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Exhibit 10.1
EXECUTION COPY
INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT (this " Agreement "),
dated as of September 3, 2006, is entered into by and between
American Real Estate Holdings Limited Partnership, a Delaware
limited partnership (" AREH "), and Atlantic Coast
Entertainment Holdings, Inc., a Delaware corporation (" ACE
Hi "). All capitalized terms used and not otherwise defined
herein are used herein as defined in the Acquisition Agreement (as
hereinafter defined).
RECITALS
WHEREAS , simultaneously with the execution of this
Agreement, AREH, ACE Hi, Pinnacle Entertainment, Inc., a Delaware
corporation (" Buyer "), ACE Gaming, LLC, a New Jersey
limited liability company, AREP Boardwalk Properties LLC, a
Delaware limited liability company (" Boardwalk "), PSW
Properties LLC, a Delaware limited liability company (" PSW
"), AREH MLK LLC, a Delaware limited liability company ("
MLK "), and Mitre Associates LLC, a Delaware limited
liability company (" Mitre " and collectively with
Boardwalk, PSW and MLK, the " AREH Subs " and collectively
the AREH Subs and AREH, the " AREH Selling Parties "), are
entering into an Acquisition Agreement (the " Acquisition
Agreement ");
WHEREAS , the AREH Selling Parties acquired the assets of
the AREH Subs for the benefit of ACE Hi because ACE Hi, neither at
the respective dates of such acquisitions had, nor at this time
has, capital or financing available to acquire such assets;
WHEREAS , the AREH Selling Parties are entering the
Acquisition Agreement and agreeing to undertake their obligations
thereunder, including without limitation, their indemnification
obligations thereunder, as an inducement for Buyer to enter into
the Acquisition Agreement and in order to facilitate the sale of
the ACE Lo Equity Interests by ACE Hi thereunder;
WHEREAS , simultaneously with the execution of the
Acquisition Agreement, as an inducement for Buyer to enter into the
Acquisition Agreement and in order to facilitate the sale of the
ACE Lo Equity Interests by ACE Hi thereunder, AREH and Buyer are
entering into a Stockholders Agreement (the " Stockholders
Agreement "), pursuant to which, among other things, AREH will
agree to make certain payments to Buyer in the event of certain
Alternative Dispositions (as defined in the Stockholders Agreement)
and any such payments shall be deemed to be capital contributions
from AREH to ACE Hi and payments from ACE Hi to Buyer;
WHEREAS , AREH and ACE Lo previously executed a Call
Agreement, pursuant to which AREH granted ACE Lo the non-exclusive
right to purchase the Traymore Site;
WHEREAS , pursuant to the Acquisition Agreement, AREH has
agreed to sell the Traymore Site directly to the Buyer as an
accommodation to ACE Hi in order to allow for an efficient transfer
of the Traymore Site along with the Casino Property; and
WHEREAS , as an inducement for AREH to enter into the
Acquisition Agreement and in order to facilitate the sale of the
ACE Lo Equity Interests by ACE Hi under the Acquisition Agreement,
ACE Hi has agreed to indemnify AREH in respect of any Losses (as
defined herein) resulting from or arising out of AREH’s
obligations under the Acquisition Agreement, in each case in
accordance with the terms of this Agreement.
NOW, THEREFORE , in consideration of the mutual promises and
covenants contained herein, for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged and intending to be legally bound, the parties hereto
hereby agree as follows:
Section 1.
Indemnification of AREH Parties . ACE Hi shall
indemnify and hold harmless AREH and its Affiliates, each of their
respective direct or indirect parent entities, officers, members,
partners, directors, employees, agents and representatives, and
each of the heirs, executors, successors and assigns of any of the
foregoing (collectively, the " AREH Parties "), from and
against any and all direct or indirect costs, losses, Liabilities,
obligations, damages, claims, causes of action, fines, levies,
charges, demands, fees and expenses, whenever arising or incurred,
of any kind or character, however asserted, including without
limitation interest, penalties, reasonable attorneys’ and
experts’ fees and any and all amounts paid in reasonable
investigation, defense or settlement of any of the foregoing
(hereinafter " Losses "), resulting from or arising out of
AREH’s indemnification obligations under the following
provisions of the Acquisition Agreement (the "AREH
Obligations"):
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(i)
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Section 12.2(b)(i) except to the extent such
indemnification obligation is due to the breach of
Sections 6.1, 6.2, 6.3, 6.4, 7.1, 7.4, or 7.8 of the
Acquisition Agreement;
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(ii)
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Section 12.2(b)(ii) provided that AREH gives
prompt written notice to ACE Hi of any matter that AREH believes in
good faith could reasonably result in AREH becoming obligated under
Section 12.2(b)(ii) and promptly notifies ACE Hi of the
actions being taken to address such matter;
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(iii)
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Section 12.2(b)(iii) except to the extent
such indemnification obligation would also arise from a breach of
Sections 6.1, 6.2, 6.3, 6.4, 7.1, 7.4, or 7.8 of the
Acquisition Agreement and provided that AREH gives prompt written
notice to ACE Hi of any matter that AREH believes in good faith
could reasonably result in AREH becoming obligated under
Section 12.2(b)(ii) and promptly notifies ACE Hi of the
actions being taken to address such matter;
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(iv)
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Section 12.2(b)(iv) – (vi);
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in each case whether such Losses arise out of or
result from a claim by an Indemnified Party against any AREH Party
or from a claim by a third Person against any AREH Party or
otherwise (collectively, " Indemnifiable Losses ");
provided, however, in no event shall ACE Hi be obligated to
indemnify an AREH Party for any Loss to the extent such Loss arises
under clause
- 2 -
(i) or (ii) of this Section 1 and is a result of
an AREH Party’s (x) gross negligence or willful
misconduct, or (y) intentional breach of a provision of the
Acquisition Agreement.
Section 2. Escrow
Provisions .
A. In order to secure ACE
Hi’s obligations hereunder and to facilitate any payment in
respect of Indemnifiable Losses hereunder, ACE Hi shall deposit
with JP Morgan Chase (the " Escrow Agent "), in a segregated
account (the " Escrow Account "), pursuant to an escrow
agreement to be entered into as of the Closing Date, by and among
ACE Hi, AREH and the Escrow Agent and to be in the form attached
hereto as Annex A (the " Escrow Agreement "), any and
all amounts or payments received by ACE Hi pursuant to the
Acquisition Agreement, which amounts shall be so deposited with the
Escrow Agent from time to time immediately following the receipt of
any such amounts by ACE Hi, including without limitation, the
following amounts:
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i.
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The ACE Closing Payment;
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ii.
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Any and all amounts received by ACE Hi from the
Deposit pursuant to Section 2.3(b) of the Acquisition
Agreement;
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iii.
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The Old Post Office Purchase Price (but only to
the extent not included in the ACE Closing Payment);
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iv.
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Any and all amounts received by ACE Hi in respect
of the ACE Purchase Price Adjustment, and
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v.
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Any and all amounts received by ACE Hi from the
GB Indemnification Escrow Amount.
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The
foregoing amounts including any interest, dividends or other
earnings accrued or earned thereon shall be collectively referred
to herein as the " Escrow Amount ".
B. Amounts from the Escrow
Amount shall remain on deposit in the Escrow Account until released
from time to time as follows:
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i.
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In the event ACE Hi is required to make a payment
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