SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
JANUARY 5, 2004
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Date of Report (Date of earliest event reported)
AMERICAN REAL ESTATE PARTNERS, L.P.
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(Exact Name of Registrant as Specified in its Charter)
DELAWARE 1-9516 13-3398766
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(State of Organization) (Commission File Number) (IRS Employer
Identification Number)
100 SOUTH BEDFORD ROAD
MT. KISCO, NY 10549
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(Address of Registrant's Principal Executive Office (Zip Code)
(914) 242-7700
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(Registrant's telephone number, including area code)
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(Former Name or Former Address, if Changed Since Last Report)
ITEM 5. OTHER EVENTS.
On January 5, 2004 the Company issued a press release, a copy of which is
filed as Exhibit 99.1. A subsidiary of the Company has entered into a Membership
Interest Purchase Agreement, a copy of which is filed as Exhibit 99.2.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(c) Exhibits.
EXHIBIT NO. DESCRIPTION
99.1 Press Release of American Real Estate Partners, L.P., dated
January 5, 2004.
99.2 Membership Interest Purchase Agreement, dated as of January, 5, 2004
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
AMERICAN REAL ESTATE PARTNERS, L.P.
(Registrant)
By: American Property Investors, Inc.
General Partner
By:/s/ John Saldarelli
Chief Financial Officer, Secretary
and Treasurer
Dated: January 5, 2004
Exhibit 99.1
Contact: John P. Saldarelli
Secretary and Treasurer
(914) 242-7700
FOR IMMEDIATE RELEASE
AMERICAN REAL ESTATE PARTNERS, L.P. AGREES TO
ACQUIRE ARIZONA CHARLIE'S CASINOS IN LAS VEGAS
Mount Kisco, New York, January 5, 2004 - American Real Estate Partners,
L.P. (NYSE: ACP) ("AREP"), announced today that American Casino & Entertainment
Properties LLC ("American Casino"), an indirect wholly-owned subsidiary of AREP,
has agreed to acquire Arizona Charlie's Decatur and Arizona Charlie's Boulder,
two casinos in Las Vegas, from Carl C. Icahn and an entity affiliated with Mr.
Icahn, for aggregate consideration of $125,900,000. Mr. Icahn is the chairman of
the board of directors of the general partner of AREP. The closing of the
acquisition is subject to certain conditions, including, among other things,
obtaining all approvals necessary under gaming laws, but is not subject to
financing. Upon the closing of the acquisition and upon receiving all approvals
necessary under gaming laws, American Real Estate Holdings Limited Partnership,
a subsidiary of AREP, will transfer 100% of the common stock of Stratosphere
Corporation, the entity that owns the Stratosphere Casino Hotel & Tower, to
American Casino. As a result, following the acquisition and the contribution,
American Casino will own and operate three gaming and entertainment properties
in the Las Vegas metropolitan area.
In connection with the transaction, American Casino intends to seek to
raise $200,000,000 pursuant to an offering of senior secured notes due 2012. The
notes will not be and have not been registered under the Securities Act of 1933,
as amended, and may not be offered or sold in the United States absent
registration or an applicable exemption from registration requirements.
Stratosphere
The Stratosphere, which offers the tallest free-standing observation tower
in the United States, is situated on approximately 31 acres of land located at
the northern end of the Las Vegas Strip. The facility is a tourist-oriented
gaming and entertainment destination property, which has approximately 80,000
square feet of gaming space, 2,444 hotel rooms, eight restaurants and
approximately 110,000 square feet of developed retail space. The Stratosphere
features three of the most visited amusement rides in Las Vegas: the Big Shot, a
16-seat ride that catapults passengers up a 160-foot mast in approximately 2.5
seconds with the force of approximately four G's; the High Roller, a 28-seat
roller coaster that takes passengers on a 34-mile-per-hour ride around the
Stratosphere at a height of more than 900 feet; and the recently launched X
Scream, an eight-seat thrill ride which launches passengers approximately 30
feet over the side of the Stratosphere, giving riders the sensation that they
are about to fall off the top of the building.
Arizona Charlie's Decatur
Arizona Charlie's Decatur is located on approximately 17 acres of land,
four miles west of the Las Vegas strip. An estimated 500,000 people live within
a five-mile radius of the property. The property is easily accessible from Route
95, a major highway in Las Vegas. Arizona Charlie's Decatur contains
approximately 52,000 square feet of gaming space, 258 hotel rooms, four
restaurants and three bars. The property targets repeat customers from the
surrounding communities.
Arizona Charlie's Boulder
Arizona Charlie's Boulder is located on approximately 24 acres of land,
seven miles east of the Las Vegas strip, near an I-515 interchange. The I-515 is
the most heavily traveled east/west highway in Las Vegas. An estimated 423,000
people live within a five-mile radius of the property. Arizona Charlie's Boulder
contains approximately 41,000 square feet of gaming space, 303 hotel rooms, four
restaurants and a 202-space recreational vehicle park. As with the Arizona
Charlie's Decatur property, the property targets repeat customers from the
surrounding communities.
Estimated 2003 Performance
American Casino estimates that, for the year ended 2003, the combined net
revenues of the three properties will be in the range of $262.0 million to
$264.0 million, combined EBITDA will be in the range of $42.5 million to $44.0
million and combined net income will be in the range of $9.3 million to $9.9
million.
The following table reconciles estimated net income to estimated EBITDA, in
each case at the midpoint of the estimated range.
Year Ending
December 31, 2003
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(in thousands)
Estimated net income................................. $ 9,609
Estimated other expenses, primarily interest......... $ 6,282
Estimated provision for income tax................... $ 7,308
Estimated depreciation and amortization.............. $ 20,024
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Estimated EBITDA................................ $ 43,223
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The above amounts are based upon many estimates which may be subject to
adjustment in connection with the audit of year-end results. The inclusion of
these estimates should not be regarded as an indication that either AREP or
American Casino considers these estimates to be a reliable prediction of actual
results. Actual results may differ materially from those expressed or implied.
Neither AREP nor American Casino intends to update or otherwise revise these
estimates to reflect circumstances existing after the date when made or to
reflect the occurrence of future events if any or all of the assumptions
underlying these estimates are shown to be in error.
These estimates were not prepared with a view to compliance with published
guidelines of the SEC or the guidelines established by the American Institute of
Certified Public Accountants regarding estimates or forecasts. These
forward-looking statements (as that term is defined in the Private Securities
Litigation Reform Act of 1995) are subject to significant contingencies and
uncertainties that could cause actual results to differ materially from these
estimates. There can be no assurance that the assumptions made in preparing
these estimates will prove accurate, and actual results may be materially
different than those contained in these estimates.
American Real Estate Partners, L.P. is a master limited partnership.
This release contains certain forward-looking statements within the meaning
of the Private Securities Litigation Reform Act of 1995, many of which are
beyond our ability to control or predict. Among these risks and uncertainties
are changes in general economic conditions, the extent, duration and strength or
any economic recovery, the extent of any tenant bankruptcies and insolvencies,
our ability to maintain tenant occupancy at current levels, our ability to
obtain, at reasonable costs, adequate insurance coverage, competition for
investment properties and other risks and uncertainties detailed from time to
time in our filings with the SEC, including our 2002 Form 10-K and Form 8-Ks.
Exhibit 99.2
MEMBERSHIP INTEREST PURCHASE AGREEMENT
Dated as of January 5, 2004
by and among
American Casino & Entertainment Properties LLC
Starfire Holding Corporation
and
Carl C. Icahn
This MEMBERSHIP INTEREST PURCHASE AGREEMENT (the or this "Agreement") dated
as of January 5, 2004 is made and entered into by and among Starfire Holding
Corporation, a Delaware corporation ("Starfire"), Carl C. Icahn ("Carl C. Icahn
" and a "Seller" and, together with Starfire, the "Sellers"), and American
Casino & Entertainment Properties LLC, a Delaware limited liability company
("Purchaser"). Capitalized terms not otherwise defined herein have the meanings
set forth in Article XIII.
WHEREAS, Charlie's Holding LLC is a Delaware limited liability company (the
"Company") formed on December 12, 2003, which, as of the date of this Agreement,
does not have any assets or liabilities and is wholly owned by Starfire;
WHEREAS, Fresca, LLC, is a Nevada limited liability company ("Fresca"),
which is owned by Starfire and Carl C. Icahn ;
WHEREAS, Nybor Limited Partnership ("Nybor") will distribute all of the
stock of its wholly owned subsidiary Arizona Charlie's, Inc., a Nevada
corporation ("ACI"), to Starfire, Nybor's limited partner, effective as of
November 13, 2003 subject to approval from the Nevada gaming authorities;
WHEREAS, Starfire is the limited partner of Nybor;
WHEREAS, it is anticipated that the following series of additional
transactions will occur immediately after obtaining the necessary approvals from
Nevada gaming authorities: (a) ACI will convert to a Delaware single member
limited liability company, Arizona Charlie's, LLC, with Starfire as its sole
member; (b) Starfire will contribute all of the membership interests in Arizona
Charlie's, LLC to the Company; and (c) Starfire and Carl C. Icahn will
contribute all of the membership interests in Fresca to the Company
(collectively, the "Internal Transactions");
WHEREAS, it is anticipated that obtaining the necessary approvals from
the Nevada gaming authorities will take approximately 4-8 months from the date
hereof;
WHEREAS, upon the consummation of the Internal Transactions, the
Company will own 100% of the limited liability company interests in Fresca and
Arizona Charlie's, LLC;
WHEREAS, following the completion of the Internal Transactions, the
only members of the Company will be Starfire with a membership interest of 99%
("Starfire LLC Interest") and Carl C. Icahn with a membership interest of 1%
("Icahn LLC Interest"); and
WHEREAS, following the completion of the Internal Transactions,
Purchaser desires to purchase 100% of the limited liability company interests of
the Company from the Company's members on the terms and subject to the
conditions set forth in this Agreement; and
WHEREAS, Starfire and Mr. Icahn desire to sell the Starfire LLC
Interest and Icahn LLC Interest (collectively, the "Membership Interest") to
Purchaser on the terms and subject to the conditions set forth in this
Agreement;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth in this Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE I
SALE OF MEMBERSHIP INTEREST AND CLOSING
1.1 Purchase and Sale. Starfire agrees to sell to Purchaser the Starfire
LLC Interest and Carl C. Icahn agrees to sell to Purchaser the Icahn LLC
Interest, and Purchaser agrees to purchase from Starfire the Starfire LLC
Interest and to purchase from Carl C. Icahn, the Icahn LLC Interest, at the
Closing on the terms and subject to the conditions set forth in this Agreement.
1.2 Purchase Price
(a) The estimated purchase price for the Membership Interest is One Hundred
Twenty-Five Million Nine Hundred Thousand Dollars ($125,900,000) (the "Estimated
Purchase Price"), subject to adjustment as provided in this Section 1.2.
(b) The "Final Purchase Price" shall be an amount equal to the Estimated
Purchase minus the amount, if any, by which Working Capital is less than $6.037
million.
1.3 Closing. Upon the terms and subject to the conditions of this
Agreement, the closing of the transactions contemplated hereby (the "Closing")
shall take place (a) at the offices of Purchaser, located at 100 South Bedford
Road, Mt. Kisco, NY at 10:00 a. m. , local time, on the second business day
immediately following the day on which the last to be satisfied or waived of the
conditions set forth in Articles VIII, IX and X (other than those conditions
that by their nature are to be satisfied at the Closing, but subject to the
satisfaction or waiver of those conditions) shall be satisfied or waived in
accordance herewith or (b) at such other time, date or place as Purchaser and
Sellers may agree. The date on which the Closing occurs is herein referred to as
the "Closing Date."
1.4 Actions at the Closing. At the Closing: (i) Purchaser shall pay 99% of
the Estimated Purchase Price to Starfire and 1% of the Estimated Purchase Price
to Carl C. Icahn, by electronic transfer of immediately available funds to the
respective accounts of each Seller in accordance with such Seller's account
information provided to Purchaser in writing no less than three business days
prior to Closing, (ii) Sellers shall deliver or cause to be delivered to
Purchaser the items set forth in Sections 9.1, 9.2 and 9.3 in form and substance
reasonably satisfactory to Purchaser, and (iii) Purchaser and Sellers shall
enter into an Assignment Agreement in the form of Exhibit A attached hereto (the
"Assignment Agreement") pursuant to which Sellers shall assign all of the
limited liability company interests in the Company to Purchaser.
1.5 Determination of Final Purchase Price.
(a) Not later than forty-five (45) days following the Closing, Purchaser
shall furnish to Sellers (i) the Closing Balance Sheet, prepared by Purchaser,
including a statement of Working Capital, (ii) a Working Capital Reconciliation
and (iii) a calculation of the Final Purchase Price based on the Closing Balance
Sheet and statement of Working Capital. The Closing Balance Sheet shall be
prepared in accordance with GAAP and in a manner that is consistent with the
Financial Statements as of December 31, 2002.
(b) Sellers shall provide access to the books and records that are under
the control or custody of Sellers and that are necessary to prepare the Closing
Balance Sheet and statement of Working Capital and determine the Final Purchase
Price.
1.6 Reconciliation of Estimated and Final Purchase Price.
(a) Sellers shall have forty-five (45) days from the date of receipt of the
Closing Balance Sheet and statement of Working Capital and the determination of
the Final Purchase Price to review the Closing Balance Sheet and statement of
Working Capital and the determination of Final Purchase Price and to agree or
disagree as to the Final Purchase Price reflected thereon. If Sellers do not
agree with the Final Purchase Price, then Sellers shall, within such forty-five
(45) day period, deliver a written objection to Purchaser that shall specify in
reasonable detail the basis for the objection on a line item basis and a
computation of the Final Purchase Price asserted by Seller (the "Working Capital
Objection"). Upon Purchaser's receipt of the Working Capital Objection,
Purchaser and Sellers shall negotiate in good faith to resolve the Working
Capital Objection, but if such Working Capital Objection cannot be resolved by
negotiation between and Purchaser and Sellers within thirty (30) days after
Purchaser's receipt of such Working Capital Objection, an Accounting Arbitrator
shall be appointed by the parties. The Accounting Arbitrator shall review any
materials that are reasonably requested from the parties and shall determine the
final Purchase Price based on its determination of each line item relevant to
the determination of Working Capital. The Accounting Arbitrator shall notify the
Purchaser and Sellers in writing of its determination of the Final Purchase
Price within thirty (30) days following such Accounting Arbitrator's
appointment, which determination shall be final, conclusive and binding on all
parties. Sellers shall pay the fees and expenses of the Accounting Arbitrator.
(b) If the Final Purchase Price is less than the Estimated Purchase Price,
Sellers shall pay the difference between such amounts to Purchaser, such
difference to be payable 99% by Starfire and 1% by Icahn, within the earlier of
(a) forty-five (45) days after the delivery of the Closing Balance Sheet or (b)
five (5) days after the determination of the Final Purchase Price by the
Accounting Arbitrator as contemplated in Section 1.6(a). The payments, shall
bear interest from the Closing until the date of payment at an annual interest
rate (calculated on the basis of a 365-day year) equal to Two Times Prime.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF STARFIRE
As an inducement to Purchaser to enter into this Agreement, Starfire hereby
makes the following representations and warranties to Purchaser:
2.1 Organization of Starfire. Starfire is a corporation duly organized,
validly existing and in good standing under the Laws of the State of Delaware.
Starfire has full organizational power and authority to execute and deliver this
Agreement and to perform Starfire's obligations hereunder and to consummate the
transactions contemplated hereby, including without limitation to sell and
transfer (pursuant to this Agreement) the Starfire LLC Interest.
2.2 Corporate Authority. The execution and delivery by Starfire of this
Agreement, and the performance by Starfire of its obligations hereunder, have
been duly and validly authorized by the board of directors of Starfire and no
other action on the part of Starfire, its shareholders or its board is necessary
for such execution, delivery or performance. This Agreement has been duly and
validly executed and delivered by Starfire and constitutes a legal, valid and
binding obligation of Starfire, enforceable against Starfire in accordance with
its terms.
2.3 Title. The delivery of the Assignment Agreement and other instruments
of transfer delivered by Starfire to Purchaser at the Closing will transfer to
Purchaser good and valid title to the Starfire LLC Interest, free and clear of
all Liens other than Liens created by Purchaser.
2.4 No Conflicts. The execution and delivery by Starfire of this Agreement
do not, and the performance by Starfire of its obligations under this Agreement
and the consummation of the transactions contemplated hereby will not:
(a) conflict with or result in a violation or breach of any of the terms,
conditions or provisions of the organizational documents of Starfire;
(b) conflict with or result in a violation or breach of any term or
provision of any Law or Order applicable to Starfire or any of its Assets and
Properties; or
(c) (i) conflict with or result in a violation or breach of, (ii)
constitute (with or without notice or lapse of time or both) a default under,
(iii) require Starfire to obtain any consent, approval or action of, make any
filing with or give any notice to any Person as a result or under the terms of,
(iv) result in or give to any Person any right of termination, cancellation,
acceleration or modification in or with respect to, or (v) result in the
creation or imposition of any Lien upon Starfire or any of its Assets and
Properties under, any Contract or License to which Starfire is a party or by
which any of its Assets and Properties is bound.
2.5 Consents and Approvals. Except for approvals required under the Gaming
Laws, no consent, authorization or approval of, filing or registration with, or
cooperation from, any Governmental Authority or any other Person not a party to
this Agreement is necessary in connection with the execution, delivery and
performance by Starfire of this Agreement or the consummation of the
transactions contemplated hereby.
2.6 Brokers. Neither Starfire nor the Company nor any Subsidiary has used
any broker or finder in connection with the transactions contemplated hereby,
and neither Purchaser nor any Affiliate of Purchaser has or shall have any
liability or otherwise suffer or incur any Loss as a result of or in connection
with any brokerage or finder's fee or other commission of any Person retained or
purporting to be retained by Starfire or by the Company or any Subsidiary in
connection with any of the transactions contemplated by this Agreement.
2.7 Accuracy of Statements. Neither this Agreement nor any schedule,
exhibit, statement, list, document, certificate or other information furnished
or to be furnished by or on behalf of the Company, any Subsidiary or Starfire to
Purchaser or any representative or Affiliate of Purchaser in connection with
this Agreement or any of the transactions contemplated hereby contains or will
contain any untrue statement of a material fact or omits or will omit to state a
material fact necessary to make the statements contained herein or therein, in
light of the circumstances in which they are made, not misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF CARL C. ICAHN
As an inducement to Purchaser to enter into this Agreement, Carl C. Icahn
hereby makes the following representations and warranties to Purchaser:
3.1 Authority. This Agreement has been duly and validly executed and
delivered by Mr. Icahn and constitutes a legal, valid and binding obligation of
Mr. Icahn, enforceable against him in accordance with its terms.
3.2 Title. The delivery of the Assignment Agreement and other instruments
of transfer delivered by Mr. Icahn to Purchaser at the Closing will transfer to
Purchaser good and valid title to the Icahn LLC Interest, free and clear of all
Liens other than Liens created by Purchaser.
3.3 No Conflicts. The execution and delivery by Mr. Icahn of this Agreement
does not, and the performance by Mr. Icahn of his obligations under this
Agreement and the consummation of the transactions contemplated hereby will not:
(a) conflict with or result in a violation or breach of any term or
provision of any Law or Order applicable to Mr. Icahn or any of his Assets and
Properties; or
(b) (i) conflict with or result in a violation or breach of, (ii)
constitute (with or without notice or lapse of time or both) a default under,
(iii) require Mr. Icahn to obtain any consent, approval or action of, make any
filing with or give any notice to any Person as a result or under the terms of,
(iv) result in or give to any Person any right of termination, cancellation,
acceleration or modification in or with respect to, or (v) result in the
creation or imposition of any Lien upon Mr. Icahn's Assets and Properties under,
any Contract or License to which Mr. Icahn is a party or by which any of its
Assets and Properties is bound.
3.4 Consents and Approvals. Except for approvals required under the Gaming
Laws, no consent, authorization or approval of, filing or registration with, or
cooperation from, any Governmental Authority or any other Person not a party to
this Agreement is necessary in connection with the execution, delivery and
performance by Mr. Icahn of this Agreement or the consummation of the
transactions contemplated hereby.
3.5 Brokers. Neither Mr. Icahn nor the Company nor any Subsidiary has used
any broker or finder in connection with the transactions contemplated hereby,
and neither Purchaser nor any Affiliate of Purchaser has or shall have any
liability or otherwise suffer or incur any Loss as a result of or in connection
with any brokerage or finder's fee or other commission of any Person retained or
purported to have been retained by Mr. Icahn or by the Company or any Subsidiary
in connection with any of the transactions contemplated by this Agreement.
3.6 Accuracy of Statements. Neither this Agreement nor any schedule,
exhibit, statement, list, document, certificate or other information furnished
or to be furnished by or on behalf of the Company, any Subsidiary or Mr. Icahn
to Purchaser or any representative or Affiliate of Purchaser in connection with
this Agreement or any of the transactions contemplated hereby contains or will
contain any untrue statement of a material fact or omits or will omit to state a
material fact necessary to make the statements contained herein or therein, in
light of the circumstances in which they are made, not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF STARFIRE AND CARL C. ICAHN
As an inducement to Purchaser to enter into this Agreement, Starfire and
Mr. Icahn jointly and severally hereby make the following representations to
Purchaser, except as set forth in the Disclosure Schedule attached to this
Agreement (it being agreed that any exceptions to such representations and
warranties shall clearly identify the sections of this Agreement to which they
apply).
4.1 Due Incorporation of Company.
(a) The Company and each of the Subsidiaries is duly organized and validly
existing under the laws of the state in which it is incorporated or organized,
as the case may be, with all requisite power and authority to own, lease and
operate its properties and to carry on its business as they are now being owned,
leased, operated and conducted. The Company and each of the Subsidiaries is
licensed or qualified to do business and is in good standing (where the concept
of "good standing" is applicable) as a foreign corporation in each jurisdiction
where the nature of the properties owned, leased or operated by it and the
business transacted by it require such licensing or qualification (except, with
respect to the Subsidiaries, where the failure to be so licensed or qualified or
be in good standing will not in the aggregate adversely affect the validity or
enforceability of this Agreement or have a Material Adverse Effect on any of the
Subsidiaries).
(b) The Sellers have delivered to Purchaser true, correct and complete
copies of the organizational documents of the Company and the Subsidiaries,
which organizational documents are in full force and effect.
4.2 Capitalization. Immediately prior to the Closing, the Sellers will own
100% of the limited liability company interests of the Company, free and clear
of all Liens. Immediately prior to the Closing, the Company will own 100% of the
limited liability company interests of each of the Subsidiaries, free and clear
of all Liens. No Person holds any option, warrant, convertible security or other
right to acquire any interest in the Company or any of the Subsidiaries. There
are no obligations, contingent or otherwise, of the Company or the Subsidiaries
to repurchase, redeem or otherwise acquire any ownership interests of the
Company or any Subsidiary or to provide funds to or make any material investment
(in the form of a loan, capital contribution or otherwise) in any Subsidiary or
any other Person.
4.3 Subsidiaries. The Company has no subsidiaries other than Fresca and
ACI. Fresca has no subsidiaries. ACI has no subsidiaries other than Jetset Tours
LLC. Except for its interests in the Subsidiaries, neither the Company nor any
of the Subsidiaries owns directly or indirectly any ownership or other
investment interest, either of record, beneficially or equitably, in any Person.
4.4 Consents and Approvals. Except for approvals required under the Gaming
Laws, no consent, authorization or approval of, filing or registration with, or
cooperation from, any Governmental Authority or any other Person not a party to
this Agreement is necessary in connection with the execution, delivery and
performance by each Seller of its respective obligations under this Agreement or
the consummation by each Seller of its respective transactions contemplated
hereby.
4.5 Financial Statements. (a) The Sellers have delivered to Purchaser true,
correct and complete copies of the Financial Statements. The Financial
Statements have been prepared in accordance with GAAP consistently applied and
present fairly the financial position, assets, liabilities and retained earnings
of the respective companies as of the dates thereof and the revenues, expenses,
results of operations, and cash flows of the respective companies for the
periods covered thereby. The Financial Statements are in accordance with the
books and records of the respective companies, do not reflect any transactions
which are not bona fide transactions and do not contain any untrue statement of
a material fact (whether or not required to be disclosed under GAAP) or omit to
state any material fact necessary to make the statements contained therein, in
light of the circumstances in which they were made, not misleading.
(b) The Sellers have delivered to Purchaser true and complete copies of all
Interim 2003 Financial Statements. The Interim 2003 Financial Statements present
fairly the financial position, assets, liabilities and retained earnings of the
respective companies as of the dates thereof and the revenues, expenses, results
of operations, and cash flows of the respective companies for the periods
covered thereby. The Interim 2003 Financial Statements are in accordance with
the books and records of the respective companies, do not reflect any
transactions which are not bona fide transactions and do not contain any untrue
statement of a material fact (whether or not required to be disclosed under
GAAP) or omit to state any material fact necessary to make the statements
contained therein, in light of the circumstances in which they were made, not
misleading.
(c) The Audited 2003 Financial Statements delivered pursuant to Section 6.3
will be true, correct and complete copies of the Audited 2003 Financial
Statements, will be prepared in accordance with GAAP consistently applied and
present fairly the financial position, assets, liabilities and retained earnings
of the respective companies as of the dates thereof and the revenues, expenses,
results of operations, and cash flows of the respective companies for the
periods covered thereby. The Audited 2003 Financial Statements will be in
accordance with the books and records of the respective companies, will not
reflect any transactions which are not bona fide transactions and will not
contain any untrue statement of a material fact (whether or not required to be
disclosed under GAAP) or omit to state any material fact necessary to make the
statements contained therein, in light of the circumstances in which they were
made, not misleading.
(d) The Interim 2004 Financial Statements delivered pursuant to Section 6.3
will be true, correct and complete copies of the Interim 2004 Financial
Statements, will be prepared in accordance with GAAP consistently applied and
present and will present fairly the financial position, assets, liabilities and
retained earnings of the respective companies as of the dates thereof and the
revenues, expenses, results of operations, and cash flows of the respective
companies. The Interim 2004 Financial Statements will be in accordance with the
books and records of the respective companies, will not reflect any transactions
which are not bona fide transactions and will not contain any untrue statement
of a material fact (whether or not required to be disclosed under GAAP) or omit
to state any material fact necessary to make the statements contained therein,
in light of the circumstances in which they were made, not misleading.
4.6 Company Status. The Company was formed solely for the purpose of
engaging in the transactions contemplated hereby. The Company has engaged in no
other business activities, has no liabilities, debts, claims, or obligations
whether accrued, absolute, contingent or otherwise, whether due or to become
due, has no Assets and Properties and has conducted its operations only as
contemplated hereby.
4.7 No Adverse Effects or Changes. Since December 31, 2002, (i) neither the
Company nor any of the Subsidiaries has suffered any Material Adverse Effect;
(ii) there has been no change, event, development, damage or circumstance
affecting the Company or the Subsidiaries that, individually or in the aggregate
could reasonably be expected to have a Material Adverse Effect on the Company or
any of the Subsidiaries; (iii) there has not been any change by the Company or
any of the Subsidiaries in its accounting methods, principles or practices, or
any revaluation by the Company or any of the Subsidiaries of any of its assets,
including writing down the value of inventory or writing off notes or accounts
receivable; and (iv) the Company and each of the Subsidiaries has conducted its
business only in the ordinary course of business consistent with past practice.
4.8 Title to Properties. Each of the Subsidiaries has good and marketable
title to, and each Subsidiary is the lawful owner of, all of the tangible and
intangible assets, properties and rights used in connection with its respective
businesses and all of the tangible and intangible assets, properties and rights
reflected in the Financial Statements, except for changes accruing in the
ordinary course of business that would not, individually or in the aggregate,
adversely affect the ability of the Company or any of the Subsidiaries to
conduct its business in the ordinary course, consistent with past practice.
4.9 Litigation. Except as disclosed in the Financial Statements, there are
no actions, suits, arbitrations, regulatory proceedings or other litigation,
proceedings or governmental investigations, with such exceptions as are
individually, or in the aggregate, not material in nature or amount, pending or,
to the knowledge of Sellers, threatened against or affecting the Company, the
Subsidiaries or any of their respective officers, directors, employees or agents
in their capacity as such, or any of the Company's Assets and Properties or
businesses of the Company or any of the Subsidiaries, and to Sellers' knowledge,
any facts or circumstances which may give rise to any of the foregoing. Except
as disclosed in the Financial Statements, neither the Company nor any of the
Subsidiaries is subject to any order, judgment, decree, injunction, stipulation
or consent order of or with any court or other Governmental Authority.
4.10 Claims Against Officers and Directors. There are no pending or, to the
knowledge of Sellers, threatened claims against any director, officer, employee
or agent of the Company, the Subsidiaries or any other Person, which could give
rise to any claim for indemnification against the Company or the Subsidiaries or
cause the Company or the Subsidiaries to incur any material liability or
otherwise suffer or incur any material Loss.
4.11 Insurance.
(a) The Subsidiaries maintain insurance policies that provide adequate and
suitable insurance coverage for the business of the Subsidiaries and are on such
terms, cover such risks and are in such amounts as the insurance customarily
carried by comparable companies of established reputation similarly situated and
carrying on the same or similar business.
(b) Prior to the date hereof, Sellers have delivered to Purchaser all
insurance policies (including policies providing property, casualty, liability,
workers' compensation, and bond and surety arrangements) under which the Company
and the Subsidiaries are an insured, a named insured or otherwise the principal
beneficiary of coverage. All insurance policies of the Company and the
Subsidiaries are in full force and effect. The Company and the Subsidiaries have
not received notice of any refusal of coverage with respect to an existing
policy. The Company and the Subsidiaries have paid all premiums due under all
such policies. The amount of the reserve for self-insured risks as of November
30, 2003 are set forth on Schedule 4.11(b), and such reserves shall be
maintained in accordance with past practice.
4.12 Compliance with Law. Except as set forth in the Financial Statements,
the Company and the Subsidiaries are in compliance and, at all times, have been
in compliance in all respects with all applicable Laws relating to the Company
or the Subsidiaries or their respective Assets and Properties or businesses.
Except as disclosed in the Financial Statements or in the ordinary course of
monitoring gaming activity under Gaming Laws, no investigation or review by any
governmental authority or self-regulatory authority is pending or, to the
knowledge of the Sellers, threatened, nor has any such authority indicated
orally or in writing to the Sellers, the Company or any of the Subsidiaries an
intention to conduct an investigation or review of the Company or any of the
Subsidiaries or, with respect to the Company or any of the Subsidiaries, of the
Sellers.
4.13 Undisclosed Liabilities. Except as disclosed in the Financial
Statements and the Interim 2003 Financial Statements, neither the Company nor
any of the Subsidiaries has any material liabilities or obligations of any
nature, whether known or unknown, absolute, accrued, contingent or otherwise and
whether due or to become due, other than liabilities and obligations incurred
after September 30, 2003 in the ordinary course of business consistent with past
practice (including as to amount and nature).
4.14 Related Parties. Except as disclosed in the Financial Statements and
except for transactions between the Company and the Subsidiaries or between the
Company's Subsidiaries, (i) no Affiliate of the Company is a party to any
Contract with the Company or any of the Subsidiaries; (ii) no Affiliate of the
Company owes any material amount of money to, nor is such Affiliate owed any
material amount of money by, the Company or any of the Subsidiaries, (iii)
neither the Company nor any of the Subsidiaries has, directly or indirectly,
guaranteed or assumed any indebtedness for borrowed money or otherwise for the
benefit of an Affiliate of the Company or any of the Subsidiaries; and (iv)
neither the Company nor any of the Subsidiaries has made any material payment
to, or engaged in any material transaction with, an Affiliate of the Company.
4.15 Intellectual Property. The Company and the Subsidiaries own, or
possess adequate rights to use, all material patents, trade names, trademarks,
copyrights, inventions, processes, designs, formulae, trade secrets, know-how
and other intellectual property rights necessary for, used or held for use in
the conduct of their businesses. All material intellectual property necessary
for used or held for use in the conduct of the businesses of the Company and any
of the Subsidiaries has been duly registered with, filed in or issued by the
relevant filing offices, domestic or foreign, to the extent necessary or
desirable to ensure full protection under any applicable Law, and such
registrations, filings or issuances remain in full force and effect.
(a) The conduct of the business of the Company and the Subsidiaries does
not infringe or otherwise conflict with any rights of any Person in respect of
intellectual property rights. None of the intellectual property rights owned by
the Company or the Subsidiaries is being infringed or otherwise, in any way,
used or available for use by any Person without a license or permission from the
Company and the Subsidiaries and neither the Company nor any of the Subsidiaries
has taken or omitted to take any action which would have the effect of waiving
any of its rights thereunder. Neither the Company nor any of the Subsidiaries
has received a claim of infringement or conflict by any third party in respect
of any intellectual property used by the Company or the Subsidiaries.
4.16 Environmental Matters. Except as set forth in the Financial
Statements:
(a) The Company and each of the Subsidiaries have obtained all material
Environmental Permits that are required with respect to their respective Assets
and Properties and businesses, either owned or leased;
(b) The Company, each of the Subsidiaries, and their respective Assets and
Properties and businesses, are and have been in compliance in all material
respects with all terms and conditions of all applicable Environmental Laws and
Environmental Permits;
(c) There are no Environmental Claims pending or, to the knowledge of the
Sellers, threatened against the Company or any of the Subsidiaries. Neither the
Company nor any of the Subsidiaries has received any notice from any
Governmental or Regulatory Authority or any person of any violation or liability
arising under any Environmental Law or Environmental Permit in connection with
its Assets and Properties, businesses or operations;
(d) Neither the Company, nor any of its Subsidiaries, nor any other Person
has caused or taken any action that will result in any material liability,
obligation or cost on the part of the Company or any of its Subsidiaries
relating to (x) environmental conditions on, above, under or from any properties
or assets currently or formerly owned, leased, operated or used by the Company
or any of its Subsidiaries, or (y) the past or present use, management,
transport, treatment, generation, storage, disposal, release or threatened
release of Hazardous Materials.
(e) Neither the Company nor any of the Subsidiaries owns, leases or
operates or has owned, leased or operated, any property listed on the National
Priorities List pursuant to CERCLA or on the CERCLIS or on any other federal or
state list as sites requiring investigation or cleanup;
(f) Neither the Company nor any of the Subsidiaries is transporting, has
transported, or is arranging for the transportation of, any Hazardous Material
to any location which is listed on the National Priorities List pursuant to
CERCLA, on the CERCLIS, or on any similar federal or state list or which is the
subject of federal, state or local enforcement actions or other investigations
that may lead to material claims against the Company or the Subsidiaries for
investigative or remedial work, damage to natural resources, property damage or
personal injury including claims under CERCLA;
(g) There are no sites, locations or operations at which the Company or any
of the Subsidiaries is currently undertaking, or has completed, any
investigative, remedial, response or corrective action as required by
Environmental Laws;
(h) There are no physical or environmental conditions existing on any
property owned or leased by the Company or the Subsidiaries resulting from their
respective operations or activities, past or present, at any location, that
would give rise to any material on-site or off-site investigative or remedial
obligations or any corrective action under any applicable Environmental Laws;
and
(i) The Seller has provided to Purchaser all material environmental site
assessments, audits, investigations and studies in its possession, custody or
control.
4.17 Employees, Labor Matters, etc. Except as set forth in the Financial
Statements, neither the Company nor any of the Subsidiaries is a party to or
bound by, and none of their employees is subject to, any collective bargaining
agreement, and there are no labor unions or other organizations representing,
purporting to represent or attempting to represent any employees employed by the
Company or any of the Subsidiaries. There has not occurred or been threatened
any material strike, slow down, picketing, work stoppage, concerted refusal to
work overtime or other similar labor activity with respect to any employees of
the Company or any of the Subsidiaries. There are no labor disputes currently
subject to any grievance procedure, arbitration or litigation and there is no
representation petition pending or threatened with respect to any employee of
the Company or any of the Subsidiaries. The Company and the Subsidiaries have
complied with all applicable Laws pertaining to the employment or termination of
employment of their respective employees, including, without limitation, all
such Laws relating to labor relations, equal employment opportunities, fair
employment practices, prohibited discrimination or distinction and other similar
employment activities; except for any failure to comply that, individually and
in the aggregate, is not reasonably likely to result in any Company Material
Adverse Effect.
4.18 Employee Benefit Plans.
(a) Except as set forth in the Financial Statements or accrued thereafter
in accordance with the terms of the Plans as of the date hereof, neither the
Company nor any of the Subsidiaries has incurred any material liability, and no
event, transaction or condition has occurred or exists that could result in any
material liability, on account of any Plans, including but not limited to
liability for (i) additional contributions required to be made under the terms
of any Plan or its related trust, insurance contract or other funding
arrangement with respect to periods ending on or prior to the date hereof which
are not reflected, reserved against or accrued in the Financial Statements; (ii)
breaches by the Company or any of the Subsidiaries, or any of their employees,
officers, directors, stockholders, or, to the knowledge of Sellers, the trustees
under the trusts created under the Plans, or any other Persons under ERISA or
any other applicable Law; or (iii) income taxes by reason of non-qualification
of the Plans. Each of the Plans has been operated and administered in all
material respects in compliance with its terms, all applicable Laws and all
applicable collective bargaining agreements. Except with respect to the increase
in employer matching contributions under the Subsidiaries' 401(k) plans, since
the date of the Financial Statements, neither the Company nor any of the
Subsidiaries has communicated to any current or former director, officer,
employee or consultant thereof any intention or commitment to amend or modify
any Plan, or to establish or implement any other employee or retiree benefit or
compensation plan or arrangement, which would materially increase the cost to
the Company or any Subsidiary.
(b) Each Plan which is intended to be "qualified" within the meaning of
section 401(a) of the Code, and the trust (if any) forming a part thereof has
received a favorable determination letter or is covered by an opinion letter
from the Internal Revenue Service and no event has occurred and no condition
exists which could reasonably be expected to result in the revocation of any
such determination. All amendments and actions required to bring each Plan into
conformity with the applicable provisions of ERISA, the Code, and any other
applicable Laws have been made or taken.
(c) There are no pending or threatened claims (and no facts or
circumstances exist that could give rise to any such claims) by or on behalf of
any participant in any of the Plans, or otherwise involving any such Plan or the
assets of any Plan, other than routine claims for benefits in the ordinary
course. The Plans are not presently under audit or examination (nor has notice
been received of a potential audit or examination) by the IRS, the Department of
Labor, or any other Governmental or Regulatory Authority.
(d) None of the Plans provides benefits of any kind with respect to current
or former employees, officers, or directors (or their beneficiaries) of the
Company and the Subsidiaries beyond their retirement or other termination of
employment, other than (i) coverage for benefits mandated by Section 4980B or
the Code, (ii) death benefits or retirement benefits under an employee pension
benefit plan (as defined by section 3(2) of ERISA), or (iii) benefits, the full
cost of which is borne by such current or former employees, officers, directors,
or beneficiaries.
(e) No Plan sponsored by the Company and the Subsidiaries is a
"multiemployer plan" within the meaning of Section 4001(a)(3) of ERISA or a
"multiple employer plan" as addressed in section 4063 or 4064 of ERISA. No Plan
sponsored by the Company and the Subsidiaries is subject to Title IV of ERISA.
(f) The consummation of the transactions contemplated by this Agreement
will not (alone or in combination with any other event, including, without
limitation, the passage of time) result in (i) any payment (including, without
limitation, severance, unemployment compensation, golden parachute, bonus
payments or otherwise) becoming due under any agreement or oral arrangement to
any current or former director, officer, employee or consultant of the Company
and the Subsidiaries, (ii) any increase in the amount of salary, wages or other
benefits payable to any director, officer, employee or consultant of the Company
and the Subsidiaries, or (iii) any acceleration of the vesting or timing of
payment of any benefits or compensation (including, without limitation, any
increased or accelerated funding obligation) payable to any director, officer,
employee or consultant of the Company and the Subsidiaries.
4.19 Real Property.
(a) Schedule 4.19(a) contains a legal description of each parcel of real
property owned by the Company and the Subsidiaries (including the address
thereof) and a legal description of each parcel in which the Company and the
Subsidiaries hold a valid easement to use such parcel. The Company and the
Subsidiaries have good and marketable title to or easement in each such parcel
of real property, free and clear of all Liens other than Permitted Encumbrances.
(b) Schedule 4.19(b) contains a list of each parcel of real property leased
by the Company and the Subsidiaries. The Company and the Subsidiaries have a
valid and subsisting leasehold estate in each such parcel of real property, free
and clear of Liens created by the Company and the Subsidiaries other than the
Permitted Encumbrances. All of the real property leases are valid, binding, and
enforceable in accordance with their terms, and are in full force and effect.
4.20 Tangible Personal Property. The Company and the Subsidiaries are in
possession of and have good title to, or have valid leasehold interests in or
valid rights under contract to use, all of the material tangible personal
property used or held for use in the business of the Company or the
Subsidiaries. All such property is in good working order and condition, ordinary
wear and tear excepted, and its use complies in all material respects with all
applicable Laws.
4.21 Contracts.
(a) Schedule 4.21 contains a true and complete list of each of the
following Contracts as of the date hereof:
(i) all Contracts providing for a commitment of employment or consultation
services for a specified term and payments at any one time or in any one year in
excess of $100,000;
(ii) all Contracts with any Person containing any provision or covenant
prohibiting or materially limiting the ability the Company or any of the
Subsidiaries to engage in any business activity or compete with any Person;
(iii) all Contracts relating to indebtedness of the Company or any of the
Subsidiaries;
(iv) all Contracts (other than this Agreement) providing for (i) the
disposition or acquisition of any assets or properties that individually or in
the aggregate are material to the business or any of the Subsidiaries or that
contain continuing obligations of any of the Subsidiaries, or (ii) any merger or
other business combination involving the Company and the Subsidiaries;
(v) all Contracts (other than this Agreement) that limit or contain
restrictions on the ability of the Company and the Subsidiaries to incur
indebtedness or incur or suffer to exist any Lien, to purchase or sell any
assets, to change the lines of business in which it participates or engages or
to engage in any merger or other business combination;
(vi) all Contracts establishing any joint venture, strategic alliance or
other collaboration;
(vii) all Contracts with any Person obligating the Company and any of the
Subsidiaries to guarantee or otherwise become directly or indirectly obligated
with respect to any liability or obligation in excess of $25,000 in each case or
$100,000 in the aggregate at any one time outstanding;
(viii) all Contracts for the leasing of real property by the Company and
any of the Subsidiaries setting forth the address, landlord and tenant for each
lease; and
(ix) all other Contracts that (i) involve the payment, pursuant to the
terms of any such Contract, by or to the Company or any of the Subsidiaries of
more than $100,000 annually, (ii) cannot be terminated within 90 days after
giving notice of termination without resulting in any material cost or penalty
to the Company, or (iii) are material to the businesses of the Subsidiaries.
(b) Prior to the date hereof, true, correct and complete copies of each
Contract required to be disclosed in Schedule 4.21 have been delivered to
Purchaser. Each such Contract is in full force and effect and constitutes a
legal, valid and binding agreement, enforceable in accordance with its terms, of
the Company and the Subsidiaries and, of each other party thereto; and neither
the Company nor, to the knowledge of Sellers, any other party to such Contract,
is in violation or breach of or default under any such Contract (or with notice
or lapse of time or both, would be in violation or breach of or default under
any such Contract).
4.22 Tax.
(a) The Company and the Subsidiaries have duly and timely filed with the
appropriate taxing authorities all material federal, state and local income Tax
Returns and all other material Tax Returns required to be filed through the date
hereof and will duly and timely file any such returns required to be filed on or
prior to the Closing. Such Tax Returns and other information filed are (and, to
the extent they will be filed prior to the Closing, will be) complete and
accurate in all material respects. Neither the Company nor the Subsidiaries have
pending any request for an extension of time within which to file federal, state
or local income Tax Returns.
(b) All Taxes of the Company and the Subsidiaries in respect of periods (or
portions thereof) ending at or prior to the Closing (i) have been paid by the
Company and the Subsidiaries or, (ii) after the Closing, will be paid by the
Sellers, or such Taxes (other than income Taxes) are shown as due and payable
after the Closing on the financial statements of the Companies and the
Subsidiaries in accordance with GAAP.
(c) No federal, state, local or foreign audits or other administrative
proceedings or court proceedings are presently pending with regard to any
material Taxes or material Tax Returns of the Company or the Subsidiaries.
Neither the Company nor any of the Subsidiaries has received a written notice of
any such pending audits or proceedings. There are no outstanding waivers
extending the statutory period of limitation relating to the payment of Taxes
due from the Company or any of the Subsidiaries.
(d) Neither the IRS nor any other taxing authority (whether domestic or
foreign) has asserted in writing, or to the best knowledge of the Company and
the Subsidiaries, is threatening to assert, against the Company or any of the
Subsidiaries any material deficiency or material claim for Taxes in excess of
the reserves established therefor.
(e) There are no Liens for Taxes upon any property or assets of the Company
or any of the Subsidiaries, except for Liens for Taxes not yet due and payable
and liens for Taxes that are being contested in good faith by appropriate
proceedings as set forth on Schedule 4.22(e) and as to which adequate reserves
have been established in accordance with GAAP.
(f) Neither the Company nor the Subsidiaries has any obligation under any
Tax sharing agreement or similar arrangement with any other Person with respect
to Taxes of such other Person.
(g) Neither the Company nor the Subsidiaries will recognize any taxable
income or become liable for any Tax as a result of any of the Internal
Transactions. The Company has never been treated as a corporation for U.S.
federal income tax purposes and is not liable for any Tax on its income.
4.23 Compliance with the Gaming Laws.
(a) The Company, the Subsidiaries and the Sellers, and each of their
respective directors, officers and persons performing management functions
similar to officers, hold all Licenses of all Governmental or Regulatory
Authorities, necessary to conduct the business and operations of the Company and
the Subsidiaries, each of which is in full force and effect, 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 License that currently is in effect. The Company, the
Subsidiaries and the Sellers, and each of their respective directors, officers
and persons performing management functions similar to officers, are in
compliance with the terms of each such License. The businesses of the Company
and the Subsidiaries are not being conducted in violation of any Law, including,
without limitation, any Gaming Laws. The Company, the Subsidiaries and Sellers
have received no notice of any investigation or review by any Governmental or
Regulatory Authority with respect to the Company or the Subsidiaries that is
pending, and, to the knowledge of the Sellers, no investigation or review is
threatened, nor has any Governmental or Regulatory Authority indicated any
intention to conduct such an investigation or review.
(b) Neither the Company, the Subsidiaries or the Sellers, nor, any of their
respective directors, officers, key employees or persons performing management
functions similar to officers, has received any written claim, demand, notice,
complaint, court order or administrative order from any Governmental or
Regulatory Authority in the past three years under, or relating to any violation
or possible violation of any Gaming Laws by the Company or any of the
Subsidiaries that has or is reasonably likely to result in fines or penalties of
$50,000 or more. To the knowledge of Sellers, 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, or of any officer, director, other person
performing management functions similar to an officer or partner, under any
Gaming Laws. Neither the Company nor the Subsidiaries has suffered a suspension
or revocation of any License held under the Gaming Laws.
4.24 Accuracy of Statements. Neither this Agreement nor any schedule,
exhibit, statement, list, document, certificate or other information furnished
or to be furnished by or on behalf of the Company or Starfire to Purchaser or
any representative or Affiliate of Purchaser in connection with this Agreement
or any of the transactions contemplated hereby contains or will contain any
untrue statement of a material fact or omits or will omit to state a material
fact necessary to make the statements contained herein or therein, in light of
the circumstances in which they are made, not misleading.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to Sellers as follows:
5.1 Organization of Purchaser. Purchaser is a limited liability company
duly formed, validly existing and in good standing under the Laws of the State
of Delaware. Purchaser has full organizational power and authority to execute
and deliver this Agreement and to perform Purchaser's obligations hereunder and
to consummate the transactions contemplated hereby, including without limitation
to buy pursuant to this Agreement the Membership Interest.
5.2 Corporate Authority. The execution and delivery by Purchaser of this
Agreement, and the performance by Purchaser of its obligations hereunder, have
been duly and validly authorized and, no other corporate action on the part of
Purchaser is necessary. This Agreement has been duly and validly executed and
delivered by Purchaser and constitutes a legal, valid and binding obligation of
Purchaser enforceable against Purchaser in accordance with its terms.
5.3 No Conflicts. The execution and delivery by Purchaser of this Agreement
do not, the performance by Purchaser of its obligations under this Agreement and
the consummation of the transactions contemplated hereby, will not:
(a) conflict with, or result in a violation or breach of, any of the terms,
conditions or provisions of the organizational documents of Purchaser;
(b) conflict with, or result in a violation or breach of, any term or
provision of any Law or Order applicable to Purchaser or any of its Assets and
Properties (other than such conflicts, violations or breaches which will not
have a Material Adverse Effect on Purchaser; or
(c) (i) conflict with, or result in a violation or breach of, (ii)
constitute (with or without notice or lapse of time or both) a default under,
(iii) require Purchaser to obtain any consent, approval or action of, make any
filing with or give any notice to any Person as a result or under the terms of,
(iv) result in or give to any Person any right of termination, cancellation,
acceleration or modification in or with respect to, or (v) result in the
creation or imposition of any Lien upon Purchaser or any of its Assets and
Properties under, any Contract or License to which Purchaser is a party or by
which any of its Assets and Properties is bound.
ARTICLE VI
COVENANTS
6.1 Maintenance of Business Prior to Closing.
(a) The Sellers shall cause each of the Company and the Subsidiaries from
the date hereof through the Closing Date to:
(i) conduct its operations and business according to their usual, regular
and ordinary course consistent with past practice;
(ii) use all commercially reasonable efforts to keep its business and
properties substantially intact, including its present operation, physical
facilities, working conditions, insurance policies, and relationships with
lessors, licensors, suppliers, customers, employees;
(iii) except as contemplated by the Internal Transactions, maintain its
corporate existence;
(iv) maintain its books and records and accounts in its usual, regular, and
ordinary manner in compliance with all applicable laws and governmental orders;
(v) pay and discharge when due all taxes, assessments and governmental
charges imposed upon it or any of its properties, or upon the income or project
therefrom in the ordinary course of business consistent with past practice;
(vi) promptly notify Purchaser of any Material Adverse Change to the
Company or the Subsidiaries; and
(vii) permit representatives of Purchaser to have full access at all
reasonable times, and in a manner so as not to interfere with the normal
business operations of the Company and the Subsidiaries, to all premises,
properties, personnel, books, records (including tax records), contracts, and
documents of or pertaining to the Company and the Subsidiaries.
(b) Without limiting the generality of the foregoing, from the date hereof
through the Closing, Sellers shall not and shall cause each of the Company and
its Subsidiaries not to:
(i) engage in any transaction or take or omit to take any action that would
result in a breach of any representation or warranty in Article II, III, and IV
of this Agreement;
(ii) declare, set aside, or pay any dividend, except the Dividend;
(iii) declare or pay any increase in compensation to any officer, director,
employee or agent of the Company or any of the Subsidiaries;
(iv) enter into any Contract that, had it been in effect on the date
hereof, would have been required to be listed on Schedule 4.21, except for those
Contracts entered into in the ordinary course consistent with past practice;
(v) permit, allow or suffer any of its properties, assets or rights to be
subject to any Lien;
(vi) incur any long-term indebtedness;
(vii) make any material capital expenditure or commitment, other than for
emergency repairs or replacement, except for those capital expenditures or
commitments made in the ordinary course consistent with past practice;
(viii) terminate, materially modify, assign, or materially amend any
Contract required to be listed on Schedule 4.21.
6.2 Efforts to Consummate Transaction. The Sellers shall cause:
(a) Nybor to distribute its interest in ACI to Starfire effective as of
November 13, 2003 promptly upon receiving approval therefor from the appropriate
Governmental or Regulatory Authority;
(b) the conversion by ACI to a single member limited liability company,
Arizona Charlie's, LLC, with Starfire as its sole member promptly upon receiving
approval therefor from the appropriate Governmental or Regulatory Authority; and
(c) (i) the contribution by Starfire of its membership interests in Arizona
Charlie's, LLC to the Company and (ii) the contribution by Starfire and Carl C.
Icahn of their membership interests in Fresca to the Company, promptly upon
receiving approval therefor from the appropriate Governmental or Regulatory
Authority.
(d) From the date hereof through the Closing Date, upon the terms and
subject to the conditions set forth in this Agreement, each of the parties shall
use its commercially reasonable efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, and to assist and cooperate with the
other parties in doing, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective, in the most
expeditious manner practicable, the transactions contemplated by this Agreement
(including satisfaction, but not waiver, of the closing conditions set forth in
Article VIII). The parties will use their commercially reasonable efforts and
cooperate with one another (i) in promptly determining whether any filings are
required to be made or consents, approvals, waivers, licenses, permits or
authorizations are required to be obtained (or, which if not obtained, would
result in a Company Material Adverse Effect on the Company or the Subsidiaries
or an event of default, termination or acceleration of any agreement or any put
right under any agreement) under any applicable Law or regulation or from any
Governmental or Regulatory Authority or third parties, and (ii) in promptly
making any such filings, in furnishing information required in connection
therewith and in timely seeking to obtain any such consents, approvals, permits
or authorizations. For purposes of this Section 6.2, Sellers shall not be
obligated to make any payment to any third party as a condition to obtaining
such party's consent or approval, other than for required filing fees.
(e) From the date hereof through the Closing Date, Sellers shall give
prompt written notice to Purchaser of: (i) any occurrence, or failure to occur,
of any event which occurrence or the failure would reasonably be expected to
cause any representation or warranty of any of the Sellers contained in this
Agreement, if made on or as of the date of such event or as of the Closing Date,
to be untrue or inaccurate, except for changes permitted by this Agreement and
except to the extent that any representation and warranty is made as of a
specified date, in which case, such representation and warranty shall be true,
complete and accurate as of such date; or (ii) any failure of the Sellers, the
Company, the Subsidiaries or any officer, director, employee, consultant or
agent of the Sellers, the Company or the Subsidiaries, to comply with or satisfy
any covenant, condition or agreement to be complied with or satisfied by it or
them under this Agreement; provided, however, that no such notification shall
affect the representations or warranties of the Sellers or the conditions to the
obligations of Purchaser hereunder.
6.3 Financial Statements. As soon as practicable after the same are
prepared, but in no event later than April 30, 2004, Sellers shall provide
Purchaser with the Audited 2003 Financial Statements. Until the Closing, as soon
as practicable after the end of each fiscal quarter but in no event later than
45 days following the end of each such fiscal quarter, Sellers shall provide
Purchaser with Interim 2004 Financial Statements relating to the most recent
fiscal quarter.
ARTICLE VII
ASSIGNMENT AND ASSUMPTION
7.1 Assignment and Assumption. At the Closing, Sellers and Purchaser shall
enter into the Assignment Agreement pursuant to which Sellers will transfer,
assign, convey and grant to Purchaser, its successors and assigns forever 100%
of Sellers' rights, title and interest to the Membership Interest.
ARTICLE VIII
CONDITIONS TO SALE OF MEMBERSHIP INTEREST
8.1 Conditions to the Obligations of Each Party. The obligations of the
Sellers and Purchaser under Article I of this Agreement are subject to the
satisfaction, on or prior to the Closing Date, of each of the following
conditions precedent:
(a) All approvals necessary to be obtained by the Company under the Gaming
Laws in order to consummate the transaction contemplated hereby shall have been
received.
(b) All approvals necessary to be obtained by the Purchaser under the
Gaming Laws in order to consummate the transaction contemplated hereby shall
have been received.
(c) All approvals necessary to be obtained by Parent under the Gaming Laws
in order to consummate the transaction contemplated hereby shall have been
received.
(d) All approvals necessary to be obtained by American Real Estate
Partners, L.P. ("AREP") under the Gaming Laws in order to consummate the
transaction contemplated hereby shall have been received.
ARTICLE IX
CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER
The obligations of Purchaser under Article I of this Agreement are subject
to the satisfaction, on or prior to the Closing Date, of each of the following
conditions precedent:
9.1 Warranties True as of Both Present Date and Closing Date. Each of the
representations and warranties of Sellers contained herein shall have been
accurate, true and correct on and as of the date of this Agreement, and shall
also be accurate, true and correct in all material respects on and as of the
Closing Date with the same force and effect as though made by Sellers on and as
of the Closing Date.
9.2 Compliance by Sellers. Each Seller shall have duly performed and
complied with all of its respective covenants, obligations and agreements
contained in this Agreement to be performed and complied with by Sellers on or
prior to the Closing Date.
9.3 Sellers' Certificates. Purchaser shall have received a certificate
dated as of the Closing Date executed by an authorized officer of Starfire and
by Carl C. Icahn certifying as to the fulfillment and satisfaction of the
conditions set forth in Sections 9.1 and 9.2.
9.4 Evidence of Gaming Approval. Purchaser shall have received satisfactory
evidence that all approvals necessary under the Gaming Laws to consummate the
transactions contemplated under this Agreement have been obtained and are in
full force and effect.
9.5 No Material Adverse Change. No Material Adverse Change to the Company
or the Subsidiaries shall have occurred and no event shall have occurred which,
in the reasonable judgment of Purchaser, is reasonably likely to have a Material
Adverse Effect on the Company or the Subsidiaries.
9.6 Actions or Proceedings. No action or proceeding by any Governmental
Authority or other Person shall have been instituted or threatened which (a)
might have a Material Adverse Effect on the Company or the Subsidiaries, or (b)
could enjoin, restrain or prohibit, or could result in substantial damages in
respect of, any provision of this Agreement or the consummation of the
transactions contemplated hereby.
ARTICLE X
CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLERS
The obligations of Sellers under Article I of this Agreement are subject to
the satisfaction, on or prior to the Closing Date, of each of the following
conditions precedent:
10.1 Warranties True as of Both Present Date and Closing Date. Each of the
representations and warranties of Purchaser contained herein shall have been
accurate, true and correct on and as of the date of this Agreement, and shall
also be accurate, true and correct in all material respects on and as of the
Closing Date with the same force and effect as though made by Purchaser on and
as of the Closing Date.
10.2 Compliance by Purchaser. Purchaser shall have duly performed and
complied with its respective covenants, obligations and agreements contained in
this Agreement to be performed and complied with by Purchaser on or prior to the
Closing Date.
10.3 Purchaser's Certificate. Sellers shall have received a certificate
dated as of the Closing Date executed by an authorized officer of Purchaser
certifying as to the fulfillment and satisfying the conditions set forth in
Sections 10.1 and 10.2.
10.4 No Material Adverse Change. No Material Adverse Change to the Company
or the Subsidiaries shall have occurred and no event shall have occurred which,
in the reasonable judgment of Purchaser, is reasonably likely to have a Material
Adverse Effect on the Company or the Subsidiaries.
10.5 Actions or Proceedings. No action or proceeding by any Governmental
Authority or other Person shall have been instituted or threatened which (a)
might have a Material Adverse Effect on the Company or the Subsidiaries, or (b)
could enjoin, restrain or prohibit, or could result in substantial damages in
respect of, any provision of this Agreement or the consummation of the
transactions contemplated hereby.
ARTICLE XI
TERMINATION
11.1 Termination. This Agreement may be terminated at any time on or prior
to the Closing Date:
(a) By written notice of either Sellers or Purchaser, if the Closing shall
not have taken place on or before August 31, 2004; provided, however, that the
right to terminate this Agreement under this Section 11.1 shall not be available
to any party whose willful failure to fulfill any obligation under this
Agreement has been the cause of or resulted in the failure of the Closing to
occur on or before such date;
(b) By Purchaser, if there shall have been a material breach of any
covenant, representation or warranty or other agreement of Sellers hereunder,
and such breach shall not have been remedied within ten Business Days after
receipt by Sellers of a notice in writing from Purchaser specifying the breach
and requesting such be remedied; or
(c) By Sellers, if there shall have been a material breach of any covenant,
representation or warranty or other agreement of Purchaser hereunder, and such
breach shall not have been remedied within ten Business Days after receipt by
Purchaser of notice in writing from Sellers specifying the breach and requesting
such be remedied.
11.2 Effect of Termination. If this Agreement is terminated pursuant to
Section 11.1, all obligations of the parties hereunder shall terminate, except
for the obligations set forth in Article XII and Article XIV, which shall
survive the termination of this Agreement, and except that no such termination
shall relieve any party from liability for any prior willful breach of this
Agreement.
ARTICLE XII
INDEMNIFICATION
12.1 Indemnification by Sellers. Sellers agree jointly and severally to
indemnify Purchaser, its Affiliates and their respective officers, directors,
employees independent contractors, stockholders, principals, partners, agents,
or representatives (each an "Indemnified Person" and collectively, the
"Indemnified Persons") against, and to hold each Indemnified Person harmless
from, any and all Losses incurred or suffered by any Indemnified Person relating
to or arising out of or in connection with (a) any breach of or any inaccuracy
in any representation or warranty made by Sellers in this Agreement, or (b) any
breach of or failure by any Sellers to perform any of its covenants or
obligations set out or contemplated in this Agreement.
12.2 Claims. As promptly as is reasonably practicable after becoming aware
of a claim for indemnification under this Agreement, the Indemnified Person
shall promptly give notice to the indemnifying Seller or Sellers ("Indemnifying
Person") of such claim and the amount the Indemnified Person will be entitled to
receive hereunder from the Indemnifying Person; provided that the failure of the
Indemnified Person to promptly give notice shall not relieve the Indemnifying
Person of its obligations except to the extent (if any) that the Indemnifying
Person shall have been prejudiced thereby. If the Indemnifying Person does not
object in writing to such indemnification claim within 30 days of receiving
notice thereof, the Indemnified Person shall be entitled to recover, on the
thirty-fifth day after such notice was given, from the Indemnifying Person the
amount of such claim, and no later objection by the Indemnifying Person shall be
permitted; if the Indemnifying Person agrees that it has an indemnification
obligation but objects that it is obligated to pay only a lesser amount, the
Indemnified Person shall nevertheless be entitled to recover, on the
thirty-fifth day after such notice was given, from the Indemnifying Person the
lesser amount, without prejudice to the Indemnified Person's claim for the
difference. In addition to the amounts recoverable by the Indemnified Person
from the Indemnifying Person pursuant to the foregoing provisions, the
Indemnified Person shall also be entitled to recover from the Indemnifying
Person interest on such amounts at the rate of [Two Times Prime] from, and
including, the thirty-fifth day after such notice of an indemnification claim is
given to, but not including, the date such recovery is actually made by the
Indemnified Person.
12.3 Notice of Third Party Claims; Assumption of Defense. The Indemnified
Person shall give notice as promptly as is reasonably practicable to the
Indemnifying Person of the assertion of any claim, or the commencement of any
suit, action or proceeding, by any Person not a party hereto (a "Third Party
Claim") in respect of which indemnity may be sought under this Agreement;
provided that the failure of the Indemnified Person to promptly give notice
shall not relieve the Indemnifying Person of its obligations except to the
extent (if any) that the Indemnifying Person shall have been prejudiced thereby.
The Indemnifying Person may, at its own expense, participate in the defense of
any Third Party Claim, suit, action or proceeding (a) upon notice to the
Indemnified Person and (b) upon delivery by the Indemnifying Person to the
Indemnified Person a written agreement that the Indemnified Person is entitled
to indemnification for all Losses arising out of such Third Party Claim, suit,
action or proceeding and that the Indemnifying Person shall be liable for the
entire amount of any Loss, at any time during the course of any such Third Party
Claim, suit, action or proceeding, assume the defense thereof; provided,
however, that (i) the Indemnifying Person's counsel is reasonably satisfactory
to the Indemnified Person, and (ii) the Indemnifying Person shall thereafter
consult with the Indemnified Person upon the Indemnified Person's reasonable
request for such consultation from time to time with respect to such Third Party
Claim, suit, action or proceeding. If the Indemnifying Person assumes such
defense, the Indemnified Person shall have the right (but not the duty) to
participate in the defense thereof and to employ counsel, at its own expense,
separate from the counsel employed by the Indemnifying Person. If, however, the
Indemnified Person reasonably determines in its judgment that representation by
the Indemnifying Person's counsel of both the Indemnifying Person and the
Indemnified Person would present such counsel with a conflict of interest, then
such Indemnified Person may employ separate counsel to represent or defend it in
any such Third Party Claim, action, suit or proceeding and the Indemnifying
Person shall pay all of the fees and disbursements in connection with the
retention of such separate counsel. If the Indemnifying Person fails to promptly
notify the Indemnified Party that the Indemnifying Party desires to defend the
Third Party Claim pursuant, or if the Indemnifying Person gives such notice but
fails to prosecute vigorously and diligently or settle the Third Party Claim,
then the Indemnified Party will have the right to defend, at the sole cost and
expense of the Indemnifying Person, the Third Party Claim by all appropriate
proceedings, which proceedings will be prosecuted by the Indemnifying Person in
good faith or will be settled at the discretion of the Indemnifying Person (with
the consent of the Indemnifying Person, which consent will not be unreasonably
withheld). The Indemnifying Person will have full control of such defense and
proceedings, including any compromise or settlement thereof. Whether or not the
Indemnifying Person chooses to defend or prosecute any such Third Party Claim,
suit, action or proceeding, all of the parties hereto shall cooperate in the
defense or prosecution thereof.
12.4 Settlement or Compromise. Any settlement or compromise made or caused
to be made by the Indemnified Person or the Indemnifying Person, of any claim,
suit, action or proceeding shall also be binding upon the Indemnifying Person or
the Indemnified Person, as the case may be, in the same manner as if a final
judgment or decree had been entered by a court of competent jurisdiction in the
amount of such settlement or compromise thereof; provided, however, that no
obligation, restriction or Loss shall be imposed on the Indemnified Person as a
result of such settlement without its prior written consent. The Indemnified
Person will give the Indemnifying Person at least 30 days' notice of any
proposed settlement or compromise of any Third Party Claim, suit, action or
proceeding it is defending, during which time the Indemnifying Person may reject
such proposed settlement or compromise; provided, however, that from and after
such rejection, the Indemnifying Person shall be obligated to assume the defense
of and full and complete liability and responsibility for such Third Party
Claim, suit, action or proceeding and any and all Losses in connection therewith
in excess of the amount of unindemnifiable Losses which the Indemnified Person
would have been obligated to pay under the proposed settlement or compromise.
12.5 Failure of Indemnifying Person to Act. In the event that the
Indemnifying Person does not assume the defense of any Third Party Claim, suit,
action or proceeding brought against an Indemnified Person, then any failure of
the Indemnified Person to defend or to participate in the defense of any such
Third Party Claim, suit, action or proceeding or to cause the same to be done,
shall not relieve the Indemnifying Person of any of its obligations under this
Agreement.
12.6 Tax Character. Sellers and Purchaser agree that any payments pursuant
to this Article XII will be treated for federal and state income tax purposes as
adjustments to the purchase price of the Membership Interest, and that they will
report such payments on all Tax Returns consistently with such characterization.
ARTICLE XIII
DEFINITIONS
13.1 Definitions. Defined Terms. As used in this Agreement, the following
defined terms have the meanings indicated below:
"Accounting Arbitrator" means such accounting firm as is agreed upon by
Purchaser and Sellers or, if Purchaser and Sellers cannot agree on an accounting
firm, such accounting firm as is selected by two other accounting firms, one
selected by Purchaser and the other by Sellers.
"Affiliate" means, with respect to any specified Person, any other Person
that, directly or indirectly, owns or controls, is under common ownership or
control with, or is owned or controlled by, such specified Person.
"Agreement" has the meaning ascribed to it in the recitals.
"Assets and Properties" of any Person means all assets and properties of
every kind, nature, character and description (whether real, personal or mixed,
whether tangible or intangible, and wherever situated), including the goodwill
related thereto, operated, owned or leased by such Person.
"Assignment Agreement" has the meaning ascribed to it in Section 1.4.
"Audited 2003 Financial Statements" means all of the following:
(a) the audited financial statements of Fresca as of December 31, 2003,
consisting of the balance sheet at such date and the related statements of
operations, statement of members' equity, and cash flows for the year then
ended, each accompanied by the audit report of KPMG LLP, independent public
auditors with respect to Fresca; and
(b) the audited financial statements of ACI and its subsidiary as of
December 31, 2003 consisting of the balance sheet at such date and the related
statements of operations, shareholders' equity, and cash flows for the year then
ended, each accompanied by the audit report of KPMG LLP, independent public
auditors with respect to ACI.
"Bondholders" mean the holders of the Purchaser's senior secured bonds due
2012 issued pursuant to an indenture between the Purchaser and the Trustee.
"Business Day" means any day of the year other than (i) any Saturday or
Sunday or (ii) any other day on which commercial banks located in New York City
are generally closed for business.
"Business or Condition" of any Person means the business, condition
(financial or otherwise), properties, assets or results of operations or
prospects of such Person, taken as a whole.
"CERCLA" means the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, or any successor statutes and any regulations
promulgated thereunder.
"CERCLIS" means the Comprehensive Environmental Response, Compensation and
Liability Information System List.
"Closing" means the closing of the transactions contemplated by Section
1.3.
"Closing Balance Sheet" means the unaudited consolidating balance sheet of
the Company as of the Closing.
"Closing Date" means the closing date of the transactions contemplated by
Section 1.3.
"Closing Date Amount" has the meaning ascribed to it in Section 1.4.
"Contract" means any contract, lease, commitment, understanding, sales
order, purchase order, agreement, indenture, mortgage, note, bond, right,
warrant, instrument, plan, permit or license, whether written or oral, which is
intended or purports to be binding and enforceable.
"Dividend" means a cash distribution from Arizona Charlie's, LLC to
Starfire of an amount not to exceed the amount of cash held by Arizona
Charlie's, LLC in excess of $8 million, determined as of the end of the gaming
day on the third business day prior to the date of such distribution.
"Dollars" or numbers proceeded by the symbol "$" means amounts in United
States Dollars.
"Environmental Claim" means any third party (including, without
limitations, governmental agencies and employees) action, lawsuit, claim or
proceeding (including claims or proceedings under OSHA or similar laws relating
to safety of employees) that seeks to impose liability for (a) pollution or
contamination of the ambient air, surface water, ground water or land; (b)
solid, gaseous or liquid waste generation, handling, treatment, storage,
disposal or transportation; (c) exposure to hazardous or toxic substances; (d)
the safety or health of employees; or (e) the transportation, processing,
distribution in commerce, use or storage of hydrocarbons or chemical substances.
An Environmental Claim includes, but is not limited to, a common law action, as
well as a proceeding to issue, modify or terminate an Environmental Permit.
"Environmental Law" means any law, rule, regulation or order of other
requirements of law (including common law) any federal, foreign, state or local
executive, legislative, judicial, regulatory or administrative agency, board or
authority with jurisdiction over the Company or any of the Subsidiaries or any
of their respective properties or assets that relates to (a) pollution or
protection of human health, natural resources and the environment, including
ambient air, surface water, ground water or land; (b) solid, gaseous or liquid
waste generation, treatment, storage, disposal or transportation; (c) exposure
to Hazardous Materials; (d) the safety or health of employees; or (e) regulation
of the manufacture, processing, distribution in commerce, use or storage of
Hazardous Materials, including hydrocarbons or chemical substances.
Environmental Laws include but are not limited to OSHA, CERCLA, the Clean Air
Act, as amended, the Federal Water Pollution Control Act, as amended, the Rivers
and Harbors Act of 1899, as amended, the Safe Drinking Water Act, as amended,
the Superfund Amendments and Reauthorization Act of 1986 ("SARA"), as amended,
the Resource Conservation and Recovery Act of 1976 ("RCRA"), as amended, the
Hazardous and Solid Waste Amendments Act of 1984, as amended, the Toxic
Substances Control Act, as amended, the Oil Pollution Act of 1990 ("OPA"), as
amended, the Hazardous Materials Transportation Act, as amended, and any other
federal, foreign, state and local law whose purpose is to conserve or protect
human health, the environment, wildlife or natural resources.
"Environmental Permit" means any permit, license, approval or other
authorization under any Environmental Law, applicable law, regulation and other
requirement of the United States or any foreign country or of any state,
municipality or other subdivision thereof relating to pollution or protection of
health or the environment, including laws, regulations or other requirements
relating to emissions, discharges, releases or threatened releases of
pollutants, contaminants or hazardous substances or toxic materials or wastes
into ambient air, surface water, ground water or land, or otherwise relating to
the manufacture, processing, distribution, use, treatment, storage, disposal,
transportation or handling of hydrocarbons or chemical subsidiaries, pollutants,
contaminants or hazardous or toxic materials or wastes.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Estimated Purchase Price" has the meaning ascribed to it in Section 1.2.
"Final Purchase Price" has the meaning ascribed to it in Section 1.2.
"Financial Statements" means all of the following:
(a) the audited financial statements of Fresca as of December 31, 2002 and
December 31, 2001, consisting of the balance sheet at such date and the related
statements of operations, members' equity, and cash flows for the year then
ended, each accompanied by the audit report of KPMG LLP, independent public
auditors with respect to Fresca;
(b) the audited financial statements of ACI and its subsidiary as of June
30, 2002 and June 30, 2001, consisting of the balance sheets at such date and
the related statements of operations, stockholders' equity, and cash flows for
the year then ended, each accompanied by the audit report of KPMG LLP,
independent public auditors with respect to ACI; and
(c) the audited financial statements of ACI and its subsidiary as of
December 31, 2002, consisting of the balance sheet at such date and the related
statements of operations, stockholders' equity, and cash flows for the
six-months ended December 31, 2002, accompanied by the audit report of KPMG LLP,
independent public auditors with respect to ACI.
"GAAP" means U.S. generally accepted accounting principles at the time in
effect.
"Gaming Laws" means any federal, state, local or foreign statute,
ordinance, rule, regulation, permit, 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 Company or the
Subsidiaries, including, without limitation, the Nevada Gaming Control Act and
the rules and regulations promulgated thereunder, the Clark County, Nevada Code,
the Municipal Code of the City of Las Vegas and the rules and regulations
promulgated thereunder, and any applicable state gaming law and any federal or
state laws relating to currency transactions.
"Governmental or Regulatory Authority" means any court, tribunal,
arbitrator, authority, administrative or other agency, commission, gaming
authority, licensing board official or other instrumentality of the United
States or any state, county, city or other political subdivision.
"Hazardous Material" means (a) any "hazardous substance," as defined by
CERCLA; (b) any "hazardous waste" or "solid waste," in either case as defined by
the Resource Conservation and Recovery Act, as amended; (c) any hazardous,
dangerous or toxic chemical, material, waste or substance, regulated by any
Environmental Law; (d) any radioactive material, including any naturally
occurring radioactive material, and any source, special or byproduct material as
defined in 42 U.S.C. 2011 et seq. and any amendments or authorizations thereof;
(e) any asbestos-containing materials in any form or condition; (f) any
polychlorinated biphenyls in any form or condition; (g) petroleum, petroleum
hydrocarbons, or any fraction or byproducts thereof; (h) any air pollutant which
is so designated by the U.S. Environmental Protection Agency as authorized by
the Clean Air Act; or (i) any mold or microbial/microbiological contaminants
that pose a risk to human health or the environment.
"Icahn LLC Interest" has the meaning ascribed to it in the recitals of this
Agreement.
"Interim 2003 Financial Statements" means all of the following:
(a) the unaudited internal financial statements of Fresca for the nine
months ended September 30, 2003, consisting of the balance sheet at such date
and the related statements of operations for the period then ended;
(b) the unaudited internal financial statements of ACI and its subsidiary
for the nine months ended September 30, 2003, consisting of the balance sheets
at such date and the related statements of operations for the periods then
ending;
"Interim 2004 Financial Statements" means all of the following:
(a) the unaudited financial statements of Fresca for each fiscal quarter
after December 31, 2003 consisting only of the balance sheet at each such date
and the related statements of operations, members' equity and cash flows for the
quarters then ending; and
(b) the unaudited consolidated financial statements of ACI and its
subsidiary for each fiscal quarter after December 31, 2003 consisting only of
the balance sheet at such date and the related statements of operations,
stockholders' equity, and cash flows for the periods then ending.
"Internal Transactions" has the meaning ascribed to it in the recitals of
this Agreement.
"Knowledge" or "knowledge" means, with respect to the Sellers, the Company
and/or the Subsidiaries, in each case the knowledge of any director, officer,
senior executive, or member of any of Sellers, Company or any Subsidiary or Carl
C. Icahn.
"Laws" means all laws, statutes, rules, regulations, ordinances and other
pronouncements having the effect of law of the United States or any state,
county, city or other political subdivision or of any Governmental or Regulatory
Authority.
"License" means licenses, permits, certificates of authority,
authorizations, approvals, registrations, findings of suitability, variances,
exemptions, certificates of occupancy, orders, franchises and similar consents
granted or issued by any Governmental or Regulatory Authority.
"Lien" means any mortgage, lien (except for any lien for Taxes not yet due
and payable), charge, restriction, pledge, security interest, option, lease or
sublease, claim, right of any third party, easement, encroachment, encumbrance
or other adverse claim of any kind or description.
"Loss" or "Losses" means any and all liabilities, losses, costs, claims,
damages (including consequential damages), penalties and expenses (including
attorneys' fees and expenses and costs of investigation and litigation).
"Material Adverse Effect" or "Material Adverse Change," as to any
Person, means a material adverse change (or circumstance involving a prospective
change) in the Business or Condition of such Person.
"Membership Interest" has the meaning ascribed to it in the Recitals of
this Agreement.
"National Priorities List" means the list of priority contaminated sites
maintained by the United States Environmental Protection Agency as contemplated
by Section 105 of CERCLA.
"Order" means any writ, judgment, decree, injunction or similar order of
any Governmental or Regulatory Authority (in each such case whether preliminary
or final).
"OSHA" means the Occupational Safety and Health Act, as amended, or any
successor statute, and any regulations promulgated thereunder.
"Parent" means American Entertainment Properties Corp., a Delaware
corporation that is 100% owned by American Real Estate Holdings Limited
Partnership and owns 100% of the issued and outstanding equity of Purchaser.
"Permitted Encumbrances" means, as applicable, those exceptions to title
listed in Schedule B - Section 2 of that certain Commitment for Title Insurance
issued by Lawyers Title of Nevada, order number 03120105RM with an effective
date of November 26, 2003 (the "ACI Title Commitment") and that certain
Commitment for Title Insurance issued by Lawyer Title of Nevada, order number
03120106RM with an effective date of December 9, 2003 (the "Fresca Title
Commitment") other than (i) items 43, 44, 48, 49, 50, 51 and 52 of Schedule B -
Section 2 of the ACI Title Commitment, (ii) items 66, 67, 68, 69 of Schedule B-
Section 2 of the Fresca Title Commitment, (iii) any taxes shown on either the
ACI Title Commitment or the Fresca Title Commitment that are due and payable,
(iv) any monetary Liens not created by the owner of the easement parcel, and (v)
any exception which materially, adversely effects the property or the business
conducted thereon as presently operated.
"Person" means any natural person, corporation, limited liability company,
general partnership, limited partnership, proprietorship, other business
organization, trust, union, association or Governmental or Regulatory Authority.
"Plans" shall mean all material pension and profit sharing, retirement and
post retirement welfare benefit, health insurance benefit (medical, dental and
vision), disability, life and accident insurance, sickness benefit, vacation,
employee loan and banking privileges, bonus, incentive, deferred compensation,
workers compensation, stock purchase, stock option, phantom stock and other
equity-based, severance, employment, change of control or fringe benefit plans,
programs, arrangements or agreements, whether written or oral, including any
employee benefit plans defined in Section 3(3) of ERISA., maintained or
contributed to by the Company or any of the Subsidiaries.
"Purchaser" has the meaning ascribed to it in the recitals of this
Agreement.
"Seller" has the meaning ascribed to it in the recitals of this
Agreement.
"Sellers" has the meaning ascribed to it in the recitals of this Agreement.
"Starfire" has the meaning ascribed to it in the recitals of this
Agreement.
"Starfire LLC Interest" has the meaning ascribed to it in the recitals of
this Agreement.
"Subsidiary" means Fresca, ACI, Arizona Charlie's, LLC and Jetset Tours
LLC.
"Tax Return" means any report, return, document, declaration or other
information or filing required to be supplied to any taxing authority or
jurisdiction (foreign or domestic) with respect to Taxes, including attachments
thereto and amendments thereof, and including, without limitation, information
returns, any documents with respect to or accompanying payments of estimated
Taxes, or with respect to or accompanying requests for the extension of time in
which to file any such report, return, document, declaration or other
information.
"Taxes" means any and all taxes, charges, fees, levies, duties,
liabilities, impositions or other assessments, including, without limitation,
income, gross receipts, profits, excise, real or personal property,
environmental, recapture, sales, use, value-added, withholding, social security,
retirement, employment, unemployment, occupation, service, license, net worth,
payroll, franchise, gains, stamp, transfer and recording taxes, fees and
charges, imposed by the Internal Revenue Service ("IRS") or any other taxing
authority (whether domestic or foreign including, without limitation, any state,
county, local or foreign government or any subdivision or taxing agency thereof
(including a United States possession)), whether computed on a separate,
consolidated, unitary, combined or any other basis; and such term shall include
any interest whether paid or received, fines, penalties or additional amounts
attributable to, or imposed upon, or with respect to, any such taxes, charges,
fees, levies, duties, liabilities, impositions or other assessments.
"Tax" shall have a correlative meaning.
"Third Party Claim" has the meaning ascribed to it in Section 12.3.
"Two Times Prime" means two times the prime rate published by Citibank,
N.A.
"Working Capital" means, as of the Closing Date, the amount calculated by
subtracting the current liabilities of Fresca and ACI as of that date from the
current assets of Fresca and ACI and its subsidiaries as of that date, in each
case determined from the Closing Balance Sheet.
"Working Capital Reconciliation" means a statement reconciling the Working
Capital included in the Closing Balance Sheet with the working capital of Fresca
and ACI and its subsidiary as of September 30, 2003.
"Working Capital Objection" shall have the meaning set forth in Section
1.4.
ARTICLE XIV
MISCELLANEOUS
14.1 Investigation. It shall be no defense to an action for breach of this
Agreement that Purchaser or its agents have (or have not) made investigations
into the affairs of the Company or that the Company or Sellers could not have
known of the misrepresentation or breach of warranty.
14.2 Survival of Representations and Warranties. The representations and
warranties of the parties hereunder shall survive the Closing.
14.3 Entire Agreement. This Agreement, including the schedules and exhibits
hereto, which are incorporated herein and made an integrated part hereof,
constitutes the entire agreement between the parties hereto and supersedes any
and all prior discussions and agreements between the parties relating to the
subject matter hereof.
14.4 Waiver. Any term or condition of this Agreement may be waived at any
time by the party that is entitled to the benefit thereof, but no such waiver
shall be effective unless set forth in a written instrument duly executed by or
on behalf of the party waiving such term or condition. No waiver by any party of
any term or condition of this Agreement, in any one or more instances, shall be
deemed to be or construed as a waiver of the same or any other term or condition
of this Agreement on any future occasion. All remedies, either under this
Agreement or by Law or otherwise afforded, will be cumulative and not
alternative.
14.5 Amendment. This Agreement may be amended, supplemented or modified
only by a written instrument duly executed by or on behalf of each party hereto.
14.6 No Third Party Beneficiary. Notwithstanding the rights of the
Bondholders and Bear, Stearns & Co., Inc. as set forth in Sections 14.4 and 14.5
of this Agreement, the terms and provisions of this Agreement are intended
solely for the benefit of each party hereto and their respective successors or
permitted assigns, and it is not the intention of the parties to confer third
party beneficiary rights upon any other Person, except that (a) each Indemnified
Persons shall be a third party beneficiary of Article XII, and (b) AREP shall be
a third party beneficiary of Section 14.14.
14.7 Assignment; Binding Effect. No party may assign this Agreement or any
right, interest or obligation hereunder without the prior written consent of the
other Parties. This Agreement is binding upon, inures to the benefit of and is
enforceable by the parties hereto and their respective successors and assigns.
14.8 Headings. The headings used in this Agreement have been inserted for
convenience of reference only and do not define or limit the provisions hereof.
14.9 Invalid Provisions. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under any present or future Law, and if the
rights or obligations of any party hereto under this Agreement will not be
materially and adversely affected thereby, (a) such provision will be fully
severable, (b) this Agreement will be construed and enforced as if such illegal,
invalid or unenforceable provision had never comprised a part hereof, and (c)
the remaining provisions of this Agreement will remain in full force and effect
and will not be affected by the illegal, invalid or unenforceable provision or
by its severance here from.
14.10 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York without giving effect to the
conflicts of laws principles thereof.
14.11 Counterparts. This Agreement may be executed in any number of
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
14.12 Waiver of Jury Trial. EACH PARTY HERETO HEREBY WAIVES TRIAL BY JURY
IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY ANY OF THEM AGAINST ANY
OTHER ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS AGREEMENT, OR ANY OTHER
AGREEMENTS EXECUTED IN CONNECTION HEREWITH OR THE ADMINISTRATION THEREOF OR ANY
OF THE TRANSACTIONS CONTEMPLATED HEREIN OR THEREIN. No party to this Agreement
shall seek a jury trial in any lawsuit, proceeding, counterclaim, or any other
litigation procedure based upon, or arising out of, this Agreement or any
related instruments or the relationship between the parties. No party will seek
to consolidate any such action in which a jury trial has been waived with any
other action in which a jury trial cannot be or has not been waived. THE
PROVISIONS OF THIS SECTION HAVE BEEN FULLY DISCUSSED BY THE PARTIES HERETO, AND
THESE PROVISIONS SHALL BE SUBJECT TO NO EXCEPTIONS. NO PARTY HAS IN ANY WAY
AGREED WITH OR REPRESENTED TO ANY OTHER PARTY THAT THE PROVISIONS OF THIS
SECTION WILL NOT BE FULLY ENFORCED IN ALL INSTANCES.
14.13 Consent to Jurisdiction. Each party irrevocably submits to the
exclusive jurisdiction of any NY State Court in the County of New York or any
courts of the United States of America located in the Southern District of New
York, and each party hereby agrees that all suits, actions and proceedings
brought by such party hereunder shall be brought in any such court. Each party
irrevocably waives, to the fullest extent permitted by law, any objection which
it may now or hereafter have to the laying of the venue of any such suit, action
or proceeding brought in any such court, any claim that any such suit, action or
proceeding brought in such a court has been brought in an inconvenient forum and
the right to object, with respect to any such suit, action or proceeding brought
in any such court, that such court does not have jurisdiction over such party or
the other party. In any such suit, action or proceeding, each party waives, to
the fullest extent it may effectively do so, personal service of any summons,
complaint or other process and agrees that the service thereof may be made by
any means permitted by Section 14.14 (other than facsimile transmission). Each
party agrees that a final non-appealable judgment in any such suit, action or
proceeding brought in such a court shall be conclusive and binding.
14.14 Expenses. All expenses, costs and fees in connection with the
transactions contemplated hereby (including fees and disbursements of counsel,
consultants and accountants) incurred by (a) Sellers shall be paid and borne
exclusively by Sellers, and (b) Purchaser shall be paid and borne exclusively by
Purchaser. Notwithstanding the foregoing, if: (i) the Closing does not occur as
a result of the failure of Sellers to receive any requisite approval under
Gaming Laws, or (ii) this Agreement is terminated prior to the Closing and such
termination results from any breach by Sellers of any representation, warranty
or covenant by Sellers, then Sellers shall reimburse Purchaser and AREP for all
such expenses, fees and cash, including for all expenses, fees and cash incurred
in connection with obtaining high yield or other financing.
14.15 Notices. All notices, request, demands and other communications
hereunder shall be in writing and shall be delivered personally, by certified or
registered mail, return receipt requested, and postage prepaid, by courier, or
by facsimile transmission, addressed as follows:
If to Starfire:
Starfire Holding Corporation
100 South Bedford Road Suite 210
Mt. Kisco, NY 10549
If to Carl C. Icahn :
Carl C. Icahn
Icahn Associates Corp.
767 Fifth Avenue, 47th floor
New York NY 10153
If to Purchaser:
American Real Estate Partners, L.P.
100 South Bedford Rd.
Mt. Kisco, NY 10549
With a copy to:
Debevoise & Plimpton LLP
919 Third Avenue
New York, NY 10022
Attention: William D. Regner
or to such other address as a party may from time to time designate in writing
in accordance with this Section. Each notice or other communication given to any
party hereto in accordance with the provisions of this Agreement shall be deemed
to have been received (a) on the Business Day it is sent, if sent by personal
delivery, (b) the earlier of receipt of three Business Days after having been
sent by certified or registered mail, return receipt requested and postage
prepaid, (c) on the Business Day it is sent, if sent by facsimile transmission
and an activity report showing the correct facsimile number of the party on whom
notice is served and the correct number of pages transmitted is obtained by the
sender (provided, however, that such notice or other communication is also sent
by some other means permitted by this Section 14.14, or (d) on the first
Business Day after sending, if sent by courier or overnight delivery.
[Signature Page Follows]
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by
the duly authorized officer of each party hereto as of the date first above
written.
Starfire Holding Corporation
By:_________________________________________
Name: Carl C. Icahn
Title: President
________________________________________
Carl C. Icahn
American Casino & Entertainment Properties LLC
By: American Entertainment Properties Corp.,
its sole member
By:______________________
Name: Richard Brown
Title: President
[Signature Page to the Membership Interest Purchase Agreement by and among
Starfire Holding Corporation, Carl C. Icahn and American Casino &
Entertainment Properties LLC selling interest in Charlie's Holding LLC]
Exhibit A
Assignment and Assumption Agreement
Assignment and Assumption Agreement, dated as of __________, 2004, among
American Casino & Entertainment Properties LLC, as Purchaser ("Purchaser"),
Starfire Holding Corporation ("Starfire"), and Carl C. Icahn ("Carl C. Icahn"
and a "Seller" and, together with Starfire, the "Sellers"). Capitalized terms
used herein shall have the meanings attributed to them in the Membership
Interest Purchase Agreement, dated as of even date herewith, between Purchaser
and Sellers (the "Membership Interest Purchase Agreement").
In consideration of the purchase and sale of the membership interests in
accordance with the Membership Purchase Agreement, Purchaser and Sellers agree
as follows:
1. Sellers hereby transfer and convey of all of their right, title and
interest in and to the Operating Agreement of Charlie's Holding LLC (the "LLC")
to Purchaser.
2 Purchaser hereby accepts all of Sellers' right, title and interest in and
to the LLC.
3. As a result of the foregoing, Purchaser is the sole owner and member of
the LLC.
IN WITNESS WHEREOF, the parties have executed this document on
_________________, 2004.
Starfire Holding Corporation
By:_________________________________________
Name:
Title:
______________________________
Carl C. Icahn
American Casino & Entertainment Properties LLC
By: American Entertainment Properties Corp.,
its sole member
By:______________________
Name:
Title:
[Signature Page to the Assignment and Assumption Agreement by
and among Starfire Holding Corporation, Carl C.
Icahn and American Casino & Entertainment Properties LLC
assigning interest in Charlie's Holding LLC]