Document:

Exhibit 10.60

 

EMPLOYMENT AGREEMENT

 

This amended and restated employment agreement (“Agreement”) is entered into effective as of 30 July 2012 (“Effective Date”) by and between Kirk A. Benson (the “Executive”) and Headwaters Incorporated, a Delaware corporation (the “Company”).  This Agreement supersedes the terms of the employment agreement between the Executive and the Company dated April 1, 2010, as amended (the “Prior Agreement”).

 

1.                                      Duties and Scope of Employment.

 

(a)                                 Position.  For the term of his employment under this Agreement, the Company agrees to employ the Executive in the position of Chairman of the Board and Chief Executive Officer, and Executive agrees to accept such employment.  The Executive shall report to the Company’s Board of Directors (the “Board”).

 

(b)                                 Obligations of the Executive.  During his employment, the Executive shall devote his full business efforts and time to the Company, consistent with the position of Chairman and Chief Executive Officer and with duties assigned by the Board.  During his employment, without the prior written approval of the Board, the Executive shall not render services in any capacity to any other person or entity and shall not act as a sole proprietor or partner of an other entity or as a shareholder owning more that five percent of the stock of any other corporation; provided that the Executive may devote a reasonable amount of time to charitable, educational, civic, political, personal investment and family business activities so long as such activities do not materially conflict with the performance of his duties under this Agreement.  The Executive shall comply with the Company’s policies and rules, as they may be in effect from time to time during his employment.

 

(c)                                  No Conflicting Obligations.  The Executive represents and warrants to the Company that he is under no obligations or commitments, whether contractual or otherwise, that are inconsistent with or in conflict with his obligations under this agreement.

 

(d)                                 Term of Employment.  The Executive’s employment under this Agreement shall commence on the Effective Date and continue until March 31, 2015 (the “Term”), unless it is terminated earlier either by the Executive or the Company.

 

2.                                      Cash, Incentive and Supplemental Retirement Compensation.

 

(a)                                 Base Salary.  The Company shall pay the Executive as compensation for his services an annual base salary at the rate of $663,000 per year until October 1, 2012, and thereafter a minimum annual base salary of $700,000, in accordance with standard Company payroll procedures, subject to normal payroll deductions and deductions authorized by the Executive.  Such base salary shall be subject to annual review by the Compensation Committee of the Board of Directors (the “Compensation Committee”).

 

(b)                                 Short Term Incentive Bonuses.  The Executive shall be eligible to be considered for annual incentive bonuses.  Such bonuses shall be awarded based on objective or subjective criteria established in advance by the Board or Compensation Committee, in its sole discretion.  Any and all awards will be approved by the Compensation Committee.

 

 

(c)                                  Long Term Incentive Compensation.  The Executive shall be eligible to participate in long term cash and equity incentive plans for corporate executives of the Company adopted by the Board.  The Executive’s participation in long term incentive plans shall be in accordance with the terms and conditions of such plans.

 

(d)                                 Financial, Tax, and Estate Planning.  During the term of the Executive’s employment, the Company will reimburse the Executive for fees and expenses related to personal financial planning, tax planning and estate planning, an amount not to exceed $10,000.00 for each twelve (12) month period.  The Executive shall present invoices for such planning services stated above to the Chairman of the Compensation Committee for approval within thirty (30) days of receipt of invoices for such services.  Reimbursement will occur through normal Company procedures, and no later than 2-1/2 months after the end of the calendar year (or if later, the Company’s tax year) in which the expense is incurred.

 

(e)                                  Supplemental Retirement Compensation.   During the Term of the Agreement, the Company shall credit an annual supplemental retirement contribution on behalf of the Executive to an unfunded bookkeeping account (“Retirement Account”), in an amount equal to 42.5% of his then current base salary.  Each contribution shall be made  on each March 31 during the Term.

 

(1)                                 The Retirement Account shall be credited with a 7% annual interest rate, compounded annually, or if elected by the Executive, shall instead be credited with income or debited with loss based on the hypothetical investment of the account in accordance with the Executive’s investment elections, which shall be made in accordance with such procedures (including default investment elections) as shall be determined by the Compensation Committee from time to time.  Unless otherwise provided by the Compensation Committee, the Executive may elect from among the investment funds offered from time to time under the Company’s 401(k) plan.  The amounts allocated to the Retirement Account (the “Retirement Benefit”) shall be paid to the Executive in a single lump sum on the first regular payroll date (but no later than thirty days) following the Executive’s termination of employment (for any reason), subject to the provisions of Section 8 below applicable to deferred compensation subject to Section 409A of the Internal Revenue Code, as amended (the “Code”).  In the event of the Executive’s death, any remaining Retirement Account balance shall be paid in a single lump sum, within thirty (30) days thereafter, to his designated beneficiary, or if no written beneficiary designation of a surviving beneficiary has been received by the Compensation Committee prior to his death, to his estate.   The Executive shall be entitled to receive only the amounts credited to the Retirement Account as of the date of termination of employment.

 

(2)                                 The Retirement Benefit shall be in addition to any other employee or executive retirement benefits or contributions to which the Executive may be entitled under any other plan maintained by the Company.  The Executive’s right to receive the Retirement Benefit is nontransferable, and the Executive shall not assign, transfer, or otherwise encumber any benefits payable hereunder except for a properly executed written beneficiary designation.  Any attempt to transfer or assign such benefits shall be null and void, and shall terminate the Company’s obligations hereunder.  Except as set

 

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forth below in Section 2(e)(3) of this Agreement, the Company shall have no obligation to set aside cash or assets to fund the Retirement Benefit.  Neither the Executive nor his beneficiary shall have any rights against the Company with respect to any portion of the Retirement Account except as a general unsecured creditor.  Neither the Executive nor his beneficiary shall have any interest in the Retirement Account until the Executive or his beneficiary actually receives payment thereof.   Any assets, whether cash or investments, which the Company may set aside to meet its deferred obligation under this Section 2(e) shall at all times remain the property of the Company, and neither the Executive nor his beneficiary shall under any circumstances acquire any property interest in any specific assets of the Company.  Subject to the terms and conditions of this Agreement, the Compensation Committee has discretionary authority to interpret and administer the terms of the Retirement Benefit, and all determinations, interpretations, rules and decisions of the Compensation Committee and any person to whom the Compensation Committee delegates duties or responsibilities shall be conclusive and binding upon all persons having or claiming to have any interest or right with respect to the Retirement Benefit, including the Executive.   Unless otherwise provided by the Compensation Committee, the claims procedures applicable under the Company’s 401(k) plan shall apply to any benefit claim or appeal with respect to the Retirement Benefit.

 

(3)                                 Upon a Change in Control (as defined below), the Company shall establish a grantor (“rabbi”) trust for the full amount then credited to the Retirement Account.  The assets of such trust shall be used exclusively and irrevocably to provide the Retirement Benefit to the Executive pursuant to the provisions of this Section 2(e) (subject, however, to the claims of the general creditors of the Company); provided, however, that the establishment of such a trust will not render this Agreement other than “unfunded” as that term is used in Sections 201(2), 301(a)(3), 401(a)(1), and 4021(a)(6) of ERISA.  Upon the establishment of such trust, and within sixty (60) days following each March 31st thereafter, the Company shall deposit in the trust an amount of cash or marketable securities (other than securities issued by the Company or any of its current or future affiliates) sufficient so that the total amount so deposited in the trust is equal in value to the lump sum payment that would be payable to the Executive if on the date such trust is established, and on the last day of each of the Company’s fiscal years thereafter, the Executive’s employment had terminated.  For purposes of this Agreement, a “Change in Control” shall mean a Change in Control as defined in the Executive Change in Control Agreement between the Executive and the Company effective as of September 30, 2006 (the “Change in Control Agreement”).

 

(f)                                   Stock Options and SARs.  Upon (i) the Executive’s retirement on or after the end of the Term of this Agreement, (ii) the termination of the Executive’s employment during the term of this Agreement by the Company without Cause (as defined below), by the Executive for Good Reason (as defined below), or by reason of the Executive’s death or disability, or (iii) a Change in Control,  the Executive’s stock options and stock appreciation rights which have been granted on or after the execution of this Agreement shall remain exercisable for a period of five (5) years following the termination of the Executive’s employment or until the expiration date stated in the Executive’s grant notice for such equity awards, whichever period is shorter, notwithstanding the provisions of the applicable equity award agreements.

 

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3.                                      Vacation and Employee Benefits.  During his employment, the Executive shall be eligible for paid vacations in accordance with the Company’s vacation or paid time off policy, as it may be amended from time to time.  The Executive shall be eligible to participate in the employee benefit plans maintained by the Company from time to time, including life, medical, disability, and dental insurance plans and 401(k) plan, subject to the applicable terms and conditions of the plan in question, and subject to the determinations of any person or committee administering such plan.  The Executive shall also be entitled to any other perquisites that the Company makes available to its executive officers, including under the Company’s vehicle policy.

 

4.                                      Business Expenses.  During his employment, the Executive shall be entitled to reimbursement by the Company for such customary, ordinary and necessary business expenses as are incurred by him in the performance of his duties and activities associated with promoting or maintaining the business of the Company, including the completion of his PhD in general business management from Claremont Graduate University.  All expenses as described in this Section 4 shall be reimbursed only upon presentation by the Executive of such documentation as may be reasonably necessary to substantiate that all such expenses were incurred in the performance of his duties in accordance with the Company’s policies.

 

5.                                      Employment at Will.  The Executive’s employment with the Company shall be “at will,” meaning that either the Executive or the Company shall be entitled to terminate the Executive’s employment and this Agreement at any time for any reason, with or without cause.  Termination by the Company or by the Executive shall be made in writing.

 

6.                                      Termination of Employment.

 

(a)                                 Termination for any Reason.  In the event that the Executive’s employment with the Company is terminated for any reason (including Cause, as defined below), then the Executive (or his estate, if applicable) shall be entitled to payment of accrued but unpaid salary, vacation pay and allowable expenses through the date of the termination of his employment.  In addition, the Company will pay the Executive any amounts and provide any benefits to which the Executive is entitled under any Company benefit plan as of his termination of employment in accordance with the provisions of such plan.

 

(b)                                 Termination Without Cause or for Good Reason.  In the event that the Executive’s employment is terminated by the Company without Cause or is terminated by the Executive for Good Reason during the term of this Agreement, other than in connection with a Change in Control pursuant to which the Executive would be eligible for severance benefits under the Change in Control Agreement (in which event the Executive will not receive severance benefits under this Section 6(b)), then, provided that the Executive executes and delivers within forty-five (45) days of termination (or such shorter period as the Company may require) an effective release in a form to be provided by the Company with terms substantially as set forth in the attached Exhibit A (the “Release”), and subject to Section 8(d) of this Agreement and the Executive’s compliance with the provisions of Sections 9 and 11 of this Agreement:

 

(1)                                 Cash Severance.  The Executive shall be entitled to payment of an aggregate amount in cash equal to the product of two (2) multiplied by the sum of (i) the Executive’s annual base salary at the rate in effect as of his termination of employment,

 

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plus (ii) the Executive’s target annual incentive bonus for the fiscal year in which the termination of employment occurs, which amount shall be payable in twenty-four (24) equal monthly installments, commencing sixty (60) days following the Executive’s termination of employment.

 

(2)                                 Bonus.  The Executive shall be entitled to payment of a prorated portion of the annual incentive bonus otherwise earned under the terms of the applicable award for the fiscal year in which the termination of employment occurs, payable when such awards would otherwise be paid.

 

(3)                                 COBRA.  If the Executive so elects and pays to continue health insurance under Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”), then starting the next calendar month after the employment termination date, the Executive will be reimbursed on a monthly basis in an amount equal to the monthly amount the Company was paying as the company-portion of premium contributions for health coverage for the Executive and the Executive’s eligible dependents immediately before the Executive’s termination of employment, until the earlier of: (i) the end of the twelve-month period following the Executive’s termination of employment or (ii) the date the Executive or the Executive’s eligible dependent loses eligibility for COBRA continuation coverage.  Any increase in the premium contribution and/or in the number of covered dependents by the Executive during this time will be at the Executive’s own expense.  The period of such Company-reimbursed COBRA continuation coverage shall be considered part of the Executive’s (and the Executive’s eligible dependents’) COBRA coverage entitlement period.  The Executive will be solely responsible for timely electing such continuation coverage for the Executive and the Executive’s eligible dependents.

 

(4)                                 Life Insurance.  The Executive shall continue to be covered at the Company’s expense in the Company’s life and accident insurance plans for twelve (12) months following the employment termination date subject to the terms of such plans as then in effect.

 

(5)                                 Equity Compensation.  Unless otherwise set forth in the Executive’s equity award agreement and agreed to by the Executive, all Company equity awards shall become fully vested and exercisable.

 

(c)                                  Post-Termination Consulting.  Upon termination of this Agreement in accordance with its terms (other than a termination by the Company for Cause or by the Executive without Good Reason), the Company shall enter into a consulting agreement with the Executive under which the Executive will provide advice and assistance concerning matters that are within the scope of the Executive’s knowledge and expertise upon the request of the Company for the three (3) year period following the Executive’s termination of employment.  The Executive shall be required to provide such services for a period of time equal to the lesser of (i) approximately twenty percent (20%) of the level of service he had performed as an employee, or (ii) such period of time as may be necessary to ensure that the Executive’s termination of employment under the Agreement will be treated as a “separation from service” pursuant to Section 409A of the Code.  As consideration for the consulting services, the Employee shall receive annual compensation

 

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equal to $300,000, payable in accordance with the Company’s normal payroll practices and procedures.  The terms of the consulting agreement shall provide that the Company may terminate the consulting agreement only for Cause, as defined herein, or as the result of the Executive’s death or disability.

 

7.                                      Definitions.

 

(a)                                 Definition of “Cause”.  For all purposes under this Agreement, “Cause” shall mean:

 

(1)                                 engaging in willful misconduct against the Company that is materially injurious to the Company; provided that any action undertaken with a reasonable and good faith belief that it is in the best interests of the Company shall not constitute willful misconduct for purposes of this clause (1);

 

(2)                                 engaging in any activity that is a conflict of interest or competitive with the Company;

 

(3)                                 engaging in any act of fraud or dishonesty that is materially injurious to the Company or any of its affiliated companies or any material breach of federal or state securities or commodities laws or regulations;

 

(4)                                 engaging in an act of assault or other acts of violence in the workplace;

 

(5)                                 repeated harassment of any individual in the workplace based on age, gender, or other protected status or class or violation of any policy of the Company regarding harassment that is materially injurious to the Company or any of its affiliated companies; or

 

(6)                                 conviction, guilty plea or plea of nolo contendere for any felony crime;

 

provided, however, that upon the Board or the General Counsel of the Company obtaining knowledge of any of the foregoing conditions, the Company must provide written notice to the Executive of the existence of any of the foregoing conditions (1) through (6) within sixty (60) days of the knowledge of the existence of the condition, and if the Executive has the ability and in fact cures the condition and harm caused thereby within thirty (30) days following the written notice, Cause shall be deemed not to exist.

 

(b)                                 Definition of “Good Reason”.  For all purposes under this Agreement, “Good Reason” shall mean any one of the following without the Executive’s consent:

 

(1)                                 a demotion or any action by the Company which results in material diminution of the Executive’s position (including removal from his position as the Company’s Chief Executive Officer or Chairman of the Board, provided that  the Executive’s cessation of service as Chairman of the Board as a result of legislative or regulatory requirements or as a result of mutual agreement between the Company and the

 

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Executive that such cessation of service is in the best interests of the Company shall not constitute Good Reason for purposes of this Agreement), reporting relationship, authority, duties or responsibilities (other than changes permitted by this Agreement or any insubstantial action not taken in bad faith);

 

(2)                                 a requirement that the Executive report to work more than 50 miles from the Company’s existing headquarters (not including normal business travel required of the Executive’s position);

 

(3)                                 a material reduction in the Executive’s base salary or benefits (unless such reduction in base salary or benefits applies generally to executives of the Company); or

 

(4)                                 a material breach by the Company of its obligations hereunder;

 

provided, however, that the Executive must provide written notice to the Board of Directors of the Company of the existence of any of the foregoing conditions (1) through (4) within sixty (60) days of the initial existence of the condition, and if the Company cures the condition within thirty (30) days following the written notice, or if the Executive fails to terminate employment within six (6) months following the initial existence of the condition constituting Good Reason, Good Reason shall be deemed not to exist.

 

(c)                                  Definition of “Restricted Period”.  For all purposes under this Agreement, “Restricted Period” means the period of twenty-four (24) months following termination of the Executive’s employment or service with the Company.

 

8.                                      Code Section 409A Compliance.

 

(a)                                 To the fullest extent applicable, amounts and other benefits payable under this Agreement, and amounts and benefits payable under any other agreements or plans referenced in this Agreement, are intended to be exempt from the definition of “nonqualified deferred compensation” under Section 409A of the Code in accordance with one or more of the exemptions available under the final Treasury regulations promulgated under Section 409A.  In this regard, each payment under Section 6(b) of this Agreement shall be deemed a separate payment for purposes of Code Section 409A.  To the extent that any such amount or benefit is or becomes subject to Section 409A due to a failure to qualify for an exemption from the definition of nonqualified deferred compensation in accordance with such final Treasury regulations, this Agreement is intended to comply with the applicable requirements of Section 409A with respect to such amounts or benefits.  This Agreement shall be interpreted and administered to the extent possible in a manner consistent with the foregoing statement of intent, and any ambiguity as to its compliance with Section 409A will be read in such a manner so that all payments hereunder comply with Section 409A of the Code.

 

(b)                                 Notwithstanding anything in this Agreement or elsewhere to the contrary, if the Executive is a “specified employee” as determined by the Compensation Committee on the date of “separation from service” (as such terms are defined for purposes of Code Section 409A), and the Company reasonably determines that any amount or other benefit payable under this Agreement on account of such separation from service constitutes nonqualified deferred

 

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compensation that will subject the Executive to “additional tax” under Section 409A(a)(1)(B) of the Code (together with any interest or penalties imposed with respect to, or in connection with, such tax, a “409A Tax”) with respect to the payment of such amount or the provision of such benefit if paid or provided at the time specified in the Agreement, then the payment or provision thereof shall be postponed to the first business day of the seventh month following the date of termination or, if earlier, the date of the Executive’s death (the “Delayed Payment Date”).  The Executive and the Company may agree to take other actions to avoid the imposition of a 409A Tax at such time and in such manner as permitted under Section 409A.  In the event that this Section 8 requires a delay of any payment, such payment shall be accumulated and paid in a single lump sum on the Delayed Payment Date, and any remaining payments and benefits due under this Agreement shall be paid or provided in accordance with the normal payment dates specified for them herein.  In addition, the provisions of this Agreement which require the commencement of payments subject to Section 409A upon a termination of employment shall be interpreted to require that the Executive have a “separation from service” with the Company as defined for purposes of Code Section 409A.

 

(c)                                  To the extent the Company is required pursuant to this Agreement to reimburse fees or expenses incurred by the Executive, and such reimbursement is taxable as compensation to the Executive, the Company shall reimburse any such eligible fees or expenses no later than 2-1/2 months after the end of the calendar year in which the fees or expenses were incurred (or if later, 2-1/2 months after the end of the Company’s taxable year in which the fees or expenses were incurred), subject to any earlier required deadline for payment otherwise applicable under this Agreement.  Except as otherwise expressly provided herein, to the extent any expense reimbursement or the provision of any in-kind benefit under this Agreement is determined to be subject to Section 409A of the Code, the amount of any such expenses eligible for reimbursement, or the provision of any in-kind benefit, in one calendar year shall not affect the expenses eligible for reimbursement in any other taxable year (except for any lifetime or other aggregate limitation applicable to medical expenses), in no event shall any expenses be reimbursed after the last day of the calendar year following the calendar year in which the Executive incurred such expenses, and in no event shall any right to reimbursement or the provision of any in-kind benefit be subject to liquidation or exchange for another benefit.

 

(d)                                 The provisions of this Section 8 shall also apply to all payments and benefits that may be provided under the Change in Control Agreement, notwithstanding any provision to the contrary contained therein, if required in order to comply with Section 409A.   In addition to the provisions set forth in subsections (a) through (c) above: (i) the cash severance payable under the Change in Control Agreement shall be paid at the same time and in the same form provided under this Agreement for severance payable under Section 6(b) (that is, in installments over twenty-four (24) months rather than a lump sum) unless the Executive’s separation from service occurs within twelve (12) months following the effective date of the closing of the Change in Control and the Change in Control qualifies as a “change in control event” as defined in Treasury Regulation Section 1.409A-3(i)(5); (ii) if the Executive’s separation from service does occur within twelve (12) months following the effective date of the closing of the Change in Control and the Change in Control qualifies as a “change in control event” as defined in Treasury Regulation Section 1.409A-3(i)(5), then the cash severance payable to the Executive under Section 1(b)(1) of the Change in Control Agreement shall be paid on the sixtieth (60th) day following his separation from service (subject to Section 8(b)) provided the Executive has

 

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fulfilled the conditions for payment of the cash severance under the Change in Control Agreement (including that the Release of Claims as defined therein shall have become effective) on or before such date (and shall not be paid otherwise); and (iii) any reimbursement of taxes required to be made by the Company under the Change in Control Agreement shall be made by the end of the calendar year next following the calendar year in which the Executive remits the related taxes.  If the payment of cash severance has commenced pursuant to Section 6(b)(1) of this Agreement before the occurrence of a Change in Control that results in the Executive’s eligibility for severance benefits under the Change in Control Agreement, then the payment of cash severance shall be governed by the Change in Control Agreement rather than Section 6(b)(1) of this Agreement, and any adjustment to reflect an underpayment or overpayment of the amount that otherwise would have been due before the Change in Control pursuant to the Change in Control Agreement shall be applied to the first installment due after the Change in Control Agreement, proceeding in chronological order thereafter as necessary.

 

9.                                      Employment and Post-Termination Covenants.  By accepting the terms of this Agreement, and as a condition for the termination payments and benefits described in Section 6, the Executive hereby agrees to the following covenants in addition to any obligations the Executive may have by law and makes the following representations:

 

(a)                                 Confidentiality.  The Executive acknowledges that, in connection with his employment by the Company, the Executive will have access to trade secrets of the Company and its affiliated companies and other information and materials which the Company desires to keep confidential, including customer lists, supplier lists, financial statements, business records and data, marketing and business plans, and information and materials relating to the Company’s services, products, methods of operation, key personnel, proprietary software and other proprietary intellectual property and information disclosed to the Company by third parties to which the Company owes a duty of nondisclosure (collectively, the “Confidential Information”); provided, however, that Confidential Information does not include information which (i) is or becomes publicly known other than as a result of the Executive’s actions in violation of this Agreement; (ii) is or becomes available to the Executive from a source (other than the Company or its affiliated companies) that the Executive reasonably believes is not prohibited from disclosing such information to the Executive by a contractual or fiduciary obligation to the Company, (iii) has been made available by the Company or its affiliated companies, directly or indirectly, to a non-affiliated third party without obligation of confidentiality; (iv) the Executive is obligated to produce as a result of a court order or pursuant to governmental action or proceeding, provided that the Executive gives the Company prompt written notice of such requirement prior to such disclosure and assistance in obtaining an order protecting such Confidential Information from public disclosure; or (v) business knowledge the Executive has acquired unrelated to any specific proprietary information relating to the Company.  The Executive further acknowledges that the Company’s Confidential Information has economic value by virtue of the fact that it is not generally known by Competitors (as defined below) or in the industry at large.  The Executive therefore covenants and agrees that, both during and after the term of his employment with the Company, he will keep secret all Confidential Information and will not disclose, reveal, divulge or otherwise make known any Confidential Information to any person (other than the Company or its employees or agents in the course of performing his duties hereunder) or use any Confidential Information for his own account or for the benefit of any other individual or entity, except with the prior written consent of the Company.

 

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(b)                                 Ownership of Intellectual Property.  The Executive agrees that all inventions, copyrightable material, software, formulas, trademarks, trade secrets and the like which are developed or conceived by the Executive in the course of his employment by the Company or on the Company’s time or property (collectively, the “Intellectual Property”) shall be disclosed promptly to the Company and the Company shall own all right, title and interest in and to the Intellectual Property.  The parties expressly agree that any and all of the Intellectual Property developed by the Executive shall be considered works made-for-hire for the Company pursuant to the United States Copyright Act of 1976, as amended from time to time.  In order to ensure that the Company shall own all right, title and interest in and to the Intellectual Property in the event that any of the Intellectual Property is not deemed a work made-for-hire (as defined in the Copyright Act of 1976) and in any other event, the Executive hereby sells and assigns all right, title and interest in and to all such Intellectual Property to the Company, and the Executive covenants and agrees to affix to the Intellectual Property appropriate legends and copyright notices indicating the Company’s ownership of all Intellectual Property and all underlying documentation to the extent reasonably appropriate, and shall execute such instruments of transfer, assignment, conveyance or confirmation as the Company reasonably considers necessary to transfer, confirm, vest, perfect, maintain or defend the Company’s right, title and interest in and to the Intellectual Property throughout the world.  The Executive’s obligation under this Section 9(b) to assign to the Company inventions created or conceived by him shall not apply to an invention that he developed entirely on his own time without using the Company’s equipment, supplies, facilities, or trade secret information, provided that those inventions (i) do not or did not relate directly, at the time of conception or reduction to practice of the invention, to the Company’s business as conducted at such time or actual or demonstrably anticipated research or development of the Company; and (ii) do not or did not result from any work performed by him for the Company.

 

(c)                                  Non-Solicitation.  The Executive agrees that during the Restricted Period, he shall not solicit the services or employment or engage the services or employ anyone who is then (or who was within the six months prior thereto) an employee of the Company or its affiliated companies.

 

(d)                                 Non-Competition.  The Executive acknowledges and agrees that, by virtue of his position with the Company, and the sensitive nature of the Confidential Information, business strategies and plans to which he has been and will be privy during the course of his employment, his work for a Competitor of the Company after leaving the Company’s employ would pose a material threat to the Company’s competitive position.  Moreover, the Executive acknowledges and agrees that it would be impossible for him to segregate his knowledge of the Company’s Confidential Information from his memory, such that he could guarantee that he would not be making use of, whether intentionally or unintentionally, directly or indirectly,  such knowledge in the course of his work for a Competitor.  Given this understanding, the Executive agrees that there must be a period of time following the termination of his employment or service with the Company during which he must not work for a Competitor, in order to ensure the protection of the Company’s Confidential Information.  The Executive agrees that the Restricted Period is reasonable and necessary to accomplish this protection, and accordingly, during the Restricted Period, the Executive agrees not to compete directly or indirectly by becoming a principal, partner, shareholder, equity holder, limited liability company member, agent, officer, other employee, advisor, consultant, member of a board of directors, or by becoming interested in any

 

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other capacity, with any business that competes anywhere in the United States with any activity of the Company or its affiliates conducted at any time during the two years prior to termination, or conducted during the six months period following the termination, as a result of plans initiated prior to such termination, including acquisitions (collectively, “Competitors”).

 

(e)                                  Authorization to Work for the Company.  The Executive represents that he is legally authorized to work in the United States and that his employment with the Company shall not constitute a violation of any contractual or other legal obligation he may have to another entity or employer.

 

(f)                                   Return of Company Property.  Upon the termination of the Executive’s employment or service with the Company, or as earlier requested by the Company, the Executive agrees to return to the Company all Company documents (and all copies thereof) and other Company property in the Executive’s possession or control, including, but not limited to, Company files, correspondence, memos, notebooks, notes, drawings, records, business plans and forecasts, financial information, specifications, computer recorded information, tangible property and equipment, credit cards, entry cards, identification badges and keys; and any materials of any kind that contain or embody any proprietary or confidential information of the Company (and all reproductions thereof in whole or in part) (collectively, the “Company Property”).  The Executive agrees to conduct a good faith and diligent search of the Executive’s belongings in advance of the aforementioned deadline to ensure the Executive’s compliance with the provisions of this Section 9.

 

(g)                                  Consequences of Breach.  The Executive agrees that the restrictions specified in this Section 9 are reasonable and necessary to protect the Confidential Information and goodwill of the Company and its affiliated companies and are intended to operate for the entire period specified and within the geographical area specified above.  The Executive further agrees that abiding by the restrictions specified in this Section 9 will not materially impinge in his ability to make a living and to support himself and his family.  The Executive further acknowledges and agrees that the Executive will not object to the Company or its affiliated companies, or any of their respective successors in interest, defending the enforceability of this Section 9.  The parties to this Agreement agree that (i) if the Executive breaches the provisions set forth in this Section 9, the damage to the Company may be substantial, although difficult to ascertain, and money damages will not afford the Company an adequate remedy, (ii) if the Executive is in breach of any provision of this Section 9 or threatens a breach of any provision of this Section 9, the Company shall be entitled, in addition to all other rights and remedies as may be provided by law, to seek specific performance and injunctive and other equitable relief to prevent or restrain a breach of any provision of this Section 9.  The Executive further acknowledges that he is voluntarily and knowingly agreeing to the post-termination restrictions described in this Section 9 in consideration of the termination payments and benefits described in Section 6, and that the Company shall have no obligation to provide such termination payments or benefits if the Executive breaches any provision of this Section 9.

 

10.                               Binding on Successors.  This Agreement may be assigned by the Company to a successor by merger, acquisition, consolidation or otherwise to the business formerly carried on by the Company and shall be binding upon the Company and any entity which is a successor by merger, acquisition, consolidation or otherwise to the business formerly carried on by the Company, or

 

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an affiliate of any such entity, and becomes the Executive’s employer by reason of (or as the direct result of) any direct or indirect sale or other disposition of the Company or substantially all of the assets of the business currently carried on by the Company, without regard to whether or not such person actively adopts this Agreement.

 

11.                               Arbitration.  The parties agree that any future disputes between the Executive and the Company under this Agreement including but not limited to disputes relating to the Release shall be resolved by binding arbitration, except where the law specifically forbids the use of arbitration as a final and binding remedy as provided below, except as provided in Section 11(g) below.

 

(a)                                 The complainant shall provide the other party a written statement of the claim.  Such statement shall identify any supporting witnesses or documents and the relief requested.

 

(b)                                 The respondent shall furnish a statement of the relief, if any, that it is willing to provide, and identifying supporting witnesses or documents.  If the matter is not resolved, the parties agree to submit their dispute to a non-binding mediation paid for by the Company; provided, however, that if the amount in dispute is $50,000 or less, this step may be waived at the election of either party.

 

(c)                                  If the matter is not resolved, the parties agree that the dispute shall be resolved by binding arbitration pursuant to the commercial arbitration rules of the International Institute for Conflict Prevention and Resolution (“CPR”), including any provisions thereof pertaining to discovery.  If the parties are not able to agree upon the selection of an arbitrator, an arbitrator shall be selected according to the applicable procedures established by the CPR.

 

(d)                                 The arbitrator shall have the authority to determine whether the conduct complained of in Section 11(a) violates the complainant’s rights under this Agreement and, if so, to grant any relief authorized by law; subject to the provisions of Section 11(g) below.  The arbitrator shall not have the authority to modify, change or refuse to enforce any lawful term of this Agreement and the Release.

 

(e)                                  The Company shall pay for the arbitrator’s fees, while each party shall pay its own attorneys’ fees.

 

(f)                                   Arbitration shall be the exclusive final remedy for any dispute between the parties under this Agreement and disputes involving claims for discrimination or harassment (such as claims under the Fair Employment and Housing Act, Title VII of the Civil Rights Act of 1964, the Americans with Disabilities Act, or the Age Discrimination in Employment Act), wrongful termination, breach of contract, breach of public policy, physical or mental harm or distress or any other disputes, and the parties agree that no dispute shall be submitted to arbitration where the complainant has not complied with the preliminary steps provided for in Sections 11(a) and (b) above.

 

(g)                                  The parties agree that the arbitration award shall be enforceable in any court having jurisdiction to enforce this Agreement and the Release, so long as the arbitrator’s findings of fact are supported by substantial evidence on the whole and the arbitrator has not made errors of law; provided, however, that either party may bring an action in a court of competent

 

12

 

jurisdiction, regarding or related to matters involving the Company’s confidential, proprietary or trade secret information, or regarding or related to inventions that the Executive may claim to have developed prior to or after joining the Company, seeking preliminary injunctive relief in court to preserve the status quo or prevent irreparable injury before the matter can be heard in arbitration.

 

(h)                                 The arbitration shall be held at a location within Salt Lake City, Utah, unless the parties mutually agree to a different location for the arbitration.

 

(i)                                     If the Executive wishes to contest or dispute a termination for Cause by the Company, or any failure to make payments claimed to be due hereunder, the Executive must give written notice of such dispute within ninety (90) calendar days of receiving a notice of termination.  The Executive may, at either the Executive’s or the Company’s option, be suspended from all duties during the pendency of such a contest or dispute.  If the Executive prevails in any such contest or dispute, the Company or its successor or assign shall thereupon be liable for the full amounts due under Section 6 as of the date of termination after adjustments for amounts already paid.

 

12.                               Indemnification.  The Company has entered into an indemnification agreement with the Executive, which agreement is incorporated by reference.

 

13.                               Withholding Taxes.  All payments made under this Agreement shall be subject to reduction to reflect taxes or other charges required to be withheld by law.

 

14.                               Choice of Law and Severability; Jurisdiction and Venue.  This Agreement shall be deemed to have been entered into and shall be construed and enforced in accordance with the laws of the State of Utah irrespective of any conflicts of law analysis.  If any provision of this Agreement becomes or is deemed invalid, illegal or unenforceable in any applicable jurisdiction by reason of the scope, extent or duration of its coverage, then such provision shall be deemed amended to the minimum extent necessary to conform to applicable law so as to be valid and enforceable or, if such provision cannot be so amended without materially altering the intention of the parties, then such provision shall be stricken and the remainder of this Agreement shall continue in full force and effect.  If any provision of this Agreement is rendered illegal by any present or future statute, law, ordinance or regulation (collectively the “Law”), then such provision shall be curtailed or limited only to the minimum extent necessary to bring such provision into compliance with the Law.  All the other terms and provisions of this Agreement shall continue in full force and effect without impairment or limitation.  Subject to the mandatory arbitration provided in Section 9 above, jurisdiction and venue in any action to enforce any arbitration award or to enjoin any action that violates the terms of this Agreement shall be in the state and federal courts serving the locality of Salt Lake City, Utah.

 

15.                               Miscellaneous.

 

(a)                                 This Agreement constitutes the complete, final and exclusive embodiment of the entire agreement between the Executive and the Company with regard to the terms and conditions of the Executive’s employment with the Company and the Executive’s anticipated termination of employment and supersedes all prior agreements with respect thereto, including

 

13

 

without limitation the Prior Agreement; provided, however, that the Change in Control Agreement shall remain in effect and shall not be superseded by this Agreement except as expressly provided herein.  It is entered into without reliance on any promise or representation, written or oral, other than those expressly contained herein, and it supersedes any other such promises, warranties or representations and any other written or oral statements concerning the Executive’s rights to any compensation, equity, or benefits from the Company, its predecessors or successors in interest.

 

(b)                                 This Agreement may not be modified or amended except in a writing signed by both the Executive and an authorized member of the Board (other than the Executive).  This Agreement shall bind the heirs, personal representatives, successors and assigns of both the Executive and the Company, and inure to the benefit of both the Executive and the Company, their heirs, successors and assigns.  No waiver by either party of any breach of, or of compliance with, any condition or provision of this Agreement by the other party shall be considered a waiver of any other condition or provision or of the same condition or provision at another time. Headings and subheadings in this Agreement are solely for convenience and do not constitute terms of this Agreement.

 

(c)                                  This Agreement may be signed in counterparts and the counterparts taken together shall constitute one agreement.  Facsimile or photocopied signatures shall be deemed as effective as original signatures.

 

(d)                                 Notices and all other communications contemplated by this Agreement shall be in writing and shall be deemed to have been duly given when personally delivered or when mailed by U.S. registered or certified mail, return receipt requested and postage prepaid.  In the case of the Executive, mailed notices shall be addressed to him at the home address that he most recently communicated to the Company in writing.  In the case of the Company, mailed notices shall be addressed to its corporate headquarters, and all notices shall be directed to the attention of its Secretary with a copy to Chairman of the Compensation Committee.

 

14

 

IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case of the Company by its duly authorized Chairman of the Compensation Committee, as of this 30th day of July 2012.

 

 

	
 
    	
EXECUTIVE
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
/s/ Kirk A. Benson
    
	
 
    	
Kirk A. Benson
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
HEADWATERS INCORPORATED
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By: 
    	
/s/ Blake O. Fisher
    
	
 
    	
 
    	
Blake O. Fisher
    
	
 
    	
Title:
    	
Chairman, Compensation Committee of the Board   of Directors of Headwaters Incorporated
    
	
 
    	
 
    

 

15

 

EXHIBIT A

 

GENERAL RELEASE LANGUAGE

 

Executive agrees, for himself, his spouse, heirs, executor or administrator, assigns, insurers, attorneys and other persons or entities acting or purporting to act on his behalf (the “Executive’s Parties”), to irrevocably and unconditionally release, acquit and forever discharge the Company, its parent, affiliates, subsidiaries, directors, officers, employees, shareholders, partners, agents, representatives, predecessors, successors, assigns, insurers, attorneys, benefit plans sponsored by the Company and said plans’ fiduciaries, agents and trustees (the “Company’s Parties”), from any and all actions, cause of action, suits, claims, obligations, liabilities, debts, demands, contentions, damages, judgments, levies and executions of any kind, whether in law or in equity, known or unknown, which the Executive’s Parties have, have had, or may in the future claim to have against the Company’s Parties by reason of, arising out of, related to, or resulting from Executive’s employment with the Company or the termination thereof.  This release specifically includes without limitation any claims arising in tort or contract, any claim based on wrongful discharge, any claim based on breach of contract, any claim arising under federal, state or local law prohibiting race, sex, age, religion, national origin, handicap, disability or other forms of discrimination, any claim arising under federal, state or local law concerning employment practices, and any claim relating to compensation or benefits.  This specifically includes, without limitation, any claim which the Executive has or has had under Title VII of the Civil Rights Act of 1964, as amended, the Age Discrimination in Employment Act, as amended, the Americans with Disabilities Act, as amended, and the Employee Retirement Income Security Act of 1974, as amended.  It is understood and agreed that the waiver of benefits and claims contained in this section does not include a waiver of (i) any indemnification rights the Executive has pursuant to the Company bylaws, agreements, or Board of Director resolutions in effect on the date of this Release and any fiduciary insurance plans in effect on the date of this release or thereafter, (ii) any payments in connection with this Agreement or the Change in Control Agreement, or (iii) the right to payment of any vested, nonforfeitable benefits to which the Executive or a beneficiary of the Executive may be entitled under the terms and provisions of any employee benefit plan of the company which have accrued as of the separation date and does not include a waiver of the right to benefits and payment of consideration to which Executive may be entitled under this Agreement or any of the agreements contemplated hereby (including the indemnification agreement and the stock option agreements).  Executive acknowledges that he is only entitled to the severance benefits and compensation set forth in this Agreement, and that all other claims for any other benefits or compensation are hereby waived, except those expressly stated in the preceding sentence.

 

The Company agrees to irrevocably and unconditionally release, acquit and forever discharge Executive from any and all actions, cause of action, suits, claims, obligations, liabilities, debts, demands, contentions, damages, judgments, levies and executions of any kind, whether in law or in equity, known or unknown, which the Company has, has had, or may in the future claim to have against the Executive, liability for which the Company would otherwise be obligated to indemnify the Executive under Delaware law, the Certificate of Incorporation of the Company, the bylaws of the Company, or the Executive’s indemnification agreement with the Company by reason of, arising out of, related to, or resulting from Executive’s employment with the Company or the termination thereof (the “Company’s Release”), provided that (i) Executive shall have

 

16

 

acted in good faith and in a manner that Executive reasonably believed to be in or not opposed to the best interest of the Company, and shall not have engaged in willful misconduct or breach of an agreement with the Company; and (ii) the Company’s Release shall not extend to any acts or omissions of the Executive for which the Company would be prohibited from indemnifying the Executive under Delaware Law,  the provisions of the Certificate of Incorporation, or  the Bylaws of the Company then in effect or which would excuse, negate, or invalidate the obligations of the insurer under any director and officer liability policy procured by the Company and covering the Executive.

 

17Exhibit 10.1

 

EXECUTION COPY

 

EQUITY INTEREST PURCHASE AGREEMENT

 

dated as of May 7, 2012

 

by and among

 

PENN NATIONAL GAMING, INC.,

as Buyer

 

HARRAH’S MARYLAND HEIGHTS, LLC,
 as the Company

 

CAESARS ENTERTAINMENT OPERATING COMPANY, INC.,
 HARRAH’S MARYLAND HEIGHTS OPERATING COMPANY, AND

PLAYERS MARYLAND HEIGHTS NEVADA, LLC

together, as Sellers

 

and

 

CAESARS ENTERTAINMENT CORPORATION,
 as Parent

 

 

TABLE OF CONTENTS

 

	
 
    	
 
    	
Page
    
	
 
    	
 
    	
 
    
	
ARTICLE I. PURCHASE AND SALE OF EQUITY   INTERESTS
    	
1
    
	
 
    	
 
    	
 
    
	
Section 1.1
    	
Purchase   and Sale of Equity Interests
    	
1
    
	
Section 1.2
    	
Excluded   Assets
    	
3
    
	
Section 1.3
    	
Retention   of Assets
    	
4
    
	
Section 1.4
    	
Assignability   and Consents
    	
4
    
	
Section 1.5
    	
Removal   of Excluded Assets
    	
5
    
	
 
    	
 
    	
 
    
	
ARTICLE II. TREATMENT OF LIABILITIES
    	
6
    
	
 
    	
 
    	
 
    
	
Section 2.1
    	
Assumed   Liabilities
    	
6
    
	
Section 2.2
    	
Excluded   Liabilities
    	
7
    
	
 
    	
 
    	
 
    
	
ARTICLE III. PURCHASE PRICE AND DEPOSIT
    	
8
    
	
 
    	
 
    	
 
    
	
Section 3.1
    	
Purchase   Price
    	
8
    
	
Section 3.2
    	
Deposit
    	
8
    
	
Section 3.3
    	
Allocation   of Purchase Price
    	
8
    
	
Section 3.4
    	
Risk   of Loss
    	
9
    
	
Section 3.5
    	
Tax   Withholding
    	
9
    
	
 
    	
 
    	
 
    
	
ARTICLE IV. WORKING CAPITAL ADJUSTMENT AND   OTHER ADJUSTMENTS
    	
10
    
	
 
    	
 
    	
 
    
	
Section 4.1
    	
Estimated   Closing Statement
    	
10
    
	
Section 4.2
    	
Estimated   Operations Statement
    	
10
    
	
Section 4.3
    	
Final   Adjustments
    	
10
    
	
Section 4.4
    	
Accounts   Receivable; Accounts Payable; Deposits
    	
12
    
	
Section 4.5
    	
Corrective   Actions
    	
12
    
	
Section 4.6
    	
Prorations
    	
12
    
	
 
    	
 
    	
 
    
	
ARTICLE V. CLOSING
    	
13
    
	
 
    	
 
    	
 
    
	
Section 5.1
    	
Time   and Place
    	
13
    
	
Section 5.2
    	
Deliveries   at Closing
    	
14
    
	
 
    	
 
    	
 
    
	
ARTICLE VI. REPRESENTATIONS AND WARRANTIES OF   PARENT AND SELLERS
    	
15
    
	
 
    	
 
    	
 
    
	
Section 6.1
    	
Organization   of Parent and Sellers
    	
15
    
	
Section 6.2
    	
Authority;   No Conflict; Required Filings and Consents
    	
15
    
	
Section 6.3
    	
Title   to Equity Interests
    	
16
    
	
Section 6.4
    	
Litigation
    	
17
    
	
 
    	
 
    	
 
    
	
ARTICLE VII. REPRESENTATIONS AND WARRANTIES   OF THE COMPANY
    	
17
    

 

i

 

	
Section 7.1
    	
Organization   of the Company; Capitalization
    	
17
    
	
Section 7.2
    	
Authority;   No Conflict; Required Filings and Consents
    	
18
    
	
Section 7.3
    	
Financial   Statements
    	
19
    
	
Section 7.4
    	
No   Undisclosed Liabilities
    	
19
    
	
Section 7.5
    	
Taxes
    	
19
    
	
Section 7.6
    	
Real   Property
    	
21
    
	
Section 7.7
    	
Intellectual   Property
    	
22
    
	
Section 7.8
    	
Agreements,   Contracts and Commitments
    	
22
    
	
Section 7.9
    	
Litigation
    	
23
    
	
Section 7.10
    	
Environmental   Matters
    	
23
    
	
Section 7.11
    	
Permits;   Compliance with Laws
    	
24
    
	
Section 7.12
    	
Labor   Matters
    	
24
    
	
Section 7.13
    	
Employee   Benefits
    	
25
    
	
Section 7.14
    	
Brokers
    	
27
    
	
Section 7.15
    	
Title   to Purchased Assets
    	
27
    
	
Section 7.16
    	
Affiliate   Transactions
    	
27
    
	
Section 7.17
    	
Minimum   Cash
    	
27
    
	
Section 7.18
    	
Vendors
    	
27
    
	
Section 7.19
    	
Absence   of Changes
    	
27
    
	
Section 7.20
    	
Insurance   Coverage
    	
27
    
	
 
    	
 
    	
 
    
	
ARTICLE VIII. REPRESENTATIONS AND WARRANTIES   OF BUYER
    	
28
    
	
 
    	
 
    
	
Section 8.1
    	
Organization
    	
28
    
	
Section 8.2
    	
Authority;   No Conflict; Required Filings and Consents
    	
28
    
	
Section 8.3
    	
Brokers
    	
29
    
	
Section 8.4
    	
Financing
    	
29
    
	
Section 8.5
    	
Licensability   of Principals
    	
29
    
	
Section 8.6
    	
Permits;   Compliance with Gaming Laws
    	
30
    
	
Section 8.7
    	
Waiver   of Buyer’s Further Due Diligence Investigation
    	
30
    
	
Section 8.8
    	
Litigation
    	
31
    
	
 
    	
 
    	
 
    
	
ARTICLE IX. COVENANTS
    	
31
    
	
 
    	
 
    
	
Section 9.1
    	
Conduct   of Business Prior to the Closing
    	
31
    
	
Section 9.2
    	
Cooperation;   Notice; Cure
    	
34
    
	
Section 9.3
    	
No   Solicitation
    	
34
    
	
Section 9.4
    	
Employee   Matters
    	
35
    
	
Section 9.5
    	
Access   to Information and the Real Property; Post-Closing Cooperation
    	
37
    
	
Section 9.6
    	
Governmental   Approvals
    	
39
    
	
Section 9.7
    	
Publicity
    	
41
    
	
Section 9.8
    	
Further   Assurances and Actions
    	
41
    
	
Section 9.9
    	
Transfer   Taxes; HSR Filing Fee
    	
42
    
	
Section 9.10
    	
No   Control
    	
42
    
	
Section 9.11
    	
Reservations;   Guests; Valet Parking; Other Transition Matters
    	
42
    
	
Section 9.12
    	
Transfer   of Utilities
    	
44
    

 

ii

 

	
Section 9.13
    	
Certain   Transactions
    	
45
    
	
Section 9.14
    	
FCC   Approvals
    	
45
    
	
Section 9.15
    	
Insurance   and Casualty
    	
45
    
	
Section 9.16
    	
Certain   Notifications
    	
46
    
	
Section 9.17
    	
Non-Solicitation
    	
46
    
	
Section 9.18
    	
Transfer   of Assets
    	
46
    
	
Section 9.19
    	
Customer   List
    	
47
    
	
Section 9.20
    	
Lien   Release
    	
47
    
	
Section 9.21
    	
Financing
    	
47
    
	
 
    	
 
    	
 
    
	
ARTICLE X. CONDITIONS TO CLOSING
    	
47
    
	
 
    	
 
    	
 
    
	
Section 10.1
    	
Conditions   to Each Party’s Obligation to Effect the Closing
    	
47
    
	
Section 10.2
    	
Additional   Conditions to Obligations of Buyer
    	
48
    
	
Section 10.3
    	
Additional   Conditions to Obligations of Sellers
    	
49
    
	
 
    	
 
    	
 
    
	
ARTICLE XI. TERMINATION AND AMENDMENT
    	
49
    
	
 
    	
 
    
	
Section 11.1
    	
Termination
    	
49
    
	
Section 11.2
    	
Effect   of Termination
    	
50
    
	
 
    	
 
    	
 
    
	
ARTICLE XII. SURVIVAL; INDEMNIFICATION
    	
52
    
	
 
    	
 
    
	
Section 12.1
    	
Survival   of Representations, Warranties, Covenants and Agreements
    	
52
    
	
Section 12.2
    	
Indemnification
    	
52
    
	
Section 12.3
    	
Procedure   for Claims between Parties
    	
54
    
	
Section 12.4
    	
Defense   of Third Party Claims
    	
54
    
	
Section 12.5
    	
Resolution   of Conflicts and Claims
    	
56
    
	
Section 12.6
    	
Limitations   on Indemnity
    	
56
    
	
Section 12.7
    	
Payment   of Damages
    	
57
    
	
Section 12.8
    	
Exclusive   Remedy
    	
57
    
	
Section 12.9
    	
Tax   Matters
    	
58
    
	
 
    	
 
    	
 
    
	
ARTICLE XIII. TITLE TO REAL PROPERTY
    	
61
    
	
 
    	
 
    
	
Section 13.1
    	
Title   Policy and UCC Search
    	
61
    
	
Section 13.2
    	
Defects   Arising After the Effective Date
    	
61
    
	
Section 13.3
    	
Failure   to Cure Title Defects
    	
62
    
	
Section 13.4
    	
Survey
    	
63
    
	
Section 13.5
    	
AS   IS
    	
63
    
	
Section 13.6
    	
No   Conflict
    	
66
    
	
 
    	
 
    	
 
    
	
ARTICLE XIV. MISCELLANEOUS
    	
66
    
	
 
    	
 
    	
 
    
	
Section 14.1
    	
Definitions
    	
66
    
	
Section 14.2
    	
Governing   Law; Consent to Jurisdiction; Waiver of Trial by Jury
    	
78
    
	
Section 14.3
    	
Notices
    	
79
    

 

iii

 

	
Section 14.4
    	
Interpretation
    	
80
    
	
Section 14.5
    	
Entire   Agreement
    	
81
    
	
Section 14.6
    	
Severability
    	
81
    
	
Section 14.7
    	
Assignment
    	
81
    
	
Section 14.8
    	
Parties   of Interest
    	
81
    
	
Section 14.9
    	
Counterparts
    	
81
    
	
Section 14.10
    	
Mutual   Drafting
    	
81
    
	
Section 14.11
    	
Amendment
    	
82
    
	
Section 14.12
    	
Extension;   Waiver
    	
82
    
	
Section 14.13
    	
Time   of Essence
    	
82
    

 

iv

 

	
EXHIBITS
    	
 
    
	
 
    	
 
    
	
Exhibit A
    	
Form of   Bill of Sale and Assignment
    	
 
    
	
 
    	
 
    	
 
    
	
Exhibit B
    	
Form of   Assignment and Assumption Agreement
    	
 
    
	
 
    	
 
    	
 
    
	
Exhibit C
    	
Form of   Trademark Assignment Agreement
    	
 
    
	
 
    	
 
    	
 
    
	
Exhibit D
    	
Form of   Deposit Escrow Agreement
    	
 
    
	
 
    	
 
    	
 
    
	
Exhibit E
    	
Form of   Customer List
    	
 
    
	
 
    	
 
    	
 
    
	
Exhibit F
    	
Form of   Assignment of Equity Interests
    	
 
    

 

	
SCHEDULES
    	
 
    
	
 
    	
 
    
	
Schedule   A
    	
Rebranding   Plan
    	
 
    
	
 
    	
 
    	
 
    
	
Schedule   B
    	
Calculation   of Net Working Capital
    	
 
    
	
 
    	
 
    	
 
    
	
Schedule   C
    	
Calculation   of Tray Ledger and Markers
    	
 
    

 

v

 

EQUITY INTEREST PURCHASE AGREEMENT

 

THIS EQUITY INTEREST PURCHASE AGREEMENT (this “Agreement”) is made and entered into as of May 7, 2012 (the “Effective Date”), by and among Penn National Gaming, Inc., a Pennsylvania corporation (“Buyer”), Caesars Entertainment Corporation, a Delaware corporation (“Parent”), Caesars Entertainment Operating Company, Inc., a Delaware corporation (“CEOC”), Harrah’s Maryland Heights Operating Company, a Nevada corporation (“HMHO”), Players Maryland Heights Nevada, LLC, a Nevada limited liability company (“PMHN”, together with CEOC and HMHO, “Sellers”), and Harrah’s Maryland Heights, LLC, a Delaware limited liability company (the “Company”). Capitalized terms used herein and not otherwise defined shall have the meanings set forth in Section 14.1.

 

WHEREAS, Sellers are the beneficial and record owners of all of the issued and outstanding membership interests of the Company (the “Equity Interests”);

 

WHEREAS, the Board of Directors of Parent believes that it is in the best interests of the Company, Sellers and Sellers’ members and stockholders to sell all of the Equity Interests; and

 

WHEREAS, Buyer desires to acquire from Sellers and Sellers desire to sell to Buyer, all of Sellers’ right, title and interest in and to the issued and outstanding Equity Interests on the terms and subject to the conditions set forth herein, after which the Company shall become a wholly-owned subsidiary of Buyer.

 

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 EQUITY INTERESTS

 

Section 1.1             Purchase and Sale of Equity Interests. Upon the terms and subject to the conditions set forth in this Agreement, at the Closing, Sellers shall sell and Buyer shall purchase from Sellers, the Equity Interests free and clear of all Liens and Encumbrances other than Permitted Liens and Permitted Encumbrances. As a result of Buyer’s acquisition of the Equity Interests, Buyer shall indirectly acquire all of the Company’s right, title and interest in, and under those certain rights and assets set forth below, free and clear of all Liens and Encumbrances other than Permitted Liens and Permitted Encumbrances, but excluding the Excluded Assets (the “Purchased Assets”):

 

(a)           the Real Property;

 

(b)           subject to Section 1.4, the Assumed Contracts;

 

(c)           the Acquired Personal Property;

 

(d)           Intentionally Omitted;

 

(e)           the Tray Ledger (pursuant to Section 4.2(a));

 

 

(f)            the Markers (pursuant to Section 4.2(b));

 

(g)           Intentionally omitted.

 

(h)           the Transferred Marks and Domain Names, the Other Transferred Registered IP, and the other Intellectual Property listed on Section 1.1(h) of the Company Disclosure Letter (collectively, the “Transferred Intellectual Property”);

 

(i)            the organizational documents, minute and stock books and records, and corporate seals of the Company;

 

(j)            (i) all corporate records of the Company, (ii) all other books and records of the Company relating exclusively to the Business (except (A) to the extent related to the Excluded Liabilities, the Excluded Assets or otherwise proprietary to Sellers or their Affiliates (other than the Company) and (B) the Customer Database), including all architectural, structural, service manuals, engineering and mechanical plans, electrical, soil, wetlands, environmental, and similar reports, studies and audits in the Company’s possession or control, (iii) all plans and specifications for the Casino in the Company’s possession or control and (iv) all human resources and other employee-related files and records relating to the Transferred Employees, except to the extent prohibited by Law; provided, however, Sellers may retain archival copies of all books, files and records as set forth in Section 1.3;

 

(k)           the Customer List;

 

(l)            the Company Permits, Governmental Approvals and Gaming Approvals exclusively related to the Casino, and pending applications therefor, to the extent transferable by Law;

 

(m)          all current assets reflected in the Final Closing Net Working Capital, including Gift Certificates and Accounts Receivable;

 

(n)           all bookings, contracts, or reservations for the use or occupancy of guest rooms and/or meeting and banquet facilities of the Casino which use or occupancy is scheduled to occur on or after the Closing Date;

 

(o)           all advertising, marketing and promotional materials exclusively used or held for use in the Business and to the extent such materials do not include any System Marks and other than the Harrah’s Branded Paraphernalia;

 

(p)           all landline telephone numbers used at the Casino on the Closing Date;

 

(q)           all rights, claims, rebates, discounts and credits (including all guarantees, indemnities, warranties and similar rights), performance or other bonds, security or other deposits, advance payments and prepaid rents in favor of the Company to the extent relating exclusively to (i) the Business as of the Closing Date, (ii) the Purchased Assets, or (iii) the Assumed Liabilities;

 

(r)            all goodwill associated with the Business;

 

2

 

(s)           all refunds or rebates of Taxes to which Buyer is entitled under Section 12.9(g);

 

(t)            the Rewards Information;

 

(u)           any and all insurance proceeds, condemnation awards or other compensation awards for loss or damage to any Purchased Assets, the Real Property and the Business to the extent occurring after the date hereof but prior to the Closing Date, and all right and claim of Sellers and the Company or any of their respective Affiliates to any such insurance or other compensation not paid by the Closing Date; and

 

(v)           all other assets and properties of the Company exclusively used or held for use in connection with the Business.

 

Section 1.2             Excluded Assets.  Notwithstanding anything to the contrary contained in this Agreement, immediately prior to the Closing, the Company shall assign to Sellers (or their designee) and Sellers (or their designee) shall obtain the right, title and interest in and to each and all of the following assets of the Company (the “Excluded Assets”):

 

(a)           the Excluded Contracts;

 

(b)           any rights, claims and credits (including all guarantees, indemnities, warranties and similar rights) in favor of the Company to the extent relating to (i) any excluded assets set forth in this Section 1.2, (ii) any Excluded Liability or (iii) the operation of the Business prior to the Closing Date, in the case of clause (iii), other than those that are specifically Purchased Assets under Section 1.1;

 

(c)           the Markers listed on Section 1.2(c) of the Company Disclosure Letter;

 

(d)           except for the Tray Ledger and the Markers (other than those Markers listed on Section 1.2(c) of the Company Disclosure Letter) (all of which are part of the Purchased Assets but shall be purchased in accordance with Section 4.2 hereof), and except for the Front Money which shall be treated as set forth in Section 9.11(d) hereof, all chips or tokens of other casinos, cash, cash equivalents, bank deposits or similar cash items of Sellers, the Company or Sellers’ Affiliates held at the Casino as of the Closing to the extent not reflected in the Final Closing Net Working Capital;

 

(e)           all refunds or rebates of Taxes to which Sellers are entitled under Section 12.9(g);

 

(f)            all of the human resources and other employee-related files and records, other than such files and records relating exclusively to the Transferred Employees (which files and records Sellers may retain an archival copy of, to the extent permitted by Law);

 

(g)           the Excluded Personal Property;

 

(h)           the Excluded Software;

 

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(i)            all indebtedness, accounts payable, or other obligations owed to the Company by any Seller or any of their Affiliates;

 

(j)            without limitation to Buyer’s rights pursuant to Sections 1.1(k)  and 1.1(t), the Customer Database;

 

(k)           all data, files and other materials located on any storage device (including personal computers and servers) located at the Real Property (other than the books and records described in Section 1.1(j)  hereof);

 

(l)            without limitation to Buyer’s rights pursuant to Sections 1.1(k)  and 1.1(t), the Total Rewards Program and any other player loyalty or rewards program of Sellers or their Affiliates and all customer related data;

 

(m)          any assets set forth on Section 1.2(m) of the Company Disclosure Letter;

 

(n)           the Company Benefit Plans;

 

(o)           the Company Insurance Policies (except as provided in Section 9.15);

 

(p)           the System Marks;

 

(q)           the Harrah’s Branded Paraphernalia; and

 

(r)            all other assets and properties of the Company not exclusively used or held for use in connection with the Business.

 

Section 1.3             Retention of Assets. Notwithstanding anything to the contrary contained in this Agreement, Sellers and their Affiliates may retain and use, at their own expense, archival copies of all of the Assumed Contracts, books, records and other documents or materials conveyed hereunder, in each case, which (a) are used in connection with Sellers’ or any of their Affiliates’ businesses other than the Business or (b) if Sellers, in good faith, determine that Sellers are reasonably likely to need access to, in connection with the preparation or filing of any Tax Returns or compliance with any other Tax reporting obligations or the defense (or any counterclaim, cross-claim or similar claim in connection therewith) of any suit, claim, action, proceeding or investigation (including any Tax audit or examination) against or by Sellers, the Company or any of its Affiliates pending or threatened as of the Closing Date; provided, that Sellers shall, and shall cause their Affiliates to, hold such documents or materials relating to the Business, and all confidential or proprietary information contained therein, confidential pursuant to Section 9.5(b).

 

Section 1.4             Assignability and Consents.

 

(a)           Notwithstanding anything to the contrary contained in this Agreement, if the attempted or actual conveyance, assignment or transfer to Sellers (or their designee) of any Excluded Assets is non-assignable or non-transferrable, by its terms, without the consent of a third party (each, a “Non-Assignable Excluded Asset”), then Sellers and Buyer shall each use their reasonable best efforts to obtain the authorization, approval, consent or waiver of such other party to the assignment of any such Non-Assignable Excluded Asset. Notwithstanding the

 

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foregoing, in no event shall the failure to obtain a consent with respect to a Non-Assignable Excluded Asset delay or otherwise impede the Closing, but the Closing shall not constitute the sale, conveyance, assignment, transfer or delivery of any such Non-Assignable Excluded Asset, and this Agreement shall not constitute a conveyance, assignment, transfer or delivery of any such Non-Assignable Excluded Asset unless and until such authorization, approval, consent or waiver is obtained. The parties shall enter into a commercially reasonable arrangement to provide that Sellers shall receive the interest of the Company in the benefits and obligations under such Non-Assignable Excluded Asset, and Sellers shall be liable to the Company in a fashion equivalent to what Sellers’ Liabilities would be under the Non-Assignable Excluded Asset if it were assigned, until such time as such third party authorization, approval, consent or waiver shall have been obtained, and such arrangement shall include performance by the Company as an agent of Sellers to the extent commercially reasonable. Provided that Sellers are liable for all Liabilities related to a Non-Assignable Excluded Asset that Sellers would otherwise be liable for under this Agreement if such Non-Assignable Excluded Asset constituted an Excluded Asset, Buyer shall, and shall cause the Company to, promptly pay over to Sellers (or their designee) the net amount (after expenses and Taxes) of all payments received by it in respect of such Non-Assignable Excluded Asset. In the event that the Company acts as Sellers’ agent or is otherwise required to act to fulfill obligations related to a Non-Assignable Excluded Asset pursuant to this Section 1.4(a), Sellers shall assist and fully cooperate with Buyer and the Company in fulfilling such obligations.

 

(b)           Once authorization, approval or waiver of or consent for the conveyance, assignment or transfer of any such Non-Assignable Excluded Asset is obtained, such Non-Assignable Excluded Asset shall be conveyed, assigned, transferred and delivered to Sellers (or their designee) without any further action by the parties hereto. Notwithstanding anything to the contrary contained in this Agreement, Sellers shall assume all Liabilities in respect of any Non-Assignable Excluded Asset that Sellers would otherwise assume under this Agreement if such Non-Assignable Excluded Asset constituted an Excluded Asset if it is receiving the benefits thereof; provided, further, that Sellers shall also be liable to the Company for performing its obligations under the arrangements described in Section 1.4(c) hereof.

 

(c)           Buyer understands and agrees that it is solely Buyer’s responsibility to obtain any and all operating agreements (other than the Assumed Contracts) necessary to conduct the Business from and after the Closing Date, including replacement software license agreements for the software which will replace the Excluded Software. Subject to the terms hereof, Buyer shall also be responsible for obtaining new licenses and permits for the operation of the Business from and after the Closing. Except as set forth in Section 1.1(l) hereof, no licenses or permits will be transferred by Sellers in connection with the sale of the Equity Interests.

 

Section 1.5             Removal of Excluded Assets. All items located at the Real Property that constitute Excluded Assets may be removed on or prior to the Closing Date and within ninety (90) days after the Closing Date (the “Removal Period”) by Sellers, their Affiliates or their respective Representatives, with the removing party making any repairs necessary as a result of any damage caused during such removal, but without any obligation on the part of Sellers, their Affiliates or any removing party to replace any item so removed. Buyer will provide Sellers, their Affiliates and their respective Representatives with reasonable access to the Real Property to effect such removal, at reasonable times within the Removal Period and after at least one (1)

 

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business day’s prior notice to Buyer, and Sellers will use reasonable efforts to minimize disruption to Buyer’s operations. Buyer, at its option, will have the right to have a Representative present during any such removal activity. Sellers recognize that Buyer will be replacing Excluded Software and that Buyer desires that its replacement software will be operational as of the Closing. Sellers agree to, and to cause the Company to, cooperate reasonably with Buyer in effecting the transition from Excluded Software to replacement software, by allowing Buyer access to the Real Property to install the replacement software; provided that: (a) there shall be no material interference with the Business before the Closing; (b) Sellers shall be reimbursed for any reasonable out-of-pocket costs incurred by the Company in connection with such cooperation; and (c) if Sellers or the Company shall be required to reveal proprietary information of Sellers or their Affiliates to Buyer in connection with such cooperation, then Sellers or the Company will, at Sellers’ option, either (i) not de-install third party Excluded Software that is now installed on personal computers that are included in the Acquired Personal Property (unless required to do so by Law or by agreement with the provider of the Excluded Software) and Buyer agrees that Buyer will either obtain new licenses for such Excluded Software or cease to use such Excluded Software following the Closing, or (ii) de-install third party Excluded Software that is now installed on personal computers included in the Acquired Personal Property. Buyer’s agreement pursuant to this Section 1.5 shall survive the Closing and shall be covered by Buyer’s indemnification obligations in ARTICLE XII hereof and enforceable by Sellers by any means available at Law or equity, including injunctive relief, which Buyer hereby agrees is an appropriate remedy. If Sellers do not remove all of the Excluded Assets located at the Real Property within the Removal Period, then Buyer may dispose of or retain any such remaining Excluded Assets.

 

ARTICLE II.

TREATMENT OF LIABILITIES

 

Section 2.1             Assumed Liabilities. Upon the terms and subject to the conditions set forth in this Agreement, the Company shall retain and be solely responsible for, and as a result of Buyer’s acquisition of the Equity Interests Buyer shall indirectly assume, only the Liabilities of the Company set forth in this Section 2.1, other than the Excluded Liabilities (collectively the “Assumed Liabilities”):

 

(a)           all Liabilities relating to the Purchased Assets or the Business, including all Liabilities, burdens and obligations arising in respect to any Assumed Contracts, accruing, arising out of, or relating to events, occurrences, pending or threatened litigation, acts, omissions and claims happening from and after the Closing;

 

(b)           all Liabilities for replacement of, or refund for, damaged, defective or returned goods relating to the Purchased Assets from and after the Closing, including items purchased in a gift shop or similar facility at the Casino from and after the Closing, but not including any pending product liability or litigation claims relating to the sale of any goods happening prior to the Closing;

 

(c)           all Liabilities with respect to entertainment and hotel reservations relating to the Casino (to the extent reflected in the Final Closing Net Working Capital) from and after the Closing;

 

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(d)           all Liabilities for (i) Taxes arising out of or relating to the ownership of the Company or the Purchased Assets after the Closing Date and (ii) Transfer Taxes that are the responsibility of Buyer pursuant to Section 9.9(a), in each case other than any Excluded Taxes (it being agreed and understood that this clause (d) is the only clause of Section 2.1 that applies to Taxes);

 

(e)           any Liabilities relating to the employment of the Transferred Employees by Buyer and its Affiliates (including, following the Closing, the Company and its Subsidiaries) solely to the extent accruing, arising out of, or relating to events, occurrences, acts, omissions and claims happening after the Closing (for the avoidance of doubt, including any Liabilities relating to the termination of any Transferred Employee from and after the Closing);

 

(f)            all current Liabilities reflected in the Final Closing Net Working Capital, including the Progressive Liabilities and the Customer Deposits;

 

(g)           any Liabilities assumed by Buyer pursuant to Section 9.4(f) hereof;

 

(h)           without limiting the rights and obligations of the parties set forth in ARTICLE XII hereof, all Liabilities under Environmental Laws, including Environmental Liabilities relating to, resulting from, caused by or arising out of ownership, operation or control of the Real Property or the other Purchased Assets, arising before or after the Closing Date, and any Liability relating to contamination or exposure to Hazardous Substances at or attributable to the Real Property or the other Purchased Assets;

 

(i)            all of the Company’s gaming chips and tokens with respect to the Business, which are branded with the name, design, logo or other similar indicia of the Casino, that are in circulation as of the Closing (collectively, the “Chips and Tokens”); and

 

(j)            any items set forth on Section 2.1 of the Company Disclosure Letter.

 

Section 2.2             Excluded Liabilities. Notwithstanding anything contained in this Agreement to the contrary, immediately prior to the Closing, the Company shall assign and Sellers shall assume, and from and after such time Sellers shall be responsible for, only the following Liabilities of the Company (“Excluded Liabilities”):

 

(a)           except as specifically listed in Section 2.1, all Liabilities relating to any Purchased Assets or the Business accruing, arising out of, or relating to events, occurrences, pending or threatened litigation, acts, omissions and claims happening or existing prior to the Closing, including all Liabilities arising from any breach of any Assumed Contract by Sellers or the Company on or prior to the Closing;

 

(b)           any Liabilities for any Excluded Taxes;

 

(c)           any Liabilities relating to the Transferred Employees accruing, arising out of, or relating to events, occurrences, pending or threatened litigation, acts, omissions and claims happening or existing prior to the Closing and any Liabilities arising out of or relating to the employment of any directors, employees or other service providers of Sellers or any of their Affiliates (other than the Transferred Employees), regardless of when arising;

 

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(d)           any Liabilities owed to any Seller or any of their Affiliates other than the Company;

 

(e)           any Liability that relates to any Excluded Asset, unless otherwise included in the Final Closing Net Working Capital;

 

(f)            any pending product liability or litigation claims relating to the sale of any goods happening prior to the Closing; and

 

(g)           any Liability of the Company for expenses or fees relating to the preparation, negotiation or entering into of this Agreement, including fees of financial advisors, attorneys, consultants and accountants.

 

ARTICLE III.

PURCHASE PRICE AND DEPOSIT

 

Section 3.1             Purchase Price. At the Closing, as consideration for the Equity Interests, Buyer shall deliver or cause to be delivered by electronic transfer of immediately available funds to an account designated by Sellers a cash payment equal to the sum of (a) six hundred ten million dollars ($610,000,000) (the “Purchase Price”) plus (b) the Estimated Closing Payment (which can be a positive or negative number) plus (c) the Estimated Operations Payment. The Purchase Price, together with the Estimated Closing Payment and the Estimated Operations Payment is the “Closing Payment.”

 

Section 3.2             Deposit. On the date hereof, Buyer shall deposit nine million one-hundred fifty thousand dollars ($9,150,000) (the “Deposit”) with Deutsche Bank National Trust Company (the “Escrow Agent”) pursuant to an escrow agreement in substantially the form attached hereto as Exhibit D (the “Deposit Escrow Agreement”) executed and delivered by Parent, Buyer and the Escrow Agent on the Effective Date; provided, further that for each two-month period by which the Outside Date is extended by Parent or Buyer pursuant to Section 5.1(b)(ii), Buyer shall, subject to Section 5.1(b)(iii), deposit an additional nine million one-hundred fifty thousand dollars ($9,150,000) (each, an “Extension Deposit”) with the Escrow Agent pursuant to the Deposit Escrow Agreement promptly and in any event within three (3) business days of such extension. Upon the Closing, the Deposit and any Extension Deposit, plus the interest accrued thereon shall be credited against the Purchase Price and the parties shall instruct the Escrow Agent to promptly release and pay the Deposit and any Extension Deposit, plus the interest accrued thereon to Parent (or its designee) pursuant to the terms of the Deposit Escrow Agreement. Upon the termination of this Agreement, the parties shall instruct the Escrow Agent to promptly release and pay the Deposit and any Extension Deposit, plus the interest accrued thereon to Buyer or Parent, as applicable, pursuant to Section 11.2(c) hereof and the terms of the Deposit Escrow Agreement. In the event of 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 written agreement acknowledges and expressly amends this Section 3.2.

 

Section 3.3             Allocation of Purchase Price. For federal income Tax and applicable state and local Tax Purposes, Buyer and Sellers hereby agree to treat (and to cause their respective Affiliates to treat) the purchase and sale of Equity Interests pursuant to this Agreement in

 

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accordance with Revenue Ruling 99-6 (Situation 2). No more than thirty (30) days after the Determination Date, Buyer shall prepare and deliver to Sellers a written statement setting forth the allocation of the purchase price (as determined for federal income tax purposes, taking into account any additional amounts payable pursuant to Section 4.3 and any assumed liabilities that are required to be treated as part of the purchase price for federal income tax purposes) among the Purchased Assets (and any other assets that are considered to be acquired for federal income tax purposes) in accordance with Section 1060 of the Code and the Treasury Regulations thereunder (the “Purchase Price Allocation”). Buyer and Sellers shall endeavor in good faith to agree on the Purchase Price Allocation. If Buyer and Sellers have not agreed on the Purchase Price Allocation within sixty (60) days following the Determination Date, then any disputed matter(s) will be finally and conclusively resolved by an independent accounting firm of recognized national standing reasonably acceptable to Buyer and Sellers with no existing relationship with either party (the “Auditor”) in accordance with this Agreement, as promptly as practicable, and such resolution(s) will be reflected on the Purchase Price Allocation, provided that the resolution for each disputed item contained in the Auditor’s determination shall be made subject to the definitions and principles set forth in this Agreement, and shall be consistent with either the position of Sellers or Buyer. Buyer and Sellers shall each use its reasonable best efforts to furnish to the Auditor such work papers and other documents and information pertaining to the disputed item as the Auditor may request. Sellers and Buyer shall bear their own expenses in the preparation and review of the Purchase Price Allocation, except that the fees and expenses of the Auditor shall be borne equally by Buyer on the one hand and Sellers on the other hand. Buyer and Sellers shall file all Tax Returns (including, but not limited to, IRS Form 8594) consistent with the Purchase Price Allocation, and shall not take any position inconsistent with the Purchase Price Allocation or agree to any proposed adjustment to the Purchase Price Allocation by any Governmental Entity, without first giving the other parties prior written notice and an opportunity to confer regarding such adjustment; provided, however, that the Purchase Price Allocation shall be adjusted by any other amounts paid under this Agreement following the Determination Date that affect the purchase price for federal income tax purposes; and provided, further, that nothing contained herein shall prevent Buyer or Sellers from settling any proposed deficiency or adjustment by any Governmental Entity based upon or arising out of the Purchase Price Allocation, or require Buyer or Sellers to litigate before any court any proposed deficiency or adjustment by any Governmental Entity challenging the Purchase Price Allocation.

 

Section 3.4             Risk of Loss. Subject to Section 9.15 hereof, until the Closing, Sellers shall bear the risk of any loss or damage to the Company, including the Purchased Assets, from condemnation, fire, casualty or any other occurrence. Following the Closing, Buyer shall bear the risk of any loss or damage to the Company, including the Purchased Assets, from condemnation, fire, casualty or any other occurrence.

 

Section 3.5             Tax Withholding. Notwithstanding anything in this Agreement to the contrary, Buyer shall be entitled to deduct and withhold from any amounts otherwise payable under this Agreement to Sellers or any other Person such amounts as are required to be deducted or withheld under the Code, or any provision of applicable Law with respect to the making of such payment. To the extent that amounts are so deducted and withheld and paid over to the applicable Governmental Entity, such deducted and withheld amounts shall be treated for all purposes of this Agreement as having been paid to Sellers or such other Person in respect of which such deduction and withholding were made.

 

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ARTICLE IV.

WORKING CAPITAL ADJUSTMENT AND OTHER ADJUSTMENTS

 

Section 4.1             Estimated Closing Statement. No less than five (5) business days prior to the Closing Date, Sellers shall prepare and deliver to Buyer a written closing statement (the “Estimated Closing Statement”) of the Estimated Closing Net Working Capital, including the resulting Estimated Closing Net Working Capital Overage (if any) or Estimated Closing Net Working Capital Shortage (if any), and the proration amounts pursuant to Section 4.6 (to the extent not already reflected in the Estimated Closing Net Working Capital), which Estimated Closing Statement shall be prepared in good faith and on a basis consistent with the preparation of the Financial Information and the calculation of Net Working Capital set forth on Schedule B. Any amounts determined to be due and owing to Sellers pursuant to the Estimated Closing Statement shall be paid by Buyer at the Closing pursuant to Section 3.1 hereof (the “Estimated Closing Payment”). Any amounts determined to be due and owing to Buyer by Sellers pursuant to the Estimated Closing Statement shall reduce the Closing Payment payable to Sellers at the Closing pursuant to Section 3.1.

 

Section 4.2             Estimated Operations Statement. Not less than five (5) business days prior to the Closing Date, Sellers shall prepare and deliver to Buyer an estimated accounting for the Casino as of the Closing Date of each of the items set forth in this Section 4.2 (the “Estimated Operations Statement”), which Estimated Operations Statement shall be prepared in good faith and on a basis consistent with the calculation of the Tray Ledger and Markers set forth on Schedule C. All amounts determined to be due and owing to Sellers by Buyer pursuant to the Estimated Operations Statement shall be paid by Buyer to Sellers at the Closing, pursuant to Section 3.1 hereof (the “Estimated Operations Payment”).

 

(a)           Tray Ledger. Buyer shall purchase the Tray Ledger for the Casino at the face amount of such Tray Ledger as set forth in the Estimated Operations Statement.

 

(b)           Markers. Buyer shall purchase the Markers for the Casino from Sellers at the face amount of such Markers as set forth in the Estimated Operations Statement.

 

(c)           House Funds. Buyer and Sellers shall mutually agree upon a procedure consistent with the counting of House Funds in the Ordinary Course of Business and in accordance with applicable Laws for counting and determining all House Funds as of the Closing, with such amount being included in the Calculation of the Estimated Closing Net Working Capital. Buyer shall have no obligation to purchase chips or tokens of other casinos, all of which shall be retained by Sellers and are Excluded Assets.

 

Section 4.3             Final Adjustments.

 

(a)           No more than ninety (90) days after the Closing Date, Sellers shall prepare and deliver to Buyer a written statement (the “Final Closing Statement”) of the Final Closing Net Working Capital, including the resulting Final Closing Net Working Capital Overage (if any) or Final Closing Net Working Capital Shortage (if any), and including a detailed breakdown of the various amounts of each component of Net Working Capital, and the proration amounts pursuant to Section 4.6 (to the extent not already reflected in the Estimated Closing Net Working Capital), which Final Closing Statement shall be prepared in good faith and on a basis consistent with the preparation of the Financial Information and the calculation of Net Working Capital set forth on

 

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Schedule B. Any such amounts determined pursuant to the Final Closing Statement shall be paid to either Sellers or Buyer pursuant to Section 4.3(d) hereof (the “Final Closing Payment”).

 

(b)           No more than ten (10) business days after the Closing Date, Sellers shall deliver to Buyer a final accounting as of the Closing of each of the items set forth in Section 4.2 hereof (the “Final Operations Statement”), which Final Operations Statement shall be prepared in good faith and on a basis consistent with the calculation of the Tray Ledger and Markers set forth on Schedule C. Any such amounts determined pursuant to the Final Operations Statement shall be paid to either Sellers or Buyer, as applicable, pursuant to Section 4.3(d) hereof (the “Final Operations Payment”).

 

(c)           If Buyer disagrees with the calculation of any amounts on the Final Closing Statement and/or the Final Operations Statement (collectively, the “Final Statements”), Buyer shall, within twenty (20) business days after its receipt of the applicable Final Statement, notify Sellers of such disagreement in writing, setting forth in detail the particulars of such disagreement. Sellers will provide Buyer reasonable access to any of Sellers’ records and relevant employees not otherwise available to Buyer as a result of the transactions contemplated hereby, to the extent reasonably related to Buyer’s review of the Final Statements. If Buyer does not provide such notice of disagreement within the twenty (20) business day period, Buyer shall be deemed to have accepted the applicable Final Statement and the calculation of all amounts set forth thereon, which shall be final, binding and conclusive for purposes of this Agreement and not subject to any further recourse by Buyer or its Affiliates. If any such notice of disagreement is timely provided, Buyer and Sellers shall use reasonable best efforts for a period of five (5) business days (or such longer period as they may mutually agree) to resolve any disagreements with respect to the calculation of any and all amounts set forth on the applicable Final Statement. If, at the end of such period, the parties are unable to fully resolve the disagreements, the Auditor shall resolve any remaining disagreements. The Auditor shall be instructed to (i) consider only such matters as to which there is a disagreement, (ii) determine, as promptly as practicable, whether the disputed amounts set forth on the applicable Final Statement were prepared in accordance with the standards set forth in this Agreement, and (iii) deliver, as promptly as practicable, to Sellers and Buyer its determination in writing. The resolution for each disputed item contained in the Auditor’s determination shall be made subject to the definitions and principles set forth in this Agreement, and shall be consistent with either the position of Sellers or Buyer. Sellers and Buyer shall bear their own expenses in the preparation and review of the Estimated Closing Statement, Final Closing Statement, Estimated Operations Statement and Final Operations Statement, except that the fees and expenses of the Auditor shall be paid one-half by Buyer and one-half by Sellers. The determination of the Auditor shall be final, binding and conclusive for purposes of this Agreement and not subject to any further recourse by Buyer, Sellers or their respective Affiliates. Any dispute with respect to the Final Statements will not affect any undisputed amounts in the Final Statements or the related payments contemplated by Section 4.3(d) hereof. The date on which an amount set forth on a Final Statement is finally determined in accordance with this Section 4.3(c) is hereinafter referred to as the “Determination Date.”

 

(d)           Any amounts determined to be due and owing to Sellers from Buyer or to Buyer from Sellers, as applicable, pursuant to this Section 4.3 shall be paid by Sellers to Buyer or by Buyer to Sellers, as applicable, within two (2) business days after the applicable Determination Date.

 

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Section 4.4             Accounts Receivable; Accounts Payable; Deposits.

 

(a)           Accounts Receivable. After the Closing, Parent and Sellers shall promptly deliver to Buyer any cash, checks or other property that they or any of their Affiliates receive to the extent relating to the Accounts Receivable of the Business included in the Final Closing Net Working Capital. After the Closing, Buyer shall promptly deliver to Sellers any cash, checks or other property that Buyer or its Affiliates receive to the extent relating to any Accounts Receivable existing as of the Closing Date and not included in the Final Closing Net Working Capital. Neither party nor their Affiliates shall agree to any settlement, discount or reduction of the Accounts Receivable belonging to the other party. Neither party nor their Affiliates shall assign, pledge or grant any security interest in the Accounts Receivable of the other party.

 

(b)           Accounts Payable. Each party and their Affiliates will promptly deliver to the other a true copy of any invoice, written notice of accounts payable or written notice of a dispute as to the amount or terms of any accounts payable received from the creditor of such accounts payable to the extent such accounts payable is owed by the other party. Should either party discover it has paid an accounts payable belonging to the other party, then Buyer or Sellers, as applicable, shall provide written notice of such payment to the other party and the other party shall promptly reimburse the party that paid such accounts payable all amounts listed on such notice.

 

(c)           Customer Deposits. Customer Deposits received by the Company relating to rooms, services and/or events relating to the period from and after the Closing shall be retained by the Company at the Closing and included in the calculation of the Final Closing Net Working Capital. Sellers shall not have further liability or responsibility after Closing with respect to any Customer Deposits relating to the period from and after the Closing and Sellers and their Affiliates shall be entitled to retain Customer Deposits to the extent of rooms and/or services furnished by Sellers prior to the Closing. “Customer Deposits” include all security and other deposits, advance or pre-paid rents or other amounts and key money or deposits (including any interest thereon) and Front Money.

 

Section 4.5             Corrective Actions. If, after the Closing, Sellers and Buyer determine that Sellers have transferred to Buyer, directly or indirectly, any assets or Liabilities that, pursuant to the terms of this Agreement, constitute Excluded Assets or Excluded Liabilities, or Sellers have retained any assets or Liabilities that, pursuant to the terms of this Agreement, constitute Purchased Assets or Assumed Liabilities, then such assets or Liabilities shall be returned or transferred, as applicable, for no additional payment, and the other party shall be obliged to accept such return or transfer.

 

Section 4.6             Prorations. The prorations relating to the Purchased Assets and the ownership and operation of the Business set forth in this Section 4.6 will be made as of the Closing. The prorations shall be estimated and prepared by Sellers and included in the Estimated Closing Statement and the Final Closing Statement delivered to Buyer pursuant to Section 4.1 and Section 4.3, respectively (in each case to the extent not already reflected in the Estimated Closing Net Working Capital).

 

(a)           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

 

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charges to that time paid by Sellers and charges thereafter paid by Buyer. Prepaid utility charges shall be adjusted on the Estimated Closing Statement and Final 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 Buyer and Sellers as of the Closing. Sellers or Buyer, as appropriate, shall, upon receipt, submit a copy of the utility billings for any such charges to the other party and such receiving party shall pay its pro-rata share of such charges to the submitting party within seven (7) days from the date of any such submission (to the extent not already reflected in the Estimated Closing Net Working Capital).

 

(b)           All income and expenses pursuant to the Assumed Contracts will be prorated between Buyer and Sellers as of the Closing Date on the Estimated Closing Statement and Final Closing Statement. Sellers shall receive a credit on the Estimated Closing Statement and Final Closing Statement for (i) the amount of any prepaid rents related to periods from and after the Closing, and (ii) security deposits, or other deposits previously paid by Sellers under the Assumed Contracts, less any such amounts paid to and collected by Sellers under the Assumed Contracts. Any amounts received by Buyer under the Assumed Contracts related to any period prior to the Closing shall be promptly paid to Sellers. Any amounts received by Sellers under the Assumed Contracts related to any period after the Closing shall be promptly paid to Buyer.

 

Except as otherwise specified in this Section 4.6 or agreed by the parties or with respect to adjustments to the Purchase Price made pursuant to Section 4.3, the net amount of all such prorations will be settled and paid on the Closing Date.

 

ARTICLE V.

CLOSING

 

Section 5.1             Time and Place.

 

(a)           Unless this Agreement is earlier terminated pursuant to ARTICLE XI hereof, the closing of the transactions contemplated by this Agreement, including the purchase and sale of the Equity Interests (the “Closing”), shall take place promptly (but in no event more than five (5) business days) following the satisfaction or waiver by the applicable party of the conditions set forth in ARTICLE X hereof (other than those conditions to be satisfied or waived at or upon the Closing), at such time and place as is agreed to by the parties (the “Closing Date”), to be effective as of 12:01 a.m. Central Time on the Closing Date.

 

(b)           Notwithstanding the foregoing:

 

(i)            Sellers may postpone the Closing Date as set forth in Section 13.2 hereof;

 

(ii)           the Closing Date shall not be later than the date which is six (6) months after the date of this Agreement (as may be extended pursuant to this Section 5.1, the “Outside Date”), unless extended by Parent or Buyer, one or more times, by a two (2) month period by providing the other with a written notice of an intent to postpone the Closing Date no earlier than ten (10) business days prior to the then-applicable Outside Date and no later than five (5) business days prior to the then-applicable Outside Date (any which extension shall give rise to Buyer’s obligation to pay an Extension Deposit pursuant to Section 3.2); provided, however,

 

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that in no event shall the Closing Date be later than the date which is twelve (12) months after the date of this Agreement; and

 

(iii)          notwithstanding anything to the contrary in this Section 5.1(b), if, at the time of delivery of an extension notice pursuant to Section 5.1(b)(ii), (x) Buyer has taken, or agreed to or committed to take (A) any action in breach of Section 9.13, or (B) any action that has materially delayed, or is reasonably likely to materially delay, the receipt of, or materially impact the ability of a party to obtain, any Required Governmental Consent that has not been obtained, or (C) any action that has caused, or is reasonably likely to cause, any Governmental Entity to commence or re-open a Proceeding that would reasonably be expected to challenge or prevent the transactions contemplated by this Agreement or delay the Closing beyond the Outside Date, then the amount of the Extension Deposit payable by Buyer pursuant to Section 3.2 in connection with such extension shall be equal to twenty-three million three-hundred sixty-three thousand dollars ($23,363,000).

 

Section 5.2             Deliveries at Closing. The following documents will be executed and/or delivered by Buyer, Sellers and/or the Company, as appropriate, at or prior to the Closing:

 

(a)           Bill of Sale for Personal Property. A Bill of Sale and Assignment substantially in the form attached as Exhibit A (the “Bill of Sale and Assignment”), conveying to Sellers (or their designee) all of the Excluded Assets.

 

(b)           Excluded Liabilities. An Assignment and Assumption Agreement substantially in the form attached as Exhibit B (the “Assignment and Assumption Agreement”) to transfer the Excluded Liabilities to Sellers (or their designee), and Sellers agree to execute and deliver such other assumption agreements or other documents required by any Person to effectuate the assumption of the Excluded Liabilities.

 

(c)           FIRPTA Certificate. A duly executed non-foreign person affidavit of each Seller (or, in the case of a Seller that is a disregarded entity, the Person treated as the “transferor” with respect to such Seller within the meaning of Treasury Regulations Section 1.1445-2(b)(2)(iii)) dated as of the Closing Date, sworn under penalty of perjury and in form and substance required under the Treasury Regulations issued pursuant to Section 1445 of the Code, stating that such Seller is not a “foreign person” as defined in Section 1445 of the Code.

 

(d)           Buyer Certificates. The certificates required by Sections 10.3(a) and (b) hereof.

 

(e)           Sellers Certificates. The certificates required by Sections 10.2(a) and (b) hereof.

 

(f)            Trademark Assignment. The short-form Trademark Assignment Agreement substantially in the form attached hereto as Exhibit C (the “Trademark Assignment Agreement”), conveying certain Transferred Intellectual Property from CLC to the Company.

 

(g)           Equity Interests. An Assignment of Equity Interests substantially in the form attached as Exhibit F (the “Assignment of Equity Interests”), conveying to Buyer (or its designee) all of the Equity Interests, and certificates evidencing the Equity Interests, to the extent the Equity Interests are certificated.

 

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(h)           Resignations. Resignations, effective as of the Closing Date, of those officers of the Company as Buyer may request in writing no less than ten (10) days prior to the Closing Date.

 

(i)            Other Documents. Any other documents, instruments or agreements which are reasonably requested that are necessary to consummate the transactions contemplated hereby and have not previously been delivered (including execution and delivery by Sellers to the Title Insurer of customary affidavits and other documentation as to matters of title in a form reasonably acceptable to Sellers and Title Insurer to allow Title Insurer to issue the Endorsement).

 

ARTICLE VI.

REPRESENTATIONS AND WARRANTIES OF PARENT AND SELLERS

 

Parent and Sellers represent and warrant to Buyer that the statements contained in this ARTICLE VI are true and correct as of the date of this Agreement (except as to such representations and warranties that address matters as of a particular date, which are given only as of such date).

 

Section 6.1             Organization of Parent and Sellers. Parent and Sellers are each duly organized and validly existing under the laws of its state of organization and has all requisite power and authority to own, lease and operate its assets and to carry on its business as now being conducted. Parent and Sellers are each 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, individually or in the aggregate, be reasonably likely to (x) have a material adverse effect on Parent or Sellers or a Company Material Adverse Effect or (y) materially impair or materially delay the Closing. Each Seller is a direct or indirect wholly-owned Subsidiary of Parent.

 

Section 6.2             Authority; No Conflict; Required Filings and Consents.

 

(a)           Parent and each Seller have all requisite power and authority to enter into this Agreement and each of the Ancillary Agreements to which it is a party and to consummate the transactions contemplated hereby and thereby. Parent’s and each Sellers’ execution and delivery of this Agreement and each Ancillary Agreement to which it is a party and the consummation by Parent and Sellers of the transactions contemplated hereby and thereby have been duly authorized by all necessary action on the part of Parent and Sellers. This Agreement has been, and each Ancillary Agreement will be at or prior to the Closing, duly executed and delivered by Parent and Sellers and, assuming the due authorization, execution and delivery by the other parties hereto and thereto, this Agreement constitutes, and each Ancillary Agreement when so executed and delivered will constitute, the valid and binding obligation of Parent and Sellers, enforceable against Parent and Sellers in accordance with their respective 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 by Parent and each Seller of this Agreement and each Ancillary Agreement to which it is a party does not, and the consummation by Parent

 

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and Sellers of the transactions contemplated hereby and thereby and the compliance by Parent and Sellers with any provisions hereof or thereof will not, (i) conflict with, or result in any violation or breach of, any provision of the organization documents of Parent or Sellers, (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 material benefit) under, or require a consent or waiver under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, lease, Contract or obligation to which Parent or Sellers are a party or by which Parent or Sellers or the Purchased Assets may be bound, (iii) result in the creation of any Lien or Encumbrance (other than Permitted Liens and Permitted Encumbrances) on any of the Purchased Assets pursuant to, any note, bond, mortgage, indenture, agreement, lease, license, permit, franchise, instrument, obligation or other Contract to which Parent or Sellers are a party or by which Parent or Sellers or the Purchased Assets may be bound or affected, or (iv) subject to the governmental filings and other matters referred to in Section 7.2(c) hereof, conflict with or violate any permit, concession, franchise, license, judgment, or Law applicable to Parent or Sellers or the Purchased Assets, except, in the case of clauses (ii), (iii) and (iv), for any such breaches, conflicts, violations, defaults, terminations, cancellations, accelerations, losses or failures to obtain any such consent or waiver which would not, individually or in the aggregate, be reasonably likely to (x) have a material adverse effect on Parent or Sellers or a Company Material Adverse Effect or (y) materially impair or materially delay the Closing.

 

(c)           No consent, approval, finding of suitability, license, permit, waiver, order or authorization of, or registration, declaration or filing with, any court, administrative agency, commission, Gaming Authority or other governmental or regulatory authority or instrumentality (“Governmental Entity”) is required by or with respect to Parent or Sellers in connection with the execution and delivery of this Agreement or the Ancillary Agreements by Parent and Sellers, the compliance by Parent and Sellers with any of the provisions hereof or thereof, or the consummation by Parent and Sellers of the transactions to which they are a party that are contemplated hereby, except for (i) the filing of the notification under, and compliance with any other applicable requirements of, the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations promulgated thereunder (the “HSR Act”), (ii) any approvals and 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 alcoholic beverages or tobacco or the renaming or rebranding of the operations at the Real Property, (iv) such other filings, consents, approvals, findings of suitability, licenses, waivers, orders, authorizations, permits, registrations and declarations as may be required under the Laws of any jurisdiction in which Parent and Sellers conduct any business or own any assets, the failure of which to make or obtain would not, individually or in the aggregate, be reasonably likely to have a material adverse effect on Parent or Sellers or a Company Material Adverse Effect and (v) any consents, approvals, orders, authorizations, registrations, permits, declaration or filings required by Buyer or any of its Subsidiaries, Affiliates or key employees (including under the Gaming Laws).

 

Section 6.3             Title to Equity Interests. Sellers are the record and beneficial owners of all Equity Interests, free and clear of all Liens, Encumbrances or any other restrictions on transfer other than restrictions on transfer arising under applicable securities Laws. Sellers are not party to any option, warrant, purchase right or other Contract (other than this Agreement)

 

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obligating Sellers to sell, transfer, pledge or otherwise dispose of Equity Interests. Sellers are not a party to any voting trust, proxy or other agreement or understanding with respect to the Equity Interests.

 

Section 6.4             Litigation. There is no action, suit or proceeding, claim, arbitration or investigation against Parent or Sellers, pending, or as to which Parent or Sellers have received any written notice of assertion or which, to Sellers’ knowledge, have been threatened against, Sellers, the Purchased Assets, the Real Property or the Business before any Governmental Entity that, individually or in the aggregate, would be reasonably likely to have a Company Material Adverse Effect or materially impair or materially delay the Closing.

 

ARTICLE VII.

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

 

The Company represents and warrants to Buyer that the statements contained in this ARTICLE VII are true and correct as of the date of this Agreement and as of the Closing (except as to such representations and warranties that address matters as of a particular date, which are given only as of such date), except as expressly set forth herein and in the corresponding section of the Disclosure Letter delivered by the Company to Buyer herewith (the “Company Disclosure Letter”). The Company 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 reasonably apparent on the face of such disclosure that the matter disclosed is relevant to another paragraph in this Agreement, qualify such other paragraph.

 

Section 7.1             Organization of the Company; Capitalization. The Company is duly organized and validly existing under the laws of its state of organization and has all requisite power and authority to own, lease and operate its assets and to carry on the Business as now being conducted. The Company 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, individually or in the aggregate, be reasonably likely to (x) have a Company Material Adverse Effect or (y) materially impair or materially delay the Closing. All of the Equity Interests are duly authorized, validly issued, fully paid and nonassessable and were issued in compliance with all applicable Laws. No Person has any rights in, or rights to acquire from the Company, any other equity related interests of the Company or any other securities convertible into, or exercisable or exchangeable for, equity interests of the Company. There are no outstanding options, warrants or other securities or subscription, preemptive or other rights convertible into or exchangeable or exercisable for any equity or voting interests of the Company and there are no “phantom stock” rights, stock appreciation rights or other similar rights with respect to the Company. The Company does not own any direct or indirect equity interest, participation or voting right in any other Person or any options, warrants, convertible securities, exchangeable securities, subscription rights, preemptive rights, rights of first refusal, conversion rights, exchange rights, repurchase rights, stock appreciation rights, phantom stock, profit participation or other similar rights in or issued by any other Person.

 

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Section 7.2             Authority; No Conflict; Required Filings and Consents.

 

(a)           The Company has all requisite power and authority to enter into this Agreement and each of the Ancillary Agreements to which it is a party and to consummate the transactions contemplated hereby and thereby. The Company’s execution and delivery of this Agreement and each Ancillary Agreement to which it is a party and the consummation by the Company of the transactions contemplated hereby and thereby have been duly authorized by all necessary action on the part of the Company. This Agreement has been, and each Ancillary Agreement will be at or prior to Closing, duly executed and delivered by the Company party thereto and, assuming the due authorization, execution and delivery by the other parties hereto and thereto, this Agreement constitutes, and each Ancillary Agreement when so executed and delivered will constitute, the valid and binding obligation of the Company, enforceable against the Company in accordance with their respective 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 by the Company of this Agreement and each Ancillary Agreement to which it is a party, the consummation by the Company of the transactions contemplated hereby and thereby, and the compliance of the Company with any provisions hereof or thereof, does not or will not, (i) conflict with, or result in any violation or breach of, any provision of the organization documents of the Company, (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 material benefit) under, or require a consent or waiver under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, lease, Contract or obligation to which the Company is a party or by which the Company or the Purchased Assets may be bound, (iii) result in the creation of any Lien or Encumbrance (other than Permitted Liens and Permitted Encumbrances) on any of the Purchased Assets pursuant to, any note, bond, mortgage, indenture, agreement, lease, license, permit, franchise, instrument, obligation or other Contract to which the Company is a party or by which the Company or the Purchased Assets may be bound or affected, or (iv) subject to the governmental filings and other matters referred to in Section 7.2(c) hereof, conflict with or violate any permit, concession, franchise, license, judgment, or Law applicable to the Company or the Purchased Assets, except, in the case of clauses (ii), (iii) and (iv), for any such breaches, conflicts, violations, defaults, terminations, cancellations, accelerations, losses or failures to obtain any such consent or waiver which would not, individually or in the aggregate, be reasonably likely to (x) have a Company Material Adverse Effect or (y) materially impair or materially delay the Closing.

 

(c)           No consent, approval, finding of suitability, license, permit, waiver, order or authorization of, or registration, declaration or filing with, any Governmental Entity is required by or with respect to the Company in connection with the execution and delivery of this Agreement or the Ancillary Agreements by the Company or the consummation by the Company of the transactions to which it is a party that are contemplated hereby, except for (i) the filing of the notification under, and compliance with any other applicable requirements of, the HSR Act, (ii) any approvals and 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 alcoholic beverages or tobacco or the renaming or rebranding of the operations at the Real Property, (iv) such other filings, consents, approvals, findings of suitability, licenses, waivers, orders, authorizations, permits, registrations and declarations as may be required under

 

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the Laws of any jurisdiction in which the Company conducts any business or owns any Purchased Assets, the failure of which to make or obtain would not, individually or in the aggregate, be reasonably likely to (x) have a Company Material Adverse Effect or (y) materially impair or materially delay the Closing, and (v) any consents, approvals, orders, authorizations, registrations, permits, declaration or filings required by Buyer or any of its Subsidiaries, Affiliates or key employees (including under the Gaming Laws).

 

Section 7.3             Financial Statements.

 

(a)           Section 7.3 of the Company Disclosure Letter contains a true and complete copy of the audited financial statements of the Company for the twelve (12) months ended December 31, 2011 and December 31, 2010 (the “Financial Information”). Except as noted therein, the Financial Information was prepared in accordance with GAAP in effect at the time of such preparation applied on a consistent basis throughout the periods involved and fairly presents in all material respects the financial position and results of operations of the Business as of such date and the results of the Business for such period. No representation or warranty is made that Buyer will be able to operate the Business for the costs reflected in the Financial Information.

 

(b)           The Company has devised and maintained systems of internal accounting controls sufficient to provide reasonable assurances that (i) transactions are executed in accordance with management’s general or specific authorization, (ii) transactions are recorded as necessary to permit the preparation of the Financial Information in conformity with GAAP, to the extent applicable, or the Company’s internal accounting principles and to maintain proper accountability for items, (iii) access to its property and assets is permitted only in accordance with management’s general or specific authorization and (iv) the recorded accountability for items is compared with the actual levels at reasonable intervals and appropriate action is taken with respect to any differences.

 

(c)           The Financial Information was prepared from the books and records of the Company, which (i) have been maintained in material compliance with applicable legal and accounting requirements and reasonable business practices, (ii) are in all material respects complete and correct and fairly reflect, in all material respects, all dealings and transactions in respect of the Business and the assets and liabilities thereof, and (iii) represent the financial information which is included in the consolidated audited financial statements of Parent.

 

Section 7.4             No Undisclosed Liabilities. Except (i) as set forth in the Financial Information, (ii) for Excluded Liabilities and (iii) for Liabilities incurred since December 31, 2011 in the Ordinary Course of Business, the Company has no Liabilities which would, individually or in the aggregate, reasonably be expected to cause a Company Material Adverse Effect.

 

Section 7.5             Taxes.

 

(a)           Except as would not, individually or in the aggregate, reasonably be expected to cause a Company Material Adverse Effect, the Company has timely filed with the appropriate Governmental Entities all Tax Returns required to be filed by the Company and all such Tax Returns are true, complete and accurate. The Company has timely paid all Taxes due from the Company whether or not shown on such Tax Returns or the Company has established an adequate reserve therefor in the Financial Information in accordance with GAAP, except as

 

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would not, individually or in the aggregate, reasonably be expected to cause a Company Material Adverse Effect.

 

(b)           Other than as set forth on Section 7.5(b)(i) of the Company Disclosure Letter , there are no claims, actions, audits or other proceedings with any Governmental Entities are presently ongoing or pending or threatened in writing in respect of any material Taxes of the Company. There are no outstanding waivers extending the statutory period of limitation relating to Taxes of the Company. Schedule 7.5(b)(ii) of the Company Disclosure Letter lists each agreement with any Governmental Entity with respect to any material Tax holiday or other material Tax incentive currently in effect with respect to the Company or the Purchased Assets, and Sellers have delivered or made available to Buyer a copy of any such agreement with the relevant Governmental Entity.

 

(c)           There are no Liens for Taxes (other than Permitted Liens) on the Company or any Purchased Assets, except as which would not, individually or in the aggregate, reasonably be expected to cause a Company Material Adverse Effect. None of the Purchased Assets are required to be treated for Tax purposes as owned by a Person other than the Company. Except as would not, individually or in the aggregate, reasonably be expected to cause a Company Material Adverse Effect, (i) the Company has complied in all respects with all Laws relating to the payment and withholding of Taxes, including with respect to payments made to employees, independent contractors, shareholders or other Persons, and (ii) all Persons classified by the Company as independent contractors are correctly classified for Tax purposes.

 

(d)           The Company is not a party to or bound by any Tax sharing, Tax indemnity, or Tax allocation agreement other than any such agreements that are customary ordinary course commercial contracts not primarily related to Taxes. No “closing agreements” described in Section 7121 of the Code (or any comparable provision of state, local or foreign Law) have been entered into by or with respect to the Company and no Tax ruling has been requested or received by or with respect to the Company, in each case, that (x) would bind Buyer or any of its Affiliates (including the Company) after the Closing and (y) would have, or reasonably be expected to have, a material effect on the Purchased Assets, the Business, Buyer, any Affiliate of Buyer or the Company after the Closing.

 

(e)           The Company has not entered into any “listed transaction” within the meaning of Treasury Regulations Section 1.6011-4(b)(2). Neither Buyer nor the Company will be required to include any material item of income in, or exclude any material item of deduction from, taxable income for any Post-Closing Period as a result of any (i) adjustment required by reason of a change in method of accounting for a Pre-Closing Period under Section 481(c) of the Code (or any corresponding or similar provision of state, local or foreign Law), or (ii) installment sale or intercompany transaction made prior to the Closing.

 

(f)            The Company has not distributed the capital stock of any corporation in a transaction intended to qualify under Section 355 of the Code within the past two years prior to the date of this Agreement, nor has the Company been distributed in a transaction intended to qualify under Section 355 of the Code within the past two years prior to the date of this Agreement. The Company is and since 2002 has been classified as a partnership for federal income tax purposes, and during this period neither the Company nor any of its Affiliates has received any written notice from any Governmental Entity challenging such classification and no

 

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Affiliate has taken a position inconsistent with such classification. Since 2002 and, to the knowledge of the Company, from the formation of the Company to 2002, the Company has never been a member of any consolidated, combined, unitary or affiliated Tax Return group. The Company does not own stock or other equity interests, for tax purposes or otherwise, in any corporation, partnership or other entity.

 

Section 7.6             Real Property.

 

(a)           All Real Property owned by the Company is described on Section 7.6(a) of the Company Disclosure Letter (the “Owned Real Property”). The Company has valid and insurable (at ordinary rates) fee simple title to the Owned Real Property subject, in each case, to all Permitted Liens and Permitted Encumbrances.

 

(b)           The Company does not lease any Real Property.

 

(c)           There are no actions, proceedings, governmental investigations, arbitrations, unsatisfied orders or judgments, actions, litigation, suits, or other proceedings, pending (or, to the Company’s knowledge, overtly contemplated or threatened) against the Company or otherwise relating to the Real Property or the interests of the Company therein, which would be reasonably likely to interfere with the use, ownership, improvement, development and/or operation of the Real Property; in each case except for such actions, proceedings or litigation, which, individually or in the aggregate, would not be reasonably likely to (x) have a Company Material Adverse Effect or (y) materially impair or materially delay the Closing.

 

(d)           There are no pending condemnation, eminent domain, or similar proceedings or actions pending or, to the Company’s knowledge, threatened with regard to the Real Property.

 

(e)           There are no violations or alleged violations of any Laws with respect to the Real Property, including but not limited to zoning and the Americans with Disabilities Act matters which would, individually or in the aggregate, be reasonably likely to (x) have a Company Material Adverse Effect or (y) materially impair or materially delay the Closing. To the Company’s knowledge, there are no material inquiries, complaints, proceedings or investigations (excluding routine, periodic inspections) pending regarding compliance of the Real Property with any such Laws.

 

(f)            To the Company’s knowledge, all material Improvements located on, under, over or within the Real Property (including chillers and elevators), and all other aspects of each parcel of Real Property, are in good operating condition and repair and are structurally sound and free of any material defects.

 

(g)           The Company has not filed notices of protest or appeal against, or commenced proceedings to recover, real property tax assessments against any of the Real Property.

 

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Section 7.7             Intellectual Property.

 

(a)           Section 7.7(a)(1) of the Company Disclosure Letter lists all of the trademark and service mark registrations and applications owned by the Company and Caesars License Company, LLC, an indirect wholly-owned subsidiary of Parent (“CLC”) as of the date hereof and used exclusively in connection with the operation of the Business, and all of the Internet domain names registered by or for the benefit of the Company or CLC and used exclusively in the Business (collectively, the “Transferred Marks and Domain Names”), which Transferred Marks and Domain Names will be owned by the Company at the Closing. Section 7.7(a)(2) of the Company Disclosure Letter lists all issued patents or patent applications or any registered copyrights that are owned by the Company and used exclusively in the Business (“Other Transferred Registered IP”). To the Company’s knowledge, no Transferred Marks and Domain Names or Other Transferred Registered IP are now involved in any opposition or cancellation proceeding and, to the Company’s knowledge, no such proceeding is or has been threatened in writing with respect thereto. To the Company’s knowledge, all Transferred Marks and Domain Names and Other Transferred Registered IP are subsisting, valid and enforceable, and no abandonment, cancellation, or forfeiture of any of the Transferred Marks and Domain Names or Other Transferred Registered IP is pending or threatened in writing. To the Company’s knowledge, neither the Company nor any of its Affiliates have received any written notice or claim challenging the validity or enforceability of any Transferred Marks and Domain Names or Other Transferred Registered IP that remains pending or unresolved as of the date hereof.

 

(b)           Except as set forth on Section 7.7(b) of the Company Disclosure Letter, the Company and CLC own exclusively, free and clear of all Liens (except for any Permitted Liens), all Transferred Intellectual Property. Neither the Company nor any of its Affiliates has received any written notice or claim challenging the Company’s or CLC’s ownership of any Transferred Intellectual Property, in each case that remains pending or unresolved as of the date hereof. To the Company’s knowledge, as of the date hereof the Company and CLC own or possess, and at the Closing the Company will own or possess, adequate and enforceable rights to use all Transferred Intellectual Property or Intellectual Property licensed to the Company or CLC, as applicable, pursuant to an Assumed Contract that is used in connection with the Business, as currently operated, without material restrictions or material conditions on use (except as set forth in the Assumed Contracts).

 

(c)           To the Company’s knowledge, the Business, including the operation of the Casino and the use of any of the Transferred Intellectual Property in connection therewith, has not infringed upon, misappropriated or violated, and do not infringe upon, misappropriate or violate, any Intellectual Property of any third party, in each case, in any material respect. Neither the Company nor any of its Affiliates has received any written notice or claim asserting that any such infringement, misappropriation, or violation is or may be occurring or has or may have occurred that remains pending or unresolved. To the Company’s knowledge, no third party is misappropriating, infringing, or violating in a material manner any Transferred Intellectual Property.

 

Section 7.8             Agreements, Contracts and Commitments. (i) Each Assumed Contract is valid and binding upon the Company (and, to the Company’s knowledge, on all other parties thereto), in accordance with its terms and is in full force and effect, (ii) there is no breach or violation of or default by the Company or, to the Company’s knowledge, by any other party under any of the Assumed Contracts, whether or not such breach, violation or default has been

 

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waived, and (iii) no event has occurred with respect to the Company or, to the Company’s knowledge, any other party, 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 the Assumed Contracts, which breach, violation, default, termination, modification, cancellation, foreclosure, imposition of a Lien, prepayment or acceleration referred to in clause (ii) or (iii) would, individually or in the aggregate, be reasonably likely to (x) have a Company Material Adverse Effect or (y) materially impair or materially delay the Closing. None of Sellers, the Company or any of their Affiliates has received any written notice (or, to the knowledge of the Company, any oral or other notice) of the intention of any Person to terminate, nor has there been any termination of, any Assumed Contract. The Company has made available to Buyer a true, correct and complete copy of all material Assumed Contracts, together with all amendments, waivers or other changes thereto.

 

Section 7.9             Litigation. Other than as set forth on Section 7.9 of the Company Disclosure Letter, there is no action, suit or proceeding, claim, arbitration or investigation against the Company, pending, or as to which the Company has received any written notice of assertion or, to the Company’s knowledge, threatened against, the Company, the Purchased Assets, the Real Property or the Business before any Governmental Entity, that, individually or in the aggregate, would be reasonably likely to (x) have a Company Material Adverse Effect or (y) materially impair or materially delay the Closing. The Company, the Purchased Assets, the Real Property and the Business are not subject to any judgment, decree, injunction, rule or order of any Governmental Entity or any arbitrator that individually or in the aggregate materially interfere with, or would reasonably be expected to materially interfere with, the ability of the Business to be conducted as it is currently conducted or to utilize its properties, assets and rights as currently utilized.

 

Section 7.10           Environmental Matters. Except as have not had and would not, individually or in the aggregate, be reasonably likely to have a Company Material Adverse Effect, (a) there are no Environmental Liabilities, (b) there are no Environmental Conditions, (c) there is no pending or, to the Company’s knowledge, threatened enforcement action regarding an Environmental Condition or compliance with Environmental Laws with respect to the Real Property or the Business, (d) no Hazardous Substance is located on the Real Property, except for amounts permitted by Environmental Laws as used in the Ordinary Course of Business of the Casino (e) in the past three (3) years the Company has not received a written notice from any Governmental Entity or third party alleging a violation of any Environmental Law and (f) the Company is in compliance with all applicable Environmental Laws. The Company possesses all licenses, permits, certificates, registrations, approvals, authorizations and consents from any Governmental Entity required under Environmental Laws with respect to operation of the Business. As promptly as reasonably practicable, and in any event within thirty (30) days of the Effective Date, the Company will provide Buyer with true and complete copies of (i) all licenses, permits, certificates, registrations, approvals, authorizations and consents from any Governmental Entity issued to the Company under Environmental Laws (“Environmental Authorizations”) and (ii) all written notices received by the Company from any Governmental Entity or third party alleging a violation of any Environmental Law that are, in each case, in the Company’s possession, custody or control.

 

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Section 7.11           Permits; Compliance with Laws.

 

(a)           The Company and, to the Company’s knowledge, each of the Company’s directors, officers, key employees and Persons performing management functions similar to officers and partners hold all 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 (the “Company Permits”), each of which is in full force and effect, except for such Company Permits the failure of which to hold would not, individually or in the aggregate, be reasonably likely to (x) have a Company Material Adverse Effect or (y) materially impair or materially delay the Closing, and 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 of the Company Permits that are currently in effect, the loss of which would, individually or in the aggregate, be reasonably likely to (x) have a Company Material Adverse Effect or (y) materially impair or materially delay the Closing. All Company Permits that are material to the Business, and all permits of the Company that are pending but not yet issued, are listed in Section 7.11(a) of the Company Disclosure Letter. The Company and, to the Company’s knowledge, the Company’s directors, officers, key employees and Persons performing management functions similar to officers and partners, are, and since January 1, 2009 have been, in compliance with the terms of the Company Permits, except for such failures to comply as would not, individually or in the aggregate, be reasonably likely to (x) have a Company Material Adverse Effect or (y) materially impair or materially delay the Closing. The Business is, and since January 1, 2009 has been, conducted in accordance with applicable Law (including the Gaming Laws), except for such noncompliance which, individually or in the aggregate, does not have and would not be reasonably likely to (x) have a Company Material Adverse Effect or (y) materially impair or materially delay the Closing. The Company has not received notice of any investigation or review by any Governmental Entity with respect to the Real Property, the Business, the other Purchased Assets or the Assumed Liabilities that is pending, and, to the Company’s knowledge, no investigation or review is threatened, nor has any Governmental Entity indicated any intention to conduct the same, other than those the outcome of which would not, individually or in the aggregate, be reasonably likely to (x) have a Company Material Adverse Effect or (y) materially impair or materially delay the Closing.

 

(b)           Neither the Company nor, to the Company’s knowledge, any of the Company’s directors, officers, key employees or partners or Persons performing management functions similar to officers or partners have 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 in connection with or related to the Business which resulted in or would be reasonably likely to result in any material fine or penalty. To the Company’s knowledge, there are no facts, which if known to the regulators under the Gaming Laws would be reasonably likely to result in the revocation, limitation or suspension of a license, finding of suitability, registration, permit or approval of the Company or any of its officers, directors, key employees or Persons performing management functions similar to an officer or partner, or limited partner under any Gaming Laws, in each case in connection with or related to the Business.

 

Section 7.12           Labor Matters.

 

(a)           Each Property Employee who is not a Reserved Employee is employed by the Company or a Subsidiary thereof, and no Reserved Employee is employed by the Company or a

 

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Subsidiary thereof. As promptly as reasonably practicable, and in any event within thirty (30) days of the Effective Date, Sellers will provide Buyer with an accurate and complete list of each Property Employee as of the date of such list stating each such individual’s (i) date of commencement of employment, (ii) current position, (iii) business location, (iv) annual/weekly/hourly rates of compensation, (v) actual and target incentive and discretionary bonus amounts for the 2011 and 2012 calendar years, (vi) status as full or part time, (vii) accrued vacation and (viii) credited service under the Company Benefit Plans (such list to be updated periodically between the date hereof and the Closing Date upon the reasonable request of Buyer to reflect new hires, transfers and terminations not inconsistent with Section 9.1(t)).

 

(b)           The Company is not and has not been a party to or is, bound by, or otherwise obligated with respect to, any collective bargaining agreement, labor union contract, trade union agreement or foreign works council contract (any such arrangement, a “Labor Agreement”). There are no unfair labor practice charges, complaints or petitions for elections pending against the Company before the National Labor Relations Board, or any similar Governmental Entity, or of which the Company has received notice. There is no strike, slowdown, work stoppage or lockout, or, to the Company’s knowledge, threat thereof, by or with respect to any Property Employees, and no such strike, slowdown, work stoppage, lockout, or, to the Company’s knowledge, threat thereof, by or with respect to any Property Employees has occurred in the past five years. To the Company’s knowledge, there have been no activities or proceedings of any labor union to try to organize any non-unionized Property Employees during the last five years, and there are no petitions for elections pending against the Company before the National Labor Relations Board or any similar Governmental Entity or of which the Company or its Affiliates have received notice.

 

Section 7.13           Employee Benefits.

 

(a)           Section 7.13(a) of the Company 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) material bonus, stock option, stock purchase, restricted stock, incentive, fringe benefit, profit-sharing, pension or retirement, deferred compensation, medical, life insurance, disability, accident, salary continuation, employment, consulting, change-in-control, retention, severance, accrued leave, vacation, sick pay, sick leave, supplemental retirement, unemployment and any other compensation or benefit plans, programs, agreements, arrangements, commitments and/or practices (whether or not insured) for employees of Sellers and their Subsidiaries who are located at the Real Property or perform services exclusively related to the Business (the “Property Employees”), other than the Reserved Employees (all of the foregoing plans, programs, arrangements, commitments, practices and Contracts referred to in (i), (ii) and (iii) above are referred to as the “Company Benefit Plans”). The Company does not sponsor, maintain, or otherwise have any obligations with respect to, nor has the Company ever sponsored, maintained, or otherwise had any obligation with respect to, any employee benefit plan, program, agreement, arrangement, commitment, practice or Contract (other than any such plan, program, agreement, arrangement, commitment, practice or Contract maintained by Sellers (or any Affiliate of Sellers other than the Company) with respect to which (x) the

 

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Company is a sponsor or contributor as a participating employer but (y) Buyer and its Affiliates (including, following the Closing, the Company) shall have no responsibility or Liability).

 

(b)           True and complete copies of each of the following documents (or accurate summaries thereof) have been made available to Buyer: (i) Company Benefit Plans, including with respect to any Company Benefit Plan that is not in writing, a written description of the material terms thereof and (ii) with respect to any Company Benefit Plan, (A) any related trust agreement, or insurance contract or documents relating to other funding arrangements, (B) for the three (3) most recently ended plan years, all IRS Form 5500s (and any financial statements and other schedules attached thereto), (C) all current summary plan descriptions and subsequent summaries of material modifications to the extent required under ERISA, (D) a current IRS determination or opinion letter that is intended to be qualified under Section 401(a) of the Code if applicable; and (E) the most recent financial and actuarial valuation reports if applicable.

 

(c)           Except as disclosed in Section 7.13(c) of the Company Disclosure Letter, (i) each Company Benefit Plan that is intended to qualify under Section 401(a) of the Code has either received a favorable determination or opinion letter from the IRS as to its qualified status or, if the remedial amendment period for such Company Benefit Plan has not yet expired, all amendments to such Company Benefit Plan that are required by the IRS through the date hereof have been adopted on a timely basis, and each trust established in connection with any Company Benefit Plan that is intended to be exempt from federal income taxation under Section 501(a) of the Code is so exempt, and no fact or event has occurred that could affect adversely the qualified status of any such Company Benefit Plan or the exempt status of any such trust; (ii) there has been no prohibited transaction (within the meaning of Section 406 of ERISA or Section 4975 of the Code, other than a transaction that is exempt under a statutory or administrative exemption) with respect to any Company Benefit Plan with respect to which the Company would be reasonably expected to have any liability; (iii) no action or other administrative proceeding has been brought, or to the Company’s knowledge, is threatened, against or with respect to any such Company Benefit Plan, including but not limited by any Property Employee (other than routine benefits claims), any audit or inquiry by the IRS or United States Department of Labor (“DOL”), or any termination or similar proceeding by the DOL or the Pension Benefit Guaranty Corporation with respect to which the Company is reasonably expected to have any liability; and (iv) no Company Benefit Plan is a multiemployer pension plan (as defined in Section 3(37) of ERISA) (“Multiemployer Plan”), multiple employer plan (within the meaning of Section 4063 or 4064 of ERISA or Section 413(c) of the Code) (“Multiple Employer Plan”) or other pension plan subject to Title IV of ERISA or Section 412 of the Code. There does not now exist, nor do any circumstances exist that could result in, any Controlled Group Liability that would be a Liability of the Company following the Closing.

 

(d)           No Company Benefit Plan that is a “welfare benefit plan” within the meaning of Section 3(1) of ERISA provides retiree or post-employment benefits to any Property Employees or to the employees of the Company’s ERISA Affiliates, other than pursuant to Section 4980B of the Code or any similar state Law. The Company and its ERISA Affiliates have complied in all material respects with the provisions of Part 6 of Title I of ERISA and Sections 4980B, 9801, 9802, 9811 and 9812 of the Code with respect to the Property Employees.

 

(e)           Each Company Benefit Plan and each employment agreement that is being assumed by Buyer pursuant to this Agreement that is a “nonqualified deferred compensation

 

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plan” (within the meaning of Section 409A(d)(1) of the Code) is, and has in the past been maintained, in material compliance with Section 409A of the Code.

 

(f)            Neither the execution or delivery of this Agreement nor the consummation of the transactions contemplated by this Agreement will, either alone or in conjunction with any other event, (i) result in any payment or benefit becoming due or payable, or required to be provided, to any director, employee or independent contractor of the Company, (ii) increase the amount or value of any benefit or compensation otherwise payable or required to be provided to any such director, employee or independent contractor, (iii) result in the acceleration of the time of payment, vesting or funding of any such benefit or compensation, (iv) result in any “excess parachute payment” within the meaning of Section 280G(b)(1) of the Code or (v) or result in any limitation on the right of the Company to amend, merge, terminate or receive a reversion of assets from any Company Benefit Plan or related trust.

 

Section 7.14           Brokers. Except for the fees and commissions of Deutsche Bank Securities Inc. (which fees and commissions are the sole responsibility of Sellers), the Company has not employed and no Person has acted directly or indirectly as a broker, financial advisor or finder for the Company or incurred any Liability for any brokerage fees, commissions or finder’s fees in connection with the transactions contemplated by this Agreement.

 

Section 7.15           Title to Purchased Assets. The Company has good and marketable title to, or a valid leasehold interest in, the tangible personal property constituting Purchased Assets, free and clear of any Encumbrances or Liens other than for Permitted Encumbrances and Permitted Liens.

 

Section 7.16           Affiliate Transactions. There are no transactions, Contracts or other obligations between the Company, on the one hand, and any officer, director or Affiliate of the Company, on the other, that will constitute an Assumed Liability or that will otherwise continue after Closing.

 

Section 7.17           Minimum Cash. As of the Closing, the Business will have an amount of House Funds at least equal to the minimum bankroll required by applicable Gaming Laws, if any.

 

Section 7.18           Vendors. As promptly as reasonably practicable, and in any event within thirty (30) days of the Effective Date, Sellers will provide Buyer with a list of the vendors of the Business as of the date of such list, including the product or service provided by, and the principal contact information for, each such vendor.

 

Section 7.19           Absence of Changes. Since December 31, 2011, the Business has been conducted in the Ordinary Course of Business, and there has not been any event, occurrence, state of circumstances or facts or change that has had or that would be reasonably expected, individually or in the aggregate (x) to have a Company Material Adverse Effect or (y) to materially impair or materially delay the Closing.

 

Section 7.20           Insurance Coverage. Sellers and the Company maintain adequate insurance coverage in accordance with reasonable commercial standards, including material insurance policies and fidelity bonds and self-insurance programs, in each case in respect of the

 

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Purchased Assets, the Real Property and the business and operations of the Business and its employees (collectively, the “Insurance Policies”).

 

ARTICLE VIII.

REPRESENTATIONS AND WARRANTIES OF BUYER

 

Buyer represents and warrants to Sellers that the statements contained in this ARTICLE VIII are true and correct as of the this Agreement and as of the Closing (except as to such representations and warranties that address matters as of a particular date, which are given only as of such date), except as expressly set forth herein and in the corresponding section of the Disclosure Letter delivered by Buyer to Sellers herewith (the “Buyer Disclosure Letter”). 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 reasonably apparent on the face of such disclosure that the matter disclosed is relevant to another paragraph in this Agreement, qualify such other paragraph..

 

Section 8.1             Organization. Buyer is duly organized, validly existing and in good standing under the laws of its state of organization and has all requisite corporate power and authority to carry on its business as now being conducted. Buyer 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, individually or in the aggregate, be reasonably likely to have a Buyer Material Adverse Effect.

 

Section 8.2             Authority; No Conflict; Required Filings and Consents.

 

(a)           Buyer has all requisite corporate power and authority to enter into this Agreement and each of the Ancillary Agreements to which it is a party and to consummate the transactions contemplated hereby and thereby. Buyer’s execution and delivery of this Agreement and each of the Ancillary Agreements to which it is a party and the consummation by Buyer of the transactions contemplated hereby and thereby have been duly authorized by all necessary action on the part of Buyer. This Agreement has been, and each Ancillary Agreement will be at or prior to the Closing, duly executed and delivered by Buyer and, assuming the due authorization, execution and delivery of the other partiers hereto, this Agreement constitutes, and each Ancillary Agreement when so executed and delivered will constitute, the valid and binding obligation of Buyer, enforceable against Buyer in accordance with their respective 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 by Buyer of this Agreement and each Ancillary Agreement to which it is a party does not, and the consummation by Buyer of the transactions contemplated hereby and thereby and the compliance by Buyer with any provisions hereof or thereof will not, (i) conflict with, or result in any violation or breach of, any provision of the organizational documents of Buyer, (ii) result in any violation or breach of, or constitute (with or without notice or lapse of time, or both) a default (or give rise to a right of termination, cancellation or acceleration of any obligation or loss of any material benefit) under, or require a consent or waiver under, any of the terms, conditions or provisions of any note, bond, mortgage,

 

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indenture, lease, Contract or obligation to which Buyer is a party or by which Buyer or any of its properties or assets may be bound, or (iii) subject to the governmental filings and other matters referred to in Section 8.2(c) hereof, conflict with or violate any permit, concession, franchise, license, judgment, or Law applicable to Buyer or any of its properties or the assets, 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 consent or waiver which would not, individually or in the aggregate, be reasonably likely to (x) have a Buyer Material Adverse Effect or (y) materially impair or materially delay the Closing.

 

(c)           No consent, approval, finding of suitability, license, permit, waiver, order or authorization of, or registration, declaration or filing with, any Governmental Entity is required by or with respect to Buyer or its Affiliates in connection with the execution and delivery of this Agreement or the Ancillary Agreements by Buyer, the compliance by Sellers with any of the provisions hereof or thereof, or the consummation by Buyer of the transactions that are contemplated hereby, except for (i) the filing of the notification report under, and compliance with any other applicable requirements of, the HSR Act, (ii) any approvals and 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 alcoholic beverages or tobacco or the renaming or rebranding of the operations at the Real Property, (iv) such other filings, consents, approvals, findings of suitability, licenses, waivers, orders, authorizations, permits, registrations and declarations as may be required under the Laws of any jurisdiction in which Buyer conducts any business or owns any assets, the failure of which to make or obtain would not, individually or in the aggregate, be reasonably likely to (x) have a Buyer Material Adverse Effect or (y) materially impair or materially delay the Closing and (v) any consents, approvals, orders, authorizations, registrations, permits, declaration or filings required by Parent, Sellers or the Company or any of their Subsidiaries, Affiliates or key employees (including under the Gaming Laws).

 

Section 8.3             Brokers. Neither Buyer nor any of its Representatives have employed, and no Person has acted directly or indirectly as a broker, financial advisor or finder for Buyer or incurred any Liability for any brokerage fees, commissions or finder’s fees in connection with the transactions contemplated by this Agreement.

 

Section 8.4             Financing. Buyer will have available at the Closing sufficient funds to enable Buyer to pay (x) the sum of the Purchase Price, the Estimated Closing Payment and the Estimated Operations Payment and (y) the Final Closing Payment and the Final Operations Payment, in each case pursuant to Section 4.2 hereof.

 

Section 8.5             Licensability of Principals. Except as set forth in Section 8.5 of the Buyer Disclosure Letter, neither Buyer nor any of its current Representatives or Affiliates (collectively the “Buyer Related Parties”) has ever withdrawn, been denied, or had revoked, a gaming license or related finding of suitability by a Governmental Entity or Gaming Authority within the last five (5) years. Buyer and each of the Buyer Related Parties are in good standing in each of the jurisdictions in which Buyer or any Buyer Related Party owns or operates gaming facilities. To Buyer’s knowledge, as of the date hereof, 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 license currently held or other Gaming Approval, or (b) result in a

 

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negative outcome to any finding of suitability proceedings currently pending, or under the suitability proceedings necessary for the consummation of this Agreement. Buyer is not aware of any material investigations of it or any of its subsidiaries operating in Missouri which investigations could result in revocation of or material discipline related to its Class A License.

 

Section 8.6             Permits; Compliance with Gaming Laws.

 

(a)           Buyer, and to its knowledge, each of its Affiliates, directors, officers, key employees and Persons performing management functions similar to officers and partners holds all 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 of Buyer (the “Buyer Permits”), each of which is in full force and effect except for such Buyer Permits, the failure of which to hold would not, individually or in the aggregate, be reasonably likely to (x) have a Buyer Material Adverse Effect or (y) materially impair or materially delay the Closing, and 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 the Buyer Permits that are currently in effect, the loss of which would, individually or in the aggregate, be reasonably likely to (x) have a Buyer Material Adverse Effect or (y) materially impair or materially delay the Closing. Buyer, and to Buyer’s knowledge, Buyer’s directors, officers, key employees and Persons performing management functions similar to officers and partners are, and since January 1, 2009 have been, in compliance with the terms of the Buyer Permits, except for such failures to comply, as would not, individually or in the aggregate, be reasonably likely to (x) have a Buyer Material Adverse Effect (y) materially impair or materially delay the Closing. Buyer has not received notice of any investigation or review by any Governmental Entity with respect to Buyer that is pending, and, no investigation or review is threatened, nor has any Governmental Entity indicated any intention to conduct the same, other than those the outcome of which would not, individually or in the aggregate, be reasonably likely to (x) have a Buyer Material Adverse Effect or (y) materially impair or materially delay the Closing.

 

(b)           Neither Buyer, nor any director, officer, key employee or partner of Buyer or its Affiliates 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, other than as would not reasonably be expected, individually or in the aggregate, to (i) have a Buyer Material Adverse Effect or (ii) materially impair or materially delay the Closing. To the knowledge of Buyer, there are no facts, which if known to the regulators under the Gaming Laws could reasonably be expected to result in the revocation, limitation or suspension of a license, finding of suitability, registration, permit or approval of Buyer or its Affiliates, or any of their officers, directors, key employees or Persons performing management functions similar to an officer or partner, or limited partner under any Gaming Laws. Neither Buyer nor any officer, director, key employee or Person performing management function similar to an officer or partner of Buyer or their Affiliates, has suffered a suspension or revocation of any Buyer Permit held under the Gaming Laws, other than as would not reasonably be expected, individually or in the aggregate, to (i) have a Buyer Material Adverse Effect or (ii) materially impair or materially delay the Closing.

 

Section 8.7             Waiver of Buyer’s Further Due Diligence Investigation. Subject to ARTICLE XIII hereof, Buyer acknowledges that it is familiar with the Purchased Assets and has

 

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had the opportunity, directly or through its representatives to inspect the Purchased Assets and conduct due diligence activities. Without limitation of the foregoing, Buyer acknowledges that the Purchase Price has been negotiated based on Buyer’s express agreement that there would be no contingencies to the Closing other than the conditions set forth in ARTICLE X hereof. Further, without limiting any representation, warranty, covenant, obligation or condition of Sellers or the Company expressly set forth herein, Buyer acknowledges that it has waived and hereby waives as a condition to the Closing any further due diligence reviews, inspections or examinations with respect to the Real Property, including with respect to engineering, environmental, survey, financial, operational, regulatory and legal compliance matters.

 

Section 8.8             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, could prevent or materially delay Buyer from completing the transactions contemplated by this Agreement.

 

ARTICLE IX.

COVENANTS

 

Section 9.1             Conduct of Business Prior to the Closing. 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 any written instructions of any Governmental Entity and to the limitations set forth below, Sellers shall cause the Company to (except to the extent as expressly provided by this Agreement or to the extent that Buyer shall otherwise grant its prior consent in writing, which consent may not be unreasonably withheld, conditioned or delayed) carry on the Business in the Ordinary Course of Business, including the payment of its debts and Taxes when due (subject to good faith disputes over such debts or Taxes, provided that, in the case of disputes over such Taxes, the Company’s failure to pay such Taxes when due would not, individually or in the aggregate, have an adverse effect on Buyer or any of its Affiliates (including, following the Closing, the Company) that is material), and use commercially reasonable efforts consistent with past practices and policies to maintain the effectiveness of the Company Permits, preserve the Purchased Assets, preserve intact the present business organization, keep available the services of its present officers and key employees and preserve relationships with customers, suppliers, distributors and others having business dealings with the Company with respect to the Business, perform in all material respects all of its obligations under the Assumed Contracts, comply with all applicable Laws in all material respects and maintain the books and records of the Company in the Ordinary Course of Business. Without limiting the generality of the foregoing, except as expressly provided by this Agreement or as disclosed on Section 9.1 of the Company 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 prior written consent of Buyer (which consent shall not be unreasonably withheld, conditioned or delayed), the Company shall not, and Sellers, with respect to subsections (e), (f), (l), (m) and (u) below, shall not:

 

(a)           sell, transfer, lease, dispose of, grant or otherwise authorize the sale, transfer, lease, disposition, grant of, any of the Purchased Assets (other than a Permitted Encumbrance), except for (i) sales of current assets in the Ordinary Course of Business, (ii) sales

 

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of equipment and other non-current assets in the Ordinary Course of Business which, individually, do not exceed $25,000 or which, in the aggregate, do not exceed $500,000, or (iii) leases of the Real Property that are terminable, without the payment of any consideration for early termination, on no more than one hundred eighty (180) days’ notice;

 

(b)           incur any Liabilities that are Assumed Liabilities, except for Liabilities incurred (i) pursuant to Section 9.1(p), or (ii) in the Ordinary Course of Business not exceeding $100,000 individually or $250,000 in the aggregate;

 

(c)           enter into, modify, amend, terminate or renew any of the Assumed Contracts or waive, release or assign any material rights or claims related to any Assumed Contracts, except (i) for modifications or amendments in the Ordinary Course of Business that would not reasonably be expected to have an adverse economic impact on the Business in excess of $100,000 individually or $250,000 in the aggregate and do not otherwise impair any material right or claim related to the Assumed Contract or impose or renew any material restriction on the Company, (ii) for renewals in the Ordinary Course of Business for a term of twelve (12) months or less or (iii) as required by applicable Law;

 

(d)           subject any of the Purchased Assets to or suffer or permit the creation on the Purchase Assets of a Lien or Encumbrance, other than Permitted Liens or Permitted Encumbrances created in the Ordinary Course of Business;

 

(e)           fail to maintain its existing insurance coverage of all types relating to Purchased Assets (however, in the event any such coverage shall be terminated or lapse, or any claim is made against such coverage that causes the amount of insurance coverage to cease to be adequate in accordance with reasonable commercial standards, Sellers shall notify Buyer as promptly as practicable, so that Buyer may purchase “gap” insurance at its option, and shall use their commercially reasonable efforts to procure substantially similar substitute insurance policies, which in all material respects are in at least such amounts, subject to the same deductibles, and against such risks as are currently covered by such policies);

 

(f)            amend the Company’s certificate of formation or operating agreement (or similar organizational documents), or any terms of their outstanding equity interests or other securities;

 

(g)           enter into a plan of consolidation, merger, share exchange or reorganization with any Person, effect any recapitalization, reclassification or other change in their capitalization, or adopt a plan of complete or partial liquidation;

 

(h)           waive, release or assign any material rights or material claims that would otherwise constitute a Purchased Asset, except as contemplated by this Agreement;

 

(i)            enter into any material transaction or transaction outside of the Ordinary Course of Business with any Affiliate relating to the Business to the extent such transaction would be an Assumed Liability or an Assumed Contract;

 

(j)            enter into any Contract the effect of which would be to grant to a third party any license to use any Transferred Intellectual Property;

 

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(k)           enter into any settlement, consent decree or other agreement or arrangement with a third party or Governmental Entity other than (i) as does not involve the institution of mandated new procedures or other business conduct or the imposition of equitable or similar relief on the Company and (ii) is not reasonably likely to result in the revocation, limitation or suspension of any Company Permit;

 

(l)            expend any insurance, condemnation awards or other compensation awarded for loss or damage to any Purchased Asset;

 

(m)          issue or sell or encumber any Equity Interests or any securities convertible into, or rights to acquire, any Equity Interests;

 

(n)           purchase any equity interests in or securities of, or make any other investment in or loans or advances to, any Person;

 

(o)           except in the Ordinary Course of Business, acquire any material assets that would constitute Purchased Assets;

 

(p)           fail to make maintenance capital expenditures, in the Ordinary Course of Business, in a total amount equal to the pro rata portion of the aggregate maintenance capital expenditures for the twelve months beginning on the effective date contemplated by the capital budget set forth in Section 9.1(p) of the Company Disclosure Letter (“Required Capital Expenditures”);

 

(q)           engage in any new line of business;

 

(r)            make any material change to its financial accounting methods, principles or practices, except as may be required by Law or by GAAP;

 

(s)           make, change or revoke any Tax election, change any of its methods of reporting income or deductions for Tax purposes, compromise any Tax liability or settle any Tax claim, audit or dispute, or file any amended Tax Return except, in each case, for any action that would not, individually or in the aggregate, have an adverse effect on Buyer or any of its Affiliates (including, following the Closing, the Company) that is material; or

 

(t)            except (1) as required by a Company Benefit Plan as in effect on the date hereof, (2) as required by applicable Law, (3) in the Ordinary Course of Business or (4) as a result of changes or actions by Parent that are not solely directed at the Company or the Property Employees, (i) enter into, adopt, amend or terminate any employee benefit plan, program, agreement, arrangement, commitment or practice for the benefit or welfare of any Property Employee, other than immaterial amendments that will not result in increased cost to Buyer and its Affiliates (including, following the Closing, the Company and its Subsidiaries), (ii) increase the compensation or benefits payable to any Property Employee or pay any amounts to any Property Employee not otherwise due, (iii) enter into any new, or amend any existing, Labor Agreement or similar agreement with respect to the Company, (iv) provide any funding for any rabbi trust or similar arrangement, or (v) (A) transfer any employee who is a Property Employee as of the date of this Agreement to an employing entity other than the Company or to a location other than the Real Property, or otherwise change such employee’s duties or employer so that the employee would no longer constitute a Property Employee, (B) take any action that results in the

 

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number of Property Employees on the Closing Date exceeding the number of Property Employees on the date of this Agreement or (C) transfer the employment of any Reserved Employee to the Company; or

 

(u)           enter into a Contract to do any of the foregoing, or to authorize or announce an intention to do any of the foregoing.

 

It is agreed and understood that if Buyer does not grant or deny consent to a proposed action within five (5) business days of receipt of the written request by Sellers to take such action by the individuals set forth in Section 9.1 of the Buyer Disclosure Letter at the email addresses set forth therein, Buyer shall be deemed to have consented to such action notwithstanding any other provision of this Section 9.1. Except as expressly contemplated by this Agreement, nothing contained in this Agreement shall give Buyer, directly or indirectly, the right to control or direct the Company’s operations prior to the Closing. Prior to the Closing, the management of the Company shall exercise, consistent with and in accordance with the terms and conditions of this Agreement, complete control and supervision over the operations of the Company.

 

Section 9.2             Cooperation; Notice; Cure.

 

(a)           Subject to compliance with applicable Law (including antitrust Laws and Gaming Laws), from the date hereof until the Closing, Sellers and Buyer shall confer on a regular basis with one or more Representatives of the other party to discuss the general status of the Business. Sellers and the Company shall, to the fullest extent permitted by Law (including antitrust Laws and Gaming Laws), provide up to four (4) Representatives designated by Buyer (the “Designated Buyer Representatives”) with reasonable access to the Reserved Employees during normal business hours, and shall use their reasonable best efforts to assist the Designated Buyer Representatives in familiarizing themselves with the operation of the Business.

 

(b)           Sellers and Buyer shall promptly notify the other in writing of, and will use all 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 causes or is reasonably expected to cause any representation, covenant or agreement of Parent, Sellers, the Company or Buyer under this Agreement to be breached in any material respect or that renders or is reasonably expected to render untrue in any material respect any representation or warranty of Parent, Sellers, the Company or Buyer contained in this Agreement. Nothing contained in Section 9.1 above shall prevent Sellers or the Company from giving such notice, using such efforts or taking any action to cure any such event, transaction or circumstance. No notice given pursuant to this Section 9.2 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.

 

Section 9.3             No Solicitation. Prior to the earlier of the Closing and the termination of this Agreement in accordance with Section 11.1 hereof, neither Parent, Sellers, the Company, nor any of their respective shareholders, members, directors, officers, employees, advisors, agents or other representatives (collectively, “Representatives”), directly or indirectly, through Affiliates or otherwise, shall (a) solicit, initiate, or encourage (including by way of furnishing information) or take any other action to facilitate knowingly any inquiries or proposals that constitute, or could reasonably be expected to lead to, a proposal or offer of any kind that constitute, or could

 

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reasonably be expected to lead to, an Acquisition Proposal, (b) engage in negotiations or discussions with any person (or group of persons) other than Buyer or its Affiliates (a “Third Party”) concerning, or provide any non-public information to any person or entity relating to, any Acquisition Proposal, (c) continue any prior discussions or negotiations with any Third Party concerning any Acquisition Proposal or (d) accept, or enter into any agreement concerning, any Acquisition Proposal with any Third Party or consummate any Acquisition Proposal. From and after the date hereof until the earlier of the termination of this Agreement or the Closing, Parent, Sellers and the Company will, and will cause their respective Affiliates to (i) use their reasonable best efforts to cause to be returned or destroyed promptly after the date hereof all confidential information provided or made available to any Person other than Buyer and its Affiliates and its and their Representatives in connection with a potential transaction involving the Business or the Company, (ii) terminate all access for such Persons to the electronic dataroom accessible through RR Donnelley Venue with respect to the Business and (iii) not amend, modify, waive or fail to enforce any of the terms or conditions included in any confidentiality agreements with respect to the Business or the Company.

 

Section 9.4             Employee Matters.

 

(a)           Each Property Employee, other than the Reserved Employees, who is an employee of the Company as of the Closing shall hereinafter be referred to as a “Transferred Employee”. Each of the Property Employees is an at-will employee, except that certain Property Employees may be eligible for severance compensation upon certain termination events under an employment agreement that covers any such Property Employee as set forth on Section 7.13(a) of the Company Disclosure Letter.

 

(b)           Effective as of the Closing, Buyer shall assume all employment agreements set forth in Section 9.4(b) of the Company Disclosure Letter to the extent in effect as of the Closing, provided that the applicable Property Employee consents to such assignment to the extent required by the terms of the applicable employment agreement.

 

(c)           For a period of at least one (1) year immediately following the Closing Date, (x) Buyer shall provide the Transferred Employees who remain employed by the Company with base compensation, bonus opportunity and annual and long-term incentive compensation opportunity that are in the aggregate, on an employee by employee basis, no less favorable than those which the Transferred Employees were provided by the Company or its Affiliates immediately prior to the Closing and (y) Buyer shall honor the severance policies of the Company and its Affiliates with respect to Transferred Employees.

 

(d)           For a period of at least one (1) year immediately following the Closing Date, Buyer shall, pursuant to plans and arrangements established or maintained by Buyer (the “Buyer Benefit Plans”), provide the Transferred Employees who remain employed by the Company employee benefits (including medical benefits) which are no less favorable in the aggregate on an employee by employee basis than those which the Transferred Employees were provided under the Company Benefit Plans immediately prior to Closing. To the extent permitted under the terms of the Buyer Benefit Plans, Buyer shall cause service with the Company and its Affiliates prior to the Closing to be treated the same as service with any of Buyer and its Affiliates from and after the Closing Date for purposes of eligibility, vesting, and benefit accrual under the Buyer Benefit Plans (except (i) to the extent giving such credit would

 

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result in duplication of benefits, (ii) for benefit accrual purposes under any defined benefit pension plan, (iii) for purposes of any retiree medical plan or (iv) for any newly established plan of Buyer for which similarly situated employees of Buyer do not receive past service credit).

 

(e)           Effective immediately after the Closing, Buyer shall cause the Transferred Employees to be covered by one or more medical benefit plans (“Buyer’s Medical Plans”), which shall provide benefits to the Transferred Employees and their dependents which in the aggregate are substantially comparable to the benefits that were provided to the Transferred Employees and their dependents by the Company Benefit Plans immediately prior to Closing. To the extent permitted under the terms of Buyer’s Medical Plans, Buyer shall cause any Transferred Employees or their dependents to not be subject to any “pre-existing conditions” exclusions or limitations or “actively at work” requirements which would cause any of the Transferred Employees or their dependents otherwise to be excluded from Buyer’s Medical Plans immediately after the Closing. To the extent permitted under the terms of Buyer’s Medical Plans, Buyer shall give effect, in determining any deductible and maximum out-of-pocket limitations, to claims incurred and amounts paid by, and amounts reimbursed to, such employees for the calendar year in which the Closing occurs under any welfare benefit plans maintained or contributed to by the Company for its benefit immediately prior to the Closing Date.

 

(f)            Effective as of the Closing Date, 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’s 401(k) Plan”). Each Transferred Employee who participates in the Harrah’s Entertainment, Inc. Savings and Retirement Plan (the “Company 401(k) Plan”) who satisfies the eligibility requirements of Buyer’s 401(k) Plan shall become eligible to participate in Buyer’s 401(k) Plan on the date he or she becomes an employee of Buyer and, to the extent permitted under the terms of Buyer’s 401(k) Plan, Buyer shall cause such Transferred Employee to be credited with eligibility service and vesting service for all periods of service with the Company or any other Person if so credited with such service under the Company 401(k) Plan. Buyer or its applicable Subsidiary shall cause Buyer’s 401(k) Plan to accept “eligible rollover distributions” (as defined in Section 402(c)(4) of the Code) from Transferred Employees with respect to such Transferred Employees’ account balances (including loans) under the Company 401(k) Plan in the form of cash (and, as applicable, promissory notes with respect to loans), if elected by such Transferred Employees.

 

(g)           The Company maintains a plan qualified under Section 125 of the Code (the “Company’s 125 Plan”) that includes flexible spending accounts for medical care reimbursements and dependent care reimbursements (“Reimbursement Accounts”). As soon as reasonably practicable following the Closing Date, cash equal to the aggregate value as of the Closing Date of the Reimbursement Accounts of the Transferred Employees shall be transferred from the Company to a plan established by Buyer intended to qualify under Section 125 of the Code (“Buyer’s 125 Plan”). Upon receipt of such amount, Buyer and Buyer’s 125 Plan shall assume all obligations with respect to the Reimbursement Accounts for the Transferred Employees as of the Closing Date. Buyer shall recognize the elections of the Transferred Employees under the Company’s 125 Plan for purposes of Buyer’s 125 Plan for calendar year 2012. The Company shall provide Buyer with all information reasonably requested in order for Buyer and Buyer’s 125 Plan to satisfy the obligations set forth in this Section 9.4(g).

 

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(h)           No provision of this Agreement shall create any third party beneficiary rights in any Transferred Employee, or any beneficiary or dependent thereof, with respect to the compensation, terms and conditions of employment and/or benefits that may be provided to any Transferred Employee by Buyer or under any benefit plan which Buyer may maintain. In no event shall the terms of this Agreement be deemed to (i) establish, amend, or modify any Company Benefit Plan or any other benefit plan, program, agreement or arrangement maintained or sponsored by Buyer, the Company or any Subsidiary of the Company or any of their respective Affiliates; (ii) alter or limit the ability of Buyer or any of its Subsidiaries (including, after the Closing Date, the Company or any Subsidiary of the Company) to amend, modify or terminate any benefit or employment plan, program, agreement or arrangement after the Closing Date; or (iii) confer upon any Property Employee any right to employment or continued employment or continued service with Buyer or any of its Subsidiaries (including, following the Closing Date, the Company or any Subsidiary of the Company), or constitute or create an employment or other agreement with any Property Employee.

 

(i)            On or following the Closing, Buyer shall comply with all provisions of the WARN Act with respect to all Transferred Employees. As part of its obligations under ARTICLE XII hereof, Buyer shall indemnify, defend and hold Sellers and the Company harmless from and against any Liability to any Transferred Employees or any Governmental Entity that may result to Sellers and/or the Company based on Buyer’s failure to comply with any provision of the WARN Act as required by this Section 9.4(i), including, but not limited to, fines, back pay and attorneys’ fees. Sellers shall notify Buyer of any terminations of the employment of any employees of the Company that occur during the ninety (90)-day period prior to the Closing.

 

(j)            Sellers shall indemnify, defend and hold Buyer and its Affiliates harmless from and against any Controlled Group Liability.

 

Section 9.5             Access to Information and the Real Property; Post-Closing Cooperation.

 

(a)           Upon reasonable notice, subject to applicable Law, including antitrust Laws and Gaming Laws, the Company shall afford Buyer’s Representatives reasonable access, during normal business hours, during the period from the date hereof to the Closing, to the Real Property (including the Casino) and to all personnel, properties, books, Contracts and records of the Casino and, during such period, the Company shall furnish promptly to Buyer all material information concerning the Business (including the Real Property) as Buyer may reasonably request (collectively, the “Inspection”); provided, however, that (i) Buyer shall provide the Company with at least twenty-four (24) hours’ prior written notice of any Inspection; (ii) if the Company so requests, Buyer’s Representatives shall be accompanied by a Representative of the Company; (iii) Buyer shall not initiate contact with employees or other representatives of the Company other than such Representative designated by the Company without the prior written consent of Sellers or the Company, which consent shall not be unreasonably withheld or delayed; (iv) Buyer’s Representatives shall not be entitled to perform any physical testing of any nature with respect to any portion of the Real Property without the Company’s prior written consent if in the reasonable judgment of the Company such testing would reasonably be expected to materially interfere with the Business and/or cause damage to the Purchased Assets; (v) Buyer shall not materially interfere with the Business; (vi) Buyer shall, at its sole cost and expense, promptly repair any damage to the Purchased Assets or any other property owned by a Person

 

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other than Buyer arising from or caused by Inspection, and shall reimburse the Company for any loss arising from or caused by any Inspection, and restore the Purchased Assets or such other third-party property to substantially the same condition as existed prior to such Inspection, and shall indemnify, defend and hold harmless Sellers, the Company and its Affiliates from and against any personal injury or property damage claims, liabilities, judgments or expenses (including reasonable attorneys’ fees) incurred by any of them arising or resulting therefrom; and (vii) in no event shall this Section 9.5(a) constitute a limitation of Buyer’s waiver of further due diligence in Section 8.7 hereof, nor shall the results of any such Inspection be a condition to Buyer’s obligations under this Agreement or limit the provisions of Section 13.5 hereof. Prior to entering the Real Property to perform any tests and assessments or for any other reason permitted hereunder and, thereafter, Buyer shall maintain a policy of comprehensive public liability insurance in an amount not less than $10,000,000 naming the Company as additional primary insured, insuring against any and all Liabilities for damages to property or injury or death to persons arising out of the entry onto the Real Property of all persons and property on Buyer’s behalf. Such insurance policy shall be with a nationally recognized insurance company reasonably acceptable to the Company and shall provide that it may not be terminated without providing the Company at least thirty (30) days written notice. Prior to Buyer’s entry onto the Real Property, Buyer shall deliver to the Company a certificate of insurance evidencing the insurance policy required by this Section 9.5(a).

 

(b)           Following the Closing Date, each party hereto will hold, and will use its best efforts to cause its Affiliates and its and their respective Representatives to hold, in strict confidence from any Person (other than any such Affiliate or Representative) all documents and information concerning the other party or any of its Affiliates (and, for the avoidance of doubt, treating information concerning the Business and the Purchased Assets as information concerning Buyer) unless (i) compelled to disclose by judicial or administrative process (including in connection with obtaining the necessary approvals of this Agreement and the transactions contemplated hereby of any Governmental Entity) or by other requirements of Law or (ii) disclosed in an action or proceeding brought by another party hereto in pursuit of its rights or in the exercise of its remedies hereunder, or unless such documents or information can be shown to have been (1) previously known by the party receiving such documents or information (other than pursuant to breach of an agreement to keep such information confidential), (2) in the public domain (either prior to or after the furnishing of such documents or information hereunder) through no fault of such receiving party or (3) later acquired by the receiving party from another source if the receiving party is not aware that such source is under an obligation to another party hereto to keep such documents and information confidential. Buyer and the Company agree that in the event any proprietary information or knowledge relating to an Excluded Asset is obtained, revealed or otherwise made known to Buyer in effecting (x) the transition from Excluded Software to replacement software pursuant to Section 1.4(c) hereof, specifically, or (y) the removal of the Excluded Assets, generally, Buyer shall not reveal, disclose, employ or otherwise use any such proprietary information and will hold such information in confidence in accordance with the terms of the Confidentiality Agreement. No information or knowledge obtained in any investigation pursuant to this Section 9.5 shall affect or be deemed to modify the obligations of the parties to consummate the transactions contemplated herein.

 

(c)           Following the Closing, and for so long as Sellers on the one hand or Buyer on the other hand, or their respective Affiliates are prosecuting, participating in, contesting or

 

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defending any action, claim, investigation, suit or proceeding, whenever filed or made, in connection with or involving in any way (i) this Agreement or the transactions contemplated hereby or (ii) the conduct or operation of the Business prior to or after the Closing, including any action, claim, investigation, suit or proceeding related to the Excluded Assets and/or the Excluded Liabilities, the other party shall (and shall cause its Affiliates, and its and their respective Representatives, to) (A) cooperate with such party and its Affiliates and their Representatives with the prosecution, participation, contest or defense, (B) provide such party and its Affiliates and their Representatives with reasonable access and duplicating rights to all properties, books, contracts, commitments and records (whether in paper or electronic form) related to the Real Property and (C) make available to such party and its Affiliates and their Representatives its personnel (including, by Buyer, the Transferred Employees), including for purposes of fact finding, consultation, testimony, interviews, depositions and witnesses, in each case as shall be reasonably necessary in connection with the prosecution, participation, contest or defense of the applicable action, claim, investigation, suit or proceeding by such party and its Affiliates and Representatives.

 

(d)           Upon reasonable notice, subject to applicable Law, including antitrust Laws and Gaming Laws, Parent shall afford Buyer’s Representatives reasonable access, during normal business hours, for up to ninety (90) days following the Closing, to each Reserved Employee for so long as he or she is an employee of Parent  or its Subsidiaries; provided, however, that Buyer shall not initiate contact with the Reserved Employees without the prior written consent of Parent, which consent shall not be unreasonably withheld or delayed.

 

Section 9.6             Governmental Approvals.

 

(a)           The parties hereto 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 contemplated by this Agreement as promptly as practicable; (ii) obtain from any Governmental Entities any consents, approvals, findings of suitability, expiration or terminations of waiting periods, licenses, permits, waivers, approvals, orders or authorizations required (A) to be obtained or made by Sellers, the Company or 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 those in connection with the HSR Act), in connection with the authorization, execution and delivery of this Agreement and the consummation of the transactions governed herein; and (iii) make all necessary registrations, declarations and filings, and thereafter make any other submissions with respect to this Agreement, as required under (A) any applicable federal or state securities Laws, (B) the HSR Act, (C) the Gaming Laws, including, providing information with respect to, executing, filing and participating in meetings with the Missouri Gaming Commission with respect to, the Petition for Change in Control 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 as promptly as practicable, but in no event later than fifteen (15) days after the date hereof, all required initial applications and documents in connection with obtaining the Governmental Approvals (including under applicable Gaming Laws and the HSR Act) and shall act diligently and promptly to pursue the Governmental Approvals and shall cooperate with each other in connection with the making of all filings referenced in the preceding sentence, provided

 

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that, Buyer shall bear the ultimate responsibility of obtaining all Gaming Approvals on or before the Outside Date. Subject to applicable Laws relating to the exchange of information, prior to making any application or material written communication to or filing with any Governmental Entity with respect to Governmental Approvals, each party shall provide the other parties with drafts thereof and afford the other parties a reasonable opportunity to comment on such drafts. Buyer, Sellers and the Company 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, and, to the extent permitted by the Governmental Entity, each party shall offer the other parties the opportunity to participate in all telephonic conferences and all meetings with any Governmental Entity to the extent relating to Governmental Approvals. Buyer, Sellers and the Company shall, to the extent practicable, consult with the other parties on, in each case, subject to applicable Laws relating to the exchange of information (including antitrust Laws and Gaming Laws), all the information relating to Buyer, Sellers or the Company, 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 to the extent made or submitted in connection with the transactions contemplated by this Agreement, other than personal information on individuals who are filing applications. Without limiting the foregoing, Buyer, Sellers and the Company will notify the other parties promptly of the receipt of comments or requests or other communications (whether oral or written) from Governmental Entities to the extent relating to Governmental Approvals and, promptly supply the other parties with copies of all written correspondence between the notifying parties or any of their Representatives and Governmental Entities with respect to Governmental Approvals. Buyer, Sellers and the Company shall share responsibility for devising and implementing the strategy for obtaining any clearances required under the HSR Act in connection with the transactions contemplated by this Agreement, provided, however, that (i) in the event of disagreement between Buyer on the one hand and Sellers and the Company on the other hand, Buyer’s view shall prevail, and (ii) Buyer shall take the lead in all meetings and communications with any Governmental Entity in connection with obtaining such clearances.

 

(b)           Without limiting Section 9.6(a) hereof, Buyer, Sellers and the Company shall:

 

(i)            each use its reasonable best efforts 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)           each use its reasonable best efforts to avoid or eliminate each and every impediment under any antitrust, competition or trade regulation Law that may be asserted by any Governmental Entity or any other Person 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 administrative tribunal seeking to restrain or enjoin the Closing; provided, however, that Buyer and its Affiliates shall be required to (and nothing in this Agreement shall require Sellers, the Company or any of its 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 Government Entity required to consummate the transactions contemplated hereby.

 

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(c)           Buyer, Sellers and the Company shall promptly advise each other upon receiving any communication from any Governmental Entity whose consent or approval is required for consummation of the transactions contemplated by this Agreement to the extent that such communication is related to the Governmental Approvals. Buyer, Sellers and the Company shall each use its 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 contemplated hereby and shall seek to prevent the entry by any Governmental Entity of any decree, injunction or other order challenging this Agreement or the consummation of the transactions contemplated hereby. The parties agree to appeal, as promptly as possible, any decree, injunction or other order challenging this Agreement or the consummation of the transaction contemplated hereby and use reasonable best efforts to have any such decree, injunction or other order vacated or reversed.

 

(d)           From the date of this Agreement until the Closing, each party shall promptly notify all other parties hereto in writing of any pending or, to the knowledge of Buyer, Sellers or the Company, as appropriate, threatened action, suit, arbitration or other 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 contemplated by this Agreement or (ii) seeking to restrain or prohibit the consummation of the Closing.

 

Section 9.7             Publicity. Parent and Sellers on the one hand and Buyer on the other hand 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 commercially reasonable efforts to agree upon, any press release or other public statement with respect to any of the transactions contemplated hereby 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 or any listing agreement with any nationally recognized stock exchange. Notwithstanding anything to the contrary herein, Buyer and Parent may make any public statement in response to questions by the press, analysts, investors or those attending industry conferences or financial analysts conference calls, so long as any such statements are not inconsistent with previous press releases, public disclosures or public statements made jointly by Buyer and Parent or made by one party and reviewed by the other and do not reveal non-public information regarding the transactions contemplated by this Agreement.

 

Section 9.8             Further Assurances and Actions.

 

(a)           Subject to the terms and conditions herein, each of the parties 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 to consummate and make effective the transactions contemplated by this Agreement, including, (i) obtaining all licenses, permits, consents, approvals, authorizations, qualifications and orders of Governmental Entities and parties to Contracts as are necessary or advisable for consummation of the transactions contemplated by this Agreement and (ii) to fulfill all conditions precedent applicable to the Closing.

 

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(b)           In case at any time after the Closing any further action is necessary to carry out the purposes of this Agreement, to vest Buyer with full title to the Equity Interests, the Purchased Assets and the assumption of the Assumed Liabilities, or to vest Sellers with full title to the Excluded Assets and the assumption of the Excluded Liabilities, Buyer, Sellers and the Company shall take all commercially reasonable action necessary (including 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, and otherwise Sellers shall bear the cost of such action. All costs and expenses related to recording the Trademark Assignment Agreement shall be borne by Buyer.

 

Section 9.9             Transfer Taxes; HSR Filing Fee.

 

(a)           All transfer, recording, documentary, sales, use, stamp, registration and other such Taxes (including real estate transfer or similar Tax that arise from any indirect transfer of property as a result of the transfer of the Equity Interests) and related fees (including any penalties, interest and additions to Tax) incurred with respect to the purchase and sale of the Equity Interests pursuant to this Agreement (“Transfer Taxes”) shall be paid by Buyer. Buyer shall indemnify, defend and hold Sellers harmless from and against any and all amounts for which Buyer is liable pursuant to this Section 9.9(a) . The party responsible under applicable Law for filing the Tax Returns pertaining to and paying such Transfer Taxes shall (i) timely file such Tax Returns and remit to the applicable Governmental Authority payment of the Transfer Taxes required to be remitted therewith and (ii) promptly provide a copy of such Tax Return to the other party. If Sellers have paid such Transfer Taxes they shall be reimbursed for such Taxes promptly by Buyer. Buyer and Sellers shall cooperate as requested in preparing, executing and filing all such Tax Returns and related documentation on a timely basis as may be required to comply with the provisions of any applicable Law.

 

(b)           The filing fee required to be paid in connection with the pre-merger notification filing under the HSR Act shall be paid by Buyer.

 

Section 9.10           No Control. Except as permitted by the terms of this Agreement, prior to the Closing, Buyer shall not directly or indirectly control, supervise, direct or interfere with, or attempt to control, supervise, direct or interfere with, the Company, including the Casino, the Real Property and the other Purchased Assets. Until the Closing, the operations and affairs of the Company, including the Casino, the Real Property and the other Purchased Assets, are the sole responsibility of and under the Company’s complete and exclusive control, except as expressly provided for in this Agreement.

 

Section 9.11           Reservations; Guests; Valet Parking; Other Transition Matters.

 

(a)           Reservations. Buyer will honor the terms and rates of all reservations (in accordance with their terms) at the Casino made prior to the Closing by guests or customers, including advance reservation cash deposits, for rooms or services confirmed by the Company for dates after the Closing Date, provided that such agreements were made in the Ordinary Course of Business. From and after the date hereof, the Company may continue to accept reservations for periods after the Closing in the Ordinary Course of Business. Buyer recognizes that such reservations may include discounts or other benefits, including benefits under frequent player or casino awards programs, group discounts, other discounts or requirements that food,

 

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beverage or other benefits be delivered by Buyer to the guest(s) holding such reservations following the Closing. 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; provided that such agreements were made in the Ordinary Course of Business. Buyer agrees that Sellers can make, or have made, 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 and Buyer, by the execution hereof, assumes the risk of non-utilization of reservations and non-performance of such agreements from and after the Closing.

 

(b)           Guests’ Safe Deposit Boxes. Not later than thirty (30) days prior to the Closing, the Company shall use commercially 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, advising them that they must make arrangements with 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 the Company, a Representative of Buyer, and a Notary Public; and the contents of such box will be sealed in a package by the Notary Public, 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 in the presence of the Representatives of the Company and Buyer, respectively. The Notary Public and the Representatives of the Company and 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 Buyer. Pursuant to ARTICLE XII hereof, Parent and Sellers shall be responsible for and indemnify Buyer against claims of alleged missing items not contained on the certificate, and Buyer shall be responsible for and indemnify Sellers against claims of alleged missing items listed on the certificate.

 

(c)           Guests’ Baggage. Prior to the Closing, the Company and Buyer shall take inventory of: (i) all baggage, suitcases, luggage, valises and trunks of hotel guests checked or left in the care of the Casino; (ii) all luggage or other property of guests retained by the Casino 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. Except for the property referred to in (ii) above, which shall be removed from the Casino by the Company within ten (10) days after the Closing, 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 Representatives of the Company and Buyer as of the Closing. Said baggage and other items shall continue to be stored by the Company and Buyer shall be responsible for claims with respect thereto.

 

(d)           Front Money.

 

(i)            Pursuant to the Gaming Laws of the State of Missouri, the Company shall, at least thirty (30) days prior to the Closing, to the extent legally required, submit for approval to all applicable Gaming Authorities a plan containing customary terms for the inventory of the Front Money at the Casino. Buyer and the Company agree to cooperate

 

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fully with each other in effectuating the plan that is approved by the applicable Gaming Authorities.

 

(ii)           Effective as of the Closing, Representatives of Buyer and the Company 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 cage and listed in an inventory prepared and signed jointly by Representatives of Buyer and the Company no later than the Closing. Buyer shall be responsible from and after the Closing for all Front Money and shall distribute Front Money only to the Persons and only in the amounts as determined pursuant to this Section 9.11(d).

 

(e)           Vehicles with Valet Parking. On the Closing Date, the Company shall transfer control of all motor vehicles that were checked and placed in the care of the Business (the “Inventoried Vehicles”) to Buyer. Thereafter, Buyer shall be responsible for the Inventoried Vehicles, provided that Sellers shall be liable to the owners of such Inventoried Vehicles with respect to any damages occurring prior to the Closing Date as a result of actions taken by the Business and its employees or contractors (including damages (as a result of actions taken by the Business and its employees or contractors) set forth in the damage report) or items missing from or damaged in such Inventoried Vehicles and such liability shall be an Excluded Liability for the purposes of this Agreement.

 

(f)            Rebranding. Prior to and following the Closing Date, as the case may be, the Company, Sellers and Buyer shall timely complete all steps required under the Rebranding Plan attached hereto as Schedule A.

 

(g)           Transition Planning. In order to facilitate an effective transition of all of the services, systems and functions necessary to operate the Business (the “Transitioned Functions”) from Sellers to Buyer and its Affiliates at Closing, during the thirty (30) day period after the Effective Date (the “Transition Planning Date”), the Parties shall work together in good faith in the development of a reasonably detailed written plan (the “Transition Plan”) setting out the steps that the parties will take to transition the Transitioned Functions from Parent and Sellers to Buyer and its Affiliates, including among other things the transition of any leased slot machines located at the Casino, and to send communications to customers regarding the transactions contemplated hereby. Each party shall use its reasonable best efforts to perform its responsibilities under the Transition Plan in order to effect transition of all Transitioned Functions to Buyer and its Affiliates at or prior to Closing. If Sellers do not identify to Buyers a Transitioned Function, in connection with the creation of the Transition Plan, on or prior to the Transition Planning Date, and such omission would materially impair Buyer’s ability to operate the Casino after the Closing Date, then, at Buyer’s request, Parent shall agree to perform such Transitioned Function on behalf of the Company, at cost, for a number of days from and after the Closing Date equal to the number of days that passed after the Transition Planning Date before Sellers first identify such Transitioned Function to Buyer; provided, that Parent shall not be required to perform any Transitioned Functions on behalf of the Company pursuant to this Section 9.11(g) after a date that is ninety (90) days after the Closing Date.

 

Section 9.12           Transfer of Utilities. Prior to the Closing, the Company shall notify all utility companies servicing the Real Property of the anticipated change in ownership of the Real Property and request that all billings after the Closing be made to Buyer at the applicable Real

 

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Property. Buyer shall be responsible for paying all deposits required by utility companies in order to continue service at the Real Property for periods after the Closing and shall take any other action and make any other payments required to assure uninterrupted availability of utilities at the Real Property for all periods after the Closing. Following the Closing, all utility deposits made by the Company relating to the pre-Closing period will be refunded directly to Sellers by the utility company holding same; provided that if any such utility deposit is returned to the Company following the Closing, Buyer shall promptly remit such deposit to Sellers.

 

Section 9.13           Certain Transactions. From the date hereof until the Closing Date, neither Buyer, Sellers nor the Company shall, and shall not permit any of their respective Affiliates to, acquire or agree to acquire by merging or by consolidating with, or by purchasing assets of or a substantial portion of equity in, or any other manner, any business or any corporation, partnership, association or other business organization or division thereof engaged in the gaming business in the State of Missouri and/or the greater St. Louis area if such acquisition or agreement to acquire could reasonably be expected to adversely affect Buyer’s ability to obtain the Gaming Approvals or to consummate the transactions contemplated by this Agreement, as applicable.

 

Section 9.14           FCC Approvals.

 

(a)           The Company and Buyer will, as applicable, within ten (10) days of the Effective Date, execute and file filing copies of FCC applications to either (i) seek the consent of the FCC to the assignment of the FCC Licenses to Buyer, or (ii) have the FCC Licenses reissued by the FCC in the name of Buyer, as appropriate (collectively, the “FCC Approvals”). The Company and Buyer agree to use their respective reasonable best efforts to cooperate with any requests for information, filing of forms, communications with the FCC or other actions which are reasonably necessary in order to obtain the FCC Approvals.

 

(b)           If the FCC Approvals have not been obtained on or before the Closing Date and no special temporary authority has been granted by the FCC that allows Buyer to operate under the FCC Licenses, then (i) the Closing shall nevertheless occur as scheduled, and (ii) the parties will comply with any applicable requirements of the FCC or applicable Law (including the Company tendering for cancellation the FCC Licenses). Buyer agrees that it will not use or operate the equipment which is the subject of the FCC Licenses or the FCC Approvals after the Closing in violation of any requirements of the FCC or any applicable Law.

 

Section 9.15           Insurance and Casualty. If, before the Closing, the Casino is damaged by fire or other casualty, then, subject to the satisfaction or waiver by the applicable party of the conditions set forth in ARTICLE X hereof, the Closing shall proceed as scheduled, and Sellers shall, after the Closing Date, (i) promptly pay to Buyer all insurance proceeds received by Sellers or their Affiliates with respect to such damage, destruction or other loss, less any proceeds applied to the physical restoration of the Casino, to the extent such restoration expenditures were approved by Buyer in writing, (ii) take such actions as may reasonably be requested by Buyer in connection with the tendering of such claims to the applicable insurers with respect to such damage, destruction or other loss and (iii) assign to Buyer all rights of Sellers and their Affiliates against third parties (other than against its insurance carriers) 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

 

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to (and recovery thereon shall be reduced by the amount of) any applicable deductibles and co-payment provisions or any payment or reimbursement and shall constitute full compensation for the damage to the Casino, and Sellers and their Affiliates shall have no responsibility for restoration or repair of the Casino or any resultant loss, directly, by subrogation, or otherwise; and provided, further, that if one or more prior claims has been made after the Effective Date against the insurance with respect to the Purchased Assets that causes the amount of insurance coverage to be insufficient to cover such damage, destruction or other loss and the Company has failed to notify Buyer of such claim(s) pursuant to Section 9.1(e), then Sellers shall pay or cause to be paid the insurance proceeds with respect to such other claim(s) to Buyer so that it receives the full amount of insurance proceeds that it would have received but for such prior claim(s).

 

Section 9.16           Certain Notifications. From the date of this Agreement until the Closing, Parent, Sellers, the Company and Buyer shall promptly notify the other parties in writing, as soon as practical after it becomes known to such party, of:

 

(a)           any breach by such party of any of its representations, warranties, covenants or obligations contained in this Agreement; and

 

(b)           any fact, circumstance, event or action which will result in, or would reasonably be expected to result in, the failure of Parent, Sellers, the Company or Buyer to timely satisfy any of the closing conditions specified in ARTICLE X hereof.

 

Nothing contained in Section 9.16 shall prevent Parent, Sellers, the Company or Buyer from giving such notice, using such efforts or taking any action to cure any of the foregoing. No notice given pursuant to this Section 9.16 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 or the parties’ rights to indemnification hereunder.

 

Section 9.17           Non-Solicitation. Each party agrees that it shall not, and shall cause their respective Affiliates not to, prior to the one (1)-year anniversary of the Closing Date, solicit employment of employees of the other party or the other party’s Affiliates that such soliciting party had substantial contact with as a result of the transactions contemplated by this Agreement; provided, however, that the restrictions contained in this Section 9.17 shall not apply to (a) general solicitations not specifically directed to any employee of a party or such party’s Affiliates, and (b) any solicitation or hiring of an individual who is not employed by the other party or such party’s Affiliates at the time of such solicitation or hiring of that individual and so long as such party did not cause, induce or attempt to cause or induce such employee to no longer be employed by such other party.

 

Section 9.18           Transfer of Assets. To the extent that Parent, Sellers or any of their Affiliates (other than the Company) holds at or prior to the Closing any asset, property or right that is exclusively used or held for use in connection with the Business, Sellers shall cause such Person to promptly, and in any event prior to the Closing, transfer such asset, property or right to the Company.

 

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Section 9.19           Customer List.

 

(a)           Consent. Parent or Sellers shall solicit customers’ consents, on an “opt-out” basis, for transfer of the information on the Customer List and the Rewards Information not less than forty five (45) days prior to the anticipated Closing Date.

 

(b)           No Direct Marketing. From and after the Closing until the four (4) year anniversary of the Closing Date, Parent and Sellers shall not, and shall cause their Affiliates not to (i) make any direct marketing to the customers on the Customer List for any casino property within a ninety (90)-mile radius of the Casino or (ii) sell, license or otherwise permit any Person to use the Customer Database or any portion thereof to make any direct marketing to the customers on the Customer List for any property within a ninety (90)-mile radius of the Casino; provided, that this Section 9.19(b) shall not restrict Parent and Sellers from marketing to customers on the Customer List in connection with online gaming, online play-for-fun games, or other online interactive games conducted by Parent.

 

Section 9.20           Lien Release. Parent and Sellers shall use their reasonable best efforts to facilitate and encourage the making of any filings, releases, discharges, deeds and other documents necessary to evidence the release by all financial institutions and other Persons to which any indebtedness (including guarantee obligations in respect thereof) of the Company is outstanding (the “Lenders”) of all Liens and Encumbrances in connection therewith relating to the Purchased Assets, the Equity Interests, the Business or the Company (“Lender Liens”), and all obligations (including guarantee obligations) of the Company in respect of such indebtedness (“Loan Obligations”), substantially simultaneously with the Closing Date. Promptly after the Effective Date, Parent and Sellers shall request that the Lenders deliver letters or similar written confirmation (each, a “Release Confirmation”), substantially simultaneously with the Closing Date, confirming that (a) all Lender Liens shall be, upon the Closing Date, released by all lenders thereunder and (b) all Loan Obligations shall be, upon the Closing Date, released. Parent and Sellers shall keep Buyer reasonably informed (orally and in writing) on a current basis regarding any material developments relating to their request for Release Confirmations, including by reporting any conversations with a Lender or its Representatives relating to the Release Confirmations, any rejection of a Release Confirmation by a Lender or any failure of a Lender to respond to a request for a Release Confirmation, and by furnishing copies of any relevant written correspondence or draft documentation.

 

Section 9.21           Financing. Prior to the Closing, Buyer will use its reasonable best efforts to obtain any financing necessary to pay the Purchase Price, the Estimated Closing Payment, the Estimated Operations Payment and all fees and expenses necessary or related to the consummation of the transactions contemplated by this Agreement. Parent, Sellers and the Company shall provide all cooperation reasonably requested by Buyer in connection with obtaining any such financing, including furnishing financial and other pertinent information necessary to show the pro forma impact of the transactions contemplated by this Agreement on Buyer and its Subsidiaries; provided that Buyer shall be reimbursed for any reasonable out-of-pocket costs incurred by the Company in connection with such cooperation.

 

ARTICLE X.

CONDITIONS TO CLOSING

 

Section 10.1           Conditions to Each Party’s Obligation to Effect the Closing. The respective obligations of each party to this Agreement to effect the Closing shall be subject to the

 

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satisfaction of each of the following conditions on or prior to the Closing, any of which may be waived in whole or in part in a writing executed by all of the parties hereto:

 

(a)           No Injunctions. No Governmental Entity of competent jurisdiction shall have enacted, issued, promulgated, enforced or entered any order, executive order, stay, decree, judgment or injunction or statute, rule or regulation which is in effect (whether temporary, preliminary or permanent) and which prevents or prohibits the consummation of, or that makes it illegal for either party hereto to consummate, the transactions contemplated by this Agreement.

 

(b)           HSR Act. Any applicable waiting periods, together with any extensions thereof, under the HSR Act shall have expired or been terminated.

 

Section 10.2           Additional Conditions to Obligations of Buyer. The obligation of Buyer to effect the Closing is subject to the satisfaction of each of the following conditions prior to the Closing, any of which may be waived in whole or in part in writing exclusively by Buyer; provided, however, that Buyer may not waive the condition set forth in Section 10.2(d) below until the date this is eleven (11) months from the Effective Date and in the event such condition is waived, Buyer agrees not to operate the Casino until such time as all Required Governmental Consents are obtained by Buyer:

 

(a)           Representations and Warranties. (i) The representations and warranties of Parent, Sellers and the Company contained in Sections 6.1 (Organization of Parent and Sellers), 6.2 (Authority; No Conflict; Required Filings and Consents), 6.3 (Title to Equity Interests), 7.1 (Organization of the Company; Capitalization) and 7.2 (Authority; No Conflict; Required Filings and Consents) shall be true and correct in all material respects at and as of the Closing as if made at and as of such time and (ii) all of the other representations and warranties of Parent, Sellers and the Company contained in this Agreement shall be true and correct (without giving effect to any limitation as to “materiality” or “Company 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, reasonably be expected to result in a Company Material Adverse Effect. Buyer shall have received a certificate signed on behalf of the Company by an officer of Sellers to such effect.

 

(b)           Performance of Obligations of Parent, Sellers and the Company. Parent, Sellers and the Company shall have performed in all material respects all covenants, agreements and obligations required to be performed by Parent, Sellers and the Company under this Agreement at or prior to the Closing, including delivery of items listed in Section 5.2 hereof and curing Monetary Defects in accordance with Article XIII hereof. Buyer shall have received a certificate signed on behalf of Sellers by an officer of Sellers and the Company to such effect.

 

(c)           Deliverables. Sellers and the Company shall have delivered executed copies of the Ancillary Agreements and other closing deliverables described in ARTICLE V to be delivered by them.

 

(d)           Governmental Consents. All consents, approvals, findings of suitability, licenses, permits, waivers, orders or authorizations of and registrations, declarations or filings with any Governmental Entity of competent jurisdiction in respect of the Gaming Laws required or necessary in connection with the transactions contemplated by this Agreement and necessary

 

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for ownership and operation of the Real Property and the Business (including approval of the Petition for Change in Control and the approval, licensing or registration of Buyer and such of its (i) officers, executive directors, key employees or Persons performing management functions similar to officers, (ii) shareholders and (iii) key business affiliates as may be required by applicable Gaming Authorities) (the “Required Governmental Consents”) have been obtained by Buyer and shall be in full force and effect by Buyer.

 

Section 10.3           Additional Conditions to Obligations of Sellers. The obligations of Sellers to effect the Closing are subject to the satisfaction of each of the following conditions prior to the Closing, any of which may be waived in whole or in part in writing exclusively by Sellers:

 

(a)           Representations and Warranties. (i) The representations and warranties of Buyer contained in Sections 8.1 (Organization) and 8.2 (Authority; No Conflict; Required Filings and Consents) shall be true and correct in all material respects at and as of the Closing as if made at and as of such time and (iii) all of the other representations and warranties of 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 where the failure of such representations and warranties to be true and correct would not, individually or in the aggregate, reasonably be expected to result in a Buyer Material Adverse Effect. Sellers shall have received a certificate signed on behalf of Buyer by an executive officer of Buyer to such effect.

 

(b)           Performance of Obligations of Buyer. Buyer 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 delivery of items listed in Section 5.2. Sellers shall have received a certificate signed on behalf of Buyer by an executive officer of Buyer to such effect.

 

(c)           Deliverables. Buyer shall have delivered executed copies of the Ancillary Agreements and other closing deliverables described in ARTICLE V to be delivered by it.

 

ARTICLE XI.

TERMINATION AND AMENDMENT

 

Section 11.1           Termination. This Agreement may be terminated at any time prior to the Closing (with respect to Sections 11.1(b) through (g) hereof, by written notice by the terminating party to the other parties):

 

(a)           by mutual written agreement of Sellers and Buyer;

 

(b)           by Sellers or Buyer, if the transactions contemplated hereby shall not have been consummated on or prior to the Outside Date; provided, however, that the right to terminate this Agreement under this Section 11.1(b) shall not be available to Sellers or Buyer, respectively, if Sellers’ (or Parent’s or the Company’s) or Buyer’s failure, respectively, to fulfill any obligation of Sellers (or Parent or the Company) or Buyer, respectively, under this Agreement has been the primary cause of the failure of the Closing to occur on or before the Outside Date;

 

(c)           by Sellers or Buyer, if any Gaming Authority made a final, non-appealable determination that such Gaming Authority will not issue to Buyer all Gaming Approvals;

 

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(d)           by Sellers or Buyer, if a court of competent jurisdiction or other Governmental Entity shall have issued a non-appealable final order, decree or ruling or taken any other non-appealable final action, in each case, having the effect of permanently restraining, enjoining or otherwise prohibiting the Closing and the transactions contemplated hereby; provided, however, that the right to terminate this Agreement under this Section 11.1(d) shall not be available to Sellers or Buyer, respectively, if Sellers’ (or Parent’s or the Company’s) or Buyer’s failure, respectively, to fulfill any obligation of Sellers (or Parent or the Company) or Buyer, respectively, under this Agreement has been the primary cause of, or materially contributed to, such action;

 

(e)           by Buyer, if the Company, Sellers or Parent have breached any representation, warranty, covenant or agreement on the part of the Company, Sellers or Parent set forth in this Agreement which (i) would result in a failure of a condition set forth in Sections 10.1(a) or (b) or Sections 10.2(a), (b), (c) or (d) hereof and (ii) is not cured 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 Company, Sellers and Parent are diligently proceeding to cure such breach, this Agreement may not be terminated pursuant to this Section 11.1(e); provided, further, that Buyer’s right to terminate this Agreement under this Section 11.1(e) shall not be available if, at the time of such intended termination, Sellers have the right to terminate this Agreement under Section 11.1(b), (c), (d) or (f) hereof;

 

(f)            by Sellers, if Buyer has breached any representation, warranty, covenant or agreement on the part of Buyer set forth in this Agreement which (i) would result in a failure of a condition set forth in Sections 10.1(a) or (b) or Section 10.3(a), (b) or (c) hereof and (ii) is not cured 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 Buyer is diligently proceeding to cure such breach, this Agreement may not be terminated pursuant to this Section 11.1(f); provided, further, that Buyer shall have no right to cure its failure to timely make any Extension Deposit and such failure shall result in an immediate right of Sellers to terminate hereunder; provided, further, that Sellers’ right to terminate this Agreement under this Section 11.1(f) shall not be available if, at the time of such intended termination, Buyer has the right to terminate this Agreement under Section 11.1(b), (c), (d) or (e) hereof; or

 

(g)           by Buyer, pursuant to Section 13.2(b) or 13.3.

 

Section 11.2           Effect of Termination.

 

(a)           Liability. In the event of termination of this Agreement as provided in Section 11.1 hereof, this Agreement shall immediately become void and there shall be no Liability on the part of Buyer or Sellers, or their respective Affiliates or Representatives, other than Sections 1.5, 9.5(b) and 11.2 and ARTICLE XIII hereof; provided, however, that nothing contained in this Section 11.2 shall relieve or limit the Liability of either party to this Agreement for any fraudulent or willful breach of this Agreement.

 

(b)           Fees and Expenses. Except as otherwise expressly provided in this Agreement, all fees and expenses incurred in connection with this Agreement and the

 

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transactions contemplated hereby shall be paid by the party incurring such expenses, whether or not the Closing is consummated. Any cancellation charges of the Escrow Agent or Title Insurer shall be paid by the party who breached this Agreement, and, if no party breached this Agreement, then each of Sellers and Buyer shall pay one-half of such cancellation charges.

 

(c)           Application of the Deposit and any Extension Deposit.

 

(i)            Upon the termination of this Agreement pursuant to Section 11.1(e) and (g) hereof, the Deposit and any Extension Deposit, together with interest earned thereon, shall be paid to Buyer.

 

(ii)           Upon the termination of this Agreement for any reason other than pursuant to Section 11.1(e) and (g) hereof, the Deposit and any Extension Deposit, together with any interest earned thereon, shall be paid to Sellers (or their designee).

 

(d)           Certain Terminations. In the event that (w) this Agreement is terminated pursuant to Section 11.1(b) or (c), (x) one or more Required Governmental Consents has not been obtained at or prior to the time of such termination, (y) all of the condition to Buyer’s obligation to effect the Closing set forth in Sections 10.1(a) or (b) and Sections 10.2(a), (b), (c) and (d) have been satisfied, or waived by Buyer, other than those conditions that are not satisfied because of the failure to obtain such Required Governmental Consent(s) and (z) any action announced, entered into or commenced by Buyer after the Effective Date (a “Buyer Corporate Transaction”) was a material cause of the failure to obtain such Required Governmental Consent(s) prior to the termination date, then, within three (3) business days of the consummation by Sellers of any Company Sale pursuant to a binding arms length agreement with a non-affiliated third party purchaser (the “Third Party Purchaser”) entered into within twelve (12) months of such termination date (a “New Sale Agreement”), Buyer shall pay to Sellers the amount, if any, by which (i) the Purchase Price less the amount of the Deposit and any Extension Deposit previously released to Sellers pursuant to Section 11.2(c) exceeds (ii) the New Sale Price (the “Make-Whole Amount”); provided, that, if Sellers and/or the Company enter into a New Sale Agreement, they shall use all reasonable best efforts to maximize the New Sale Price and shall permit Buyer to participate on the same process as all other bidders in the sales process seeking a Third Party Purchaser; provided, however,  that prior to entry into a New Sale Agreement, Sellers and the Company may use its good faith judgment to determine the most favorable Company Sale proposal, considering all legal, regulatory and financial aspects (including certainty of closing). In the event of a termination of this Agreement of the type described in the first sentence of this Section 11.2(d), there shall be no Liability on the part of Buyer or its Affiliates or Representatives other than payment of the Make-Whole Amount (if any) pursuant to this Section 11.2(d), and as set forth in Section 11.2(c); provided, however, that nothing contained in this Section 11.2(d) shall relieve or limit the Liability of Buyer for any fraudulent or willful breach of this Agreement. For the avoidance of doubt, the parties acknowledge and agree that this Section 11.2(d) does not limit Buyer’s obligations pursuant to Section 9.13 hereof and does not restrict Buyer’s ability to engage in a Buyer Corporate Transaction.

 

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ARTICLE XII.

SURVIVAL; INDEMNIFICATION

 

Section 12.1           Survival of Representations, Warranties, Covenants and Agreements.

 

(a)           Except as set forth in ARTICLE XI and Section 12.1(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)           The representations and warranties made by Parent, Sellers, the Company and 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) six (6) months after the Closing Date, provided, however, that the representations made in Sections 6.1 (Organization of Sellers), 6.2 (Authority; No Conflict; Required Filings and Consents), 6.3 (Title to Equity Interests), 7.1 (Organization of the Company), 7.2 (Authority; No Conflict; Required Filings and Consents), 7.14 (Brokers), 7.17 (Minimum Cash), 8.1 (Organization), 8.2 (Authority; No Conflict; Required Filings and Consents), 8.3 (Brokers) (collectively, the “Fundamental Representations”) shall survive indefinitely, and the representations and warranties in Section 7.5 (Tax) shall survive until sixty (60) days following the expiration of the statute of limitations (taking into account any extensions or waivers thereof) applicable to the collection of the applicable Tax that is the subject of such representations. The period of time a representation or warranty survives the Closing pursuant to the preceding sentence shall be the “Survival Period” with respect to such representation or warranty. The parties intend for the preceding two sentences to shorten the otherwise applicable statute of limitations and agree that, subject to the last sentence of this Section 12.1(b), no claim may be brought based 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 provided herein shall not affect a party (i) in respect of any claim made by such party in reasonable detail in writing received by an Indemnifying Party prior to the expiration of the applicable Survival Period provided herein, or (ii) in respect of any claim grounded in fraud or willful misconduct of the Indemnifying Party.

 

Section 12.2           Indemnification.

 

(a)           Except with respect to Taxes that are governed by Section 12.2(d), from and after the Closing, Parent and Sellers shall indemnify, save and hold harmless Buyer and its Affiliates and its and their respective Representatives, successors and assigns (each, a “Buyer Indemnified Party” and collectively, the “Buyer Indemnified Parties”) from and against any and all costs, losses, Taxes, 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:

 

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(i)            any breach of any representation or warranty other than a Fundamental Representation made by Parent, Sellers or the Company in this Agreement;

 

(ii)           any breach of Fundamental Representation made by Parent, Sellers or the Company in this Agreement;

 

(iii)          any breach of any covenant (excluding any Damages incurred in connection with, arising out of, or resulting from a breach of Section 9.1(p)  that have been reflected in Net Working Capital) or agreement made, or to be performed, by Parent, Sellers or the Company in this Agreement;

 

(iv)          the Excluded Liabilities;

 

(v)           the Excluded Assets; or

 

(vi)          the ownership, use, registration, maintenance, licensing or previous transfer of the Purchased Assets prior to the Closing or the conduct of the Business prior to the Closing.

 

(b)           Except with respect to Taxes that are governed by Section 12.2(d), from and after the Closing, Buyer shall indemnify, save and hold harmless Sellers, the Company and their respective Affiliates and its and their Representatives, successors and (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 other than a Fundamental Representation made by Buyer in this Agreement;

 

(ii)           any breach of Fundamental Representation made by Buyer in this Agreement;

 

(iii)          any breach of any covenant or agreement made, or to be performed, by Buyer in this Agreement;

 

(iv)          the Assumed Liabilities;

 

(v)           the Purchased Assets; or

 

(vi)          the ownership, use, registration, maintenance, licensing or further transfer of the Purchased Assets after the Closing or the conduct of the Business after the Closing.

 

(c)           Interpretation.  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, except in cases where such damages are recovered from an Indemnified Party by a third party.

 

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(d)           Tax Indemnification.

 

(i)            From and after the Closing, Sellers shall indemnify, save and hold harmless the Buyer Indemnified Parties from and against any and all Damages incurred in connection with, arising out of, or resulting from: (A) any breach of any representation or warranty contained in Section 7.5  (Taxes); (B) any breach of any covenant or agreement made, or to be performed by Parent, Sellers or the Company on or prior to the Closing Date, pursuant to Section 3.3, Section 9.1(s), Section 9.9(a) and Section 12.9;  and (C) any Excluded Taxes.

 

(ii)           From and after the Closing, Buyer shall indemnify, save and hold harmless the Seller Indemnified Parties from and against any and all Damages incurred in connection with, arising out of, or resulting from: (A) any breach of any covenant or agreement made, or to be performed by Buyer, pursuant to Section 3.3, Section 9.9(a)  and Section 12.9;  and (B) any Taxes of the Company or relating to the Purchased Assets for any Post-Closing Period; in each case, other than Taxes for which Sellers are responsible pursuant to Section 12.2(d)(i).

 

Section 12.3           Procedure for Claims between Parties. Except with respect to Taxes that are governed by Section 12.2(d), 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, to the extent then ascertainable, the monetary damages sought (each, a “Notice”)  to the indemnifying party hereunder (the “Indemnifying Party” and collectively, the “Indemnifying Parties”)  as soon as reasonably 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 XII. 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 12.4           Defense of Third Party Claims.

 

(a)           Except with respect to Taxes that are governed by Section 12.2(d), if any lawsuit, action, proceeding, investigation, claim or enforcement action is initiated against an Indemnified Party by any third party (each, a “Third Party Claim”)  for which indemnification under this ARTICLE XII may be sought, Notice thereof, together with copies of all notices and communication relating to such Third Party Claim, shall be given to the Indemnifying Party as promptly as reasonably 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.

 

(b)           If it so elects at its own cost, risk and expense, the Indemnifying Party shall be entitled to:

 

(i)            take control of the defense and investigation of such Third Party Claim at its sole cost and expense if the Indemnifying Party notifies the Indemnified Party in writing that the Indemnifying Party will indemnify the Indemnified Party for any Damages related to the Third Party Claim;

 

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(ii)           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 reasonably concluded that there may be one or more legal defenses or defense strategies available to such Indemnified Party that are different from or additional to those available to an applicable Indemnifying Party or that there exists or is reasonably likely to exist a conflict of interest, 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

 

(iii)          compromise or settle such Third Party Claim, which compromise or settlement shall be made (x) only with the written consent of the Indemnified Party, such consent not to be unreasonably withheld, or (y) if such compromise or settlement contains an unconditional release of the Indemnified Party in respect of such claim, without any cost, liability or admission of wrongdoing of any nature whatsoever to or by such Indemnified Party, and provides only for monetary damages that will be paid in full by the Indemnifying Party.

 

(c)           If the Indemnifying Party elects to assume the defense of a Third Party Claim, the Indemnified 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.

 

(d)           If the Indemnifying Party fails to assume the defense of such Third Party Claim within fifteen (15) calendar days after receipt of the Notice, the Indemnified Party against which such Third Party 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 Third Party Claim shall not be compromised or settled without the written consent of the Indemnifying Party, which consent shall not be unreasonably withheld.

 

(e)           If the Indemnified Party assumes the defense of the Third Party Claim, the Indemnified Party will keep the Indemnifying Party reasonably informed of the progress of any such defense, compromise or settlement.

 

(f)            If the Indemnifying Party notifies the Indemnified Party that it does not dispute its liability to the Indemnified Party with respect to the Third Party Claim or fails to notify the Indemnified Party whether the Indemnifying Party disputes its liability to the Indemnified Party with respect to such Third Party Claim within sixty (60) days of the Notice of such Third Party Claim having been provided to the Indemnifying Party, the Damages arising from such Third Party Claim will be conclusively deemed a liability of the Indemnifying Party and the Indemnifying Party shall pay the amount of such Damages to the Indemnified Party on demand following the final determination thereof. If the Indemnifying Party disputes its liability with respect to such claim within such 60-day period, then such dispute shall be resolved in accordance with the terms and conditions of Section 12.5.

 

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(g)           This Section 12.4 shall not apply to any claim with respect to Taxes that are governed by Section 12.2(d), which shall be governed exclusively by Section 12.9(c).

 

Section 12.5           Resolution of Conflicts and Claims.

 

(a)           If the Indemnifying Party objects in writing to any claim for indemnification made by an Indemnified Party in any written Notice of a claim (an “Objection  Notice”), Sellers, on the one hand, and Buyer, on the other hand, shall attempt in good faith to agree upon the rights of the respective parties with respect to each of such claims, and such Sellers and Buyer shall provide information to the other party (as reasonably requested) related to the issues set forth in the Objection Notice. If Sellers and Buyer should so agree, a memorandum setting forth such agreement shall be prepared and signed by both parties.

 

(b)           If no such agreement is reached after good faith negotiation, either Buyer or Sellers may demand mediation of the dispute, unless the amount of the damage or loss is at issue in a pending action or proceeding involving a Third Party Claim, in which event mediation shall not be commenced until such amount is ascertained or both parties agree to mediation. In any such mediation, Buyer and Sellers agree to employ a mediator from the American Arbitration Association (the “AAA”) to assist them in reaching resolution of such dispute according to the Commercial Mediation Rules of the AAA. The mediator shall be a corporate attorney with at least fifteen (15) years experience in acquisitions. The fees and expenses of the mediator shall be shared equally by Buyer and Sellers. If, after mediation efforts, Buyer and Sellers should agree as to all or a portion of a claim, a memorandum setting forth such agreement shall be prepared and signed by both parties. If after reasonable efforts, and over a period of sixty (60) calendar days, the parties are unable to reach agreement on such dispute utilizing the mediator, the parties shall be permitted to proceed with any legal remedy available to such party.

 

(c)           The provisions of this Section 12.5 shall apply to disputes between the parties as to Tax matters subject to Section 12.9, with the term “Third Party Claim” replaced with “Tax Claim”.

 

Section 12.6           Limitations on Indemnity.

 

(a)           No Buyer Indemnified Party shall seek, or be entitled to, indemnification from any of the Indemnifying Parties pursuant to Section 12.2(a)(i) hereof to the extent the aggregate claims for Damages of the Buyer Indemnified Parties for which indemnification is sought pursuant to Section 12.2(a)(i) hereof are less than six million one-hundred thousand dollars ($6,100,000) (the “Deductible”) or exceed an amount equal to thirty million five-hundred thousand dollars ($30,500,000) (the “Cap”); provided, that, if the aggregate of all claims for Damages for which indemnification is sought pursuant to Section 12.2(a)(i) hereof equals or exceeds the Deductible, then the Buyer Indemnified Parties shall be entitled to recover for such Damages, subject to the limitations in this Section 12.6(a), only to the extent such Damages exceed the Deductible, but in any event not to exceed the Cap.

 

(b)           In addition to the limitations set forth in Section 12.6(a), no Buyer Indemnified Party shall seek, or be entitled to, indemnification from any of the Indemnifying Parties pursuant to Section 12.2(a)(i) hereof to the extent any individual claim or series of related individual claims for Damages of the Buyer Indemnified Parties for which indemnification is sought pursuant to Section 12.2(a)(i) hereof is less than $100,000, at which time, subject to the

 

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limitation set forth herein, the Buyer Indemnified Party shall be entitled to indemnification for the full amount of all such Damages from and including the first dollar of such Damages and all such Damages shall count towards the satisfaction of the Deductible.

 

(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 and (ii) shall be computed 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). 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) up to the amount paid by Indemnifying Party to Indemnifying Party. The Indemnified Parties shall use commercially reasonable efforts to obtain from any applicable insurance company any insurance proceeds in respect of any claim for which the Indemnified Parties seek indemnification under this ARTICLE XII.

 

Section 12.7           Payment of Damages. Except as otherwise permitted in Section 12.9(a), an Indemnified Party shall be paid in cash by an Indemnifying Party the amount to which such Indemnified Party may become entitled by reason of the provisions of this ARTICLE XII, within ten (10) business 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 judgment of a court or administrative body having jurisdiction over such proceeding.

 

Section 12.8           Exclusive Remedy.

 

(a)           After the Closing, the indemnities provided in this ARTICLE XII 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, Buyer, Parent and Sellers 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 (other than claims of, or causes of action arising from, fraud or willful misconduct) 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 or pursuant to the provisions of this ARTICLE XII). Notwithstanding anything to the contrary in this Section 12.8, in the event of willful misconduct, or a fraudulent breach of the representations, warranties, covenants or agreements contained herein, by Buyer, Parent or Sellers, any Indemnified Party shall have all remedies available at law or in equity (including for tort) with respect thereto.

 

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(b)           Without limiting the foregoing, the Buyer Indemnified Parties and the Seller Indemnified Parties hereby waive and agree not to seek (whether under any Environmental Law or otherwise) any statutory or common law remedy (whether for contribution, equitable indemnity or otherwise) against any Indemnifying Party with regard to any Environmental Condition or Environmental Liability, except solely in accordance with the exclusive remedy provided in this ARTICLE XII.

 

Section 12.9           Tax Matters.

 

(a)           Treatment of Indemnification Payments. All indemnification payments made pursuant to this ARTICLE XII shall be treated by the parties for income Tax purposes as adjustments to the purchase price, unless (i) otherwise required pursuant to a “determination” (as defined in Section 1313(a) of the Code or any similar provision of state, local or foreign Law) or (ii) Buyer provides Sellers with its written consent, which consent shall not be unreasonably withheld, conditioned or delayed.

 

(b)           Tax Returns.

 

(i)            Sellers shall prepare or cause to be prepared all Tax Returns required to be filed by, with respect to or that include the Company with respect to taxable periods of the Company ending on or before the Closing Date (the “Pre-Closing Separate Tax Returns”), and such Pre-Closing Separate Tax Returns, to the extent they relate to the Company, shall be prepared consistent with past practices and this Agreement, except as otherwise required by applicable Law. Sellers shall file or cause to be filed all Pre-Closing Separate Tax Returns that are required to be filed on or before the Closing Date and Sellers shall pay, or cause to be paid, all such Taxes shown as due on such Tax Returns. Buyer shall file or cause to be filed all Pre-Closing Separate Tax Returns for the Company that are prepared by Sellers pursuant to the first sentence of this Section 12.9(b)(i) that are due after the Closing Date and, subject to the other provisions in this Agreement, shall pay or cause to be paid all Taxes shown as due on such Pre-Closing Separate Tax Returns, provided that neither Buyer nor the Company shall be required to sign or file any Tax Return (i) not prepared in accordance with this Agreement or (ii) if it reasonably determines that there is not substantial authority supporting each material position reflected on such Tax Return (or such higher standard as may be required under applicable state, local or foreign Law to avoid the imposition of penalties) and, provided, further, that signing and filing a Tax Return in accordance with the foregoing provision shall not be considered an acknowledgement that such Tax Return complies with the requirements of this Agreement. Sellers shall pay to Buyer no later than three (3) business days prior to the due date for filing any Pre-Closing Separate Tax Return referenced in the preceding sentence, the amount of Taxes shown as due on such Pre-Closing Separate Tax Returns. Sellers shall provide Buyer a copy of each such Pre-Closing Separate Tax Return for its review and comment a reasonable number of days prior to the due date (including any applicable extension) of such Tax Return, and Sellers shall reasonably consider any written comments of Buyer received prior to filing such Pre-Closing Separate Tax Return. If the Company is permitted under any applicable income Tax Law to treat the Closing Date as the last day of the taxable period in which the Closing occurs, Buyer and Sellers shall treat (and shall cause their respective Affiliates to treat) the Closing Date as the last day of such taxable period.

 

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(ii)           Buyer shall prepare or cause to be prepared all Tax Returns of the Company for taxable periods starting on or before the Closing Date and ending after the Closing Date (each, a “Straddle Period”), and shall cause such Tax Returns to be prepared consistent with past practices, except as otherwise required by applicable Law. The Company shall file or cause to be filed all such Tax Returns for any Straddle Period and, subject to the other provisions in this Agreement, shall pay or cause to be paid all Taxes shown as due on such Tax Returns. Sellers shall pay to Buyer no later than three (3) business days prior to the due date for filing any Tax Return for any Straddle Period the amount of Taxes owing with respect to the Straddle Period for which Sellers are responsible pursuant to Section 12.2(d)(i). Buyer shall provide Sellers a copy of each such Tax Return for their review and comment a reasonable number of days prior to the due date (including any applicable extension) of such Tax Return, and Buyer shall reasonably consider any written comments of Sellers received by Buyer prior to filing such Tax Return.

 

(iii)          For purposes of the indemnity provisions of this Agreement, in the case of any Taxes that are imposed on a periodic basis and are payable for a Straddle Period, the portion of such Tax related to the portion of such Straddle Period ending on and including the Closing Date shall (A) in the case of any Taxes other than gross receipts, employment, sales or use Taxes, Taxes based upon or related to income and other similar Taxes, be deemed to be the amount of such Tax for the entire Straddle Period multiplied by a fraction the numerator of which is the number of days in the Straddle Period ending on and including the Closing Date and the denominator of which is the number of days in the entire Straddle Period, and (B) in the case of any Tax based upon or related to income and any gross receipts, employment, sales or use Tax and other similar Taxes, be deemed equal to the amount which would be payable if the relevant Tax period ended on and included the Closing Date.

 

(c)           Tax Contest. Buyer or Sellers, as applicable, shall promptly notify Sellers or Buyer, as applicable, in writing upon receipt by Buyer (or, following the Closing, the Company) or Sellers, as applicable, of a written notice of any audit or administrative or judicial proceeding with respect to Taxes of the Company which Sellers or Buyer, as applicable, may be responsible for pursuant to Section 12.2(d) (a “Tax Claim”); provided, however, no failure or delay by Buyer or Sellers, as applicable, to provide notice of a Tax Claim shall reduce or otherwise affect the obligation of Sellers or Buyer, as applicable, hereunder except to the extent Sellers or Buyer, as applicable, is actually prejudiced thereby. Buyer and Sellers shall cooperate with each other in the conduct of any Tax Claim. Sellers shall have the right to control the conduct of any Tax Claim for a period that ends on or prior to the Closing Date if Sellers provide Buyer with notice of its election to control such claim within twenty (20) days of Buyer notifying Sellers of such Tax Claim. If Sellers do not elect to control any such Tax Claim within the time period set forth above, then Buyer shall be entitled to control all aspects of such claim. Buyer shall control any Tax Claim for a period that begins before and ends after the Closing Date. If the resolution of any Tax Claim for any Pre-Closing Period or Straddle Period could reasonably be expected to have an adverse effect on the party that is not in control of such claim, (A) the party in control of such claim shall keep the other party reasonably informed regarding the progress and substantive aspects of such Tax Claim, (B) the other party shall be entitled to participate in any proceedings with respect to such Tax Claim and (C) the party in control of such claim shall not compromise or settle any such Tax Claim without obtaining the other party’s prior written consent, which consent shall not be unreasonably withheld, conditioned or delayed. Notwithstanding anything to the contrary in this Agreement, Buyer shall have the right

 

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to exclusively control the conduct of any audit or administrative or judicial proceeding with respect to the Company for any taxable period other than a Straddle Period beginning after the Closing Date.

 

(d)           Cooperation. Buyer and Sellers shall reasonably cooperate, as and to the extent reasonably requested by the other party, in connection with the filing of Tax Returns and any audit, litigation or other proceeding with respect to Taxes of the Company. Such cooperation shall include the retention and (upon the other party’s request, provided that the other party provides reimbursement for all reasonable out of pocket expenses) the provision of records and information reasonably relevant to any such audit, litigation or other proceeding and making employees available on a mutually convenient basis to provide additional information and explanation of any material provided hereunder. Each of Buyer and Sellers shall (i) retain all books and records in its (or its Affiliate’s) possession after the Closing with respect to Tax matters pertinent to the Company relating to any taxable period beginning before the Closing Date until expiration of the statute of limitations (taking into account any extensions thereof) of the respective taxable periods and (ii) give the other party reasonable written notice prior to transferring, destroying or discarding any such books and records and, if the other party so requests, shall allow the requesting party to take possession of such books and records.

 

(e)           Certain Actions After Closing. Neither Buyer nor any of its Affiliates (including, after the Closing, the Company) shall, without the prior written consent of Sellers (such consent not to be unreasonably withheld, conditioned or delayed), (i) make or change any (A) Tax election of the Company for a taxable period (or portion thereof) ending on or before the Closing Date or (B) property Tax election of the Company affecting the Tax Claim described in Section 7.5(b)(i) of the Company Disclosure Letter in respect of certain property Taxes of the Company for the 2011 taxable period, (ii) amend, refile or otherwise modify (or grant an extension of any applicable statute of limitations with respect to) any Tax Return of the Company for a taxable period (or portion thereof) ending on or before the Closing Date, or (iii) cause the Company to engage in any transaction on the Closing Date after the Closing that is outside of the ordinary course of business, except for the transactions contemplated by this Agreement; in each case, except for any action that would not, individually or in the aggregate, have an adverse effect on Sellers or any of their Affiliates (including, with respect to a taxable period (or portion thereof) ending on or before the Closing Date, the Company) that is material.

 

(f)            Tax Sharing Agreements. Any and all existing Tax sharing or similar agreements between Sellers or any of their Affiliates, on the one hand, and the Company, on the other hand, shall be terminated and all payables and receivables arising thereunder shall be settled, in each case prior to the Closing Date. After the Closing, neither Buyer nor the Company shall have any further rights or liabilities thereunder.

 

(g)           Tax Refunds. Sellers shall be entitled to any refund (whether by way of payment or reduction in Taxes otherwise payable in cash) received by Buyer or the Company of Taxes constituting an Excluded Liability; provided, however, that Sellers shall not be entitled to any refund of Taxes to the extent that such refund is attributable to the carryback of a loss or other Tax attribute arising in a Post-Closing Period. Except as provided in the foregoing sentence, Buyer shall be entitled to any other refund of or with respect to the Company or with respect to Transfer Taxes paid by Buyer pursuant to Section 9.9(a). If any party receives a refund to which another party is entitled pursuant to this Section 12.9(g), such party shall pay

 

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over such refund (net of costs or Taxes to the party receiving such refund) to the party entitled to such refund no later than ten (10) business days following receipt of such refund.

 

ARTICLE XIII.

TITLE TO REAL PROPERTY

 

Section 13.1           Title Policy and UCC Search. Buyer has obtained the Title Commitment and agrees to accept the Title Policy delivered by the Company on or immediately prior to the date hereof and the Uniform Commercial Code search of Sellers dated as of April 25, 2012 (the “UCC Search”). Buyer hereby acknowledges receipt of the Title Commitment, Title Policy and the UCC Search as evidence of the status of the Company’s title to the Purchased Assets and acceptance of the matters thereon as Permitted Liens. Buyer agrees to accept valid and insurable (at ordinary rates) fee simple title to the Real Property subject to the Permitted Liens and Permitted Encumbrances. Buyer shall have the option upon the Closing Date to purchase a date-down endorsement to the Title Policy (or, at Buyer’s option, a new title insurance policy) together with a non-imputation endorsement (if available) (the “Endorsement”), insuring that the Company is the owner of the Real Property described in the Title Policy, subject to the exceptions set forth in the Endorsement. Buyer shall pay the premium for the Endorsement.

 

Section 13.2           Defects Arising After the Effective Date.

 

(a)           The UCC Search shall be updated by the Company not earlier than thirty (30) days and not later than ten (10) days prior to the Closing Date. The Endorsement, if Buyer elects to obtain such Endorsement, shall be updated by Buyer not earlier than thirty (30) days and not later than ten (10) days prior to the Closing Date. If the updated UCC Search and/or Endorsement, if applicable, discloses defects in title not shown by (i) the applicable Title Policy, (ii) UCC Search, (iii) the Company Disclosure Letter, (iv) the Title Commitment or (v) this Agreement which, in any case, render fee simple title to the Real Property uninsurable (at ordinary rates) (“Non-Monetary Defects”), or, if the Real Property should become subject to a Monetary Defect (together with any Non-Monetary Defects, “Additional Exceptions”), Buyer may object to such Additional Exceptions by delivering to the Company an itemized written notice of Buyer’s objection to such Additional Exceptions (“Defect Notice”) within fifteen (15) days after the date of receipt by Buyer of the updated Endorsement, if applicable, or UCC Search or, if earlier, the Closing Date (the “Notice Period”). Additional Exceptions will not be deemed to include any Permitted Liens or Permitted Encumbrances. Buyer’s failure to deliver a Defect Notice during the Notice Period shall be deemed a waiver of Buyer’s right to object to such Defect(s), and Buyer shall then accept such title as is described in the Endorsement and UCC Search, as updated, without reserving any claim against the Company for such Defect(s); provided that such a failure shall not limit any claim that Buyer may have with respect to a breach of the Company’s obligations pursuant to Section 9.1(d) hereof).

 

(b)           If Buyer provides a Defect Notice to the Company during the Notice Period, the Company shall have five (5) days after receipt of the Defect Notice within which to give written notice to Buyer as to whether the Company will elect to cure any Additional Exceptions. The Company shall be under no obligation to remove any Additional Exceptions that are not Monetary Defects (and that are not created as a consequence of a breach of the Company’s obligations pursuant to Section 9.1(d) hereof), and any refusal of the Company to do so shall not be a default of the Company under this Agreement. Failure to notify Buyer in

 

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writing within such period of the Company’s election shall be deemed the Company’s election not to cure any such Additional Exceptions. If the Company elects, in its sole discretion, to cure any Additional Exceptions, the Company shall have thirty (30) days after receipt of the Defect Notice to cure such Additional Exceptions which Company has elected to cure, and the Closing shall, if necessary, be extended accordingly. Buyer shall have five (5) business days following either receipt of the Company’s notice electing not to cure any Additional Exceptions or the date on which the Company is deemed to have elected not to cure any Additional Exceptions in which to elect (in each case, without limitation to any claim that Buyer may have with respect to a breach of the Company’s obligations pursuant to Section 9.1(d) hereof) either to (i) waive its objection to the Additional Exceptions that the Company does not or is deemed not to elect to cure and to proceed with Closing; or (ii) terminate this Agreement upon written notice to the Company and Escrow Agent. The Company shall be obligated to cure Monetary Defects in accordance with Section 13.2(c).

 

(c)           The Company shall be obligated to cure monetary Liens encumbering the Real Property (other than any non-delinquent Taxes and assessments and any monetary Liens created or suffered by Buyer or consented to by Buyer), including financing liens or encumbrances created by, under or through or the Company or that are held by the Company or any of its Affiliates (“Monetary Defects”) in the manner provided below. In order to cure a Monetary Defect, or any Additional Exception that the Company elects to cure in accordance with this Article XIII, the Company 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 Buyer and Escrow Agent on or prior to the Closing Date. The Company may cure Monetary Defects, and any Additional Exceptions that the Company elects to cure, by any of the following methods to the extent applicable: (i) removing the Monetary Defect or applicable Additional Exceptions of record; (ii) posting a bond which causes a Monetary Defect to cease to be a Lien on the Real Property; or (iii) providing indemnification to the Title Insurer against adverse final adjudication of any Monetary Defect or such Additional Exception and having the Title Insurer provide an endorsement, if applicable, which deletes such Monetary Defect or such Additional Exception as an exception to coverage.

 

Section 13.3           Failure to Cure Title Defects. If the Company fails to cure a Monetary Defect that it is obligated to cure in accordance with Section 13.2 hereof, or an Additional Exception that the Company had elected to cure in accordance with Section 13.2 hereof, such failure shall be a default by the Company and this Agreement shall, at the option of Buyer (to be exercised by written notice to the Company given no later than the earlier of: (a) the Closing Date or (b) five (5) business days after such the Company’s notice to Buyer of such the Company’s election not to cure or attempt to cure such title defects), be terminated, the Escrow Agent shall return the Deposit to Buyer and Buyer and the Company shall be released and discharged from any further obligation to each other hereunder; provided, that if Buyer so elects, Buyer may accept such title as is tendered by the Company without a reduction in the Purchase Price or reservation of claim against the Company (but without limitation to any claim that Buyer may have with respect to a breach of the Company’s obligations pursuant to Section 9.1(d) hereof). Buyer’s right to terminate this Agreement pursuant to this Section 13.3 shall apply to the entire Agreement and notwithstanding anything contained to the contrary herein, if Buyer elects to terminate this Agreement pursuant to this Section 13.3, Buyer shall not, in any event, have a right to terminate less than all of this Agreement.

 

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Section 13.4           Survey.  Buyer agrees to accept the Real Property subject to all matters shown by the surveys described on Section 13.4 of the Company Disclosure Letter (collectively, the “Survey”). The Company shall, at Buyer’s sole cost and expense, cause the Survey to be updated and recertified to Buyer not earlier than one hundred twenty (120) days and not later than fifteen (15) days prior to the Closing. If a recertified updated and recertified Survey reveals: (a) any material encroachments of the Real Property onto property of others; (b) any material encroachments of property of others onto the Real Property; or (c) the location of any title matter on the Real Property in a manner that would materially and adversely affect the ability to use the Real Property as presently constructed and located on the Real Property; or any other matter which would render title to the Real Property uninsurable and unmarketable, and if such matters were not revealed by the Survey, then such disclosure shall be an Additional Exception as to which the provisions of Sections 13.2 and 13.3 hereof shall govern Buyer’s and the Company’s rights and obligations.

 

Section 13.5           AS IS.  SUBJECT ONLY TO THE COMPANY’S REPRESENTATIONS AND WARRANTIES AND COVENANTS EXPRESSLY SET FORTH HEREIN OR ANY CERTIFICATE OR AGREEMENT DELIVERED PURSUANT HERETO AND SUBJECT TO THE CONDITIONS, RIGHTS AND OBLIGATIONS SET FORTH HEREIN AND THEREIN, BUYER EXPRESSLY ACKNOWLEDGES AND AGREES, AND REPRESENTS AND WARRANTS TO SELLER AND THE COMPANY, THAT BUYER HAS OR WILL HAVE THE OPPORTUNITY TO FULLY EXAMINE AND INSPECT THE PURCHASED ASSETS PRIOR TO THE EXECUTION OF THIS AGREEMENT AND THAT BUYER IS FULLY CAPABLE OF EVALUATING AND HAS EVALUATED THE PURCHASED ASSETS’ SUITABILITY FOR BUYER’S INTENDED USE THEREOF, AND BUYER IS PURCHASING THE PURCHASED ASSETS WITH ALL DEFECTS IN THEIR “AS IS”, “WHERE IS” CONDITION AND WITH ALL FAULTS, WHETHER KNOWN, UNKNOWN, APPARENT, OR LATENT. BUYER’S DECISION TO PURCHASE THE PURCHASED ASSETS IS NOT BASED ON ANY COVENANT, WARRANTY, PROMISE, AGREEMENT, GUARANTY, OR REPRESENTATION BY THE COMPANY, SELLER OR ANY OF THEIR AFFILIATES OR REPRESENTATIVES AS TO CONDITION, PHYSICAL OR OTHERWISE, TITLE, LEASES, RENTS, REVENUES, INCOME, EXPENSES, OPERATION, ZONING OR OTHER REGULATION, COMPLIANCE WITH LAW, SUITABILITY FOR PARTICULAR PURPOSES OR ANY OTHER MATTER WHATSOEVER EXCEPT TO THE EXTENT EXPRESSLY SET FORTH IN THIS AGREEMENT. SUBJECT ONLY TO THE COMPANY’S REPRESENTATIONS, WARRANTIES AND COVENANTS EXPRESSLY CONTAINED HEREIN, THE CONDITIONS SET FORTH IN ARTICLE X AND THE REPRESENTATIONS, WARRANTIES, AND CONDITIONS SET FORTH IN ALL CERTIFICATES AND AGREEMENTS DELIVERED BY THE COMPANY PURSUANT TO THIS AGREEMENT, BUYER ACKNOWLEDGES AND AGREES THAT NEITHER THE COMPANY, SELLER, NOR ANY OF THEIR AFFILIATES NOR ANY OF THEIR RESPECTIVE REPRESENTATIVES HAS MADE, AND BUYER SPECIFICALLY WAIVES AND RELINQUISHES ALL RIGHTS, PRIVILEGES AND CLAIMS ARISING OUT OF, ANY ALLEGED REPRESENTATIONS, WARRANTIES (INCLUDING WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR USE, AND WARRANTIES ARISING FROM A COURSE OF DEALING, USAGE OR TRADE), PROMISES, COVENANTS, AGREEMENTS OR GUARANTIES OF ANY KIND OR CHARACTER WHATSOEVER, WHETHER EXPRESS OR IMPLIED, ORAL OR WRITTEN, PAST, PRESENT OR FUTURE, WHICH MAY HAVE BEEN MADE OR GIVEN, OR WHICH MAY

 

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BE DEEMED TO HAVE BEEN MADE OR GIVEN, BY THE COMPANY, ITS AFFILIATES OR ANY OF THEIR RESPECTIVE REPRESENTATIVES, AS TO, CONCERNING OR WITH RESPECT TO:

 

(A)          THE VALUE OF THE PURCHASED ASSETS (REGARDLESS OF, WITHOUT LIMITATION, ANY STATEMENTS MADE BY THE COMPANY OR ANY ENTRY MADE IN THE COMPANY’S FINANCIAL STATEMENTS);

 

(B)           THE INCOME DERIVED OR TO BE DERIVED FROM THE PURCHASED ASSETS;

 

(C)           THE SUITABILITY OF THE REAL PROPERTY FOR ANY AND ALL ACTIVITIES AND USES WHICH BUYER MAY CONDUCT THEREON, INCLUDING, THE POSSIBILITIES FOR FUTURE DEVELOPMENT OF THE REAL PROPERTY;

 

(D)          THE FITNESS OF THE PURCHASED ASSETS FOR ANY PARTICULAR PURPOSE;

 

(E)           THE MANNER OR QUALITY OF REPAIR, STATE OF REPAIR OR LACK OF REPAIR OF THE PURCHASED ASSETS;

 

(F)           THE NATURE, QUALITY OR CONDITION OF THE PURCHASED ASSETS, INCLUDING SOILS CONDITION, ANY GRADING OR OTHER WORK PERFORMED ON OR WITH RESPECT TO THE REAL PROPERTY, AND THE GEOLOGICAL CONDITION OF THE REAL PROPERTY;

 

(G)           THE COMPLIANCE OF OR BY THE REAL PROPERTY OR ITS OPERATION WITH ANY APPLICABLE LAWS;

 

(H)          THE MANNER OR QUALITY OF THE CONSTRUCTION OR MATERIALS, IF ANY, INCORPORATED INTO THE REAL PROPERTY;

 

(I)            COMPLIANCE WITH ANY ENVIRONMENTAL PROTECTION, POLLUTION OR LAND USE LAWS, RULES, REGULATIONS, ORDERS OR REQUIREMENTS, INCLUDING TITLE III OF THE AMERICANS WITH DISABILITIES ACT OF 1990 OR ANY ENVIRONMENTAL LAWS, AS ANY OF THE FOREGOING MAY BE AMENDED FROM TIME TO TIME AND REGULATIONS PROMULGATED UNDER ANY OF THE FOREGOING FROM TIME TO TIME;

 

(J)            THE PRESENCE, SUSPECTED PRESENCE OR ABSENCE OF HAZARDOUS SUBSTANCES AT, ON, UNDER, OR ADJACENT TO THE REAL PROPERTY;

 

(K)          THE CONTENT, COMPLETENESS OR ACCURACY OF THE STUDY MATERIALS OR ANY PLANS, DRAWINGS, DESCRIPTIONS OR THE LIKE WITH RESPECT TO THE REAL PROPERTY;

 

(L)           THE CONFORMITY OF THE REAL PROPERTY TO PAST, CURRENT OR FUTURE APPLICABLE ZONING OR BUILDING REQUIREMENTS;

 

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(M)         DEFICIENCY OF ANY DRAINAGE;

 

(N)          THE FACT THAT THE REAL PROPERTY MAY BE LOCATED ON OR NEAR EARTHQUAKE FAULTS OR IN SEISMIC HAZARD ZONES;

 

(O)          THE EXISTENCE OR NON-EXISTENCE OF VESTED LAND USE, ZONING OR BUILDING ENTITLEMENTS AFFECTING THE REAL PROPERTY; OR

 

(P)           ANY OTHER MATTER CONCERNING THE NATURE OR CONDITION OF THE REAL PROPERTY, PHYSICAL OR OTHERWISE.

 

SUBJECT ONLY TO THE COMPANY’S REPRESENTATIONS, WARRANTIES AND COVENANTS EXPRESSLY CONTAINED HEREIN, THE CONDITIONS SET FORTH IN ARTICLE X, THE RIGHTS AND OBLIGATIONS SET FORTH IN ARTICLE X, AND ANY CERTIFICATES DELIVERED BY THE COMPANY PURSUANT TO THIS AGREEMENT, BUYER FURTHER ACKNOWLEDGES AND AGREES THAT THE PURCHASE PRICE REFLECTS THE PARTIES’ AGREEMENT TO CONVEY THE EQUITY INTERESTS, INCLUDING THE REAL PROPERTY ON AN “AS IS, WHERE IS” BASIS AND BUYER HAS SPECIFICALLY AGREED TO DO SO IN ORDER TO INDUCE SELLER AND THE COMPANY TO ENTER INTO THIS AGREEMENT. BUYER FURTHER ACKNOWLEDGES THAT NEITHER SELLER NOR THE COMPANY IS LIABLE FOR AND SHALL NOT BE BOUND IN ANY MANNER BY ANY ORAL OR WRITTEN STATEMENTS, REPRESENTATIONS OR INFORMATION PERTAINING TO THE COMPANY, INCLUDING THE PURCHASED ASSETS, OR THE OPERATION THEREOF, FURNISHED BY ANY REPRESENTATIVE OF THE COMPANY, EXCEPT TO THE EXTENT CONTAINED IN THE REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY EXPRESSLY SET FORTH HEREIN AND IN ANY CERTIFICATES DELIVERED BY THE COMPANY PURSUANT TO THE TERMS OF THIS AGREEMENT. SUBJECT ONLY TO THE COMPANY’S REPRESENTATIONS, WARRANTIES AND COVENANTS EXPRESSLY CONTAINED HEREIN, THE CONDITIONS SET FORTH IN ARTICLE X AND ANY CERTIFICATES AND AGREEMENTS DELIVERED BY THE COMPANY PURSUANT TO THIS AGREEMENT, BUYER FURTHER ACKNOWLEDGES AND AGREES THAT, TO THE MAXIMUM EXTENT PERMITTED BY LAW, THE SALE OF THE EQUITY INTERESTS, INCLUDING THE TRANSFER OF THE REAL PROPERTY AS PROVIDED FOR HEREIN IS MADE ON AN “AS IS”, “WHERE IS” CONDITION AND BASIS WITH ALL FAULTS, AND SUBJECT TO ALL APPLICABLE LAWS GOVERNING OR LIMITING THE DEVELOPMENT, USE OR OPERATION OF THE PURCHASED ASSETS OR THE CASINO (SUBJECT ONLY TO THE COMPANY’S REPRESENTATIONS, WARRANTIES AND COVENANTS EXPRESSLY SET FORTH HEREIN AND IN ANY CERTIFICATES DELIVERED BY THE COMPANY PURSUANT TO TERMS OF THIS AGREEMENT), AND THAT THE COMPANY HAS NO OBLIGATIONS TO MAKE REPAIRS, REPLACEMENTS OR IMPROVEMENTS OF ANY KIND TO THE PURCHASED ASSETS.

 

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Section 13.6           No Conflict. Nothing in this Article XIII shall limit or modify the Company’s obligations pursuant to Section 9.1(d) hereof or any remedies that may be available to Buyer in connection with any breach of such obligations pursuant to this Agreement.

 

ARTICLE XIV.

MISCELLANEOUS

 

Section 14.1           Definitions.

 

(a)           For purposes of this Agreement, the term:

 

“Accounts Receivable” means all accounts receivable (including receivables and revenues for food, beverages, telephone and casino credit), notes receivable or overdue accounts receivable, in each case, due and owing by any third party, but not including the Tray Ledger and the Markers owed to the Company or its Affiliates

 

“Acquired Personal Property” means the Personal Property, excluding the Excluded Personal Property.

 

“Acquisition Proposal” means any proposal or offer from any Person relating to any direct or indirect acquisition or purchase of the Real Property or the other Purchased Assets, other than the transactions with Buyer contemplated by this Agreement.

 

“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.

 

“Ancillary Agreements” means the Bill of Sale and Assignment, the Assignment and Assumption Agreement, the Trademark Assignment Agreement, the Assignment of Equity Interests, and the Deposit Escrow Agreement.

 

“Assumed Contracts” means all service contracts, equipment leases and other leases with respect to Personal Property, Intellectual Property license agreements, sign leases and other Contracts exclusively related to the Casino, other than the Excluded Contracts and Contracts that relate to the Excluded Assets.

 

“Business” means the business conducted by the Company at or with respect to the Casino.

 

“Buyer Material Adverse Effect” means changes, events, circumstances or effects that have had, will have or would reasonably be expected to have a material adverse effect on Buyer’s ability to perform its obligations hereunder, obtain any Gaming Approval or to consummate the transactions contemplated hereby.

 

“Casino” means that certain hotel and casino located on the Real Property and commonly known as Harrah’s St. Louis.

 

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“Class A License” means a license granted by the Missouri Gaming Commission under the Gaming Laws to allow the parent organization(s) or controlling entity, as determined by the executive director, to develop and operate Class B licensee(s).

 

“Class B License” means a license granted by the Missouri Gaming Commission under the Gaming Laws to maintain, conduct gambling games on, and operate an excursion gambling boat and gaming facility at a specific location.

 

“Code” means the Internal Revenue Code of 1986, as amended.

 

“Company Material Adverse Effect” means changes, events, circumstances or effects that have had, will have or could reasonably be expected to be material and adverse to the business, financial condition or results of operations of the Purchased Assets or the Business, taken as a whole; provided, that none of the following, individually and in the aggregate, shall constitute or be taken into account in determining whether a Company Material Adverse Effect has occurred: (i) general conditions (or changes therein) in the (A) travel, hospitality or gaming industries, or in the jurisdiction where the Company operates or (B) the financial, banking, currency or capital markets, (ii) any change in GAAP or applicable Law (other than a change in Gaming Law prohibiting or substantially restricting gaming activities which are currently permitted at Closing), (iii) any change, event or effect resulting from the entering into or public announcement of the transactions contemplated by this Agreement, (iv) any change, event or effect resulting from any act of terrorism, commencement or escalation of armed hostilities in the U.S. or internationally, and (v) the failure of the Casino to meet any financial or other projections (provided that the underlying cause of any such failure to meet financial or other projections may be considered in determining whether a Company Material Adverse Effect has occurred); provided, however, that the matters described in clauses (i), (ii) and (iv) above shall be considered in determining whether a Company Material Adverse Effect has occurred to the extent of any disproportionate impact on the Purchased Assets or the Business, taken as a whole, relative to other participants operating in the same industries and geographic markets as the Business.

 

“Company Sale” means a bona fide sale of the Business for cash, by means of a sale of all of the Equity Interests or all or substantially all of the assets of the Company to a non-affiliated third party.

 

“Confidentiality Agreement” means that certain agreement entered into as of January 10, 2012 between CEOC and Buyer.

 

“Contract” means any agreement, contract, lease, power of attorney, note, loan, evidence of indebtedness, purchase order, letter of credit, settlement agreement, franchise agreement, undertaking, covenant not to compete, employment agreement, license, instrument, obligation, commitment, understanding, policy, purchase and sales order, quotation and other executory commitment to which any Person is a party or to which any of the assets of such Person are subject, whether oral or written, express or implied.

 

“Controlled Group Liability” means any and all liabilities (i) under Title IV of ERISA, (ii) under Section 302 of ERISA, (iii) under Sections 412 and 4971 of the Code, (iv) as a result of a failure to comply with the continuation coverage requirements of Section 601 et seq. of

 

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ERISA and Section 4980B of the Code, and (v) under corresponding or similar provisions of foreign laws or regulations,

 

“Customer Database” means all customer databases, customer lists historical records of customers and any other information collected with respect to customers of the Casino, including any information used in connection with marketing and promoting the Casino.

 

“Customer List” means a list of the names and key tendencies of customers listed on the Customer Database who have visited the Casino during the twenty-four (24) month period prior to the Closing, which Customer List shall be in format and contain the information set forth on Exhibit E to the extent available in the Customer Database, and subject to receipt of consent from each customer to the transfer of such information to the extent required by the Total Rewards Program or applicable Law.

 

“Encumbrances” means claims, pledges, agreements, limitations on voting rights, charges or other encumbrances or restrictions on transfer of any nature.

 

“Environment” means ambient air, vapors, surface water, groundwater, wetlands, drinking water supply, land surface, or subsurface strata and biota.

 

“Environmental Condition” means, as relating exclusively to the Purchased Assets, the release into the Environment and/or presence in the Environment of any Hazardous Substance as a result of which the Company (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 compliance, investigation or remediation, or (iv) by reason of which the Real Property or other assets of the Company, 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 fully corrected prior to the date hereof in accordance with Environmental Law and to the satisfaction of the applicable Governmental Entity.

 

“Environmental Laws” means all applicable and legally enforceable federal, state and local statutes or laws, common law, judgments, orders, regulations, licenses, permits, enforceable guidance and policies, rules and ordinances relating to Hazardous Substances, pollution, restoration or protection of health, safety 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, including any judicial or administrative interpretation thereof.

 

“Environmental Liabilities” means all Liabilities (including 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), 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 Environmental Law and relating exclusively to the Company’s Purchased Assets or the generation and disposal of wastes or other materials relating to the Business.

 

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“ERISA Affiliate” means any trade or business, whether or not incorporated, that together with the Company would be deemed a “single employer” within the meaning of Section 4001(b) of ERISA or Section 414 of the Code.

 

“Estimated Closing Net Working Capital” means the Company’s good faith estimate of the Net Working Capital of the Business as of the Closing.

 

“Estimated Closing Net Working Capital Overage” means the amount, if any, by which the Estimated Closing Net Working Capital is greater than the Target Net Working Capital.

 

“Estimated Closing Net Working Capital Shortage” means the amount, if any, by which the Estimated Closing Net Working Capital is less than the Target Net Working Capital.

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

 

“Excluded Contracts” means all Contracts listed in Section 14.1(a) of the Company Disclosure Letter.

 

“Excluded Personal Property” means the following:

 

(i)            any Personal Property covered by the equipment leases from Affiliates of the Company or other agreements by which property owned by Affiliates of the Company is located at the Real Property and used in connection with the Business, all of which equipment leases and other agreements are set forth on Section 14.1(b) of the Company Disclosure Letter;

 

(ii)           all point of sale credit card verification terminals or imprint plates owned by third parties;

 

(iii)          any and all signs, menus, stationery, gift shop inventory or other items indicating that the Real Property is owned and/or operated by or on behalf of the Company or its Affiliates or bearing the System Mark of the Company or its Affiliates;

 

(iv)          any gaming licenses, liquor licenses or other licenses or permits pertaining to the Real Property not indirectly transferable to Buyer, in the sale of the Equity Interests, by Law; and

 

(v)           any personal property held as prizes.

 

“Excluded Software” means all computer software owned by or licensed for use by the Company or its Affiliates, including all source codes, object codes and data bases, whether on tape, disc or other computerized format, and all related user manuals, computer records, service codes, programs and stored materials (including 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 foregoing, including the Customer Database and any customer tracking system.

 

“Excluded Taxes” means, without duplication, all (i) Taxes (for the avoidance of doubt, other than Transfer Taxes that are governed by Section 9.9(a)) imposed on or payable by or with

 

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respect to the Company, or for which it is liable, for any Pre-Closing Period; (ii) Taxes relating to the Excluded Assets or the Excluded Liabilities (including, for the avoidance of doubt, any Taxes resulting from or arising out of any actions or transactions pursuant to Section 1.4(a) (but not to the extent such Taxes have reduced the amounts payable to Sellers pursuant to Section 1.4(a)) or (b) or Section 1.5 relating to any Excluded Assets or Excluded Liabilities); (iii) Liabilities of the Company pursuant to any Tax sharing, allocation or indemnification agreement entered into before the Closing to indemnify any other Person in respect of or relating to Taxes of such other Person to the extent such Liabilities (A) relate to a Pre-Closing Period or (B) otherwise accrue, arise out of, or relate to events, occurrences, pending or threatened litigation, acts, omissions and claims happening or existing prior to the Closing; (iv) Taxes relating to a Pre-Closing Period for which the Company is liable (or that may be collected from the Company by way of offset against a refund of Tax otherwise due to the Company) under Treasury Regulation Section 1.1502-6 (or any similar provision of state, local or foreign Law) or as a successor or transferee; and (v) Taxes of Sellers and their Affiliates (other than the Company) for any period (for the avoidance of doubt, other than Transfer Taxes that are governed by Section 9.9(a)).

 

“FCC” means the Federal Communications Commission.

 

“FCC Licenses” means the licenses to operate a base station or two way security radios at the Casino as described in Section 14.1(c) of the Company Disclosure Letter.

 

“Final Closing Net Working Capital” means the Net Working Capital of the Business as of the Closing as set forth in the Final Closing Statement.

 

“Final Closing Net Working Capital Overage” means the amount, if any, by which the Final Closing Net Working Capital is greater than the Target Net Working Capital.

 

“Final Closing Net Working Capital Shortage” means the amount, if any, by which the Final Closing Net Working Capital is less than the Target Net Working Capital.

 

“Fixtures” means all fixtures owned or leased by the Company and placed on, attached to, or located at the Real Property.

 

“Front Money” means all money stored on deposit in the Casino cage belonging to, and stored in an account for, any Person who is not the Company or an Affiliate of the Company.

 

“GAAP” means generally accepted accounting principles in the United States.

 

“Gaming Approvals” means all licenses, permits, approvals, authorizations, registrations, findings of suitability, franchises, entitlements, waivers and exemptions issued by any Gaming Authority or required by any Gaming Law necessary for or relating to the conduct of activities by any party hereto or any of its Affiliates and the transactions contemplated hereby, including the ownership, operation, management and development of the Business, the Purchased Assets and Assumed Liabilities; specifically including a resolution by the Missouri Gaming Commission granting the Petition for Change in Control of the Company from Sellers to Buyer as contemplated by and upon the terms set forth in this Agreement.

 

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“Gaming Authorities” means any Governmental Entity with regulatory control or jurisdiction over the conduct of lawful gaming or gambling in any jurisdiction and within the State of Missouri, specifically the Missouri Gaming Commission.

 

“Gaming Laws” means any federal, state, local or foreign statute, ordinance (including zoning), rule, regulation, permit (including land use), consent, registration, finding of suitability, approval, license, judgment, order, decree, injunction or other authorization, including any condition or limitation placed thereon, governing or relating to the current or contemplated casino and gaming activities and operations and manufacturing and distributing operations of the Purchased Assets, the Business or the Company.

 

“Gift Certificate” means any certificate, coupon, voucher or other writing which entitles the holder or bearer to a credit (whether in a specified dollar amount or for a specified item, such as a room night or meal) to be applied against the usual charge for rooms, meals and/or other goods or services at the Casino; but shall not include complimentary rooms (or room rates below average rack rates) granted to convention and other meeting groups in the Ordinary Course of Business.

 

“Harrah’s Branded Paraphernalia” means all personal property of the Company including chips, tokens, cards, dice, promotional coupons and tickets, marketing items, and office supplies, which include the trade names, trade dress, logos and general marketing style associated with Parent, Sellers or their respective Affiliates, and their controlled casino operations, including Harrah’s, Caesars Entertainment, Harrah’s St. Louis and Harrah’s Maryland Heights.

 

“Hazardous Substance” means any pollutant, chemical, substance and any toxic, infectious, carcinogenic, reactive, corrosive, ignitable or flammable chemical, or 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, or that otherwise results in any Environmental Liability, including 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.

 

“House Funds” means all cash and cash equivalents located at the Casino, including cash, negotiable instruments, and other cash equivalents located in cages, drop boxes, slot machines and other gaming devices, cash on hand for the Casino manager’s petty cash fund and cashiers’ banks, coins and slot hoppers, carousels, slot vault and poker bank and cash in the registration, retail, restaurant and other non-gaming areas of the Real Property (including in vending machines, postage meters, pay phones, laundry machines and other cash-operated equipment), and all checks, travelers’ checks, and bank drafts paid by guests of the Casino, but shall not include Front Money, which shall be treated in accordance with Section 9.11(d) hereof or the Tray Ledger, which shall be treated in accordance with Section 4.2(a) hereof.

 

“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, technologies, discoveries, apparatus, know-how, trade secrets, trademarks, trademark registrations and applications, domain names, trade dress, service marks, service mark registrations and applications, trade names, and all goodwill associated with the foregoing, copyright registrations, copyrightable and copyrighted works, databases, software,

 

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rights of publicity, rights of privacy, moral rights, customer lists and confidential marketing and customer information.

 

“IRS” means the Internal Revenue Service, a division of the United States Treasury Department, or any successor thereto.

 

“knowledge” means (i) when used in the phrase “Company’s knowledge” or “Sellers’ knowledge” and words of similar import, the actual knowledge of: Tim Lambert, Ryan Hammer, Matt Heiskell and Matt Anfinson and (ii) when used in the phrase “knowledge of Buyer” or “Buyer’s knowledge” and words of similar import, the actual knowledge of: Carl Sottosanti, Frank Donaghue and Walter Bogumil.

 

“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.

 

“Liabilities” means 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, deed of trust, pledge, option, right of first refusal or first offer, conditional sale, lien, security interest, conditional or installment sale agreement, charge or other claims or rights of third parties of any kind.

 

“Markers” means any amounts owed by any Person that is not an Affiliate of the Company to the Company related to the Casino for gaming chips, tokens or similar cash equivalents used at the Real Property delivered to such Person on credit or otherwise.

 

“Net Working Capital” means the difference between (a) the current assets of the Business, including cash and cash equivalents (including House Funds), the value of inventory, Accounts Receivable, Gift Certificates, and current prepaid expenses, to the extent benefiting the Business post-Closing and (b) the current liabilities of the Business, including accounts payable, all accrued expenses, all accrued Liabilities with respect to the Transferred Employees, all Customer Deposits and all Progressive Liabilities, with each amount determined in accordance with GAAP applied on a basis consistent with the past practices of the Company and its Affiliates; provided, that (x) if the Company has not made any Required Capital Expenditure required prior to the Closing Date pursuant to Section 9.1(p), then the Net Working Capital as of the Closing Date shall be deemed to be decreased by the amount of each such shortfall, and (y) if the Company has made any Required Capital Expenditure prior to the Closing Date that is not required to be made pursuant to Section 9.1(p) until after the Closing Date, then the Net Working Capital as of the Closing Date shall be deemed to be increased by the amount of each such early payment. For purposes of this Agreement, Net Working Capital shall exclude (i) the items set forth in Sections 4.2 and 4.6 hereof and (ii) any Tax assets or Liabilities.

 

“New Sale Price” shall mean the aggregate consideration payable in connection with the Company Sale that is the subject of the New Sale Agreement, taking into account any applicable purchase price adjustments.

 

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“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.

 

“Permitted Encumbrances” means any lien to secure payment of real estate Taxes, including special assessments, which is a lien not yet due or payable, all matters disclosed by the Survey, zoning and subdivision ordinances (provided such ordinances are not currently violated or in anticipation of being violated), terms and conditions of licenses, permits and approvals for the Real Property (which are disclosed on Section 7.11(a) of the Company Disclosure Letter) and Laws of any Governmental Entity having jurisdiction over the Real Property.

 

“Permitted Liens” means, with respect to the Company (i) Liens or Encumbrances for assessments and other governmental charges not delinquent or which are currently being contested in good faith by appropriate proceedings; (ii) Liens or Encumbrances for Taxes not yet due and payable or Taxes being contested in good faith by appropriate proceedings; (iii) mechanics’ and materialmen’s Liens or Encumbrances not filed of record and similar charges not delinquent or which are filed of record but are being contested in good faith by appropriate proceedings; (iv) Liens or Encumbrances in respect of judgments or awards with respect to which the Company shall in good faith currently be prosecuting an appeal or other proceeding for review and with respect to which the Company shall have secured a stay of execution pending such appeal or such proceeding for review; (v) easements, leases, reservations or other rights of others in, or minor defects and irregularities in title to, property or assets of the Company; provided that, such easements, leases, reservations, rights, defects or irregularities do not impair the use of the property or assets for the purposes for which they are held in any material manner; (vi) rights of tenants under operating leases and hotel guests whose occupancy may be terminated on short notice; (vii) with respect to the Real Property, all exceptions described in the Title Policy (other than items 39-40 on Schedule B thereto), the Title Commitment (other than items 44-49 on Schedule B thereto) and the UCC Search (other than those set forth on Section 14.1(d) of the Company Disclosure Letter); (viii) any Assumed Liability; and (ix) any Lien or Encumbrance that will be released and discharged at or prior to the Closing.

 

“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, barge, showroom, restaurant, bar, convention, meeting and other furniture, furnishings, fittings, appliances, equipment, equipment manuals, slot machines, gaming tables and gaming paraphernalia (including parts or inventories thereof), passenger/delivery vehicles, computer hardware and IT hardware systems, reservations terminals, software, point of sale equipment, two-way security radios and base station, machinery, spare parts, apparatus, appliances, draperies, art work, carpeting, keys, building materials, telephones and other communications equipment, televisions, maintenance equipment, tools, signs and signage, office supplies, engineering, maintenance and cleaning supplies and other supplies of all kinds, stationery and printing, linens (sheets, towels, blankets, napkins), uniforms, silverware, glassware, chinaware, pots, pans and utensils, and food, beverage, alcoholic beverage inventories, all articles of personal property now located on the Real Property for resale, whether owned or leased by the Company, and other tangible personal

 

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property that are used or held for use in the Business and located at the Casino on the Closing Date.

 

“Petition for Change in Control” means a document filed with the Missouri Gaming Commission in proper form to request approval of a “change in control” under 11 CSR 45-10.040(12) upon the terms and conditions set forth in this Agreement without the automatic nullification of the existing Class B License held by the Company under the Gaming Laws that would occur absent such approval.

 

“Post-Closing Period” means any taxable period (including the portion of a Straddle Period) beginning after the Closing Date.

 

“Pre-Closing Period” means any taxable period (including the portion of a Straddle Period) ending on or before the Closing Date.

 

“Progressive Liabilities” means the sum of (a) the face amounts of the progressive slot machine meters with an in house progressive jackpot feature (if such slot machines are not removed by the vendor at or before the Closing) and (b) the face amounts of the meters for the table games with an in house progressive jackpot feature.

 

“Real Property” means the real property described on Section 7.6(a) of the Company Disclosure Letter attached hereto, in each case together with the buildings located thereon and the barge located thereon, and all associated parking areas, Fixtures and all other improvements located thereon (the buildings and such other improvements are referred to herein collectively as the (“Improvements”)); all references hereinafter made to the Real Property shall be deemed to include all rights, benefits, privileges, tenements, hereditaments, covenants, conditions, restrictions, easements and other appurtenances on the Real Property or otherwise appertaining to or benefitting the Real Property and/or the Improvements situated thereon, including all mineral rights, development rights, air and water rights, subsurface rights, vested rights entitling, or prospective rights which may entitle the owner of the Real Property to related easements, land use rights, air rights, viewshed rights, density credits, water, sewer, electrical or other utility service, credits and/or rebates, strips and gores and any land lying in the bed of any street, road or alley, open or proposed, adjoining the Real Property, and all easements, rights-of-way and other appurtenances used or connected with the beneficial use or enjoyment of the Real Property.

 

“Rebranding Plan” means the plan for removing all Harrah’s Branded Paraphernalia from the operations of the Company as agreed upon between the parties and set forth on Schedule A attached hereto and incorporated herein.

 

“Reserved Employees” means the employees of the Casino that are listed in Section 14.1(e) of the Company Disclosure Letter.

 

“Rewards Information” means the portion of the Customer Database that includes the total points accrued at the Casino by customers listed on the Customer List under the Total Rewards Program to the extent that Parent can obtain such information using its commercially reasonable efforts, and subject to receipt of consent from each customer to the transfer of such information to the extent required by the Total Rewards Program or applicable Law.

 

74

 

“Room Revenues” means all revenues from the rental of guest rooms at the Casino, together with any sales or other taxes thereon.

 

“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 business names, slogans, color arrangements, designs, logos, Internet domain names and other similar indicia of source or origin now or hereafter used or owned by the Company or any of its Affiliates that is not used exclusively in the Business.

 

“Target Net Working Capital” means $1,500,000.

 

“Taxes” means any and all taxes, charges, fees, levies, tariffs, duties, liabilities, impositions or other assessments in the nature of a tax (together with any and all interest, penalties, additions to tax and additional amounts imposed with respect thereto) imposed by any Governmental Entity, including income, gross receipts, profits, gaming, live entertainment, 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.

 

“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 supplied or required to be supplied to any Governmental Entity with respect to Taxes, including attachments thereto and amendments thereof.

 

“Title Commitment” means that certain title commitment number NCS-539000-3-MPLS issued by First American Title Insurance Company, with an effective date of March 14, 2012.

 

“Title Insurer” means the title company, if any, selected by Buyer to issue the Endorsement, if applicable.

 

“Title Policy” means that certain policy of title insurance issued by the Chicago Title Insurance Company, dated February 6, 2008, for the benefit of the Company with respect to the Real Property.

 

“Total Rewards Program” means the Total Rewards® player loyalty program of Parent and its Affiliates.

 

“Tray Ledger” means any accounts receivable of registered hotel guests who have not checked out and who are occupying hotel rooms at the Casino on the evening of the Closing Date, including the related Room Revenues.

 

75

 

“WARN Act” means the Worker Adjustment and Retraining Notification Act of 1988 and analogous state and local Law.

 

(b)           The following are defined elsewhere in this Agreement, as indicated below:

 

	
 
    	
 
    	
Cross Reference
    
	
Terms
    	
 
    	
in Agreement
    
	
AAA
    	
 
    	
Section 12.5(b)
    
	
Additional   Amount
    	
 
    	
Section 11.2(c)
    
	
Additional   Exceptions
    	
 
    	
Section 13.2(a)
    
	
Adjustment   Date
    	
 
    	
Section 3.1
    
	
Agreement
    	
 
    	
Preamble
    
	
Assignment   and Assumption Agreement
    	
 
    	
Section 5.2(b)
    
	
Assignment   of Equity Interests
    	
 
    	
Section 5.2(g)
    
	
Assumed   Liabilities
    	
 
    	
Section 2.1
    
	
Auditor
    	
 
    	
Section 3.3
    
	
Bill   of Sale and Assignment
    	
 
    	
Section 5.2(a)
    
	
Buyer
    	
 
    	
Preamble
    
	
Buyer   Benefit Plans
    	
 
    	
Section 9.4(d)
    
	
Buyer   Disclosure Letter
    	
 
    	
Article VIII
    
	
Buyer   Indemnified Parties
    	
 
    	
Section 12.2(a)
    
	
Buyer   Indemnified Party
    	
 
    	
Section 12.2(a)
    
	
Buyer   Permits
    	
 
    	
Section 8.6
    
	
Buyer   Related Parties
    	
 
    	
Section 8.5
    
	
Buyers’   125 Plan
    	
 
    	
Section 9.4(g)
    
	
Buyer’s   401(k) Plan
    	
 
    	
Section 9.4(f)
    
	
Buyer’s   Medical Plans
    	
 
    	
Section 9.4(e)
    
	
Cap
    	
 
    	
Section 12.6(a)
    
	
CEOC
    	
 
    	
Preamble
    
	
Chips   and Tokens
    	
 
    	
Section 2.1(i)
    
	
CLC
    	
 
    	
Section 7.7(a)
    
	
Closing
    	
 
    	
Section 5.1
    
	
Closing   Date
    	
 
    	
Section 5.1
    
	
Closing   Payment
    	
 
    	
Section 3.1
    
	
Commitment   Letter
    	
 
    	
Section 8.4
    
	
Company
    	
 
    	
Preamble
    
	
Company’s   125 Plan
    	
 
    	
Section 9.4(g)
    
	
Company   401(k) Plan
    	
 
    	
Section 9.4(f)
    
	
Company   Benefit Plans
    	
 
    	
Section 7.13(a)
    
	
Company   Disclosure Letter
    	
 
    	
Article VII
    
	
Company   Permits
    	
 
    	
Section 7.11(a)
    
	
Customer   Deposits
    	
 
    	
Section 4.4(c)
    
	
Damages
    	
 
    	
Section 12.2(a)
    
	
Deductible
    	
 
    	
Section 12.6(a)
    
	
Defect   Notice
    	
 
    	
Section 13.2(a)
    
	
Deposit
    	
 
    	
Section 3.2
    

 

76

 

	
 
    	
 
    	
Cross Reference
    
	
Terms
    	
 
    	
in Agreement
    
	
Deposit   Escrow Agreement
    	
 
    	
Section 3.2
    
	
Designated   Buyer Representative
    	
 
    	
Section 9.2(a)
    
	
Determination   Date
    	
 
    	
Section 4.3(c)
    
	
DOL
    	
 
    	
Section 7.13(c)
    
	
Effective   Date
    	
 
    	
Preamble
    
	
Endorsement
    	
 
    	
Section 13.1
    
	
Environmental   Authorizations
    	
 
    	
Section 7.10
    
	
Equity   Interests
    	
 
    	
Recitals
    
	
ERISA
    	
 
    	
Section 7.13(a)
    
	
Escrow   Agent
    	
 
    	
Section 3.2
    
	
Estimated   Closing Payment
    	
 
    	
Section 4.1
    
	
Estimated   Closing Statement
    	
 
    	
Section 4.1
    
	
Estimated   Operations Payment
    	
 
    	
Section 4.2
    
	
Estimated   Operations Statement
    	
 
    	
Section 4.2
    
	
Excluded   Assets
    	
 
    	
Section 1.2
    
	
Excluded   Liabilities
    	
 
    	
Section 2.2
    
	
Extension   Deposit
    	
 
    	
Section 3.2
    
	
FCC   Approvals
    	
 
    	
Section 9.14(a)
    
	
Final   Closing Payment
    	
 
    	
Section 4.3(a)
    
	
Final   Closing Statement
    	
 
    	
Section 4.3(a)
    
	
Final   Operations Payment
    	
 
    	
Section 4.3(b)
    
	
Final   Operations Statement
    	
 
    	
Section 4.3(b)
    
	
Final   Statements
    	
 
    	
Section 4.3(c)
    
	
Financial   Information
    	
 
    	
Section 7.3
    
	
Fundamental   Representations
    	
 
    	
Section 12.1(b)
    
	
Governmental   Approvals
    	
 
    	
Section 9.6(a)
    
	
Governmental   Entity
    	
 
    	
Section 6.2(c)
    
	
Group   Tax Returns
    	
 
    	
Section 12.9(b)(i)
    
	
HMHO
    	
 
    	
Preamble
    
	
HSR   Act
    	
 
    	
Section 6.2(c)
    
	
Improvements
    	
 
    	
Section 14.1(a)
    
	
Indemnified   Parties
    	
 
    	
Section 12.3
    
	
Indemnified   Party
    	
 
    	
Section 12.3
    
	
Indemnifying   Parties
    	
 
    	
Section 12.3
    
	
Indemnifying   Party
    	
 
    	
Section 12.3
    
	
Inspection
    	
 
    	
Section 9.5(a)
    
	
Insurance   Policies
    	
 
    	
Section 7.20
    
	
Inventoried   Vehicles
    	
 
    	
Section 9.11(e)
    
	
Labor   Agreement
    	
 
    	
Section 7.12(b)
    
	
Make-Whole   Amount
    	
 
    	
Section 11.2(d)
    
	
Monetary   Defects
    	
 
    	
Section 13.2(c)
    
	
Multiemployer   Plan
    	
 
    	
Section 7.13(c)
    
	
Multiple   Employer Plan
    	
 
    	
Section 7.13(c)
    
	
New   Sale Agreement
    	
 
    	
Section 11.2(d)
    
	
Non-Assignable   Excluded Asset
    	
 
    	
Section 1.4(c)
    

 

77

 

	
 
    	
 
    	
Cross Reference
    
	
Terms
    	
 
    	
in Agreement
    
	
Non-Monetary   Defect
    	
 
    	
Section 13.2(a)
    
	
Notice
    	
 
    	
Section 12.3
    
	
Notice   Period
    	
 
    	
Section 13.2(a)
    
	
Objection   Notice
    	
 
    	
Section 12.5(a)
    
	
Ordinary   Course of Business
    	
 
    	
Section 14.1
    
	
Other   Transferred Registered IP
    	
 
    	
Section 7.7(a)
    
	
Outside   Date
    	
 
    	
Section 5.1
    
	
Owned   Real Property
    	
 
    	
Section 7.6(a)
    
	
Payoff   Letter
    	
 
    	
Section 9.20
    
	
PMHN
    	
 
    	
Preamble
    
	
Pre-Closing   Separate Tax Returns
    	
 
    	
Section 12.9
    
	
Property   Employees
    	
 
    	
Section 7.13(a)
    
	
Purchase   Price
    	
 
    	
Section 3.1
    
	
Purchase   Price Allocation
    	
 
    	
Section 3.3
    
	
Purchased   Assets
    	
 
    	
Section 1.1
    
	
Reimbursement   Accounts
    	
 
    	
Section 9.4(g)
    
	
Removal   Period
    	
 
    	
Section 1.5
    
	
Representatives
    	
 
    	
Section 9.3
    
	
Required   Capital Expenditures
    	
 
    	
Section 9.1(p)
    
	
Required   Governmental Consents
    	
 
    	
Section 10.2(d)
    
	
Restricted   Area
    	
 
    	
Section 9.19
    
	
Seller   Indemnified Parties
    	
 
    	
Section 12.2(b)
    
	
Seller   Indemnified Party
    	
 
    	
Section 12.2(b)
    
	
Sellers
    	
 
    	
Preamble
    
	
Sellers   Disclosure Letter
    	
 
    	
Article VI
    
	
Straddle   Period
    	
 
    	
Section 12.9(b)(ii)
    
	
Survey
    	
 
    	
Section 13.4
    
	
Survival   Period
    	
 
    	
Section 12.1(b)
    
	
Tax   Claim
    	
 
    	
Section 12.9(c)(ii)
    
	
Third   Party
    	
 
    	
Section 9.3
    
	
Third   Party Claim
    	
 
    	
Section 12.4(a)
    
	
Third   Party Purchaser
    	
 
    	
Section 11.2(d)
    
	
Trademark   Assignment Agreement
    	
 
    	
Section 5.2(f)
    
	
Transfer   Taxes
    	
 
    	
Section 9.9(a)
    
	
Transferred   Employees
    	
 
    	
Section 9.4(a)
    
	
Transferred   Intellectual Property
    	
 
    	
Section 1.1(h)
    
	
Transferred   Marks and Domain Names
    	
 
    	
Section 7.7(a)
    
	
Transition   Plan
    	
 
    	
Section 9.11(g)
    
	
Transition   Functions
    	
 
    	
Section 9.11(g)
    
	
UCC   Search
    	
 
    	
Section 13.1
    

 

Section 14.2           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 this Agreement or the facts and circumstances leading to

 

78

 

its execution, whether in contract, tort or otherwise, shall be governed by and construed in accordance with the Laws of the State of Missouri, applicable to contracts executed in and to be performed entirely within the State of Missouri, 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 the United States Eastern District Court for the District of Missouri, and any appellate court 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 court, (ii) agrees that any claim in respect of any such action or proceeding may be heard and determined in such 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 such 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 such court, and (v) to the extent such party is not otherwise subject to service of process in the State of Missouri, appoints Corporation Service Company as such party’s agent in the State of Missouri 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 14.3 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 14.2(C) .

 

Section 14.3           Notices. All notices, requests, claims, demands and other communications required or permitted to be given hereunder will be in writing and will be given or made by delivery in person, by courier service, by facsimile (with a copy sent by another means specified herein), or by registered or certified mail (postage prepaid, return receipt requested). Except as

 

79

 

provided otherwise herein, notices delivered by hand or by courier service shall be deemed given upon receipt; notices delivered by facsimile shall be deemed given twenty-four (24) hours after the sender’s receipt of confirmation of successful transmission; and notices delivered by registered or certified mail shall be deemed given seven (7) days after being deposited in the mail system. All notices shall be addressed to the parties at the following addresses (or at such other address for a party as will be specified by like notice):

 

(a)           if to Buyer, to

 

Penn National Gaming, Inc.

825 Berkshire Boulevard

Suite 200

Wyomissing, Pennsylvania 19610

with copies, which shall not constitute notice, to:

 

Wachtell, Lipton, Rosen & Katz

51 West 52nd Street

New York, New York 10019

Attn: Daniel A. Neff

Facsimile: (212) 403-2000

 

(b)           if to Parent, Sellers, or the Company (prior to the Closing), to

 

Caesars Entertainment Corporation

One Caesars Palace Drive

Las Vegas, Nevada 89109

Attention: General Counsel

Facsimile: (702) 407-6418

 

with a copy to:

 

Latham & Watkins LLP

650 Town Center Drive

20th Floor 

Costa Mesa, California 92626

Attention: Charles K. Ruck and Michael A. Treska

Facsimile: (714) 755-8290

 

Section 14.4           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 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. Buyer, Sellers and the Company will be referred to herein individually as a “party” and collectively as “parties” (except where the context otherwise requires).

 

80

 

Section 14.5           Entire Agreement. This Agreement and all documents and instruments referred to herein constitute the entire agreement and supersede all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof; provided that the Confidentiality Agreement shall remain in full force and effect after the Closing. Each party hereto agrees that, except for the representations and warranties contained in this Agreement and the Company Disclosure Letter, neither Sellers, the Company, nor Buyer 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 14.6           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 14.7           Assignment. Without the prior written consent of the other party, neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by operation of Law (including by merger, consolidation or a change of control) or otherwise; provided, however, Buyer may assign any of its rights in whole or in part to one or more of Buyer’s direct or indirect wholly owned Subsidiaries; provided, further that no such assignment shall relieve Buyer of any of its obligations hereunder. Any assignment in violation of the preceding sentence shall be void and no assignment shall relieve the assigning party of any of its obligations hereunder.

 

Section 14.8           Parties of Interest. Except as set forth in ARTICLE XII hereof, 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 14.9           Counterparts. This Agreement may be executed by facsimile or electronic mail transmission 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 14.10         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 that 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

 

81

 

favoring or disfavoring any party by virtue of the authorship of any of the provisions of this Agreement.

 

Section 14.11         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 of Buyer and Sellers.

 

Section 14.12         Extension; Waiver. At any time prior to the Closing, Buyer, Sellers and the Company by action taken or authorized by their respective boards of directors 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 14.13         Time of Essence. Time is of the essence with respect to this Agreement and all terms, provisions, covenants and conditions hereof.

 

[SIGNATURE PAGE FOLLOWS]

 

82

 

 

IN WITNESS WHEREOF, the undersigned have caused this Agreement to be signed by their respective duly authorized officers as of the date first written above.

 

 

	
BUYER
    	
 
    	
 
    	
SELLERS
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Penn National Gaming, Inc.,
    	
 
    	
Caesars   Entertainment Operating Company, Inc.,
    
	
a Pennsylvania corporation
    	
 
    	
a   Delaware corporation
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
By:
    	
/s/   Robert S. Ippolito
    	
 
    	
By:
    	
/s/   Jonathan S. Halkyard
    
	
Name:   
    	
Robert   S. Ippolito
    	
 
    	
Name:
    	
Jonathan   S. Halkyard
    
	
Its:   
    	
VP/Secretary/Treasurer
    	
 
    	
Its:
    	
EVP   and Chief Financial Officer
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
THE COMPANY
    	
 
    	
Harrah’s   Maryland Heights Operating Co.,
    
	
 
    	
 
    	
 
    	
a   Nevada corporation
    
	
Harrah’s Maryland Heights, LLC,
    	
 
    	
 
    	
 
    
	
a Delaware limited liability company
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
By:
    	
/s/   Jonathan S. Halkyard
    	
 
    	
By:   
    	
/s/   Jonathan S. Halkyard
    
	
Name:
    	
Jonathan   S. Halkyard
    	
 
    	
Name:
    	
Jonathan   S. Halkyard
    
	
Its:
    	
Authorized   Representative
    	
 
    	
Its:
    	
SVP   and Treasurer
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
PARENT
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Caesars Entertainment   Corporation,
    	
 
    	
Players   Maryland Heights Nevada, LLC,
    
	
a Delaware corporation
    	
 
    	
a   Nevada limited liability company
    
	
 
    	
 
    	
 
    	
By: Players Holding, LLC, Member
    
	
By:
    	
/s/   Jonathan S. Halkyard
    	
 
    	
By: Players International, LLC, Member
    
	
Name:
    	
Jonathan   S. Halkyard
    	
 
    	
By: Caesars Entertainment Operating
    
	
Its:
    	
EVP   and Chief Financial Officer
    	
 
    	
Company, Inc., Member
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
By:
    	
/s/   Jonathan S. Halkyard
    
	
 
    	
 
    	
 
    	
Name:
    	
Jonathan   S. Halkyard
    
	
 
    	
 
    	
 
    	
Its:
    	
EVP   and Chief Financial Officer
    

 

Signature Page to Equity Interest Purchase Agreement

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