarily
liable for any withdrawal liability that Flamingo would have had to the
respective Substituted Multiemployer Pension Plan but for the provisions of this
Section 7.4(h) and Section 4204 of ERISA; and (iv) in the event that all or
substantially all of Flamingo’s assets are distributed, or if Flamingo is
liquidated during the first five (5) plan years beginning after the Closing
Date, then Flamingo shall provide a bond or amount in escrow equal to the

38

--------------------------------------------------------------------------------

 

present value of the withdrawal liability that Flamingo would have had but for
the provisions of this Section 7.4(h) and Section 4204 of ERISA.
          (i) Upon the Closing, Flamingo Buyer shall become a successor employer
and shall assume all Liabilities and obligations under, and be bound by, the
collective bargaining agreements listed on Section 7.4(i) of the Flamingo
Disclosure Letter or any successor agreements, amendments, or memoranda of
understanding in respect thereof.
     Section 7.5 Access to Information and the Properties.
     (a) Upon reasonable notice, subject to applicable Law, including, without
limitation, antitrust Laws, Gaming Laws and privacy Laws, (i) Flamingo shall
afford Flamingo Buyer’s Representatives reasonable access, during normal
business hours during the period from the date hereof to the Closing, to the
Casino Property and to all its personnel, properties, books, Seller Benefit
Plans, insurance records, Contracts and records, expressly excluding, however,
those related exclusively to the Flamingo Excluded Assets and the Flamingo
Excluded Liabilities, and, during such period, Flamingo shall furnish promptly
to Flamingo Buyer all material information concerning the business and operation
of Flamingo, the Flamingo Purchased Assets and the Property Employees (other
than Flamingo Excluded Assets and the Flamingo Excluded Liabilities) as Flamingo
Buyer may reasonably request, and (ii) Boardwalk shall afford Boardwalk Buyer’s
Representatives reasonable access, during normal business hours during the
period from the date hereof to the Closing, to the Traymore Site and to all,
insurance records, and other records, expressly excluding, however, records
relating solely to the Boardwalk Excluded Assets and the Boardwalk Excluded
Liabilities, and, during such period, Boardwalk shall furnish promptly to
Boardwalk Buyer all material information concerning the Boardwalk Purchased
Assets (other than the Traymore Excluded Assets and the Traymore Excluded
Liabilities) as Buyer may reasonably request (with respect to both Flamingo and
Boardwalk, an “Inspection”); provided, however, that (A) the applicable Buyer
shall provide the applicable Seller with at least twenty-four (24) hours’ prior
written notice of any Inspection; (B) if the applicable Seller so requests and
if such Representative of the applicable Seller is readily available without
undue delay, the applicable Buyer’s Representatives shall be accompanied by a
Representative of the applicable Seller; (C) without the prior written consent
of the applicable Seller’s Representatives, which consent shall not be
unreasonably withheld or delayed, Buyers shall not initiate contact with
employees or other representatives of a Seller or its Affiliates other than such
Seller’s Representatives or other individuals designated by any of Seller’s
Representatives; (D) Buyers’ Representatives shall not be entitled to perform
any physical testing of any nature with respect to any portion of the Casino
Property or the Traymore Site without the applicable Seller’s prior written
consent, which consent may be withheld if in the sole judgment of Seller’s
Representatives such testing would unduly interfere with the operation of the
business conducted at the Properties; (E) Buyers shall not unduly interfere with
the operation of the business conducted at the Properties; (F) the applicable
Buyer shall, at its sole cost and expense, promptly repair any damage to the
Properties or any other property owned by a Person other than such Buyer arising
from or caused by such Inspection, and shall reimburse the applicable Seller for
any loss arising from or caused by any Inspection, and restore the Properties or
such other third-party property to substantially the same condition as existed
prior to such Inspection, and shall indemnify, defend and hold harmless each
Seller and its Affiliates from and against any personal

39

--------------------------------------------------------------------------------

 

injury or property damage claims, liabilities, judgments or expenses (including
reasonable attorneys’ fees) incurred by any of them arising or resulting
therefrom; and (G) subject to the conditions to Closing set forth in
Article VIII hereof, in no event shall the results of any such Inspection or
Buyers’ satisfaction therewith be a condition to Buyers’ obligations hereunder,
it being the intent of Buyers to purchase the Purchased Assets and Assumed
Liabilities on an “As Is, Where Is” basis as set forth in Sections 6.7 and 11.1
hereof, except as expressly set forth to the contrary in this Agreement,
including, without limitation Article V hereof. Each Buyer will hold and cause
its Representatives to hold any such information furnished to it by Sellers,
which is nonpublic in confidence in accordance with the confidentiality
agreements, with respect to Flamingo, dated October 4, 2004, by and between
Caesars Entertainment, Inc. and American Real Estate Partners L.P. and, with
respect to Boardwalk, dated May 20, 2005, by and between Caesars Entertainment,
Inc. and American Real Estate Partners L.P. (collectively, the “Confidentiality
Agreements”). The Confidentiality Agreements shall continue in full force and
effect in accordance with its terms until Closing, at which time the
Confidentiality Agreement shall only terminate with respect to information
relating solely to the Purchased Assets and/or the Assumed Liabilities.
Notwithstanding anything to the contrary, Buyers and Sellers agree that in the
event any proprietary information or knowledge relating to any Excluded Asset is
obtained, revealed or otherwise made known to Buyers in effecting (1) the
transition from Excluded Software to replacement software pursuant to
Section 1.5(b) hereof (including as a result of the parties having entered into
the Excluded Software License), specifically, or (2) the removal of the Excluded
Assets, generally, Buyers shall not reveal, disclose, employ or otherwise use
any such proprietary information and will hold such information in confidence in
accordance with the Confidentiality Agreements. No information or knowledge
obtained in any investigation pursuant to this Section 7.5 shall affect or be
deemed to modify any representation or warranty contained in this Agreement or
the conditions to the obligations of the parties to consummate the transactions
contemplated herein.
     (b) Following the Closing, upon reasonable notice, each Buyer and each
Seller shall (and shall cause their respective Affiliates and Representatives,
to) provide the other parties hereto and their respective Affiliates and
Representatives with reasonable access and duplicating rights, during normal
business hours, to each Buyer’s and each Seller’s personnel, properties, books,
insurance records, Seller Benefit Plans, contracts, commitments and records
included in or related to Seller, the Properties or the Property Employees and
shall cooperate with the requesting party, as reasonably necessary for such
requesting party to pursue any suit, claim, action, proceeding or investigation
relating to the claims in connection with this Agreement and the transactions
contemplated hereby, including, without limitation, any suit, claim, action,
proceeding or investigation related to the Excluded Assets, Excluded
Liabilities, Retained Employees and Transferred Employees. Notwithstanding the
foregoing, no party shall be required to provide any information which (i) they
reasonably believe they may not provide to the requesting party or its
respective Affiliates and Representatives by reason of applicable Law or by a
confidentiality agreement with a third party, and if, in the case of a
confidentiality agreement, the non-requesting party has used reasonable efforts
to obtain the consent of such party to such disclosure, or (ii) constitutes
information protected by the attorney/client and/or attorney work product
privilege. If any material is withheld by the non-requesting party pursuant to
the immediately preceding sentence, such non-requesting party shall inform the
requesting party as to the general nature of the material which is being
withheld.

40

--------------------------------------------------------------------------------

 

     (c) Following the Closing, at either Seller’s request, the applicable Buyer
will cause its employees to prepare the Books and Records and financial
statements, in each case which have been provided to Buyers at the Closing,
required by such Seller or its Affiliates (and which are not otherwise the
responsibility of such Buyer under this Agreement, including with respect to
Buyer’s obligations under Section 2.5 hereof) in connection with any filing with
a Governmental Authority (including Tax Returns relating to the Flamingo
Purchased Assets prepared by or with the assistance of Property Employees) in
respect of the period prior to the Closing Date, as promptly as practicable and
in any event no later that three (3) days in advance of any applicable deadlines
and/or required filing dates. Each Seller will reimburse the applicable Buyer
for the cost, including the wage cost, of having such employees prepare any of
the foregoing Books and Records and financial statements requested by such
Seller pursuant to this Section 7.5(c) hereof and each Seller shall make
available to such employees any Excluded Software or other Excluded Assets
reasonably required for such purpose.
     (d) From and after the Closing Date, Sellers shall, and shall cause their
respective Affiliates to, keep confidential any and all information concerning
the Purchased Assets and the Assumed Liabilities (the “Post-Closing Confidential
Information”); provided, however, that the Post-Closing Confidential Information
shall not include information which (i) is or becomes generally available to the
public other than as a result of a disclosure by Sellers or any of their
respective Affiliates acting in such capacity in violation of this Agreement, or
(ii) becomes available after the Closing Date to Sellers or any of their
respective Affiliates on a non-confidential basis from a source that is
reasonably believed by Sellers or any of their respective Affiliates not to be
bound by an obligation of confidentiality to the Buyers (whether by agreement or
otherwise). Notwithstanding the foregoing, if either Seller or any of their
respective Affiliates is requested or becomes legally compelled (by
interrogatories, request for information or documents, subpoena, civil
investigative demand or similar process) to disclose any Post-Closing
Confidential Information, the Sellers or any of their respective Affiliates will
(i) provide Buyers with prompt written notice of the existence, terms and
circumstances of such a request, (ii) consult with Buyers on the advisability of
taking legally available steps to resist or narrow such requests (in respect of
which Buyers may seek a protective order or other appropriate remedy at Buyers’
sole expense), and (iii) if disclosure of such information is required, furnish
only that portion of the Post-Closing Confidential Information which, in the
opinion of Sellers’ counsel, the Seller or any of their respective Affiliates is
legally compelled to disclose and, further, exercise their reasonable best
efforts to obtain reliable assurance that confidential treatment will be
accorded the Post-Closing Confidential Information.
     Section 7.6 Governmental Approvals.
     (a) Each Buyer and each Seller shall cooperate with each other and use
their reasonable best efforts to (i) as promptly as practicable, take, or cause
to be taken, all appropriate action, and do or cause to be done, all things
necessary, proper or advisable under applicable Law or otherwise to consummate
and make effective the transactions governed by this Agreement as promptly as
practicable, (ii) obtain from any Governmental Entities any consents, licenses,
permits, waivers, approvals, authorizations or orders, including without
limitation, Buyers’ Gaming Approvals, required (A) to be obtained or made by
each Seller or each Buyer or any of their respective Affiliates or any of their
respective Representatives and (B) to avoid any action or proceeding by any
Governmental Entity (including, without limitation, those in

41

--------------------------------------------------------------------------------

 

connection with the HSR Act and antitrust and competition Laws of any other
applicable jurisdiction), in connection with the authorization, execution and
delivery of this Agreement and the consummation of the transactions governed
herein and therein, and (iii) make all necessary filings, and thereafter make
any other required submissions with respect to this Agreement, as required under
(A) any applicable federal or state securities Laws, (B) the HSR Act and
antitrust and competition Laws of any other applicable jurisdiction, (C) the
Gaming Laws and (D) any other applicable Law (collectively, the “Governmental
Approvals”), and to comply with the terms and conditions of all such
Governmental Approvals. The parties hereto and their respective Representatives
and Affiliates shall file within fifteen (15) days after the date hereof, all
required initial applications and documents in connection with obtaining the
Governmental Approvals (including without limitation under applicable Gaming
Laws and the HSR Act) and shall act diligently and promptly to pursue the
Governmental Approvals, including, without limitation, filing such additional
applications and documents as may be required, and shall cooperate with each
other in connection with the making of all filings referenced in the preceding
sentence, including providing copies of all such documents to the non-filing
party and its advisors prior to filing and, if requested, to accept all
reasonable additions, deletions or changes suggested in connection therewith.
Each Buyer and each Seller shall use reasonable best efforts to schedule and
attend any hearings or meetings with Governmental Entities to obtain the
Governmental Approvals as promptly as possible. Each Buyer and each Seller shall
have the right to review in advance and, to the extent practicable, each will
consult the other parties hereto on, in each case, subject to applicable Laws
relating to the exchange of information (including, without limitation,
antitrust laws and any Gaming Laws), all the information relating to the
applicable Buyer or the applicable Seller, as the case may be, and any of their
respective Affiliates or Representatives which appear in any filing made with,
or written materials submitted to, any third party or any Governmental Entity in
connection with the transactions governed by this Agreement. Without limiting
the foregoing, each Buyer and each Seller will notify the other party hereto
promptly of the receipt of comments or requests from Governmental Entities
relating to Governmental Approvals, and will supply the other party with copies
of all correspondence between the notifying party or any of its Representatives
and Governmental Entities with respect to Governmental Approvals. If, at any
time prior to eight (8) months from the date hereof (the “Third Party Retention
Date”), Buyers, acting upon the advice of its counsel and in good faith,
reasonably believe that it is unlikely that they will receive all Necessary
Gaming Approvals by the Eighth Extended Outside Date, Buyers may, upon written
notice to Sellers prior to the Third Party Retention Date, elect to retain a
third party gaming operator reasonably acceptable to Seller (a “Third Party
Operator”); provided, further, that the Sellers shall be deemed to have accepted
such Third Party Operator if Seller has not otherwise objected to such Third
Party Operator within ten (10) days of receipt of such written notice. Such
written notice to Seller shall contain reasonable detail regarding the identity
and gaming history of the Third Party Operator. Upon acceptance by the Seller,
the Third Party Operator will be obligated to purchase all Purchased Assets and
assume all Assumed Liabilities that are required to obtain all Necessary Gaming
Approvals under applicable Laws, on the terms and conditions set forth in this
Agreement, provided, that the retention of a Third Party Operator shall in no
way relieve the Buyers of any of their agreements or obligations hereunder.
Within thirty (30) days after the date of the acceptance by Seller of a Third
Party Operator, such Third Party Operator will be required to (a) execute any
documents reasonably required by either Buyers or Sellers to obligate such party
to the terms and conditions hereof and (b) file all required initial
applications and

42

--------------------------------------------------------------------------------

 

documents in connection with obtaining the Necessary Gaming Approvals; provided,
that in all cases, Buyers must have retained such Third Party Operator no later
than the Eighth Extended Outside Date. For the sake of clarity, in all cases the
Buyer shall continue to be (i) obligated in all circumstances to make all
required Deposits under Section 4.1(a) and (b) hereof and (ii) subject to the
provisions of Section 9.3.
     (b) Each Buyer and each Seller shall each use its reasonable best efforts:
          (i) to avoid the entry of, or to have vacated or terminated, any
decree, order, or judgment that would restrain, prevent or delay the Closing, on
or before the Outside Date, including defending through litigation on the merits
any claim asserted in any court by any Person; and
          (ii) to avoid or eliminate each and every impediment under any
antitrust, competition or trade regulation Law that may be asserted by any
Governmental Entity with respect to the Closing so as to enable the Closing to
occur as soon as reasonably possible (and in any event no later than the Outside
Date), including implementing, contesting or resisting any litigation before any
court or quasi-judicial administrative tribunal seeking to restrain or enjoin
the Closing; provided, however, that Buyers and their respective Affiliates
shall be required to effect (and nothing in this Agreement shall require
Sellers, or any of their respective Affiliates to commit to) any divestitures,
licenses or hold separate or similar arrangements with respect to its, or their
respective assets or conduct of business arrangements, to the extent necessary
to obtain any approval from a Governmental Entity required to consummate the
transactions contemplated hereby, except where all required actions pursuant to
this proviso, if taken together, would be materially adverse to the business,
financial condition or results of operations of the Buyers and their respective
Affiliates.
     (c) Each Buyer and each Seller shall promptly advise each other upon
receiving any communication from any Governmental Entity whose consent or
approval is required for consummation of the transactions governed by this
Agreement which causes such party to reasonably believe that there is a
reasonable likelihood that such consent or approval from such Governmental
Entity will not be obtained or that the receipt of any such approval will be
materially delayed. Each Buyer and each Seller shall use their reasonable best
efforts to take, or cause to be taken, all actions reasonably necessary to
defend any lawsuits or other legal proceedings challenging this Agreement or the
consummation of the transactions governed by this Agreement, seeking to prevent
the entry by any Governmental Entity of any decree, injunction or other order
challenging this Agreement or the consummation of the transactions governed by
this Agreement, appealing as promptly as possible any such decree, injunction or
other order and having any such decree, injunction or other order vacated or
reversed.
     (d) From the date of this Agreement until the Closing, the parties hereto
shall promptly notify the other parties hereto in writing of any pending or, to
the knowledge of any Buyer or any Seller, as appropriate, threatened Legal
Proceeding or investigation by any Governmental Entity or any other Person
(i) challenging or seeking damages in connection with the Closing or any other
transaction governed by this Agreement or (ii) seeking to restrain or prohibit
the consummation of the Closing.

43

--------------------------------------------------------------------------------

 

     Section 7.7 Publicity. Sellers and Buyers shall agree on the form and
content of the initial press release regarding the transactions contemplated
hereby and thereafter shall consult with each other before issuing, provide each
other the opportunity to review and comment upon and use all reasonable efforts
to agree upon, any press release or other public statement with respect to any
of the transactions contemplated hereby and thereby and shall not issue any such
press release or make any such public statement prior to such consultation and
prior to considering in good faith any such comments, except as may be required
by applicable Law (including, without limitation, the Securities Act, the
Exchange Act and any Gaming Laws) or any listing agreement with the New York
Stock Exchange. Notwithstanding anything to the contrary herein, Buyers and
Sellers or their respective Affiliates may make any public statement in response
to specific questions by the press, analysts, investors or those attending
industry conferences or financial analyst conference calls, so long as any such
statements are not inconsistent with previous press releases, public disclosures
or public statements made jointly by Buyers and Sellers and do not reveal
non-public information regarding Buyers or Sellers.
     Section 7.8 Further Assurances and Actions.
     (a) Subject to the terms and conditions herein, each party hereto agrees to
use its reasonable best 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 and regulations to consummate and make
effective the transactions contemplated by this Agreement, including, without
limitation, using their respective reasonable best efforts to obtain (i) all
Seller Permits and Buyer Permits, as applicable, and (ii) consents of parties to
the Assumed Contracts and Traymore Contracts and (iii) consents from customers
on the Affiliate Customer List as such consents may be required by the
Gramm-Leach-Bliley Act of 1999, any other applicable Law in effect as of the
Closing, or any Seller privacy policy which may be in effect as of the date
hereof, in each case, as are necessary for consummation of the transactions
contemplated by 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 Buyers with full title to
the Purchased Assets the proper officers and/or directors of Buyers and Sellers
shall take all action reasonably necessary (including such officers’ executing
and delivering further notices, assumptions, releases and acquisitions);
provided that, if such action is necessary due to events or circumstances
particular to Buyer, Buyer shall bear the cost of such action.
     (c) The parties hereto acknowledge that Consolidated Supplies, Services and
Systems, a Nevada corporation and an Affiliate of Flamingo (“CS3”), owns certain
assets listed on Section 7.8(c) of the Flamingo Disclosure Letter and used
exclusively in the operation of the Casino Property (collectively, the “CS3
Assets”). Flamingo shall cause CS3 to take such actions as are necessary to
cause CS3 at the Closing to transfer to Flamingo Buyer the CS3 Assets, and
certain of the Liabilities associated therewith that would be Flamingo Assumed
Liabilities if such Liabilities were Liabilities of Flamingo (“CS3
Liabilities”). In addition, such CS3 Assets shall be deemed to be Flamingo
Purchased Assets for purposes of this Agreement and such CS3 Liabilities shall
be deemed to be Flamingo Assumed Liabilities for purposes of this Agreement,
including without limitation, the representations and warranties with respect to
the Flamingo Purchased Assets and the Flamingo Assumed Liabilities set forth in
Article V hereof.

44

--------------------------------------------------------------------------------

 

     Section 7.9 Transfer Taxes; HSR Filing Fee.
     (a) All 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
with respect to the Purchased Assets pursuant to this Agreement shall be borne
one-half by Buyers and one-half by Sellers. Except as required by applicable
Law, Buyers shall prepare, execute and file all Tax Returns and other
documentation on a timely basis as may be required to comply with the provisions
of any such Tax Laws; provided, however, that any such Tax Returns and other
documentation shall be subject to the approval of the applicable Seller, which
approval shall not be unreasonably withheld and, only to the extent required by
applicable Law, the applicable Seller shall execute such Tax returns.
     (b) All recording or filing fees with respect to the removal of any Liens
or Encumbrances on the Traymore Site shall be paid one-half by Boardwalk Buyer
and one-half by Boardwalk. All recording fees for the deed and all title
insurance search fees and premiums shall be paid one-half by Buyers and one-half
by Sellers.
     (c) The filing fees pursuant to the pre-merger notifications under the HSR
Act shall be paid one-half by Buyers and one-half by Sellers.
     Section 7.10 Accounts Receivable; Accounts Payable.
     (a) Flamingo agrees that after the Closing Date, Buyer shall have the right
and authority to collect for its own account or the account of its Affiliates
all accounts receivable which are transferred and assigned to any Buyer as set
forth on the Detailed Balance Sheet. Flamingo agrees that it will promptly
transfer and deliver to Buyer any cash or other property which Flamingo may
receive in respect of such accounts receivable. Buyer agrees that after the
Closing Date, Flamingo shall have the right and authority to collect for its own
account or the account of its Affiliates all accounts receivables which are
retained by Flamingo as set forth on the Detailed Balance Sheet. Buyer agrees
that it will promptly transfer and deliver to Flamingo any cash or other
property which Buyer may receive in respect of such accounts receivables.
     (b) Following the Closing Date, Flamingo Buyer shall make payments in the
Ordinary Course of Business consistent with Flamingo’s practice prior to Closing
in respect of all Liabilities of the type designated on the Detailed Balance
Sheet as being assumed by Flamingo Buyer and reflected on the Pre-Closing
Working Capital Statement and the Working Capital Statement, other than those
which are being contested in good faith by appropriate proceedings. Following
the Closing Date, Flamingo Buyer shall cooperate with Flamingo to inform
Flamingo in a timely manner of the receipt of goods and/or services ordered by
Flamingo prior to the Closing Date. In respect of expenses that are accrued in
whole or in part prior to the Closing Date, which become payable after the
Closing Date and which do not appear on the Pre-Closing Working Capital
Statement or Working Capital Statement, such expenses shall be prorated between
Flamingo Buyer and Flamingo as of the Closing Date on the Flamingo Determination
Date. Within ten (10) days of the Flamingo Determination Date, the amount, if
any, pursuant to this Section 7.10(b) due from Flamingo Buyer to Flamingo or due
from Flamingo to Flamingo Buyer shall be paid in cash by wire transfer of
immediately available funds from Flamingo Buyer to Flamingo or from Flamingo to
Flamingo Buyer, as applicable.

45

--------------------------------------------------------------------------------

 

     Section 7.11 Reservations; Chips; Front Money; Guests; Keys.
     (a) Reservations. Flamingo Buyer will honor the terms and rates of all
pre-Closing reservations (in accordance with their terms) at the Casino Property
by guests or customers, including advance reservation cash deposits, for rooms
or services confirmed by Flamingo for dates after the Closing Date. Prior to the
Closing Date, Flamingo may continue to accept reservations for periods after the
Closing in the Ordinary Course of Business consistent with past practice in
operating the Casino Property. Flamingo Buyer recognizes that such reservations
may include, to the extent consistent with the Ordinary Course of Business
consistent with past practice, discounts or other benefits, including, without
limitation, benefits extended under Total Rewards or any other frequent player
or casino awards programs, group discounts, other discounts or requirements that
food, beverage or other benefits be delivered by Flamingo Buyer to the guest(s)
holding such reservations. Flamingo Buyer will honor all room allocation
agreements and banquet facility and service agreements which have been granted
to groups, persons or other customers for periods after the Closing Date at the
rates and terms provided in such agreements. Flamingo Buyer agrees that Flamingo
cannot make any representation or warranty that any party holding a reservation
or agreement for rooms, facilities or services will utilize such reservation or
honor such agreement. Flamingo Buyer, by the execution hereof, solely assumes
the risk of non-utilization of reservations and non-performance of such
agreements from and after the Closing.
     (b) Destruction of Chips. Except as otherwise provided for in the Flamingo
License Agreement and applicable Gaming Laws, as of Closing, Flamingo Buyer will
(i) cease to issue or use and will not reissue or reuse any of Flamingo’s gaming
chips, tokens or plaquemines and (ii) be solely responsible and liable for
compliance with applicable Gaming Laws, including any obligation to destroy such
gaming chips, tokens or plaquemines.
     (c) Front Money. Effective as of the Transfer Time, Representatives of each
of Flamingo Buyer and Flamingo shall take inventory of all Front Money and
identify what Persons are entitled to what portions of such Front Money. All
such Front Money shall be retained in the Casino Property cage and listed in an
inventory prepared and signed jointly by Representatives of Flamingo Buyer and
Flamingo no later than the Transfer Time. Flamingo Buyer shall be responsible
from and after the Transfer Time for all Front Money and shall distribute Front
Money only to the Persons and only in the amounts as determined pursuant to this
Section 7.11(c). Pursuant to Article X hereof, Flamingo shall be responsible for
and indemnify Flamingo Buyer against claims of alleged missing Front Money not
contained on the inventory, and Flamingo Buyer shall be responsible for and
indemnify Flamingo against claims of alleged missing Front Money listed on the
inventory.
     (d) Guests’ Baggage. Effective as of the Transfer Time, Flamingo and
Flamingo Buyer shall take inventory of: (i) all baggage, suitcases, luggage,
valises and trunks of hotel guests checked or left in the care of Flamingo at
the Casino Property; (ii) all luggage or other property of guests retained by
Flamingo as security for unpaid accounts receivable; and (iii) the contents of
the baggage storage room; provided, however, that no such baggage, suitcases,
luggage, valises or trunks shall be opened. All such baggage and other items
shall be sealed in a manner to be agreed upon by the parties and listed in an
inventory prepared and signed jointly by said representatives of Flamingo and
Flamingo Buyer as of the Closing Date. Said baggage and

46

--------------------------------------------------------------------------------

 

other items shall be stored as Flamingo Buyer shall choose, and Flamingo Buyer
shall be solely responsible for claims with respect thereto.
     (e) Guests’ Safe Deposit Boxes. Not later than thirty (30) days prior to
the anticipated Closing Date, Flamingo shall use reasonable efforts to send a
notice by certified mail to the last known address of each Person who has stored
personal property in safe deposit boxes located at the Casino Property, advising
them that they must make arrangements with Flamingo Buyer to continue use of
their safe deposit box and that if they should fail to do so within fifteen (15)
days after the date of such notice is sent, the box will be opened in the
presence of a Representative of Flamingo and a Representative of Flamingo Buyer,
and the contents of such box will be sealed in a package by the Representatives
of each of Flamingo and Flamingo Buyer, who shall write on the outside the name
of the Person who rented the safe deposit box and the date of the opening of the
box. The Representatives of each of Flamingo and Flamingo Buyer shall then
execute a certificate reciting the name of the Person who rented the safe
deposit box, the date of the opening of the box and a list of its contents. The
certificate shall be placed in the package and a copy of it sent by certified
mail to the last known address of the person who rented the safe deposit box.
The package will then be placed in a vault arranged by Flamingo Buyer. Pursuant
to Article X hereof, Flamingo shall be responsible for and indemnify Buyer
against claims of alleged missing items not contained on the certificate, and
Flamingo Buyer shall be responsible for and indemnify Flamingo against claims of
alleged missing items listed on the certificate.
     (f) Keys. As of the Closing Date, (i) Flamingo shall use commercially
reasonable effort to deliver to Flamingo Buyer or otherwise leave at the Casino
Property all keys in its possession relating to the Casino Property and
(ii) Boardwalk shall use commercially reasonable efforts to deliver to Boardwalk
Buyer or otherwise leave at the Traymore Site all keys in its possession
relating to the Traymore Site.
     Section 7.12 Insurance Policies. Each Seller’s fire and casualty insurance
and other insurance policies shall be cancelled by such Seller or any of its
Affiliates as of the date immediately following the Closing Date, and any
refunded premiums shall be retained by such Seller. Buyers will be solely
responsible for acquiring and placing its casualty insurance, business
interruption insurance, liability insurance and other insurance policies for
periods after the Closing.
     Section 7.13 Certain Transactions. Prior to the Closing, neither party
shall take, or agree to commit to take, any action that would or is reasonably
likely to materially delay the receipt of, or materially impact the ability of a
party to obtain, any Governmental Approval necessary for the consummation of the
transactions contemplated by this Agreement.
     Section 7.14 Insurance; Casualty and Condemnation.
     (a) If, before the Closing, one or both of the Casino Property or Traymore
Site suffer damage that does not result in a Casualty Termination Event, then
the Closing shall proceed as scheduled and Flamingo or Boardwalk, applicable,
shall, as of the Closing Date, (i) promptly pay to the applicable Buyer all
insurance proceeds received by such Seller or its Affiliates with respect to
such damage, destruction or other loss, less any proceeds applied to any
physical

47

--------------------------------------------------------------------------------

 

restoration of the applicable Property and (ii) assign to the applicable Buyer
all rights of such Seller and its Affiliates 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,
provided that the proceeds of such insurance shall be subject to (and recovery
thereon shall be reduced by the amount of) any payment or reimbursement (but not
subject to any applicable deductibles and co-payment provisions, which shall be
the responsibility of the applicable Seller and shall be paid to the applicable
Buyer or applied to such repair or replacement as applicable) and shall
constitute full compensation for the damage to the Property, and such Seller
shall have no responsibility for restoration or repair of the applicable
Property or any resultant loss, directly, by subrogation, or otherwise. For the
avoidance of doubt, nothing contained in this Section 7.14(a) shall restrict the
ability of Buyers to seek indemnification from the applicable Seller as provided
in Article X hereof. In the event of damage that does not result in a Casualty
Termination Event, between the date of the casualty and the Closing, the
applicable Buyer will have the right to consult with Seller regarding
negotiations with Seller’s insurance carriers and to review and consult with
Seller with respect to any repairs (including the cost thereof) to be made prior
to or after Closing. After Closing, the applicable Buyer shall have the right to
negotiate and settle with any insurance carrier, 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 Casualty Termination Event occurs prior to the Closing
Date, Buyers shall have the option, by written notice to both Sellers and the
Escrow Agent within ten (10) days of the occurrence of such Casualty Termination
Event, to exercise their termination right under Section 9.1(g) hereof;
provided, however, that, if requested by Sellers, Sellers and Buyers shall
discuss and consult in good faith for a period of up to thirty (30) days after
any such casualty to discuss whether such casualty (individually or together
with any prior casualties) constitutes a Total Material Adverse Effect, and
after any such period expires, Buyers shall have fifteen (15) days to exercise
its termination right pursuant to Section 9.1(g) hereof with respect to such
casualty.
     (c) In the event a condemnation proceeding or payment in lieu of
condemnation occurs relative to any part of the Casino Property or Traymore Site
prior to the Closing Date, and such proceeding does not result in a Condemnation
Termination Event, all payments relative to such condemnation shall be paid by
the applicable Seller, or the rights to such payments shall be assigned, to the
applicable Buyer at the Closing (the “Condemnation Amount”), or, at the
applicable Seller’s election, the Purchase Price shall be reduced by the
Condemnation Amount.
     Section 7.15 License of Excluded Software. As of the date hereof,. Flamingo
and Flamingo Buyer shall enter into the non-exclusive, “as-is,” fully-paid,
worldwide, non-transferable license (the “Excluded Software License”), attached
hereto as Exhibit K, pursuant to which Flamingo Buyer shall be permitted to use
certain of the Excluded Software designated in the Excluded Software License for
the term specified in such Excluded Software License following the Closing Date
exclusively in connection with the operation of the Casino Property and only to
the extent permitted under any third-party agreements governing Flamingo’s use
of any such Excluded Software. It is agreed and understood by Flamingo Buyer
that the Excluded Software License will not cover source code and Flamingo shall
not be obligated to provide any support services to Flamingo Buyer in respect of
any Excluded Software covered by the Excluded Software License, except as
otherwise provided for in the Excluded Software License.

48

--------------------------------------------------------------------------------

 

Neither Flamingo Buyer nor any of its Affiliates or Representatives shall sell,
license, lease, or otherwise transfer the Excluded Software License without the
prior written consent of Flamingo, which consent may be withheld in Flamingo’s
sole discretion. In the event of any such sale, license, lease or other transfer
without the prior written consent of Flamingo, Flamingo shall have the right to
terminate the Excluded Software License granted hereunder, and thereafter
Flamingo Buyer shall have no right to use the Excluded Software.
     Section 7.16 Non-Solicitation. Without prior written consent of the other
Party, for a period of one year from the Closing Date, (a) Flamingo Buyer or its
Affiliates shall not employ or solicit to employ any of the information
technology employees of Flamingo or its Affiliates (other than the Property
Employees immediately prior to Closing, and then pursuant to the terms of this
Agreement) and (b) Flamingo or its Affiliates shall not employ or solicit to
employ any of the information technology employees of Flamingo Buyer or its
Affiliates or any of the Property Employees, (i) in either case, other than any
such employee who has been terminated prior to the commencement of employment
discussions between the other party and such employee and (ii) other than any
such employee who responds to a solicitation (x) by the soliciting party or any
of its Affiliates or representatives, which constitutes a good faith general
solicitation, mass advertisement or similar type of broad based publicly
disseminated solicitation through advertisement or (y) by a search firm,
provided that neither the soliciting party nor its Affiliates or representatives
encourages or advises any such firm to approach any such employee.
     Section 7.17 Termination of Billboard Lease. Boardwalk shall cause the
Billboard Lease to be terminated and of no further force or effect at or prior
to Closing.
     Section 7.18 No Control. Except as permitted by the terms of this
Agreement, prior to the Closing, Buyers shall not directly or indirectly
control, supervise, direct or interfere with, or attempt to control, supervise,
direct or interfere with, the Purchased Assets. Until the Closing, the
operations and affairs of the Purchased Assets is the sole responsibility of and
under the applicable Seller’s complete control, except as provided for in this
Agreement.
     Section 7.19 Estoppel Certificate. Boardwalk shall use commercially
reasonable efforts to cooperate with Buyer in obtaining an estoppel certificate
relating to the Traymore Site in form and substance satisfactory to the Buyer,
acting reasonably.
     Section 7.20 2005 Audited Financial Statements. Flamingo shall use its
commercially reasonable efforts to deliver to Buyers at Closing stand-alone
audited balance sheets, statements of income, and cash flow statements relating
to the Business operated at the Casino Property as of December 31, 2005 (the
“Audited Financial Information”). The Audited Financial Information shall be
prepared in accordance with generally accepted accounting principles in effect
at the time of such preparation applied on a consistent basis throughout the
period involved (except as may be indicated in the notes to such financial
statements) and will fairly present, in all material respects, the consolidated
financial position and results of operations of the Casino Property as of such
date, subject to normal recurring year-end audit adjustments. Buyer shall
cooperate with Flamingo and Deloitte & Touche as may be reasonably requested by
Flamingo or Deloitte & Touche in connection with the preparation of the Audited
Financial Statements. All costs that would not have been incurred by Flamingo
but for its obligation to prepare the Audited Financial Statements hereunder
shall be borne solely by the Buyers.

49

--------------------------------------------------------------------------------

 

ARTICLE VIII
CONDITIONS TO CLOSING
     Section 8.1 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:
     (a) No Injunctions. No Governmental Entity shall have (i) initiated any
order to enact, issue, promulgate, enforce or enter, or (ii) enacted, issued,
promulgated, enforced or entered any order, executive order, stay, decree,
judgment or injunction or statute, rule, regulation which is in effect (whether
temporary, preliminary or permanent) to prevent or prohibit the consummation of
any of the transactions contemplated by the Agreement or make it illegal for any
party hereto to perform its obligations hereunder.
     (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) Consents and Approvals. All consents, waivers, authorizations and
approvals of any Person required in connection with the consummation of the
transactions contemplated hereby that are set forth on Section 8.2(c) of the
Buyer Disclosure Letter shall have been duly obtained and shall be in full force
and effect on the Closing Date and written evidence (in form and substance
reasonably acceptable to Buyers) of any such consents, waivers, authorizations
and approvals shall have been provided to Buyers on or prior to the Closing
Date.
     (d) Governmental Consents. Each Buyer shall have obtained all Gaming
Approvals necessary in connection with the transactions contemplated by this
Agreement and necessary for ownership and operation of the Purchased Assets
(including, without limitation, approval, licensing or registration of such
Buyer and its (i) officers, executive directors, key employees, managers or
Persons performing management functions similar to officers, and (ii) partners
(general and limited partners), stockholders and members, each, as required by
any Governmental Entity) (each a “Necessary Gaming Approval” and collectively
the “Necessary Gaming Approvals”) and such Necessary Gaming Approvals shall be
in full force and effect.
     Section 8.2 Additional Conditions to Obligations of Buyers. The obligation
of Buyers 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 Buyers:
     (a) Representations and Warranties. The representations and warranties of
each of Flamingo and Boardwalk contained in this Agreement shall be true and
correct (without giving effect to any limitation as to “materiality” or “Seller
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

50

--------------------------------------------------------------------------------

 

representations and warranties to be true and correct would not, individually or
in the aggregate, result in a Total Material Adverse Effect. Each Buyer shall
have received certificates signed on behalf of the applicable Seller by an
executive officer of such party to such effect.
     (b) Performance of Obligations. Each of Flamingo and Boardwalk shall have
performed in all material respects all covenants, agreements and obligations
required to be performed by it under this Agreement at or prior to the Closing,
including without limitation delivery of items listed in Section 4.2 hereof.
Each Buyer shall have received certificates signed on behalf of the applicable
Seller by an executive officer of such party to such effect.
     Section 8.3 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 all of the Sellers:
     (a) Representations and Warranties. The representations and warranties of
each Buyer contained in this Agreement shall be true and correct (without giving
effect to any limitation as to “materiality” or “Buyer 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. Each Seller shall have received a
certificate signed on behalf of the applicable Buyer by an executive officer of
such party to such effect.
     (b) Performance of Obligations of Buyers. Buyers shall have performed in
all material respects all covenants, agreements and obligations required to be
performed by them under this Agreement at or prior to the Closing, including,
without limitation, delivery of items listed in Section 4.2 hereof. Each Seller
shall have received a certificate signed on behalf of the applicable Buyer by an
executive officer of such party to such effect.
ARTICLE IX
TERMINATION AND AMENDMENT
     Section 9.1 Termination. This Agreement may be terminated 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 9.1(a) hereof, which requires
mutual agreement of all parties):
     (a) by mutual agreement of Sellers and Buyers;
     (b) by either Buyers 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 9.1(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 Sellers, if any Gaming Authority has made a nonappealable final
determination that such Gaming Authority (i) will not issue to any Buyer any
Necessary Gaming Approvals,

51

--------------------------------------------------------------------------------

 

provided, that if such nonappealable final determination is made with respect to
any such Buyer prior to the Third Party Retention Date, Sellers shall not be
able to terminate unless such Buyer determines that it will not retain a Third
Party Operator; provided, further, that such Buyer shall be required to make
such determination reasonably promptly and in no event later than the Third
Party Retention Date, or (ii) will not issue to any Third Party Operator any
Necessary Gaming Approvals, if applicable;
     (d) by either Buyers or Sellers, if (i) a court of competent jurisdiction
or other Governmental Entity shall have issued a nonappealable final order,
decree or ruling or taken any other nonappealable final action, in each case,
having the effect of permanently restraining, enjoining or otherwise prohibiting
the Closing and the transactions contemplated hereby, or (ii) a Governmental
Entity shall have initiated any order to enact, issue, promulgate, enforce or
enter or shall have enacted, issued, promulgated, enforced or entered any order,
executive order, stay, decree, judgment or injunction or statute, rule,
regulation which is in effect (whether temporary, preliminary or permanent)
prevents or prohibits the consummation of the transactions contemplated by this
Agreement or makes it illegal for either party hereto to perform its obligations
hereunder; provided, however, that the right to terminate this Agreement under
this Section 9.1(d) shall not be available to any party whose failure to fulfill
any obligation under this Agreement has been the cause of, or materially
contributed to, such action;
     (e) by Buyers, if any Seller has breached any representation, warranty,
covenant or agreement on the part of such Seller set forth in this Agreement
which (i) would result in a failure of a condition set forth in Sections 8.2(a)
or (b) hereof and (ii) is not cured in all material respects within thirty
(30) calendar days after written notice thereof; provided, however, that if such
breach cannot reasonably be cured within such thirty (30) day period but can be
reasonably cured prior to the Outside Date, and such Seller is diligently
proceeding to cure such breach, this Agreement may not be terminated pursuant to
this Section 9.1(e); provided, further, that Buyers’ right to terminate this
Agreement under this Section 9.1(e) shall not be available if, at the time of
such intended termination, any Seller has the right to terminate this Agreement
under Sections 9.1(c), (d) or (f) hereof;
     (f) by Sellers, if any Buyer has breached any representation, warranty,
covenant or agreement on the part of such Buyer set forth in this Agreement
which (i) would result in a failure of a condition set forth in Sections 8.3(b)
or (c) hereof and (ii) is not cured in all material respects within thirty
(30) calendar days after written notice thereof; provided, however, that if such
breach cannot reasonably be cured within such thirty (30) day period but can be
reasonably cured prior to the Outside Date, and the applicable Buyer is
diligently proceeding to cure such breach, this Agreement may not be terminated
pursuant to this Section 9.1(f); provided, further, that Sellers’ right to
terminate this Agreement under this Section 9.1(f) shall not be available if, at
the time of such intended termination, any Buyer has the right to terminate this
Agreement under Sections 9.1(d) or (e) hereof;
     (g) by Buyers, upon a Casualty Termination Event or a Condemnation
Termination Event; provided, however, that the termination right set forth in
this Section 9.1(g) is subject to the terms and conditions set forth in
Section 7.14 hereof; and
     (h) by Buyers pursuant to Section 11.2(c).

52

--------------------------------------------------------------------------------

 

     Section 9.2 Effect of Termination.
     (a) Liability. In the event of termination of this Agreement as provided in
Section 9.1 hereof, this Agreement shall immediately become void and there shall
be no further Liability on the part of Buyers or Sellers, or their respective
Affiliates or Representatives; provided, however, that notwithstanding the
foregoing (i) to the extent that 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 9.1 hereof shall relieve any party of liability for a breach of any
provision of this Agreement occurring before such termination, (ii) no
termination of this Agreement pursuant to Section 9.1 hereof shall relieve or
limit the Liability of any party to this Agreement for any fraudulent or willful
breach of this Agreement. In the event that this Agreement is terminated, Buyers
will redeliver all documents, work papers and other materials of Sellers
relating to the transactions contemplated herein, whether obtained before or
after the execution hereof, in accordance with the terms of the Confidentiality
Agreements, and (iii) Sections 7.5 (relating to confidentiality), 9.2, 9.3 and
Article XII hereof shall remain in full force and effect notwithstanding such
termination.
     (b) Fees and Expenses. Except as otherwise expressly provided in this
Agreement, all fees and expenses incurred in connection with this Agreement and
the transactions contemplated hereby shall be paid by the party incurring such
expenses, whether or not the Closing is consummated.
     Section 9.3 Application of the Deposit; Liquidated Damages.
     (a) In the event that (i) any Seller terminates this Agreement pursuant to
Section 9.1(c) or (f) hereof, or (ii) any Seller or any Buyer terminates this
Agreement pursuant to Section 9.1(b) and at or prior to such time Buyer or, in
the event a Buyer retains a Third Party Operator, such Third Party Operator,
shall not have received all Necessary Gaming Approvals, then, in each case, the
Deposit (and any interest thereon) will be delivered to Sellers by the Escrow
Agent unless any Seller’s failure to fulfill any of its obligations under this
Agreement has been a material cause of the Buyer’s or a Third Party Operator’s,
as applicable, failure to obtain any Necessary Gaming Approval. In all other
circumstances of termination of this Agreement, the Deposit (and any interest
thereon) shall be returned to Buyers.
     (b) The parties hereto agree that the provisions contained in Section 9.2
and Section 9.3 are an integral part of the transactions contemplated by this
Agreement, that the damages resulting from the termination of this Agreement as
set forth in Section 9.2 and Section 9.3(a) of this Agreement are uncertain and
incapable of accurate calculation and that the amounts payable pursuant to
Section 9.2 and Section 9.3 hereof are reasonable forecasts of the actual
damages which may be incurred by the parties under such circumstances. The
amounts payable pursuant to Section 9.2 and Section 9.3 hereof constitute
liquidated damages and not a penalty and shall be the sole and exclusive remedy
in the event of termination of this Agreement by Sellers. If Buyers fail to pay
to Sellers (including by preventing the timely delivery by the Escrow Agent) any
amounts due under Section 9.3, in accordance with the terms hereof, Buyers shall
pay the reasonable costs and expenses (including legal fees and expenses) of
each Seller in connection with any action, including the filing of any lawsuit
or other legal action, taken to collect payment.

53

--------------------------------------------------------------------------------

 

     (c) In the event the foregoing liquidated damages provision is declared
void or unenforceable by a court of competent jurisdiction (and as a result,
Sellers do not receive liquidated damages), then Sellers may elect to pursue any
and all remedies available to it at Law or in equity, including actual damages;
provided, however, that neither Sellers nor Buyers may challenge the validity of
this Section 9.3.
ARTICLE X
SURVIVAL; INDEMNIFICATION
     Section 10.1 Survival of Representations, Warranties, Covenants and
Agreements.
     (a) Except as set forth in Article IX and Section 10.1(b) hereof, the
representations, warranties, covenants and agreements of each party hereto shall
remain operative and in full force and effect regardless of any investigation
made by or on behalf of any other party hereto, any Person controlling any such
party or any of their Representatives whether prior to or after the execution of
this Agreement.
     (b) Notwithstanding the foregoing provisions of this Section 10.1, (i) the
representations and warranties made by each Seller and each Buyer in this
Agreement shall survive the Closing until (and claims based upon or arising out
of such representations and warranties may be asserted at any time before)
twelve (12) months after the Closing Date, (ii) the representations and
warranties made by each Seller in Sections 5.1, 5.2, 5.8, 5.12, 5.17, the first
sentence of 5.14 and 5.26 shall survive the Closing until (and claims based upon
or arising out of such representations and warranties may be asserted at any
time before) the date that is six (6) months after the date on which the
applicable statute of limitations for such matters expires, and (iii) there
shall be no limitation on the time within which notice of a claim based on fraud
or intentional misrepresentation on the part of any party hereto may be made.
     (c) The period of time a representation or warranty survives the Closing
pursuant to Section 10.1(b) shall be the “Survival Period” with respect to such
representation or warranty. The parties intend for Section 10.1(b)(i) to shorten
the otherwise applicable statute of limitations and agree that, subject to the
last sentence of this Section 10.1(c) and Section 10(b)(iii), no claim may be
brought based solely upon, directly or indirectly, any of the representations
and warranties contained in this Agreement after the Survival Period with
respect to such representation or warranty. The covenants and agreements of the
parties hereto in this Agreement shall survive the Closing without any
contractual limitation on the period of survival (other than those covenants and
agreements that are expressly required to remain in full force and effect for a
specified period of time). 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 Survival Period provided
herein.
     Section 10.2 Indemnification.
     (a) From and after the Closing, each Seller shall, in the case of each
Seller, severally but not jointly with such other Seller, indemnify, save and
hold harmless Buyers and their

54

--------------------------------------------------------------------------------

 

respective Affiliates and their respective Representatives (each, a “Buyer
Indemnified Party” and collectively, the “Buyer Indemnified Parties”) from and
against any and all costs, losses, Liabilities, obligations, damages, claims,
demands and expenses (whether or not arising out of third party claims),
including interest, penalties, reasonable attorneys’ fees and all amounts paid
in investigation, defense or settlement of any of the foregoing (herein,
“Damages”), incurred in connection with, arising out of or resulting from:
          (i) any breach of any representation or warranty made by such Seller
in this Agreement;
          (ii) any breach of any covenant or agreement made, or to be performed,
by such Seller in this Agreement;
          (iii) the Flamingo Excluded Liabilities and the Flamingo Excluded
Assets; and
          (iv) the Boardwalk Excluded Liabilities and the Boardwalk Excluded
Assets.
     (b) From and after the Closing, each Buyer shall, severally but not jointly
with such other Buyer, indemnify, save and hold harmless each Seller and its
Affiliates and their respective Representatives (each, a “Seller Indemnified
Party” and collectively, the “Seller Indemnified Parties”) from and against any
and all Damages incurred in connection with, arising out of or resulting from:
          (i) any breach of any representation or warranty made by such Buyer in
this Agreement;
          (ii) any breach of any covenant or agreement made, or to be performed,
by such Buyer in this Agreement;
          (iii) (A) the Flamingo Assumed Liabilities and (B) the Boardwalk
Assumed Liabilities; and
          (iv) (A) except for the Flamingo Excluded Liabilities and the
Boardwalk Excluded Liabilities, the ownership, use, operation or maintenance of
the Flamingo Purchased Assets solely with respect to periods from and after the
Closing or the conduct of the business of the Casino Property solely with
respect to periods from and after the Closing and (B) the ownership, use,
operation or maintenance of the Boardwalk Purchased Assets solely with respect
to periods from and after the Closing or the conduct of the business of the
Traymore Site solely with respect to periods from and after the Closing.
          (v) The parties hereto hereby acknowledge and agree that for purposes
of this Article X in determining whether any representation or warranty of the
Sellers in Article V hereof or Buyers in Article VI hereof have been breached
and for purposes of determining the amount of Damages resulting therefrom, any
and all “Material Adverse

55

--------------------------------------------------------------------------------

 

Effect,” “material adverse effect,” “materiality” and similar exceptions and
qualifiers set forth in any such representations and warranties shall be
disregarded.
     Section 10.3 Interpretation.
     (a) Notwithstanding anything in this Agreement to the contrary, the term
Damages shall not include any consequential, special or incidental damages,
claims for lost profits, or punitive or similar damages.
     (b) Notwithstanding anything to the contrary in this Agreement, neither the
Buyer Indemnified Parties nor the Seller Indemnified Parties shall be entitled
to any recovery of Damages pursuant to Section 10.2(a)(i) or Section 10.2(b)(i),
respectively, to the extent that any of the Buyer Indemnified Parties or the
Seller Indemnified Parties, as applicable, received written notice on or prior
to the Closing Date of any Liability that gives rise to the Damages.
     Section 10.4 Procedure for Claims between Parties. If a claim for Damages
is to be made by a Buyer Indemnified Party or Seller Indemnified Party (each, an
“Indemnified Party” and collectively, the “Indemnified Parties”) entitled to
indemnification hereunder, such party shall give written notice briefly
describing the claim and the total monetary damages sought (each, a “Notice”) to
the indemnifying party hereunder (the “Indemnifying Party” and collectively, the
“Indemnifying Parties”) as soon as practicable after such Indemnified Party
becomes aware of any fact, condition or event which may give rise to Damages for
which indemnification may be sought under this Article X. Any failure to submit
any such notice of claim to the Indemnifying Party shall not relieve any
Indemnifying Party of any Liability hereunder, except to the extent that the
Indemnifying Party was actually prejudiced by such failure.
     Section 10.5 Defense of Third Party Claims. If any lawsuit or enforcement
action is filed against an Indemnified Party by any third party (each, a “Third
Party Claim”) for which indemnification under this Article X may be sought,
Notice thereof shall be given to the Indemnifying Party as promptly as
practicable. The failure of any Indemnified Party to give timely Notice
hereunder shall not affect rights to indemnification hereunder, except to the
extent that the Indemnifying Party was actually prejudiced by such failure. The
Indemnifying Party shall be entitled, if it so elects at its own cost, risk and
expense, (a) to take control of the defense and investigation of such Third
Party Claim, (b) to employ and engage attorneys of its own choice (provided that
such attorneys are reasonably acceptable to the Indemnified Party) to handle and
defend the same, unless the named parties to such action or proceeding include
both one or more Indemnifying Parties and an Indemnified Party, and the
Indemnified Party has been advised in writing by counsel that there may be one
or more legal defenses available to such Indemnified Party that are different
from or additional to those available to an applicable Indemnifying Party, in
which event such Indemnified Party shall be entitled, at the Indemnifying
Parties’ reasonable cost, risk and expense, to separate counsel (provided that
such counsel is reasonably acceptable to the Indemnifying Party), and (c) to
compromise or settle such claim, which compromise or settlement shall be made
only (A) with the written consent of the Indemnified Party, such consent not to
be unreasonably withheld and (B) if such compromise or settlement contains an
unconditional release of the Indemnified Party in respect of such claim. If the
Indemnifying Party elects to assume the defense of a Third Party Claim, the
Indemnified

56

--------------------------------------------------------------------------------

 

Party shall cooperate in all reasonable respects with the Indemnifying Party and
its attorneys in the investigation, trial and defense of such Third Party Claim
and any appeal arising therefrom; provided, however, that the Indemnified Party
may, at its own cost, participate in the investigation, trial and defense of
such lawsuit or action and any appeal arising therefrom. The parties shall
cooperate with each other in any notifications to insurers. If the Indemnifying
Party fails to assume the defense of such claim within fifteen (15) calendar
days after receipt of the Notice, the Indemnified Party against which such claim
has been asserted will have the right to undertake, at the Indemnifying Parties’
reasonable cost, risk and expense, the defense, compromise or settlement of such
Third Party Claim on behalf of and for the account and risk of the Indemnifying
Parties; provided, however, that such claim shall not be compromised or settled
without the written consent of the Indemnifying Party, which consent shall not
be unreasonably withheld. If the Indemnified Party assumes the defense of the
claim, the Indemnified Party will keep the Indemnifying Party reasonably
informed of the progress of any such defense, compromise or settlement.
     Section 10.6 Limitations on Indemnity.
     (a) Other than in respect of a claim for indemnification pursuant to
Sections 10.2(a)(iii) or (iv), in respect of any breach of Sections 5.1, 5.2(a),
5.17 or 7.9 or based on fraud or intentional misrepresentation on the part of
any party hereto, for which, in each of said instances, except as otherwise
expressly set forth in this Article X, there shall be no limitations on the
amount of Damages recoverable through the indemnification provisions hereunder,
no Buyer Indemnified Party shall seek, or be entitled to seek, indemnification
from any of the Indemnifying Parties pursuant to Sections 10.2(a)(i) or
(ii) hereof to the extent the aggregate claims for Damages of the Buyer
Indemnified Parties is less than One Million Five Hundred Thousand Dollars
($1,500,000) (the “Threshold”) or exceeds Ten Million Dollars ($10,000,000) (the
“Cap”); provided, that, if the aggregate of all claims for Damages for which
indemnification is sought pursuant to Section 10.2(a)(i) or (ii) hereof equals
or exceeds the Threshold, then Buyer shall be entitled to recover for such
Damages subject to the limitations in this Section 10.6(a) only to the extent
such Damages exceed the Threshold, but in any event not to exceed the Cap.
     (b) Other than in respect of a claim for indemnification pursuant to
Sections 10.2(b)(iii) or (iv); in respect of any breach of Sections 6.1, 6.2(a)
or 7.9, or based on fraud or intentional misrepresentation on the part of any
party hereto, for which, in each of said instances, except as otherwise
expressly set forth in this Article X, there shall be no limitations on the
amount of Damages recoverable through the indemnification provisions hereunder,
no Seller Indemnified Party shall seek, or be entitled to, indemnification from
any of the Indemnifying Parties pursuant to Section 10.2(b)(i) or (ii) hereof to
the extent the aggregate claims for Damages of the Seller Indemnified Parties
are less than the Threshold, or exceeds the Cap; provided, that, if the
aggregate of all claims for Damages for which indemnification is sought pursuant
to Section 10.2(b)(i) or (ii) hereof equals or exceeds the Threshold, then Buyer
shall be entitled to recover for such Damages subject to the limitations in this
Section 10.6(b) only to the extent such Damages exceed the Threshold, but in any
event not to exceed the Cap.
     (c) In calculating the amount of any Damages payable to a Buyer Indemnified
Party or a Seller Indemnified Party hereunder, the amount of the Damages
(i) shall not be duplicative of any other Damage for which an indemnification
claim has been made, (ii) shall be computed

57

--------------------------------------------------------------------------------

 

net of any amounts actually recovered by such Indemnified Party under any
insurance policy with respect to such Damages (net of any costs and expenses
incurred in obtaining such insurance proceeds) and (iii) shall be computed net
of any Tax benefit obtained or obtainable by the Indemnified Party with respect
to such Damages. 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 Indemnifying Party. The Indemnified Parties shall use
reasonable best 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 X.
     Section 10.7 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 X, 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 10.8 Exclusive Remedy. Except in the case of fraud or intentional
misrepresentation, in which case the Buyer Indemnified Parties and the Seller
Indemnified Parties reserve any and all rights and remedies available to them,
after the Closing, the indemnities provided in this Article X shall constitute
the sole and exclusive remedy of any Indemnified Party for Damages 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 Damages does not preclude a party from bringing an
action for specific performance or other equitable remedy to require a party to
perform its obligations under this Agreement. Without limiting the foregoing and
except in the case of fraud or intentional misrepresentation, in which case the
Buyer Indemnified Parties and the Seller Indemnified Parties reserve any and all
rights and remedies available to them, Buyers and each Seller each hereby waive
(and, by their acceptance of the benefits under this Agreement, each Buyer
Indemnified Party and Seller Indemnified Party hereby waives), from and after
the Closing, any and all rights, claims and causes of action such party may have
against the other party arising under or based upon this Agreement or any
schedule, exhibit, Disclosure Letter, document or certificate delivered in
connection herewith, and no legal action sounding in tort, statute or strict
liability may be maintained by any party (other than a legal action brought
solely to enforce the provisions of this Article X).
     Section 10.9 Treatment of Indemnification Payments. All indemnification
payments made pursuant to this Article X shall be treated by the parties for
income Tax purposes as adjustments to the Purchase Price, unless otherwise
required by applicable Law.
ARTICLE XI
PROPERTY
     Section 11.1 As Is.

58

--------------------------------------------------------------------------------

 

     (a) Buyers or its Representatives shall have fully examined and inspected
the Properties prior to the execution of this Agreement, and subject to the
representations and warranties in Article V and the provisions of this
Article XI, Buyers agree to accept the Properties in an “AS IS” condition as of
the Closing. Buyers agree that, except as provided in Article V hereof, no Buyer
is relying upon any representations, statements, or warranties (oral or written,
implied or express) of any officer, employee, agent or Representative of any
Seller, or any salesperson or broker (if any) involved in this transaction as to
the Properties, including, but not limited to: (i) any representation,
statements or warranties as to the physical condition of the Properties,
(ii) the fitness and/or suitability of the Properties for use as a resort, hotel
and/or casino; (iii) the financial performance of the Properties; (iv) the
compliance of the Properties with applicable building, zoning, subdivision,
environmental, or land use Laws, codes, ordinances, rules or regulations;
(v) the state of repair of the Properties; (vi) the value of the Properties;
(vii) the manner or quality of construction of the Properties; (viii) the income
derived or to be derived from the Properties; or (i) the fact that the
Properties may be located on earthquake faults or in seismic hazardous zones. To
the extent not covered by the representations and warranties made in Article V,
each Buyer, for itself and its successors and assigns, waives any right to
assert any claim against Sellers, at Law or in equity, relating to any such
matter, whether latent or patent, disclosed or undisclosed, known or unknown, in
contract or tort, now existing or hereafter arising.
     (b) Except as expressly set forth to the contrary in this Agreement,
including, without limitation Article V hereof, Buyers acknowledge and agree
that they are taking the Properties in “As-Is” condition with respect to any
environmental conditions and Buyers shall be responsible, at the Buyers’ sole
cost and expense, to take all necessary and required action in connection with
the Purchased Assets and Assumed Liabilities as they related to such
environmental conditions.
     Section 11.2 Title to Casino Land.
     (a) Title Commitment. At Closing, Flamingo shall provide to Flamingo Buyer
a policy of title insurance with respect to the Casino Property in the form of
the Title Commitment annexed to Section 11.2(a) of the Flamingo Disclosure
Letter. Flamingo shall execute any and all owner’s affidavits as reasonably
required by Lawyers Title of Nevada, Inc. (with respect to the Casino Land) (the
“Title Insurer”).
     (b) Defects. Flamingo Buyer agrees to accept title to the Casino Land
subject to all matters shown by the Title Commitment annexed to Section 11.2(a)
of the Flamingo Disclosure Letter. The Title Commitment shall be updated at or
shortly before Closing. If the updated Title Commitment shows defects in title
not shown by the Title Commitment annexed to Section 11.2(a) of the Flamingo
Disclosure Letter or, if the Casino Land or Flamingo’s interest therein should
become subject to a Lien or other financial Encumbrance, and Flamingo has
received from Flamingo Buyer an itemized written notice of such defects within
ten (10) days after the date of delivery of the updated Title Commitment to
Flamingo Buyer or, if earlier, the Closing Date, Flamingo shall have thirty
(30) days after receipt of such notice (or, if longer, until the Closing Date)
to cure any such defects in title, and the Closing Date shall, if necessary, be
extended accordingly. Title defects will not be deemed to include any matters
shown by the Title Commitment annexed to Section 11.2(a) of the Flamingo
Disclosure Letter. Failure to notify Flamingo within the specified period of
title defects revealed by the updated Title

59

--------------------------------------------------------------------------------

 

Commitment shall be deemed a waiver of Flamingo Buyer’s right to disapprove of
the status of Flamingo’s title but only with respect to new matters shown on
such updated Title Commitment, and Flamingo Buyer shall then accept such title
as is described in the Title Commitment, as updated, without reserving any claim
against Flamingo for title defects. Flamingo shall be under no obligation to
remove title defects, and any failure or refusal of any Flamingo to do so shall
not be a default of Flamingo hereunder, except that Flamingo shall be obligated
to cure monetary encumbrances in an amount in excess of Fifty Thousand Dollars
($50,000) that are not disclosed by the Title Commitment annexed to
Section 11.2(a) of the Flamingo Disclosure Letter (other than Taxes and
assessments and the encumbrances created or suffered by Buyer) which are unpaid
and liquidated at Closing, not to exceed Two Million Dollars ($2,000,000) in the
aggregate (“Monetary Encumbrances”), if any, which encumber the Properties or
Flamingo’s interest therein as of the Closing in the manner provided below. An
encumbrance is liquidated only if it is fixed either by agreement of the Seller
and the party asserting the encumbrance or by operation of law. In order to cure
a Monetary Encumbrance, and if Flamingo desires to attempt to cure any other
title defects, Flamingo shall have the option to extend the Closing Date for a
period of thirty (30) days, by giving written notice of such extension election
to Flamingo Buyer at or before the Closing Date. Cure of Monetary Encumbrances
may be effected by either (i) payment and release of such Monetary Encumbrance
of record, or (ii) posting a bond which causes such Monetary Encumbrance to
cease to be a Lien on the applicable Property.
     (c) Failure to Cure Title Defects. If Flamingo fails to cure Monetary
Encumbrances that it is obligated to cure in accordance with Section 11.2(b),
such failure shall be a default by Flamingo subject to the remedies of
Article IX. If Flamingo elects not to attempt to cure or remove any other title
defects or if it elects to do so but is not successful in its efforts to do so
on or before the Closing Date, or the end of the extension period, if elected,
then this Agreement shall, at the option of Flamingo Buyer (to be exercised by
written notice to Flamingo given no later than the earlier of: (i) the original
or extended Closing Date, as applicable; or (ii) five (5) days after Flamingo’s
notice to Flamingo Buyer of Flamingo’s election not to cure or attempt to cure
such title defects), be terminated, Escrow Agent shall return the Deposit to
Buyers and Buyers and Flamingo shall be released and discharged from any further
obligation to each other hereunder; provided that if Flamingo Buyer so elects,
Flamingo Buyer may accept such title as is tendered by Flamingo without
reduction in the Purchase Price, or reservation of claim against Flamingo;
provided, that, in such case, Flamingo shall be obligated to cure Monetary
Encumbrances thereon in accordance with the terms of Section 11.2(b) hereof.
     (d) Survey. Flamingo agrees to deliver to Flamingo Buyer, within ninety
(90) days of the date hereof, a survey of the Casino Land (the “Survey”). If
Flamingo Buyer provides notice to Flamingo that the Survey reveals (i) any
material encroachments of the Casino Land onto property of others; (ii) any
material encroachments of property of others on the Casino Land; or (iii) the
location of any title matter on the Casino Land in a manner that would
materially and adversely affect the ability to use the Casino Land as presently
used; or any other matter which would render Flamingo’s title to the Casino Land
uninsurable or unmarketable, then such disclosure shall be a title defect as to
which the provisions of Section 11.2(b) and 11.2(c) shall govern Flamingo
Buyer’s and Flamingo’s rights and obligations. Flamingo Buyer may, at Flamingo
Buyer’s sole cost and expense, cause the Survey to be recertified to Flamingo
Buyer at or shortly before Closing.

60

--------------------------------------------------------------------------------

 

     Section 11.3 Title to the Traymore Site Land. Title to the Traymore Site
Land shall be conveyed by Boardwalk to Boardwalk Buyer by Bargain and Sale Deed
with Covenant As To Grantor’s Acts, free and clear of all Liens and Encumbrances
except for (a) municipal zoning ordinances and applicable governmental
regulations and (b) current taxes not then due and payable, provided none of the
foregoing will materially interfere with the Boardwalk Buyer’s intended use of
the Traymore Site and (c) those tenancies and leases set forth on Section 5.22
of the Boardwalk Disclosure Letter (which clauses (a), (b) and (c) are
collectively referred to as “Traymore Permitted Encumbrances”).
ARTICLE XII
MISCELLANEOUS
     Section 12.1 Definitions.
     (a) For purposes of this Agreement, the term:
     “Acquired Personal Property” means the Personal Property, excluding the
Excluded Personal Property.
     “Acquisition Proposal” means (i) any proposal or offer from any Person
relating to any direct or indirect acquisition or purchase of the Purchased
Assets or any material portion thereof, (ii) any tender offer or exchange offer,
or (iii) any merger, consolidation, business combination, recapitalization,
liquidation, dissolution or similar transaction involving any Seller and a third
party, in each case, other than the transactions contemplated by this Agreement.
The parties agree and acknowledge that notwithstanding anything in the previous
sentence, no transaction or action relating solely to Excluded Assets, including
Other Assets or Other Property, shall be deemed to be an Acquisition Proposal.
     “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.
     “Affiliate Customer List” means the output (in either electronic or printed
form as reasonably requested by Flamingo Buyer) of that portion of the Customer
Database that includes (a) the information set forth in Section 4.2(g) of the
Flamingo Disclosure Letter, to the extent available in the Customer Database as
of a time no earlier than 48 hours prior to the Closing but in no event after
the Closing, for customers of the Casino Property, who (i) have visited the
Casino Property during the 24 month period prior to the Closing (but not
including such data for the ten day period prior to the Closing) and (ii) have
visited any other property owned or operated by Harrah’s or its Affiliates and
(b) the names, addresses and dates of stay for customers at the hotel located at
the Casino Property for the twelve (12) months prior to the Closing Date;
provided, however, that the Affiliate Customer List shall not include any “do
not mail” customers.

61

--------------------------------------------------------------------------------

 

     “Assumed Contracts” means the Contracts related to the Casino Property
which exist as of the Closing Date, which are either (i) set forth on
Section 1.1(a)(iii) of the Flamingo Disclosure Letter, or (ii) not listed on
Section 1.1(a)(iii) of the Flamingo Disclosure Letter but (a) reflected in the
income statements of Flamingo prepared through the Closing Date and which are
not otherwise, individually or in the aggregate, material to the Casino Property
or (b) entered into prior to Closing with the approval of Flamingo Buyer or
which did not require the approval of Flamingo Buyer pursuant to Section 7.1(a).
     “Billboard” means the billboard located on the Traymore Site at the corner
of Indiana Avenue and the Atlantic City Boardwalk.
     “Books and Records” means all books and records of Flamingo relating to the
Casino Property including, without limitation, the rent roll, all architectural,
structural, service manuals, engineering and mechanical plans and surveys,
electrical, soil, wetlands, environmental and similar reports, studies,
certificates and audits and all plans and specifications for the Casino Property
except to the extent related primarily to the Excluded Liabilities, the Excluded
Assets or otherwise proprietary to Harrah’s or its Affiliates (other than
Flamingo) and shall not be deemed to include the Customer Database.
     “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 deed a reference to a
calendar day.
     “Buyer Material Adverse Effect” means changes, events or effects that would
reasonably be expected, individually or in the aggregate, to materially impair
or delay the ability of Buyers to consummate the transactions contemplated by
this Agreement.
     “Casino Property” means, collectively, the Casino Land, the building
structures and improvements comprising hotel and casino located on the Casino
Land, and the Fixtures on the Casino Land.
     “Casualty Termination Event” means damage to the Casino Property and/or
Traymore Site by fire or other casualty which damages results in a Total
Material Adverse Effect.
     “Code” means the Internal Revenue Code of 1986, as amended, or any
successor provisions.
     “Condemnation Termination Event” means, with respect to Flamingo, a taking
of a material part of the Casino Property such that the remaining balance of the
Casino Property may not be feasibly operated (after using commercially
reasonable efforts to restore the Casino Property) as a casino hotel reasonably
similar to other casino hotels in the area, and with respect to Boardwalk, any
taking of any material portion of the Traymore Site adjacent to the Atlantic
City boardwalk.
     “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,

62

--------------------------------------------------------------------------------

 

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.
     “Customer Database” means all customer databases, customer lists,
historical records of customers and any other customer information collected and
used by Flamingo or its Affiliates in connection with marketing and promoting
the Casino Property.
     “Detailed Balance Sheet” means the September 30, 2005 balance sheet and
related data of Flamingo as set forth on Section 2.4 of the Flamingo Disclosure
Letter.
     “Encumbrances” means Liens, covenants, conditions, restrictions,
agreements, easements, title defects, options, rights of first offer, rights of
first refusal, restrictions on transfer, rights of other parties, limitations on
use, limitations on voting rights, or other encumbrances of any kind or nature.
     “Environmental Condition” means, the Release into the environment of any
Hazardous Substance as a result of which the applicable Seller (i) has or may
become liable to any Person for an Environmental Liability, (ii) is or was in
violation of any Environmental Law, (iii) has or may be required to incur
response costs for investigation or remediation, or (iv) by reason of which any
Land or other assets of such Seller, may be subject to any Lien under
Environmental Laws; provided, however, that none of the foregoing shall be an
Environmental Condition if such matter was fully remediated or otherwise
corrected prior to the date hereof in accordance with Environmental Law.
     “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 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, interest, direct or
indirect, known or unknown, absolute or contingent, past, present or future,
resulting from any claim or demand, by any Person or entity, under any
Environmental Law, or arising from Environmental Conditions relating to the
Property.
     “Exchange Act” means the Securities Exchange Act of 1934, as amended.
     “Excluded Contracts” means all Contracts which are not primarily used in or
relate to the Casino Property or are listed on Section 1.2(a)(ii) of the
Flamingo Disclosure Letter, which list

63

--------------------------------------------------------------------------------

 

shall include, without limitation, those Contracts used primarily in the
Business and entered into by any Affiliate of Flamingo.
     “Excluded Intellectual Property” means all Intellectual Property which is
not set forth on Section 5.5 of the Flamingo Disclosure Letter.
     “Excluded Personal Property” means the following:
             (i) any and all signs, menus, stationery, gift shop inventory or
other items containing any Excluded Intellectual Property or indicating that the
Casino Property is owned and/or operated by or on behalf of “Flamingo” or
identifying the Casino Property as the “Flamingo” or bearing the System Mark
“Caesars,” “Harrah’s” or any other System Mark of Flamingo’s Affiliates, except
for those items that Flamingo Buyer and Flamingo agree may be modified by Buyer
to remove such System Marks or identification;
             (ii) all records, files and memorabilia pertaining to Flamingo or
Harrah’s and any past or present corporate Affiliates or predecessors of
Flamingo or Harrah’s (including Caesars Entertainment, Inc.); and
             (iii) any personal property of any third party (including, without
limitation, any Affiliate of Flamingo) located at the Casino Property that is
not the subject of an Assumed Contract.
     “Excluded Software” means all computer software owned by or licensed for
use by Flamingo or its Affiliates and all source code, user codes and data,
whether on tape, disc or other computerized format, and all related user
manuals, computer records, service codes, programs, stored materials and
databases (including, without limitation, all access codes and instructions
needed to obtain access to and to utilize the information contained on such
computer records), together with any and all updates and modifications of all of
the foregoing and all copyrights related to the computer software, including,
without limitation, the Customer Database and any customer tracking system.
     “Fixtures” means, as it relates to each Seller, all fixtures owned by
Seller and placed on, attached to, or located at and used in connection with the
operation of the Property.
     “Flamingo Customer List” means the output (in either electronic or printed
form as reasonably requested by Flamingo Buyer) of that portion of the Customer
Database that includes the information set forth in Section 4.2(g) of the
Flamingo Disclosure Letter, to the extent available in the Customer Database as
of a time no earlier than 48 hours prior to the Closing but in no event after
the Closing, for customers of the Casino Property, who (i) have visited the
Casino Property during the 24 month period prior to the Closing (but not
including such data for the ten day period prior to the Closing) and (ii) have
not visited any other property owned or operated by Harrah’s or its Affiliates;
provided, however, that the Flamingo Customer List shall not include any “do not
mail” customers.
     “Flamingo Databases” means a list, in electronic form (where available), of
the following databases maintained by Flamingo: Keno Players, Race and Sports
Players, W2-G Winners, Entertainment Tickets, Catering Contacts, Wedding Guests,
Alta Villa Promotion, Tour and

64

--------------------------------------------------------------------------------

 

Travel, Ride to Riches Groups, Turnaround Bus Operators, Convention/Company
Meetings, Wholesalers, Prospects-Meetings/Conventions, Prospects-Wholesalers,
Prospects-Tour & Travel, Prospects-Rides to Riches and Website Guestbook.
     “Front Money” means all money stored on deposit at the Casino Property cage
belonging to, and stored in an account for, any Person.
     “Gaming Approvals” means all licenses, permits, approvals, authorizations,
registrations, findings of suitability, franchises, entitlements, waivers and
exemptions issued by any Gaming Authority necessary for or relating to the
conduct of activities by any party hereto or any of its Affiliates, including,
without limitation, the ownership, operation, management and development of the
Purchased Assets.
     “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 Nevada and State of New Jersey, specifically,
the Nevada Gaming Commission, the Nevada State Gaming Control Board, 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 Nevada and State of New Jersey and their political
subdivisions.
     “Gaming Laws” mean all laws pursuant to which any Gaming Authority
possesses regulatory, licensing or permit authority over gaming within (i) the
State of Nevada, including, without limitation, the Nevada Gaming Control Act,
as codified in Chapter 463 of the NRS, as amended from time to time, and the
regulations of the Nevada Gaming Commission promulgated thereunder, as amended
from time to time, and (ii) the State of New Jersey, including, without
limitation, the New Jersey Casino Control Act, as amended from time to time.
     “Harrah’s” means Harrah’s Operating Company, Inc., a Delaware 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.
     “Intellectual Property” means all intellectual property or other
proprietary rights of every kind, foreign or domestic, including all patents,
patent applications, inventions (whether or not patentable), processes,
products, technologies, discoveries, copyrightable and copyrighted works,
apparatus, 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.

65

--------------------------------------------------------------------------------

 

     “IRS” means the Internal Revenue Service, a division of the United States
Treasury Department, or any successor thereto.
     “Knowledge” means (a) when used in the phrase “knowledge of the Seller” or
“the Seller’s knowledge” and words of similar import, the actual knowledge of
(i) Darryl Dauenhauer and Ken Kitko, with respect to Flamingo, and (ii) Anthony
F. Santo and N. Lynne Hughes, with respect to Boardwalk, and (b) when used in
the phrase “knowledge of Buyer” or “Buyer’s knowledge” and words of similar
import, the actual knowledge of: Richard Brown and Denise Barton.
     “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, as it relates to each Seller, leases, subleases, occupancy
and concession agreements affecting such Seller’s Property.
     “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.
     “Liabilities” mean any direct or indirect liability, indebtedness,
obligation, commitment, expense, claim, deficiency, guaranty or endorsement of
or by any Person of any type, whether accrued, absolute, contingent, matured,
unmatured, liquidated, unliquidated, known or unknown.
     “Liens” means any mortgage, pledge, lien, security interest, conditional or
installment sale agreement, option, right of first refusal, restriction,
exaction, imposition, charge or other claims of third parties of any kind or
nature.
     “Material Assumed Contracts” means, as it relates to each Seller, all
Assumed Contracts that either (i) have a remaining obligation for payment or
services in excess of One Hundred Thousand Dollars ($100,000) or (ii) are not
cancelable by such Seller upon thirty (30) days notice.
     “NRS” means Nevada Revised Statutes, as amended through the date hereof.
     “Ordinary Course of Business” shall describe any action taken by a Person
if such action is consistent with such Person’s past practices and is taken in
the ordinary course of such Person’s normal day to day operations.
     “Outside Date” means the Initial Outside Date; provided, however, that such
date shall be extended by the number of days that the Initial Outside Date has
been extended pursuant to Section 4.1(a) or 11.2(b) hereof, or if the Buyers
retain a Third Party Operator in accordance with the terms of Section 7.6(a)
hereof, Section 4.1(b) hereof.
     “Passenger/Delivery Vehicles” means those certain passenger or delivery
vehicles and recreational vehicles identified in Section 12.1(c) of the Flamingo
Disclosure Letter.

66

--------------------------------------------------------------------------------

 

     “Permitted Encumbrances” means, as it relates to each Seller:
          (i) Liens or Encumbrances for mechanics’ and materialmen’s Liens or
Encumbrances not filed of record and charges assessments and other governmental
charges not delinquent or which are currently being contested in good faith by
appropriate proceedings and for which Seller shall have provided bond or other
security reasonably satisfactory to the Buyer;
          (ii) Liens or Encumbrances for Taxes not yet due and payable;
          (iii) special Taxes and assessments payable or becoming a Lien after
the Closing Date;
          (iv) Liens and Encumbrances created or approved by Buyer;
          (v) easements, leases, reservations or other rights of others in, or
minor defects and irregularities in title to, property or assets of Seller;
provided that such easements, leases, reservations, other rights of others in or
defects or irregularities do not materially impair the use of such property or
assets for the purposes for which they are held; further provided that such
easements, leases, reservations, other rights of other in or defects or
irregularities are not of such a nature that the Property is not financeable
under customary terms and conditions; further provided that all such easements,
leases, reservations or other rights of others in or minor defects and
irregularities in title as to the Casino Land and Fixtures are shown as
exceptions on the Title Commitment annexed to Section 11.2(a) of the Flamingo
Disclosure Letter and/or the Survey (subject to Section 11.2(d) hereof); and
further provided that, in the case of the Traymore Site, such easements, leases,
reservations, other rights of others in or defects or irregularities would not
reasonably be expected to prevent the development of the Traymore Site as a
casino hotel within twelve (12) months following the Closing Date;
     (vi) zoning and subdivision ordinances;
     (vii) terms and conditions of licenses, permits and approvals for the
Casino Land and Laws of any Governmental Entity having jurisdiction over the
Property;
     (viii) Assumed Contracts for any areas of the Casino Land or the Traymore
Site Property;
     (ix) any Liens or Encumbrances or privilege vested in any other lessor, or
any licensor or permitter for rent or other obligations of Seller relative to
any Assumed Contracts so long as the payment of such rent or the performance of
such obligations is not delinquent;
     (x) rights of tenants under operating leases whose occupancy may be
terminated on thirty (30) days or less notice and rights of guests in possession
or holding reservations for future use or occupancy of the applicable Property,
in each case to the extent disclosed in writing to Buyers prior to the date
hereof;
     (xi) any Liens or Encumbrances identified in the Title Commitment annexed
to Section 11.2(a) of the Flamingo Disclosure Letter or (subject to
Section 11.2(d) hereof) the Survey;

67

--------------------------------------------------------------------------------

 

     (xii) any Assumed Liability; or
     (xiii) such other matters as would not reasonably be expected to materially
impair, individually or in the aggregate, the Purchased Assets.
     “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), subject to
Section 7.11(b) hereof, 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 Flamingo and located at the Casino Property or used in
Ordinary Course of Business thereon on the Closing Date.
     “Pre-Closing Employee Liabilities” means (i) with respect to the Retained
Employees, all Liabilities arising out of or relating primarily to any and all
severance obligations or other Liabilities relating to the termination of
Retained Employees, (ii) with respect to Property Employees, any and all accrued
and unpaid salary, bonuses and commissions (but excluding vacation/sick pay)
payable to any such Property Employee for any period prior to the Closing Date
and (iii) with respect to the matters set forth on Section 7.1(1) and 7.1(2) of
the Flamingo Disclosure Letter, all wages required to be paid as of the Closing
and which are accrued and unpaid as of the Closing.
     “Pre-Closing Tax Liabilities” means, as it relates to both Flamingo and
Boardwalk, any Liability related primarily to (i) income Taxes of Flamingo or
Boardwalk, respectively, and (ii) except as provided for in Sections 3.1 and
7.9, all Liabilities for Taxes including, without limitation, any Taxes due
pursuant to subsequent deficiency determinations made under NRS Chapter 463,
arising from and attributable to the ownership of the Purchased Assets prior to
the Closing Date; provided, however, that all Taxes that are included in the
calculation of the Final Working Capital Adjustment shall not constitute
Pre-Closing Tax Liabilities.
     “Property” means one of the following, as applicable: the Casino Property
and the Traymore Site.
     “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.

68

--------------------------------------------------------------------------------

 

     “Seller Material Adverse Effect” means, as it relates to each Seller,
changes, events or effects that are materially adverse to the business,
financial condition or results of operations of the Purchased Assets; provided
that the following, individually and in the aggregate, shall be excluded from
the definition of Seller Material Adverse Effect and from any determination as
to whether a Seller Material Adverse Effect has occurred: (i) any change, event
or effects arising out of or resulting from changes in or affecting the
(w) travel, hospitality or gaming industries generally, to the extent the
applicable Purchased Assets are not disproportionately affected thereby
(x) travel, hospitality or gaming industries in the markets or jurisdictions
where the applicable Property is located to the extent the applicable Purchased
Assets are not disproportionately affected thereby or (y) the financial,
banking, currency or capital markets in general to the extent the applicable
Purchased Assets are not disproportionately affected thereby, (ii) any change,
event or effect resulting from the entering into or public announcement of the
transactions contemplated by this Agreement, and (iii) any change, event or
effect resulting from any act of terrorism, commencement or escalation of armed
hostilities in the U.S. or internationally, or declaration of war by the U.S.
Congress to the extent the applicable Purchased Assets are not
disproportionately affected thereby, and (iv) the applicable Property’s
prospects or the failure of such Property to meet any financial or other
projections.
     “Subsidiary” means, with respect to any party, any corporation or other
organization, whether incorporated or unincorporated, of which (i) such party or
any other Subsidiary of such party 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 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.
     “System Mark” means service marks, trademarks, trade names, fictitious firm
names, color arrangements, designs, logos and other similar designations of
source or origin and general intangibles of like nature, together with the
goodwill symbolized thereby, now or hereafter held or applied for in connection
therewith.
     “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.
     “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.

69

--------------------------------------------------------------------------------

 

     “Title Commitment” means that certain Title Insurance Commitment which is
annexed to Section 11.2(a) of the Flamingo Disclosure Letter.
     “Total Material Adverse Effect” means, as applied to the Sellers in the
aggregate, changes, events or effects that are materially adverse to the
business, financial condition or results of operations of the Purchased Assets;
provided that the following, individually and in the aggregate, shall be
excluded from the definition of Total Material Adverse Effect and from any
determination as to whether a Total Material Adverse Effect has occurred:
(i) any change, event or effects arising out of or resulting from changes in or
affecting the (w) travel, hospitality or gaming industries generally, to the
extent the applicable Purchased Assets are not disproportionately affected
thereby (x) travel, hospitality or gaming industries in the markets or
jurisdictions where the applicable Property is located to the extent the
applicable Purchased Assets are not disproportionately affected thereby or
(y) the financial, banking, currency or capital markets in general to the extent
the applicable Purchased Assets are not disproportionately affected thereby,
(ii) any change, event or effect resulting from the entering into or public
announcement of the transactions contemplated by this Agreement, and (iii) any
change, event or effect resulting from any act of terrorism, commencement or
escalation of armed hostilities in the U.S. or internationally, or declaration
of war by the U.S. Congress to the extent the applicable Purchased Assets are
not disproportionately affected thereby, and (iv) the applicable Property’s
prospects or the failure of such Property to meet any financial or other
projections.
     “Total Rewards” means the player loyalty program of Harrah’s, including the
Connection Card program.
     “Transfer Time” means 11:59:59 p.m., New York City time, on the day prior
to the Closing Date.
     “Transferred Data” means all data, files and other materials that the
parties reasonably agree are required for Flamingo Buyer to operate the Casino
Property; provided, however, that such data, files and materials shall not
include that which, in Flamingo’s sole discretion, is deemed to be proprietary
information, sensitive or confidential customer information, or competitively
sensitive information.
     “Transferred Employee Records” means records of Flamingo that relate to
Transferred Employees, but only to the extent that such records may be
transferred under applicable Law.
     “Transferred Intellectual Property” means all Intellectual Property used
exclusively in the operation of the Casino Property and set forth on Section 5.5
of the Flamingo Disclosure Letter, other than the Excluded Intellectual
Property.
     “Traymore Contracts” means the Contracts (including all amendments,
modifications and supplements thereto) related to the ownership, maintenance and
operation of the Traymore Site, which are either (i) set forth on
Section 1.1(b)(iii) of the Boardwalk Disclosure Letter, or (ii) not listed on
Section 1.1(b)(iii) of the Boardwalk Disclosure Letter but entered into prior to
Closing with the approval of Boardwalk Buyer or which did not require the
approval of Boardwalk Buyer pursuant to Section 7.1(b) or (c).

70

--------------------------------------------------------------------------------

 

     “Traymore Site” means, collectively, the Traymore Site Land, the Traymore
Site Improvements, and the Fixtures at the Traymore Site Land.
     “WARN Act” means the Worker Adjustment and Retraining Notification Act of
1988 and analogous state and local Law.
     “Working Capital” means the calculation, in accordance with the methodology
set forth on the Detailed Balance Sheet, of the current assets of Flamingo
(other than Excluded Assets) minus the current liabilities of Flamingo (other
than Excluded Liabilities), excluding all real and personal property Taxes
subject to proration pursuant to Article III hereof.
     “Working Capital Adjustment” means the amount (which may be a positive or
negative number) that equals Closing Date Working Capital.
     (b) The following are defined elsewhere in this Agreement, as indicated
below:

          Cross Reference in Terms   Agreement
Actual Traymore Adjustment
  Section 2.6(a)
Agreement
  Preamble
Assumed Liabilities
  Section 1.3(b)
Auditor
  Section 2.3
Boardwalk
  Preamble
Boardwalk Assumed Liabilities
  Section 1.3(b)
Boardwalk Determination Date
  Section 2.6(b)
Boardwalk Excluded Assets
  Section 1.2(b)
Boardwalk Excluded Environmental Liabilities
  Section 1.4(b)
Boardwalk Excluded Liabilities
  Section 1.4(b)
Boardwalk Purchase Price Allocation
  Section 2.3(b)
Boardwalk Purchased Assets
  Section 1.1(b)
Broker
  Section 5.12
Buyer
  Preamble
Buyer 401(k) Plan
  Section 7.4(g)
Buyer Benefit Plans
  Section 6.9(a)
Buyer Disclosure Letter
  ARTICLE VI
Buyer Indemnified Parties
  Section 10.2(a)
Buyer Permits
  Section 6.6(a)
Cap
  Section 10.6(a)
Casino Land
  Section 5.4(a)
Closing
  Section 4.1
Closing Date
  Section 4.1
Closing Date Working Capital
  Section 2.5(a)
Condemnation Amount
  Section 7.14(c)
Confidentiality Agreements
  Section 7.5(a)
CS3
  Section 7.8(c)
CS3 Assets
  Section 7.8(c)
CS3 Liabilities
  Section 7.8(c)

71

--------------------------------------------------------------------------------

 

          Cross Reference in Terms   Agreement
Damages
  Section 10.2(a)
Deposit
  Section 2.2(a)
Deposit Escrow Agreement
  Section 2.2(a)
ERISA
  Section 5.11(a)
Escrow Agent
  Section 2.2(a)
Estimated Closing Statement
  Section 2.4(b)
Excluded Assets
  Section 1.2(b)
Excluded Liabilities
  Section 1.4(b)
Excluded Software License
  Section 7.15
Fifth Extended Outside Date
  Section 4.1
Final Traymore Adjustment
  Section 2.6(c)
Final Working Capital Adjustment
  Section 2.5(c)
Financial Information
  Section 5.3
First Extended Outside Date
  Section 4.1
Flamingo
  Preamble
Flamingo Assumed Liabilities
  Section 1.3(a)
Flamingo Benefit Plans
  Section 5.11(a)
Flamingo Determination Date
  Section 2.5(b)
Flamingo Disclosure Letter
  Article V
Flamingo Excluded Assets
  Section 1.2(a)
Flamingo Excluded Liabilities
  Section 1.4(a)
Flamingo Purchase Price Allocation
  Section 2.3(a)
Flamingo Purchased Assets
  Section 1.1(a)
Fourth Extended Outside Date
  Section 4.1
Governmental Approvals
  Section 7.6(a)
Governmental Entity
  Section 5.2(c)
HSR Act
  Section 5.2(c)
Indemnified Party
  Section 10.4
Indemnifying Party
  Section 10.4
Initial Outside Date
  Section 4.1
Initial Traymore Adjustment
  Section 2.4(b)
Initial Working Capital Adjustment
  Section 2.4
Inspection
  Section 7.5(a)
Monetary Encumbrances
  Section 11.2(b)
Necessary Gaming Approval
  Section 9.1(c)
Non-Assignable Asset
  Section 1.6(a)
Notice
  Section 10.4
Other Assets
  Section 1.7
Other Property
  Section 1.7
Post-Closing Confidential Information
  Section 7.5(d)
Pre-Closing Working Capital
  Section 2.4
Pre-Closing Working Capital Statement
  Section 2.4
Property Employees
  Section 5.11(a)
Purchase Price
  Section 2.1

72

--------------------------------------------------------------------------------

 

          Cross Reference in Terms   Agreement
Purchased Assets
  Section 1.1(b)
Representatives
  Section 7.3
Retained Employees
  Section 7.4(a)
Second Extended Outside Date
  Section 4.1
Seller
  Preamble
Seller 401(k) Plan
  Section 7.4(g)
Seller Indemnified Parties
  Section 10.2(b)
Seller Permits
  Section 5.9
Substituted Multiemployer Pension Plan
  Section 7.4(h)
Survey
  Section 11.2(d)
Survival Period
  Section 10.1(c)
Third Extended Outside Date
  Section 4.1
Third Party Claim
  Section 10.5
Third Party Operator
  Section 7.6(a)
Threshold
  Section 10.6(a)
Transferred Employees
  Section 7.4(a)
Transfers
  Section 7.1(a)(i)
Traymore Leases
  Section 5.22
Traymore Licenses
  Section 1.1(b)(iv)
Traymore Permitted Encumbrances
  Section 11.3
Traymore Plans
  Section 1.1(b)(iv)
Traymore Contracts
  Section 1.1(b)(iii)
Traymore Site Improvements
  Section 1.1(b)(ii)
Traymore Site Land
  Section 1.1(b)(i)
Traymore Warranties
  Section 1.1(b)(iv)
Working Capital Statement
  Section 2.5(a)

     Section 12.2 Governing Law; Consent to Jurisdiction; Waiver of Trial by
Jury.
     (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, applicable to contracts executed in and to be performed entirely
within the State of Delaware, without regard to the conflicts of laws principles
thereof.
     (b) Each of the parties hereto hereby irrevocably and unconditionally
submits, for itself and its property, to the exclusive jurisdiction of any
Delaware State court, or Federal court of the United States of America, sitting
in Delaware, and any appellate court from any thereof, in any action or
proceeding arising out of or relating to this Agreement or the agreements
delivered in connection herewith or the transactions contemplated hereby or
thereby or for recognition or enforcement of any judgment relating thereto, and
each of the parties hereby irrevocably and unconditionally (i) agrees not to
commence any such action or proceeding except in such courts, (ii) agrees that
any claim in respect of any such action or proceeding may be heard and

73

--------------------------------------------------------------------------------

 

determined in such Delaware State court or, to the extent permitted by Law, in
such Federal court, (iii) waives, to the fullest extent it may legally and
effectively do so, any objection which it may now or hereafter have to the
laying of venue of any such action or proceeding in any such Delaware State or
Federal court, (iv) waives, to the fullest extent permitted by Law, the defense
of an inconvenient forum to the maintenance of such action or proceeding in any
such Delaware State or Federal court, and (v) to the extent such party is not
otherwise subject to service of process in the State of Delaware, as to Harrah’s
and Sellers, appoints Corporation Service Company as such party’s agent in the
State of Delaware and as to Buyers, appoints CT Corporation System as such
party’s agent in the State of Delaware, for acceptance of legal process and
agrees that service made on any such agent shall have the same legal force and
effect as if served upon such party personally within such state. Each of the
parties hereto agrees that a final judgment in any such action or proceeding
shall be conclusive and may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by Law. Each party to this Agreement
irrevocably consents to service of process in the manner provided for notices in
Section 12.3 hereof. Nothing in this Agreement will affect the right of any
party to this Agreement to serve process in any other manner permitted by Law.
     (c) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE
UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND
THEREFORE IT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE
TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING
OUT OF OR RELATING TO THIS AGREEMENT AND ANY OF THE AGREEMENTS DELIVERED IN
CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. EACH
PARTY CERTIFIES AND ACKNOWLEDGES THAT (I) NO REPRESENTATIVE, AGENT OR ATTORNEY
OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER
PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE EITHER OF SUCH
WAIVERS, (II) IT UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF SUCH
WAIVERS, (III) IT MAKES SUCH WAIVERS VOLUNTARILY, AND (IV) IT HAS BEEN INDUCED
TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION 12.2(c).
     Section 12.3 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 Buyers, to
 
       
 
      Sands Casino Hotel
 
      Indiana Avenue & Brighton Park
 
      Atlantic City, NJ 08401
 
      Attn: General Counsel
 
      Fax: (609) 441-4937

74

--------------------------------------------------------------------------------

 

         
 
      with copies to:
 
       
 
      Stratosphere
 
      2000 Las Vegas Boulevard South
 
      Las Vegas, NV 89104
 
      Attn: General Counsel
 
      Fax: (702) 383-4733
 
       
 
      Martin Hirsch
 
      767 Fifth Avenue, 47th Fl.
 
      New York, NY 10153
 
      Fax: (212) 750-5841
 
       
 
      Marc Weitzen, Esq.
 
      767 Fifth Avenue, 47th Fl.
 
      New York, NY 10153
 
      Fax: (212) 750-5841
 
       
 
      Sills Cummis Epstein & Gross, P.C.
 
      One Riverfront Plaza
 
      Newark, New Jersey 07102-5400
 
      Attention: Noah Bronkesh, Esq.
 
      Fax: (973) 643-6500
 
       
 
      Kummer Kaempfer Bonner & Renshaw
 
      3800 Howard Hughes Parkway, Seventh Floor
 
      Las Vegas, NV 89109
 
      Attention: Gregg Vermeys
 
      Fax: (702) 796-7181
 
       
 
  (b)   if to Flamingo, to
 
       
 
      Flamingo-Laughlin, Inc.
 
      c/o Harrah’s Operating Company, Inc.
 
      One Harrah’s Court
 
      Las Vegas, Nevada 89119
 
      Attn: General Counsel
 
      Fax: (702) 407-6418
 
      Attn: Anthony F. Santo
 
      Fax: (702) 494-4869
 
       
 
      with a copy to:
 
       
 
      Skadden, Arps, Slate, Meagher & Flom LLP
 
      Four Times Square
 
      New York, NY 10036
 
      Attn: Martha E. McGarry

75

--------------------------------------------------------------------------------

 

         
 
  (c)   if to Boardwalk, to:
 
       
 
      Boardwalk Regency Corporation
 
      Martial Development Corporation
 
      c/o Caesars Atlantic City
 
      2100 Pacific Avenue
 
      Atlantic City, New Jersey 08401
 
      Attn: N. Lynne Hughes
 
      Fax: (609) 340-2410
 
       
 
      Attn: General Counsel
 
      Fax: (702) 407-6418
 
       
 
      with copies to:
 
       
 
      Sandson & DeLucry, LLC
 
      17 Gordon’s Alley
 
      Atlantic City, New Jersey 08401
 
      Attn: Richard F. DeLucry, Esq.
 
      Fax: (609) 344-0204
 
       
 
      Skadden, Arps, Slate, Meagher & Flom LLP
 
      Four Times Square
 
      New York, NY 10036
 
      Attn: Martha E. McGarry
 
      Fax: (212) 735-2000

     Section 12.4 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 Flamingo
Disclosure Letter, the Boardwalk 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 Harrah’s, Buyers and Sellers will be referred to herein
individually as a “party” and collectively as “parties” (except where the
context otherwise requires).
     Section 12.5 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 12.6 Entire Agreement; No Third Party Beneficiaries. 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 Agreements shall remain in full force

76

--------------------------------------------------------------------------------

 

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 Harrah’s, Sellers
or Buyers 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 12.7 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 12.8 Assignment. With the exception of an assignment by each Buyer
to one of its respective Affiliates, written notice of which shall be given to
Sellers, 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 without the prior written consent of
the other party, provided, however, that any assignment by any Buyer to one of
its respective Affiliates shall not be valid under this Agreement unless such
Affiliate assumes all of such Buyer’s agreements and obligations hereunder and
provided, that (a) no such assignment shall relieve such Buyer from any of its
agreements and obligations hereunder, and (b) no such assignment in any way
(i) shall adversely effect the ability to receive, or delay the receipt of, the
Gaming Approvals or antitrust approvals contemplated by this Agreement or
(ii) shall adversely affect or delay the Closing of the transactions
contemplated by this Agreement. Any assignment in violation of this Section 12.8
shall be void.
     Section 12.9 Parties of Interest. 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.
     Section 12.10 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 12.11 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

77

--------------------------------------------------------------------------------

 

favoring or disfavoring any party by virtue of the authorship of any of the
provisions of this Agreement.
     Section 12.12 Amendment. This Agreement may be amended by Buyer and
Sellers. This Agreement may not be amended except by an instrument in writing
signed on behalf of each Buyer and each Seller.
     Section 12.13 Extension; Waiver. At any time prior to the Closing, Buyers
and Sellers 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 contained herein or in any document delivered
pursuant hereto and (iii) waive compliance with any of the agreements or
conditions contained here. 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 12.14 Time of Essence. Time is of the essence with respect to this
Agreement and all terms, provisions, covenants and conditions herein.
     Section 12.15 Disclosure Letters. Each of the Flamingo Disclosure Letter
and the Boardwalk Disclosure Letter shall be 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 such disclosure
clearly and unequivocally apprises Buyers of the matters to be excepted from
such other paragraphs in this Agreement. The Buyer Disclosure Letter shall be
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
such disclosure clearly and unequivocally apprises Sellers of the matters to be
excepted from such other paragraphs in this Agreement.
     Section 12.16 Guarantee. Harrah’s hereby unconditionally guarantees the
obligations of Flamingo and Boardwalk to pay any indemnification obligations
pursuant to Article X hereof.
[SIGNATURE PAGE FOLLOWS]

78

--------------------------------------------------------------------------------

 

     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.

                  FLAMINGO-LAUGHLIN, INC.    
 
           
 
  By:   /s/     
 
           
 
           
 
                BOARDWALK REGENCY CORPORATION    
 
           
 
  By:   /s/     
 
           
 
           
 
                MARTIAL DEVELOPMENT CORPORATION    
 
           
 
  By:   /s/     
 
           
 
           
 
                AREP LAUGHLIN CORPORATION    
 
           
 
  By:   /s/     
 
           
 
           
 
                AREP BOARDWALK LLC    
 
           
 
  By:   /s/     
 
           

SIGNATURE PAGE TO ASSET PURCHASE AGREEMENT

 

--------------------------------------------------------------------------------

 

                  HARRAH’S OPERATING COMPANY, INC.    
 
  Acknowledged and Agreed Solely for the Purposes of Article X and Section 12.16
   
 
           
 
  By:   /s/     
 
           

SIGNATURE PAGE TO ASSET PURCHASE AGREEMENT