February 29, 2016

Pinnacle Entertainment/Ameristar Casinos (FTC 2013)

Deal SummaryCooperation | Conditions Precedent |Defense Strategy | Litigation Commitments | Remedy Commitments | Reverse Break Fees | Termination Provisions

(a)               Deal Summary. On December 20, 2012, Pinnacle Entertainment entered into an agreement to acquire Ameristar for $2.8 billion. Pinnacle agreed to make specific divestitures to obtain clearance. The reverse break fee was $38 million. The parties agreed that either company could initially terminate the transaction nine months after signing (September 21, 2013), though the merger agreement permitted extensions under certain conditions with a maximum of twelve months. The parties completed the deal on August 14, 2013 after reaching an agreement with the FTC to divest the Ameristar Casino Lake Charles development project and the Lumiere Place Casino and Hotels.

(b)               Cooperation. §5.7(e): (e) The parties shall keep each other apprised of the status of matters relating to the completion of the transactions contemplated by this Agreement and work cooperatively in connection with obtaining the approvals of or clearances from each applicable Governmental Entity, including: (i) cooperating with each other in connection with filings required to be made by any party under any Antitrust Law or applicable Gaming Law and liaising with each other in relation to each step of the procedure before the relevant Governmental Entities and as to the contents of all communications with such Governmental Entities. In particular, to the extent permitted by Law or Governmental Entity, no party will make any notification in relation to the transactions contemplated hereunder without first providing the other party with a copy of such notification in draft form and giving such other party a reasonable opportunity to discuss its content before it is filed with the relevant Governmental Entities, and such first party shall consider all reasonable comments timely made by the other party in this respect; providedhowever, that no party shall be required to provide the other party with any filings (or related materials) if such party reasonably determines that the disclosure of filings (or related materials) would be materially prejudicial to such party’s business; (ii) furnishing to the other party all information within its possession that is required for any application or other filing to be made by the other party pursuant to applicable Law in connection with the transactions contemplated by this Agreement; (iii) promptly notifying each other of any communications (and, unless precluded by Law, providing copies of any such communications that are in writing) from or with any Governmental Entity with respect to the transactions contemplated by this Agreement and ensuring to the extent permitted by Law or Governmental Entity that each of the parties is entitled to attend any meetings with or other appearances before any Governmental Entity with respect to the transactions contemplated by this Agreement, unless a party has a reasonable basis to object to the presence of the other party at any such meetings or appearances; (iv) consulting and cooperating with one another in connection with all analyses, appearances, presentations, memoranda, briefs, arguments, opinions and proposals made or submitted by or on behalf of any party hereto in connection with proceedings under or relating to the Antitrust Laws or applicable Gaming Laws; and (v) without prejudice to any rights of the parties hereunder, consulting and cooperating in all respects with the other in defending all lawsuits and other proceedings by or before any Governmental Entity challenging this Agreement or the consummation of the transactions contemplated by this Agreement.

(c)                Conditions Precedent. §6.1(b), (c): Conditions to Each Party’s Obligation to Effect the Merger. The obligation of each party to effect the Merger is subject to the satisfaction at or prior to the Effective Time of the following conditions:

                        (b) No Injunctions or Legal Restraints; Illegality. No temporary restraining order, preliminary or permanent injunction or other judgment, order or decree issued by any court of competent jurisdiction or other legal restraint or prohibition shall be in effect, and no Law shall have been enacted, entered, promulgated, enforced or deemed applicable by any Governmental Entity that, in any case, prohibits or makes illegal the consummation of the Merger.

                        (c) HSR Act; Antitrust. Any applicable waiting period (and any extension thereof) under the HSR Act relating to the transactions contemplated by this Agreement shall have expired or been terminated.

(d)               Defense Strategy. §5.7(f): In addition, Parent shall take, or cause to be taken, all other action and do, or cause to be done, all other things necessary, proper or advisable under all Antitrust Laws and/or applicable Gaming Laws to consummate the transactions contemplated by this Agreement as promptly as practicable, including using its reasonable best efforts to obtain as promptly as practicable the expiration of all waiting periods and obtain all Parent Permits and all other approvals and any other consents required to be obtained in order for the parties to consummate the transactions contemplated by this Agreement, and (i) placing particular assets or an operating property in trust upon the Closing pending obtaining control upon subsequent Gaming Approval, (ii) agreeing to sell, divest, or otherwise convey particular assets or an operating property of Parent and its Subsidiaries, and (iii) agreeing to sell, divest, or otherwise convey particular assets or an operating property of the Company and its Subsidiaries, contemporaneously with or subsequent to the Effective Time.

(e)                Litigation Commitments. §5.7(a): Upon the terms and subject to the conditions of this Agreement, each of the parties shall use its reasonable best efforts to take, or cause to be taken, all actions and to do, or cause to be done, and cooperate with each other in order to do, all things necessary, proper or advisable under applicable Law (including under any Antitrust Law and under any applicable Gaming Law) to consummate the transactions contemplated by this Agreement at the earliest practicable date, including: (i) causing the preparation and filing of all forms, registrations and notices required to be filed to consummate the Merger and the taking of such actions as are necessary to obtain any requisite consent or expiration of any applicable waiting period under the HSR Act; (ii) taking the steps necessary or desirable to obtain all consents, approvals (including Gaming Approvals) or actions of, make all filings with and give all notices to any Governmental Entity or any other Person required in order to permit consummation of the transactions contemplated by this Agreement; (iii) defending all lawsuits and other proceedings by or before any Governmental Entity challenging this Agreement or the consummation of the Merger; and (iv) resolving any objection asserted with respect to the transactions contemplated under this Agreement under any Antitrust Law raised by any Governmental Entity and preventing the entry of any court order, and vacating, lifting, reversing or overturning any injunction, decree, ruling, order or other action of any Governmental Entity that would prevent, prohibit, restrict or delay the consummation of the transactions contemplated by this Agreement.

(f)                Remedy Commitments. §5.7 (g): Notwithstanding anything to the contrary set forth in this Agreement, the obligations of Parent under this Section 5.7 shall not require Parent to take any action that would require Parent to divest or place in trust, or permit or cause the Company to divest or place in trust, more than two operating properties (and under no circumstances more than one operating property in any one state). No actions taken pursuant to this Section 5.7 shall be considered for purposes of determining whether a Material Adverse Effect has occurred.

(g)               Reverse Break Fees. § 7.3(d)-(f): If this Agreement is terminated: …(ii) by the Company or Parent pursuant to (A) Section 7.1(b)(i) due to the failure of the condition set forth in Section 6.1(d), or (B) Section 7.1(b)(ii); then, in any such case, Parent will pay to the Company, at the time specified in the next sentence, a termination fee of $85,000,000 in cash (the “Reverse Termination Fee”). In the case of termination of this Agreement by the Company pursuant to Section 7.1(b)(i), Section 7.1(b)(v) or Section 7.1(c)(iii) under the circumstances set forth in Section 7.3(d)(i) (other than in the event of a Company Causation Exception), or by the Company pursuant to Section 7.1(b)(i) under the circumstances set forth in Section 7.3(d)(i) or pursuant to Section 7.1(b)(ii), the Reverse Termination Fee will be paid by Parent as promptly as practicable, but in any event no later than two Business Days, after such termination, and in the case of termination of this Agreement by Parent pursuant to Section 7.1(b)(i) or Section 7.1(b)(v) under the circumstances set forth in Section 7.3(d)(i), or by Parent pursuant to Section 7.1(b)(i) under the circumstances set forth in Section 7.3(d)(ii) or pursuant to Section 7.1(b)(ii), the Reverse Termination Fee will be paid by Parent prior to or simultaneous with such termination.

 

                        (e) Notwithstanding anything to the contrary in this Agreement, if this Agreement is terminated and the Reverse Termination Fee is payable to the Company pursuant to Section 7.3(d), then, in such instances, the Company’s right to receive the Reverse Termination Fee: (i) shall be deemed to be liquidated damages for any and all losses or damages suffered or incurred by the Company or any of its Affiliates in connection with this Agreement, the Debt Financing and Debt Financing Commitment, and the transactions contemplated hereby and thereby; and (ii) shall be the sole and exclusive remedy of the Company and its Affiliates against the Parent and its Subsidiaries (including the other Parent Entities), the Parent Financing Sources and any of their respective former, current, or future general or limited partners, stockholders, managers, members, directors, officers, affiliates, employees, representatives or agents (“Parent Related Parties”) for any loss suffered as a result of any breach of any representation, warranty, covenant or agreement in this Agreement or the failure of the Merger to be consummated, and none of the Parent Entities, the Parent Financing Sources or any of the Parent Related Parties shall have any further liability or obligation relating to or arising out of this Agreement or the transactions contemplated by this Agreement. In the event of any Financing Failure, the Parent Financing Sources will not have any liability of any nature (for any breach of this Agreement or of the Debt Financing Commitment) to the Company or any of its Subsidiaries or to any stockholder or Affiliate of the Company or any of its Subsidiaries. The parties agree that the Reverse Termination Fee (whether or not payable due to a Company Causation Exception) and the agreements contained in Section 7.3(d) are an integral part of the Merger and that the Reverse Termination Fee (whether or not payable due to a Company Causation Exception) constitutes liquidated damages and not a penalty. In addition, notwithstanding anything to the contrary contained in this Agreement, except for Parent’s obligation to pay to the Company the Reverse Termination Fee if and when such Reverse Termination Fee becomes payable by Parent to the Company pursuant to Section 7.3(d): (A) neither Parent, HoldCo, Merger Sub nor any other Parent Related Parties will have any liability (1) for any inaccuracy in any representation or warranty set forth in Section 4.7 or any other representation or warranty relating to the Debt Financing (regardless of whether such representation or warranty refers specifically to the Debt Financing), or (2) any breach of any of the Financing Covenants; and (B) in the event of any Financing Failure, none of Parent, its Subsidiaries (including the other Parent Entities), the Parent Financing Sources or any of Parent Related Parties will have any liability of any nature (for any breach of this Agreement or any breach in connection with the Debt Financing or Debt Financing Commitment) to the Company or any of its Subsidiaries or to any stockholder or Affiliate of the Company or any of its Subsidiaries. Without limiting the generality of the foregoing and notwithstanding anything to the contrary contained in this Agreement, following the termination of this Agreement, in no event will the Company or any of its Subsidiaries (and the Company will ensure that the Company’s and its Subsidiaries’ and their respective controlled Affiliates do not) seek to recover any money damages or losses, or seek to pursue any other recovery, judgment, damages or remedy (including any equitable remedy) of any kind, in connection with any inaccuracy or breach of the type referred to in the clause (A) above or in connection with any Financing Failure (except that the Company may seek to recover the Reverse Termination Fee if and when such Reverse Termination Fee becomes payable by Parent to the Company pursuant to Section 7.3(d).

 

                        (f) Each party hereto acknowledges that the agreements contained in Section 7.3 are an integral part of the transactions contemplated by this Agreement, and that, without these agreements, the other parties hereto would not enter into this Agreement; accordingly, if a party fails promptly to pay any amounts due pursuant to Section 7.3, and, in order to obtain such payment, the other party commences a suit that results in a judgment against such party for the amounts set forth in Section 7.3, such party shall pay other party its costs and expenses (including reasonable attorneys’ fees and expenses) in connection with such suit, together with interest on the amounts due pursuant to the applicable provisions of this Section 7.3 from the date such payment was required to be made until the date of payment at the prime lending rate as published in The Wall Street Journal in effect on the date such payment was required to be made.

(h)               Time Period and Other Conditions Under Which the Parties May Walk Away from the Agreement. §7.1: Termination. This Agreement may be terminated and the Merger may be abandoned at any time prior to the Effective Time, whether before or after the Company Stockholder Approval has been obtained (with any termination by Parent also being an effective termination by HoldCo and Merger Sub):

                        . . . .

                        (b) by either Parent or the Company: (i) if the Merger shall not have been consummated before September 21, 2013, or, if the Marketing Period has started and is in effect at such date, then the second Business Day following the expiration of the Marketing Period (the “Termination Date”); provided, that neither party shall have the right to terminate this Agreement pursuant to this Section 7.1(b)(i) if any action of such party or failure of such party to perform or comply with the covenants and agreements of such party set forth in this Agreement shall have been the primary cause of, or resulted primarily in, the failure of the Merger to be consummated by the Termination Date and such action or failure to perform constitutes a breach of this Agreement; provided further, that if as of the Termination Date, all of the conditions precedent to Closing other than the condition set forth in Section 6.1(d) (other than those conditions that by their nature are to be satisfied at the Closing, provided that such conditions are reasonably capable of being satisfied) shall have been satisfied as of the Termination Date, then either Parent or the Company may unilaterally extend the Termination Date for 90 days upon written notice to the other by the Termination Date, in which case the Termination Date shall be deemed for all purposes to be so extended; provided further, however, that with respect to any such unilateral extension by the Company or Parent, the Termination Date shall only be extended for the duration (not to exceed 90 days) during which the Debt Financing Commitment (or any alternative debt financing commitment meeting the requirements of Section 5.16), in each case, after giving effect to the extension, if any, of the same, remains in full force and effect; provided further, however, that if the Merger is not consummated by the Termination Date as a result of a Financing Failure, then, notwithstanding the first proviso of this Section 7.1(b)(i), Parent may terminate this Agreement pursuant to Section 7.1(b)(v). For the avoidance of doubt, nothing in this Agreement shall be construed to obligate Parent to seek or obtain any extension of the Debt Financing Commitment (or, after September 21, 2013, to seek any alternative debt financing commitment meeting the requirements of Section 5.16). (ii) if the Company or any Parent Entity receives a definitive oral or written notice or determination from any Gaming Authority or the staff of any Gaming Authority that a Parent Entity will not be granted any Gaming Approval by such Gaming Authority that is required in order for the condition set forth in Section 6.1(d) to be satisfied; provided, that neither party shall have the right to terminate this Agreement pursuant to this Section 7.1(b)(ii) if any action of such party or failure of such party to perform or comply with the covenants and agreements of such party set forth in this Agreement shall have been the primary cause of, or resulted primarily in, any such Gaming Authority’s refusal to grant any such Gaming Approval; (iii) if any court of competent jurisdiction or other Governmental Entity shall have issued a judgment, order, injunction, rule or decree, or taken any other action restraining, enjoining or otherwise prohibiting any of the transactions contemplated by this Agreement and such judgment, order, injunction, rule, decree or other action shall have become final and nonappealable; provided, that the party seeking to terminate this Agreement pursuant to this Section 7.1(b)(iii) shall have used its reasonable best efforts to contest, appeal and remove such judgment, order, injunction, rule or decree, ruling or other action in accordance with Section 5.7;