MEMBERSHIP INTERESTS PURCHASE AGREEMENT
THIS MEMBERSHIP INTERESTS PURCHASE AGREEMENT (this “Agreement”), dated August 20, 2007 (“Agreement Date”), is entered into by and between GAMECO HOLDINGS, INC., a Delaware corporation (“Seller”), and JACOBS ENTERTAINMENT, INC., a Delaware corporation (“Buyer”). Capitalized terms not defined in context are defined in Section 12.15.
RECITALS
A. Seller is the sole member of JALOU FOX, LLC, a Louisiana limited liability company (“Fox”);
B. Fox owns and operates a truck stop, convenience store, restaurant, fueling operation and video draw poker gaming parlor located at 52367 Highway 16, Denham Springs, Louisiana 70706 and a bar and video gaming parlor located at 52359 Highway 16, Denham Springs, Louisiana 70706 (collectively, “St. Helena”); and
C. Seller desires to sell to Buyer, and Buyer desires to purchase from Seller, upon the terms and subject to the conditions of this Agreement, all of the membership interests of Fox (collectively, the “Membership Interests”).
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual agreements, terms, conditions, covenants, representations and warranties hereinafter set forth, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:
Article 1.
PURCHASE AND SALE OF MEMBERSHIP INTERESTS
1.1. Purchase and Sale of Membership Interests. At the Closing and effective as of the Closing Date, (a) Seller will sell, transfer and assign, free and clear of all Liens or Claims whatsoever, all of the Membership Interests to Buyer or its designee or nominee, and (b) Buyer will purchase the Membership Interests from Seller and deliver to Seller the Purchase Price (as defined in Section 1.2).
1.2. Purchase Price. The purchase price for the Membership Interests (the “Purchase Price”) shall be Thirteen Million Seven Hundred and Forty-Two Thousand Eight Hundred and Thirteen Dollars ($13,742,813.00), to be adjusted by Buyer and Seller for the actual amount of working capital as of the Closing Date. Notwithstanding anything in this Agreement to the contrary, the Purchase Price shall be paid as follows:
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1.2.1. Thirteen Million Two Hundred and Forty-Two Thousand Eight Hundred and Thirteen Dollars ($13,242,813.00) (the “Initial Purchase Price”) shall be paid to the Seller via wire transfer of immediately available funds on the Closing Date.
1.2.2. Five Hundred Thousand Dollars ($500,000.00) shall be with held from the Purchase Price pending the calculation by Buyer and confirmation by Seller of the amount of working capital of Fox as of the Closing Date (such amount, the “Working Capital Amount”). Upon such calculation and confirmation, the parties shall adjust the Purchase Price as appropriate, such that the Working Capital Amount shall constitute the remainder of the Purchase Price due to Seller, and Buyer shall remit the Working Capital Amount to Seller via wire transfer. Such calculation, confirmation and remission shall occur not later than ten (10) business days after the Closing Date.
1.2.3. The final Purchase Price for the Membership Interests shall be the Initial Purchase Price plus the Working Capital Amount.
1.3. Transfer Taxes. Buyer and Seller shall share equally any and all transfer or similar Taxes (but excluding all withholding taxes computed on the basis of net income) — (“Transfer Taxes”) imposed upon either party hereto as a result of the transactions contemplated hereby. To the extent any exemptions from such Transfer Taxes are available, Buyer and Seller shall cooperate to prepare any certificates or other documents necessary to claim such exemptions.
Article 2.
CLOSING AND DELIVERIES
2.1. General. The closing of the transactions contemplated herein (the “Closing”) shall take place at the offices of Hahn Loeser & Parks, LLP, 3300 BP Tower, 200 Public Square, Cleveland, Ohio 44114-2301 on September 4, 2007, or such other time, date and place as the parties may agree. The effective time of closing shall be 12:01 a.m. (the “Effective Time”) on the date of the Closing (the “Closing Date”).
2.2. Seller’s Closing Deliveries. On the Closing Date, Seller shall deliver, or caused to be delivered, to Buyer the following items:
2.2.1. Membership Interests. An instrument of assignment, in form and substance reasonably acceptable to the Buyer and Buyer’s legal counsel, conveying the Membership Interests to Buyer, together with the certificates of membership interests issued by Fox;
2.2.2. Limited Liability Company Records. All of the original limited liability company records, including company record book, etc., for Fox;
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2.2.3. Officer’s Certificate. A certificate of an officer of Seller to the effect that the conditions set forth in Sections 8.1 and 8.2 have been satisfied;
2.2.4. Good Standing Certificates. A good standing/full force and effect certificate, as applicable, dated not more than thirty (30) days prior to the Closing Date, for the Seller and Fox;
2.2.5. Secretary’s Incumbency Certificate. A certificate of the Secretary for the Seller certifying (a) the current officers of the Seller and Fox, (b) a current copy of the Seller’s Certificate of Incorporation and the Articles of Organization for Fox, (c) a current copy of the Seller’s By-laws and the Operating Agreement of Fox, and (d) a copy of the Seller’s resolution authorizing the sale contemplated by this Agreement; and
2.2.6. Updates to Schedules. An update to each of the Schedules attached to this Agreement identifying any changes between the Agreement Date and the Closing Date.
2.3. Buyer’s Closing Deliveries. On the Closing Date, Buyer shall deliver, or cause to be delivered, to Seller the following items:
2.3.1. Wire Transfer. The Initial Purchase Price paid via wire transfer in immediately available funds to an account specified by Seller prior to the Closing;
2.3.2. Officer’s Certificate. A certificate of an officer of Buyer to the effect that the conditions set forth in Sections 9.1 and 9.2 have been satisfied;
2.3.3. Good Standing Certificate. A good standing certificate, dated not more than thirty (30) days prior to the Closing Date, for the Buyer;
2.3.4. Secretary’s Incumbency Certificate. A certificate of the Secretary for the Buyer certifying (a) the current officers of the Buyer, (b) a copy of the Buyer’s Certificate of Incorporation and By-laws and (c) a copy of the Buyer’s resolution authorizing the sale contemplated by this Agreement.
Article 3.
DUE DILIGENCE
3.1. Due Diligence Period. Beginning on the Agreement Date and continuing thereafter until the Closing Date (“Due Diligence Period”), Buyer shall have the right to perform the following due diligence pursuant to the terms and conditions hereof:
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3.2. General Testing and Inspections. Buyer shall have the right, during the Due Diligence Period, to conduct such engineering, environmental, general business and feasibility studies, audits, test, reviews and/or surveys of St. Helena and Fox’s assets, liabilities, operations (including gaming operations and records), financial performance and affairs, as the Buyer deems necessary, including soil tests, borings, drainage tests and similar tests on any land or improvements owned or leased by Fox, and audits and reviews of any of the financial and business records, operations, documents and instruments of the Seller pertaining to Fox or its operations. Such studies shall be conducted by the Buyer and its agents at the Buyer’s sole cost and expense. Subject to reasonable advance notice, the Seller and Fox agree to allow Buyer and its agents access to all assets, records, documents and instruments of Fox to conduct such studies and audits, provided such access shall not unreasonably interfere with the activities of the Seller or Fox. Buyer shall, and does hereby, save, defend, indemnify and hold the Seller and Fox harmless from and against all claims, lawsuits, judgments, losses, liabilities or expenses of any kind or nature which may be asserted against or incurred by the Seller or Fox as the result of the Buyer’s or its agents’ actions and activities conducted pursuant to this Section 3.2. The Buyer shall keep the results of all due diligence activities confidential unless specifically directed or required to disclose the same under any federal, state or local law, rule or regulation or upon the order of any court or Governmental Body. Notwithstanding any other provisions of this Agreement or any documents contemplated hereby to the contrary, the obligation of the Buyer to defend, indemnify and hold harmless the Seller and Fox under this Section 3.2 shall survive the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby or the termination of this Agreement.
3.3. Title Insurance. Prior to the Closing, Buyer may cause to have delivered to Buyer a commitment from a title insurance company reasonably acceptable to Buyer to issue, as of the Closing Date for any real property owned or leased by Fox in the customary form prescribed for use in the State of Louisiana, an Owner’s Policy of Title Insurance (collectively, the “Title Policy”). Seller shall deliver any information as reasonably may be required by Buyer’s title insurance company under the requirements section of the title insurance commitment or otherwise in connection with the issuance of Buyer’s title insurance policy. Seller shall provide an affidavit of title or such other information as Buyer’s title insurance company may reasonably require in order for the title insurance company to delete the standard exceptions and to insure over the “gap” (i.e., the period of time between the effective date of the title insurance company’s last checkdown of title and the Closing Date) and to cause the title insurance company to delete all standard exceptions from the final title insurance policy.
3.4. Financial Statements. Prior to the Closing Date, Seller has delivered, or caused to be delivered, to the Buyer an audited Statement of Income and Balance Sheet for Fox for the full calendar year ending on December 31, 2006 (collectively, the “Financial Statements”), in such detail as may be reasonably requested by the Buyer.
Article 4.
SELLER’S REPRESENTATIONS AND WARRANTIES
Seller represents and warrants to Buyer as follows:
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4.1. Organization and Authorization.
4.1.1. Seller is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware.
4.1.2. Fox is a limited liability company duly organized, validly existing and in full force and effect under the laws of the State of Louisiana. Fox does not have any subsidiaries.
4.2. Validity of Agreements. Seller has the power and authority to enter into this Agreement and all other agreements and instruments executed and delivered or to be executed and delivered under this Agreement (the “Transaction Documents”) to which Seller is a party. The execution, delivery and performance by Seller of this Agreement, the Transaction Documents and the other documents and certificates contemplated therein have been duly authorized by all necessary corporate action on the part of Seller. This Agreement is, and when executed and delivered at the Closing, the Transaction Documents to which Seller is a party and all other documents and certificates contemplated therein will be, the legal, valid and binding obligations of Seller, enforceable against Seller in accordance with their terms.
4.3. Non-Contravention. The execution and delivery by Seller of this Agreement, the Transaction Documents to which Seller is a party and all other documents and certificates contemplated therein and the consummation and performance by Seller of the transactions contemplated by this Agreement and the Transaction Documents will not (i) violate any provision of the Certificate of Incorporation or the By-laws of Seller or Articles of Organization or Operating Agreement of Fox, (ii) violate or result in any default under, or the acceleration of (whether by the giving of notice or the passage of time or both), any obligation under any contract, note, bond, mortgage, indenture, or lease to which Seller or Fox is a party or by which Seller or Fox is bound that would, in any such event, be material, or (iii) violate any constitutional provision, statute, rule, law, regulation, award, order, ordinance, judgment, decree, citation, policy, standard, interpretation, writ or injunction of any Governmental Body (collectively, “Law”).
4.4. Capitalization. The Membership Interests represent the only authorized, issued and outstanding equity interests of Fox. The Membership Interests are duly and validly issued and outstanding and are fully paid and nonassessable. The Membership Interests have not been issued in violation of, and are not subject to, and there are no, outstanding options or other conversion or exchange rights relating to the Membership Interests. There are no authorized or outstanding options under which the Seller or Fox may be obligated to issue or sell any equity interests of Fox. Except as identified on Schedule 4.4, there are no agreements, commitments, contacts or rights of first refusal relating to the issuance, sale or transfer of any equity interest of or profit participation in Fox. At the Closing, Buyer shall receive the Membership Interests free and clear of all Liens and Claims whatsoever. As of the Closing, Fox shall not be subject to any obligation (contingent or otherwise) to repurchase or otherwise acquire or retire any equity interests (including Membership Interests). Seller has full legal and beneficial ownership of the Membership Interests. The Membership Interests have not been registered under any securities laws of any Governmental Body.
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4.5. Title to Property. As of the Agreement Date, except as disclosed on Schedule 4.5, Fox has good and valid title to, or a valid and enforceable leasehold interest in, all of its properties and assets, tangible or intangible, as reflected in Fox’s Financial Statements, and the schedules attached thereto, and the same are free and clear of all Liens and Claims except (a) Liens to be released at or prior to Closing, (b) such Liens that are disclosed by the Title Policy (including real property taxes that are a lien but not yet due and owing) for St. Helena and the records of the Secretary of State of Louisiana and (c) those Liens and Claims identified on Schedule 4.5.
4.6. Tax Matters. Except as set forth on Schedule 4.6, Seller and Fox, as applicable, have timely filed or will timely file, in the manner provided by Law, all Tax Returns for periods prior to and including the Closing Date which are required to be filed with respect of the income or operations of Seller. All such Tax Returns are complete and correct in all material respects and have been prepared in material compliance with all applicable laws and regulations. Seller has paid or will pay all Taxes owed for the taxable periods covered by such Tax Returns (whether or not shown thereon) in the manner provided by Law. None of the assets of Fox is subject to any Liens for any Taxes, and to the Seller’s actual knowledge there is no basis upon which such a Lien could be asserted.
4.7. Environmental Liability. Except as set forth on Schedule 4.7 and the documents referred to therein, to the Seller’s actual knowledge, there has been no release, threatened release, spill, leak, discharge or emission of any Hazardous Materials to the air, surface water, groundwater or soil at St. Helena requiring corrective action under any applicable Environmental Laws. To the Seller’s actual knowledge, there has been no material release, threatened release, spill, leak, discharge or emission of any Hazardous Materials to the air, surface water, groundwater or soil at St. Helena that is a violation of any applicable Environmental Laws. “Hazardous Materials” means any hazardous or toxic substance or waste or any contaminant or pollutant regulated or otherwise creating liability under any Environmental Laws, including, without limitation, “hazardous substances” as defined by the Comprehensive Environmental Response Compensation and Liability Act, as amended, “toxic substance” as defined by the Toxic Substance Control Act, as amended, “hazardous wastes” as defined by the Resource Conservation and Recovery Act, as amended, “hazardous materials” as defined by the Hazardous Materials Transportation Act, as amended, thermal discharges, radioactive substances, PCBs, natural gas, petroleum products or byproducts and crude oil. “Environmental Laws” means all Laws relating to pollution, worker health and worker safety, or the environment, and all other Laws relating to emissions, discharges, releases or threatened releases of Hazardous Materials into the environment or otherwise relating to the generation, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials. Fox is and has been in material compliance with all Environmental Laws, provided any noncompliance has not had and is not likely to have a Material Adverse Effect on Fox or its operations. Buyer acknowledges that St. Helena contains a fueling operation for the sale and dispersal to the general public of gas and diesel fuels. Except as set forth on Schedule 4.7 and the documents referred to therein, neither the Seller nor Fox has received any written notice, report or other information regarding any actual or alleged violation of Environmental Laws relating to St. Helena.
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4.8. Seller Inter-company Loans. Notwithstanding the contents of the Financial Statements or any other language to contrary contained in this Agreement, any loans, notes payable or other debt obligations between the Seller and Fox or between Fox and any other subsidiaries of the Seller (collectively, the “Seller Inter-company Loans”) shall be retired by the Seller from the proceeds of the Purchase Price and shall not be a part of the transfer of the Membership Interests at Closing. In no event shall the Buyer, nor any of its subsidiaries, including, but not limited to, Fox following the Closing, have any liability for any of the Seller Inter-company Loans.
4.9. Consents, etc. Except as identified on Schedule 4.9 or the matters described in Section 6, any registration, declaration or filing with, or consent, approval, license, permit or other authorization or order by, any governmental or regulatory authority, domestic or foreign, that is required in connection with the valid execution, delivery, acceptance and performance by the Seller and Fox under this Agreement or the consummation by the Seller and Fox of any of the transactions contemplated hereby has been or will be completed, made or obtained on or before the Closing Date.
4.10. Litigation, etc. Except as set forth on Schedule 4.10, to the Seller’s actual knowledge there are no Claims against the Seller or Fox or any of their respective assets, or pending or threatened by the Seller or Fox against any third party, at law or in equity, or before or by any Governmental Body. To the Seller’s actual knowledge, Fox is not subject to any judgment, order or decree of any court or other Governmental Body (excepting various licensing necessary for its customary and on-going operations).
4.11. Brokers’ Fees. No investment banker, broker, finder or other intermediary has been retained by or is authorized to act on behalf of Seller or Fox who might be entitled to any fee or commission from Buyer upon consummation of the transactions contemplated by this Agreement.
4.12. No Adverse Change. From the Agreement Date to the Closing Date, there shall be no adverse change in the operating results, assets, liabilities, operations, prospects, employee relations or customer or supplier relations of Fox which has had or could reasonably be expected to have a Material Adverse Effect.
4.13. Conduct Pending Closing. From the Agreement Date until the Closing Date, Seller shall: (i) use commercially reasonable efforts to cause St. Helena to be operated and to carry on its respective businesses in the ordinary course consistent with its past practice; and (ii) not permit or cause the distribution of any assets from Fox, including, but not limited to, cash and other current assets, excepting only those distributions and payments made in the ordinary course of Fox’s business.
Article 5.
BUYER’S REPRESENTATIONS AND WARRANTIES
Buyer hereby represents and warrants to Seller as follows:
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5.1. Organization and Power. Buyer is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware.
5.2. Authorization and Validity of Agreements. The execution, delivery and performance by Buyer of this Agreement, the Transaction Documents and the other documents and certificates contemplated therein has been duly authorized by all necessary corporate action on the part of Buyer. Buyer has the power and authority to enter into this Agreement, the Transaction Documents and the other documents and certificates contemplated to be executed herein and to consummate the transactions contemplated thereby. This Agreement and the Transaction Documents and the other documents and certificates contemplated herein constitute the legal, valid and binding obligations of Buyer, enforceable against it in accordance with their respective terms.
5.3. Non-Contravention. The execution and delivery by Buyer of this Agreement, the Transaction Documents and the other documents and certificates contemplated therein and the consummation and performance by Buyer of the transactions contemplated herein will not (i) violate any provision of the Certificate of Incorporation or By-laws of Buyer, (ii) violate, or be in conflict with any provision of, or constitute a default under, or result in the termination of, or accelerate the performance required by, or cause the acceleration of the maturity of any liability or other obligation to which Buyer is a party, or (iii) violate any Law.
5.4. Brokers’ Fees. No investment banker, broker, finder or other intermediary has been retained by or is authorized to act on behalf of Buyer who might be entitled to any fee or commission from Seller upon consummation of the transactions contemplated by this Agreement.
5.5. Non-Registration. The Buyer understands and agrees that the Membership Interests are not registered under the Securities Act of 1933, as amended (the “Securities Act”), nor the securities laws of any state, and, accordingly, the Membership Interests may not be offered, sold, pledged, hypothecated or otherwise transferred or disposed of in the absence of registration or the availability of an exemption from registration under the Securities Act and any applicable state securities laws.
5.6. Devices. The Buyer acknowledges that all Devices operated at St. Helena are owned and operated therein by a third-party, licensed device owner, to-wit; Southern Trading Corporation, a Louisiana corporation. All such Devices are operated pursuant to a Device Placement Agreement between Fox and Southern Trading Corporation, a copy of which has been provided to the Buyer.
5.7. Licensure. The Buyer acknowledges that the activities of the video draw poker gaming parlors and the alcohol, tobacco and lottery sales, as applicable, conducted at St. Helena are subject to licensing and regulation by various federal, state and local Governmental Bodies. The Buyer further acknowledges that appropriate notifications to the Louisiana State gaming authorities of the consummation of the transactions contemplated by this Agreement will be required promptly following the Closing hereunder.
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Article 6.
SURVIVAL
The representations and warranties contained in Sections 4.1 through 4.8 and Sections 5.1 through 5.7, inclusive, shall survive the execution and delivery of this Agreement and consummation of the transactions provided for in this Agreement without limitation as to time. The representations and warranties contained in Sections 4.9 through 4.13 shall survive the Closing hereunder and shall continue in effect for a period of one (1) year from and after the Closing Date.
Article 7.
MUTUAL COVENANTS AND AGREEMENTS
7.1. Expenses. Except as otherwise specifically provided in this Agreement and the Transaction Documents, each party shall bear its own expenses in connection with and in performance of this Agreement and the Transaction Documents. Buyer shall be solely responsible for all of its costs incurred in its due diligence activities, including, but not limited to, the costs of any surveys, environmental site assessment studies, title policies and title commitments and any and all costs, expenses or fees relating to its financing of the transaction contemplated in this Agreement.
7.2. Cooperation. Each party shall cause every Person that is a shareholder, director, officer or employee of any party hereto or Fox to use all commercially reasonable efforts to assist in the satisfaction of such party’s obligations hereunder and in the consummation of the transactions contemplated herein.
Article 8.
CONDITIONS PRECEDENT TO THE OBLIGATION OF BUYER TO CLOSE
The obligation of Buyer to consummate the transactions contemplated by this Agreement is subject to the fulfillment, prior to or on the Closing Date, of each of the following conditions precedent, any one or more of which may be waived by Buyer in writing:
8.1. Compliance with Covenants. Seller shall have performed and complied in all material respects with all covenants, obligations and agreements required by this Agreement to be performed or complied with by it at or prior to the Closing Date.
8.2. Representation and Warranties. The representations and warranties of Seller contained in this Agreement shall be true and correct in all material respects on the Closing Date as if made on such date, except for any changes permitted by the terms of this Agreement.
8.3. Actions of Seller at Closing. At the Closing and unless otherwise waived by Buyer, Seller shall have delivered to Buyer those deliveries set forth in Section 2.2.
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