STOCK PURCHASE AGREEMENT
AMONG
ISLE OF CAPRI BLACK HAWK, L.L.C.
IC HOLDINGS COLORADO, INC.
COLORADO GRANDE ENTERPRISES, INC.,
AND
CGC HOLDINGS, L.L.C.
DATED AS OF
APRIL 25, 2005
INDEX OF DEFINED TERMS
The following terms have the respective meanings specified in the indicated
Sections of the Agreement:
Term Agreement Section
- ---- ------------------
Accounts Receivable 2.17
Advances 2.17
Affiliate 2.1
Agreement Recitals
Annual Financial Statements 2.6(a)
Casino Recitals
Claims 5.10(b)
Closing 1.2(a)
Closing Balance Sheet 1.5(a)
Closing Date 1.2(a)
Code 2.10(a)
Colorado Commission 2.7
Colorado Liquor Authorities 2.7
Consent 2.7
Contracts 2.4(b)
Damages 5.10
Environmental Laws 2.12
Estimated Purchase Price 1.2
Expiration Date 5.1
Financial Statements 2.6(a)
GAAP 1.2
Governmental Authority 2.4(iii)
Hazardous Materials 2.12
Indemnified Party 5.11(a)
Indemnifying Party 5.11
Independent Firm 1.5(b)
Interim Financial Statements 2.6(a)
Judgments 2.4(a)
Knowledge of Seller's Management Employees 2.8
Laws 2.4
Liability, Liabilities 2.6
Liens 1.1
Material Adverse Effect 2.1
Permits 2.4(a)
Permitted Encumbrances 2.10
Person 2.3(b)
Post-Closing Adjustment 1.4
Proceeding(s) 2.8
Pre-Closing Tax Period 2.9(a)(iii)
Purchase Price 1.4
Purchaser Recitals
Purchaser Claims 5.10(a)
Purchaser Group 5.10(a)
Purchaser's Auditor 1.5(a)
Real Property 2.15
Real Property Leases 2.15
Required Regulatory Consents 2.7
Seller Recitals
Seller Claims 5.10(c)
Seller Disclosure Schedule Article II
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Term Agreement Section
- ---- ------------------
Seller Group 5.10(b)
Seller's Auditor 1.5(a)
Seller's Management Employees 2.8
Seller's Pass-Through Claims 5.10(a)
Shares Recitals
Subject Company Recitals
Subject Company Agreements 2.14
Target Working Capital 1.2
Tax Representations 4.2(a)
Tax Return 2.9(a)
Taxes 2.9(a)
Third-Party Consent 2.7
Working Capital 1.2
Working Capital Calculation Statement 1.5(a)
EXHIBIT INDEX
Exhibit A Promissory Note
Exhibit B Pledge Agreement
Exhibit C Transition Services Agreement
Exhibit D Guaranty
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THIS STOCK PURCHASE AGREEMENT ("AGREEMENT"), dated as of April 25, 2005, is
among ISLE OF CAPRI BLACK HAWK, L.L.C., a limited liability company organized
under the laws of Colorado ("PARENT"), IC HOLDINGS COLORADO, INC., a Colorado
corporation ("SELLER"), COLORADO GRANDE ENTERPRISES, INC., a corporation
organized under the laws of Colorado (the "SUBJECT COMPANY") and CGC HOLDINGS,
L.L.C., a limited liability company organized under the laws of Nevada
("PURCHASER").
WHEREAS, Seller is a wholly-owned subsidiary of Parent; and
WHEREAS, Seller owns 100 shares of common stock, par value $.01, of the
Subject Company, which shares constitute 100% of the outstanding shares of the
Subject Company (the "SHARES");
WHEREAS, the Subject Company owns (or leases) and operates the Colorado
Grande Casino together with all related facilities located in Cripple Creek,
Colorado (the "CASINO"); and
WHEREAS, Seller desires to sell and Purchaser desires to purchase the
Shares.
NOW, THEREFORE, in consideration of the mutual representations, warranties,
covenants, agreements and undertakings contained or referred to in this
Agreement, the parties hereby agree as follows:
ARTICLE I
PURCHASE AND SALE OF THE SHARES
1.1 PURCHASE AND SALE OF THE SHARES. Upon the terms and subject to the
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conditions set forth in this Agreement, Seller hereby sells to Purchaser, and
Purchaser hereby purchases from Seller, the Shares, free and clear of all liens,
mortgages, charges, security interests, burdens, pledges, options, claims,
rights of any third party, easements, encroachments, encumbrances or other
restrictions or limitations of any nature whatsoever ("LIENS"), except for (a)
the restriction on transfer without the prior approval of the Colorado Limited
Gaming Control Commission and the requirement to comply with the Colorado
Limited Gaming Act and regulations promulgated thereunder, (b) the Pledge
Agreement described in Section 1.2(b), and (c) state and federal securities laws
restrictions.
1.2 CONSIDERATION. The aggregate consideration to be paid by Purchaser
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for the Shares shall be U.S. Six Million Five Hundred Thousand Dollars
($6,500,000) (the "ESTIMATED PURCHASE PRICE"), payable as follows:
(a) $600,000 in cash (the "CASH PAYMENT"), payable by wire
transfer contemporaneously herewith (the date hereof being referred to herein
as, the "CLOSING DATE", and the transactions contemplated herein to occur such
date collectively as, the "CLOSING"); and
(b) a Promissory Note payable to Seller in the aggregate principal
amount of $5.9 million having terms and provisions substantially conforming to
those in Exhibit A attached hereto, which shall be secured by a Pledge Agreement
having terms and provisions substantially conforming to those in Exhibit B
hereto.
The parties acknowledge and agree that the Closing shall be effective as of
2:00 a.m., CDT, on April 25, 2005.
The Estimated Purchase Price is based on the Subject Company having Working
Capital (as defined below) on the Closing Date equal to $0.00 (the "TARGET
WORKING CAPITAL"). The Estimated Purchase Price is subject to adjustment after
the Closing as provided in Section 1.4. As used herein, the term "WORKING
CAPITAL" means the Subject Company's (i) cash and marketable securities, plus
(ii) notes and accounts receivable minus an appropriate reserve, plus (iii)
inventory minus obsolete and nonsalable items, plus (iv) other current assets,
minus (v) accounts payable, minus (vi) other current liabilities, including
accrued liabilities and deposits and current taxes, all as stated on the Closing
Balance Sheet determined in accordance with United States generally accepted
accounting principles applied in a manner consistent with past practices of the
Subject Company ("GAAP"). The parties hereto have attached as Schedule 1.2 a
copy of the March 27, 2005 balance sheet of the Subject Company and indicated
thereon the items that are to be used in calculating Working Capital.
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1.3 CLOSING DOCUMENTATION.
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(a) Seller shall contemporaneously herewith deliver to Purchaser
the following:
(i) certificates for the Shares duly endorsed for transfer or
accompanied by duly executed stock powers or stock transfer forms sufficient to
convey to Purchaser title to the Shares;
(ii) the resignations of the directors and officers of the
Subject Company that have been requested to resign by Purchaser, effective as of
the Closing Date;
(iii) a certificate, signed by the secretary of Seller,
certifying resolutions of the board of managers of Seller authorizing the
execution, delivery and performance of this Agreement;
(iv) the Third-Party Consents which are identified on
Schedule 2.7;
(v) documentation in form and substance reasonably acceptable
to Purchaser of the termination of all obligations under that certain Management
Agreement dated April 22, 2003 by and between Isle of Capri Casino, Inc., and
the Subject Company.
(vi) a good standing certificate for the Subject Company as
of the Closing Date; and
(vii) a Transition Services Agreement executed by Seller
substantially in the form of Exhibit C hereto.
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(b) Purchaser shall contemporaneously herewith deliver to Seller
the following:
(i) the cash portion of the Estimated Purchase Price by wire
transfer of immediately available funds to an account identified by Seller to
Purchaser;
(ii) a Promissory Note and a Pledge Agreement executed by
Purchaser substantially in the form of Exhibits A and B hereto, respectively;
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(iii) a Transition Services Agreement executed by Purchaser
substantially in the form of Exhibit C hereto; and
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(iv) a Guaranty executed by Nevada Gold & Casinos, Inc.,
substantially in the form of Exhibit D hereto.
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1.4 POST-CLOSING ADJUSTMENTS. Should Working Capital as reflected on
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the Closing Balance Sheet be less than or greater than the Target Working
Capital as reflected in the Working Capital Calculation Statement (as defined in
Section 1.5), the "PURCHASE PRICE" shall be adjusted upward or downward (the
"POST-CLOSING ADJUSTMENT") by the amount necessary to cause Working Capital to
be equal to the Target Working Capital, and Purchaser or Seller, as the case may
be, shall pay the amount of the Post-Closing Adjustment to the other in cash.
Any such payment shall be made within two (2) business days following agreement
by Purchaser and Seller on the Working Capital Calculation Statement (as defined
in Section 1.5).
1.5 CLOSING BALANCE SHEET.
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(a) Following the Closing Date, Purchaser shall cause to be
prepared the balance sheet of the Subject Company as of the Closing Date (the
"CLOSING BALANCE SHEET"), which shall be prepared and presented consistent with
GAAP, applied on a consistent basis with the preparation of the balance sheet
included in the Financial Statements. Within thirty (30) days following the
Closing Date, Purchaser shall deliver the Closing Balance Sheet to Seller
accompanied by a statement documenting the calculation of Working Capital as of
the Closing Date ("WORKING CAPITAL CALCULATION STATEMENT"). The Closing Balance
Sheet and Working Capital Calculation Statement shall have been reviewed by
Pannell Kerr & Forster of Texas, Inc., independent public
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accountants of Purchaser ("PURCHASER'S AUDITOR"), and, following the delivery
thereof, shall (at Seller's option) be reviewed by independent public
accountants or consultants engaged by Seller ("SELLER'S AUDITOR"), who will be
afforded full access to all books and records of the Subject Company and work
papers used in the preparation thereof.
(b) Within thirty (30) days following the date on which the
Closing Balance Sheet and Working Capital Calculation Statement are delivered
pursuant to Section 1.5(a), Seller shall give notice to Purchaser as to whether
Seller has any objection thereto (such notice to contain Seller's comments and
exceptions to the Closing Balance Sheet and Working Capital Calculation
Statement, if any). Failure to object to the Closing Balance Sheet or the
Working Capital Calculation Statement within such 30-day period shall constitute
Seller' acceptance thereof. If Seller gives notice that it does not concur with
the Closing Balance Sheet or the Working Capital Calculation Statement presented
by Purchaser and the parties are unable to mutually resolve Seller's exceptions
within twenty (20) days following the date of such notice, then within twenty
(20) days following the date of such notice Purchaser and Seller shall jointly
select and retain an independent firm of certified public accountants of
national standing and reputation (the "INDEPENDENT FIRM") for the purpose of
resolving all remaining unresolved issues with respect to the Closing Balance
Sheet and the Working Capital Calculation Statement. In the event that Seller
and Purchaser are unable to agree upon the firm to be selected as the
Independent Firm within such twenty (20) day period, then such selection shall
be made by an independent arbitrator agreed upon from a list of three
arbitrators supplied, at Purchaser's request, within five (5) days after the
expiration of the twenty-day period, to Purchaser and Seller from the American
Arbitration Association, and the retention of the Independent Firm shall be made
by Seller and Purchaser within five (5) days after such list is supplied.
(c) Within twenty (20) days following such retention of the
Independent Firm, Seller and Purchaser shall present to the Independent Firm the
issue or issues that must be resolved with respect to the Closing Balance Sheet
and the Working Capital Calculation Statement.
(d) Seller and Purchaser shall use commercially reasonable efforts
to cause the Independent Firm to render its decision as soon as is reasonably
practicable, including, without limitation, prompt compliance with all
reasonable requests by the Independent Firm for information, papers, books,
records and the like; provided that Seller and Purchaser agree that the purpose
of retention of the Independent Firm shall not include the conduct of its own
independent audit of the Closing Balance Sheet, but rather shall be limited to
resolving the issues presented to it and matters related thereto. All decisions
of the Independent Firm with respect to the Closing Balance Sheet and the
Working Capital Calculation Statement shall be final and binding upon both
Seller and Purchaser and judgment may be entered thereon in any court of
competent jurisdiction.
(e) Purchaser and Seller shall bear all fees, costs, disbursements
and other expenses of their own respective auditor associated with performance
of their respective functions pursuant to this Section 1.5. For purposes of
this Agreement, payment of all fees, costs, disbursements and other expenses of
the Independent Firm that are incurred pursuant to this Section 1.5 shall be
split evenly between Seller and Purchaser.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller has delivered herewith to Purchaser a disclosure schedule (the
"SELLER DISCLOSURE SCHEDULE") arranged in paragraphs corresponding to the
numbered and lettered paragraphs contained in this Article II, and the
disclosure in any paragraph shall qualify only such paragraph. Seller
represents and warrants to Purchaser that:
2.1 ORGANIZATION; SUBSIDIARIES. The Subject Company is a corporation
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duly organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation, with all requisite power and authority to own,
lease and operate its properties and to carry on its business as it is currently
being conducted. Prior to the execution of this Agreement, Seller has made
available to Purchaser true, correct and complete copies of the articles of
incorporation and bylaws, or other comparable charter documents, of the Subject
Company as in effect on the date hereof, and true, correct and complete copies
of all minutes of all meetings (or written consents in lieu of meetings) of the
Board of Directors (and all committees thereof) and stockholders of the Subject
Company. The Subject Company does not have any Affiliates controlled by it
directly or indirectly through one or more intermediaries. The Subject Company
does not own beneficially, directly or indirectly, any equity securities or
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similar interests of any corporation, association, joint-stock company, limited
liability company, business trust or unincorporated organization, or any
interest in any partnership or joint venture of any kind. As used herein, the
term "MATERIAL ADVERSE EFFECT" means a material adverse effect on the financial
condition, business, operations, assets, or results of operations of the Subject
Company or the ability of Seller to perform its obligations under this
Agreement. For purposes of this Agreement, "AFFILIATE" means, with respect to
any Person, any other Person controlling, controlled by or under common control
with such Person, with "control" for such purpose meaning the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of a Person, whether through the ownership of voting
securities or voting interests, by contract or otherwise.
2.2 AUTHORITY; ENFORCEABILITY. Each of Seller and the Subject Company
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has the limited liability company or corporate power, as applicable, and
authority to enter into this Agreement and to carry out its respective
obligations hereunder. The execution and delivery of this Agreement and the
consummation of the transactions provided for hereby have been duly authorized
by the Board of Directors (or Managers) of each of Seller and the Subject
Company and no other limited liability company or corporate proceeding on the
part of Seller or the Subject Company is necessary to authorize the execution or
delivery of this Agreement or the consummation of any of the transactions
contemplated hereby. This Agreement has been duly executed and delivered by
each of Seller and the Subject Company and, assuming due authorization,
execution and delivery by Purchaser, constitutes a legal, valid and binding
obligation of each of Seller and the Subject Company, enforceable against each
of them in accordance with its terms, except as such enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium and similar laws
relating to or affecting creditors generally and by general equitable principles
(regardless of whether such enforceability is considered in a proceeding in
equity or law).
2.3 OWNERSHIP OF CAPITAL STOCK.
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(a) The authorized capital stock of the Subject Company consists
of 100 shares of common stock, $0.01 par value per share, all of which shares
are currently issued and outstanding. The Shares constitute 100% of the
outstanding shares of capital stock of the Subject Company. All of the Shares
(i) are duly authorized, validly issued, fully paid and nonassessable and (ii)
are, and when issued were, free of preemptive rights. Seller owns beneficially
and of record all of the Shares, free and clear of all Liens. There are no
shares of capital stock of the Subject Company held in the treasury of the
Subject Company and no shares of capital stock of the Subject Company are
currently reserved for issuance for any purpose or upon the occurrence of any
event or condition.
(b) There are not authorized or outstanding any subscriptions,
options, conversion rights, warrants, calls, rights, convertible securities or
other agreements, securities or commitments of any nature whatsoever (whether
oral or written and whether firm or conditional) obligating Seller or the
Subject Company, or obligating Seller or any of its Affiliates to cause the
Subject Company to issue, transfer, deliver or sell, or cause to be issued,
transferred, delivered or sold, any shares of the capital stock, or any
securities convertible into or exchangeable for shares of capital stock, of the
Subject Company or obligating the Subject Company to grant, extend or enter into
any such agreement or commitment. There are no outstanding contractual
obligations of Seller or the Subject Company which relate to the purchase, sale,
issuance, redemption, acquisition, transfer, disposition, holding or voting of
any shares of capital stock or other securities of the Subject Company or the
management or operation of the Subject Company. No individual, corporation,
proprietorship, firm, partnership, limited partnership, trust, association or
other entity (collectively, a "PERSON") has any right to participate in, or
receive any payment based on any amount relating to, the revenue, income, value
or net worth of the Subject Company or any component or portion thereof, or any
increase or decrease in any of the foregoing.
(c) The assignments, endorsements, stock powers and other
instruments of transfer delivered by Seller to Purchaser in connection herewith
are sufficient to transfer Seller's entire interest, legal and beneficial, in
the Shares. Seller has the requisite power and authority to convey good title
to all of the Shares, and Purchaser is hereby receiving good title to such
Shares, free and clear of all Liens against payment of the Purchase Price in
accordance with the terms of this Agreement.
2.4 NO BREACH. Neither the execution and delivery of this Agreement nor
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the performance by Seller of its obligations hereunder nor the consummation of
the transactions provided for hereby does, except as set forth in Section 2.4 of
the Seller Disclosure Schedule:
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(i) conflict with or violate any provision of the certificate
of incorporation or bylaws of Seller or the Subject Company;
(ii) violate, conflict with or result in the breach or
termination of, or constitute a default or event of default, or give a
third party any additional right (including a termination right) under,
permit cancellation of, result in the creation of any Lien upon any of the
assets or properties of the Subject Company under, or constitute a
circumstance which, with or without notice or lapse of time or both, would
constitute any of the foregoing under the terms of any contracts,
agreements, commitments, arrangements, undertakings, leases, licenses,
mortgages, bonds, notes, understandings or other instruments ("CONTRACTS")
or any permits, authorizations, approvals, registrations, certificates or
licenses granted by or obtained from any governmental, administrative or
regulatory authority ("PERMITS"), in each case, whether written or verbal,
which is binding and enforceable to which Seller or the Subject Company is
a party or by which either of them or any of their respective properties or
assets are bound and except as could not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect; or
(iii) constitute a violation by Seller or the Subject Company
of any laws, rules, orders, directives (unless such directive shall be
subject to legal contest by Seller or the Subject Company, as otherwise set
forth in Section 2.4 of the Seller Disclosure Schedule) or regulations
("LAWS") of any governmental, administrative or regulatory authority
("GOVERNMENTAL AUTHORITY") or any judgments, orders, rulings or awards
("JUDGMENTS") of any court, arbitrator or other judicial authority or any
Governmental Authority, except as could not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect.
2.5 BROKERS. No Person, other than Libra Securities, LLC, has acted
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directly or indirectly as a broker, finder, consultant, intermediary or
financial advisor for Seller or any of its Affiliates, including without
limitation the Subject Company, in connection with the transactions contemplated
hereby, and no Person, other than Libra Securities, LLC, is entitled to any fee
or commission or like payment from Seller or any of its Affiliates, including
without limitation, the Subject Company, in respect thereof based in any way on
any agreement, arrangement or understanding made by or on behalf of Seller or
any of its Affiliates, including without limitation, the Subject Company.
Neither Purchaser nor the Subject Company are, or will be, liable for all or any
portion of any fee, commission or like payment owing to Libra Securities, LLC.
2.6 FINANCIAL STATEMENT; LIABILITIES.
--------------------------------
(a) Seller has made available to Purchaser copies of the unaudited
balance sheet, income statement and statement of cash flows of the Subject
Company at and for the years ended April 27, 2003 and April 25, 2004 (the
"ANNUAL FINANCIAL STATEMENTS"), and copies of the unaudited balance sheet,
income statement and statement of cash flows of the Subject Company at and for
the nine months ended March 27, 2005 (the "INTERIM FINANCIAL STATEMENTS" and
together with the Annual Financial Statements, the "FINANCIAL STATEMENTS"). The
Annual Financial Statements fairly present in all material respects in
conformity with GAAP, applied on a consistent basis, the financial condition of
the Subject Company at the dates thereof and the results of its operations and
changes in financial condition for the periods then ended except that the Annual
Financial Statements do not include any financial statement footnotes or
schedules. The Interim Financial Statements fairly present in all material
respects the financial condition of the Subject Company at the dates thereof and
the results of its operations and changes in financial condition for the period
then ended, subject to normal recurring year-end adjustments the effect of which
will not individually or in the aggregate have a Material Adverse Effect, and
except that such financial statements do not include any footnotes or schedules.
The Financial Statements are in accordance with the books and records of the
Subject Company.
(b) Except as set forth in Section 2.6 of the Seller Disclosure
Schedules, as of March 27, 2005, the Subject Company did not have any
liabilities or obligations of any nature required by GAAP to be reflected in its
financial statements (collectively, "LIABILITIES" and individually, a
"LIABILITY"), that were not reflected on the March 27, 2005 balance sheet of the
Subject Company. As of March 27, 2005, the Subject Company did not have any
Liabilities that would be required by GAAP to be reflected in its financial
statements as long-term debt. Except as set forth in Section 2.6 of the Seller
Disclosure Schedule, since March 27, 2005, the Subject Company has not incurred
(i) any Liability that would be required by GAAP to be reflected in its
financial
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statements as long-term debt, or (ii) any Liability, except in the case of this
clause (ii), Liabilities incurred in the ordinary course of business consistent
with past practices.
(c) Since March 27, 2005, the Subject Company has conducted its
business only in the ordinary and usual course in substantially the same manner
as previously conducted, and, except as set forth in Section 2.6 of the Seller
Disclosure Schedule, has not undergone or suffered any change that has had
individually, or in the aggregate, a Material Adverse Effect.
2.7 CONSENTS. Except as set forth in Section 2.7 of the Seller
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Disclosure Schedule, no consent, waiver, approval, authorization, registration,
license or declaration of or by, or filing with, any Governmental Authority (a
"CONSENT") or any third party (a "THIRD-PARTY CONSENT") is required to be made
or obtained by Seller or the Subject Company in connection with the execution
and delivery of this Agreement or the consummation of any of the transactions
provided for hereby, except for (a) the approval of the Colorado Limited Gaming
Control Commission (the "COLORADO COMMISSION") of the change of ownership of the
Subject Company, transfer of the Shares to Purchaser, suitability of Purchaser
to acquire the Shares, and suitability of Purchaser and its Affiliates to own,
operate and manage the Casino, (b) the approval of the Colorado Division of
Liquor Enforcement and City of Cripple Creek (collectively, the "COLORADO LIQUOR
AUTHORITIES") of the change in ownership of the Subject Company (collectively,
the consents set forth in Sections 2.7(a) and (b) may be referred to as the
"REQUIRED REGULATORY CONSENTS").
2.8 ACTIONS AND PROCEEDINGS. Except as set forth in Section 2.8 of the
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Seller Disclosure Schedule, there is no action, suit, claim or legal,
administrative, arbitration or other alternative dispute resolution proceeding
or investigation (each, a "PROCEEDING" and collectively, "PROCEEDINGS") pending
or, to the Knowledge of Seller's Management Employees (as defined below),
threatened against the Subject Company or any of its properties or businesses or
against any officers, directors, employees, agents or stockholders of the
Subject Company in their capacities as such. Except as set forth in Section 2.8
of the Seller Disclosure Schedule, all of the proceedings pending or threatened
against the Subject Company are fully covered by insurance policies (or other
indemnification agreements with third parties) and are being defended by the
insurers (or such third parties), subject to such deductibles as are set forth
in such Seller Disclosure Schedule. Except as disclosed in Section 2.8 of the
Seller Disclosure Schedule, the Subject Company is not subject to any order,
judgment, decree, injunction, stipulation or consent order of or with any court
or other Governmental Authority. The Subject Company has not entered into any
agreement to settle or compromise any proceeding pending or threatened against
it which has involved any obligation other than the payment of money or for
which the Subject Company has any continuing obligation. As used in this
Agreement, the term "KNOWLEDGE OF SELLER'S MANAGEMENT EMPLOYEES", or words of
similar import, shall mean the actual knowledge of any of the persons identified
in Section 2.8(A) of the Seller Disclosure Schedule (such persons being
"SELLER'S MANAGEMENT EMPLOYEES").
2.9 TAXES AND TAX RETURNS.
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(a) For purposes of this Agreement:
(i) "TAXES" means all taxes, charges, fees, duties, levies or
other assessments, including (without limitation) income, gross receipts,
net proceeds, ad valorem, turnover, real and personal property (tangible
and intangible), sales, use, franchise, excise, value added, stamp, gaming,
device fees, alcoholic beverage-related excise and other related taxes,
leasing, lease, user, transfer, fuel, excess profits, occupational,
interest equalization, windfall profits, severance and employees' income
withholding, unemployment and Social Security taxes, which are imposed by
the United States, or any state, local or foreign government or subdivision
or agency thereof, including any interest, penalties or additions to tax
related thereto.
(ii) "TAX RETURN" means any report, return, document,
declaration, payee statement or other information or filing required to be
supplied to any Tax authority or any person with respect to Taxes,
including any amendment made with respect thereto.
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(iii) "PRE-CLOSING TAX PERIOD" means any Tax period ending on
or before the close of business on the Closing Date or, in the case of any
Tax period which includes, but does not end on, the Closing Date, the
portion of such period up to and including the Closing Date.
(b) All material federal, state and foreign Tax Returns of the
Subject Company, including, without limitation, Tax Returns required to be filed
with the Colorado Division of Gaming, have been or will be filed or sent by or
for the Subject Company in respect of Taxes pursuant to applicable Laws for all
periods through and including the Closing Date. All Taxes shown as due on such
Tax Returns and other filings have been or will be timely paid. Each such Tax
Return and filing is true and correct or will be true and correct when filed.
(c) The Closing Balance Sheet will specifically reflect reserves
for Taxes that are adequate to cover all unpaid liabilities for Taxes, whether
or not disputed, that are attributable to the Pre-Closing Tax Period and for
which the Subject Company may be in its own right, under Treas. Reg.
Sec.1.1502-6, or as a transferee of the assets of, or successor to, any person.
The Subject Company has not incurred any Tax liabilities other than in the
ordinary course of business for any taxable year for which the statute of
limitations has not expired.
(d) To the Knowledge of Seller's Management Employees, no Tax
Return of the Subject Company has ever been audited or investigated by any
Governmental Authority, and no material issues have been raised in any
examination by any Governmental Authority with respect to the Subject Company.
(e) All Taxes which the Subject Company is required by law to
withhold or collect, including without limitation, sales and use taxes, and
amounts required to be withheld for Taxes of persons who are treated as
employees of the Subject Company for federal income tax purposes, have been duly
withheld or collected and, to the extent required, have been paid over to the
proper Governmental Authorities or are held as may be required by law for such
purpose.
(f) Neither the Subject Company nor any person on behalf of the
Subject Company has waived any statute of limitation in respect of Taxes or
agreed to any extension of time with respect to a Tax assessment or deficiency,
nor has any such waiver or agreement been requested by any Governmental
Authority.
(g) Except as set forth in Section 2.9 of the Seller Disclosure
Schedule, to the Knowledge of Seller's Management Employees, the Subject Company
has not been a member of an affiliated group (as defined in section 1504(a) of
the Internal Revenue Code of 1986, as amended (the "CODE")) or filed or been
included in a combined, consolidated or unitary Tax Return, and, to the
Knowledge of Seller's Management Employees, the Subject Company is not liable
for the Taxes of any taxpayer for any taxable period beginning before the
Closing Date as a result of filing unitary, combined, or consolidated Tax
Returns, as a transferee or successor, by contract or otherwise.
(h) Except as set forth in Section 2.9 of the Seller Disclosure
Schedule, in the past five years, the Subject Company has not been a party to a
transaction that has been reported as a reorganization within the meaning of
Code section 368, or as a distribution under Code section 355.
2.10 TITLE TO PROPERTY; CONDITION. Except as disclosed in Section 2.10
----------------------------
of the Seller Disclosure Schedule, the Subject Company has (i) with respect to
all parcels of real property reflected on the Closing Balance Sheet, good and
valid title, (ii) with respect to all parcels of real property leased by the
Subject Company pursuant to the Real Property Leases (as defined below) listed
on Schedule 2.10, valid and subsisting leasehold estates, and (iii) with respect
to all material tangible and intangible personal property owned by the Subject
Company, good title, in each instance free and clear of all Liens other than
Permitted Encumbrances. "PERMITTED ENCUMBRANCES" means any Liens that (i) are
listed in Section 2.10 of the Seller Disclosure Schedule, (ii) liens for taxes
not yet due and payable, and (iii) those Liens that, individually or in the
aggregate with all other Permitted Encumbrances, do not, and could not be
reasonably expected to, materially interfere with the use or value of the
properties or assets of the Subject Company or to otherwise have or result in a
Material Adverse Effect. The Subject Company has made available to Purchaser a
copy or an accurate summary of the material terms of all of its material real
property and personal property leases.
7
2.11 COMPLIANCE WITH LEGAL REQUIREMENTS; PERMITS. Except as set forth
-------------------------------------------
in Section 2.11 of the Seller Disclosure Schedule, the Subject Company is
currently conducting its businesses in compliance in all material respects with
all applicable Laws, Judgments and Permits. The books and records of the Casino
have been, and currently are, maintained in compliance in all material respects
with all applicable Laws, Judgments and Permits.
2.12 ENVIRONMENTAL MATTERS.
---------------------
(a) Except as set forth in Section 2.12 of the Seller Disclosure
Schedule:
(i) the Subject Company has at all times complied, and
currently complies, in all material respects with all Laws, orders,
Permits, conditions, requirements and agreements relating to (i) the
protection of the environment, (ii) human health or safety or (iii) the
storage, treatment, disposal, transportation or other handling of hazardous
or toxic substances, petroleum and its fractions, byproducts and
derivatives, solid and hazardous wastes, asbestos, polychlorinated
biphenyls, pollutants or contaminants (collectively, "HAZARDOUS MATERIALS")
or (iv) protection of rivers and other water bodies (collectively,
"ENVIRONMENTAL LAWS," including without limitation, as amended, the federal
Oil Pollution Act of 1990, Clean Water Act, Rivers and Harbors Acts, Clean
Air Act, Comprehensive Environmental Response, Compensation and Liability
Act, Solid Waste Disposal Act, Resource Conservation and Recovery Act and
related or analogous state and local laws or other requirements and common
law) and is in compliance with all licenses, Permits and other
authorizations required under any Environmental Law;
(ii) the Subject Company has not received written notice of
any claim and, to the Knowledge of Seller's Management Employees, no claim
has been threatened in any forum, judicial or administrative, alleging
liability or noncompliance, or otherwise demanding Damages, injunctive
relief or penalties with respect to any Environmental Laws, environmental
Permit or other legal theory (e.g., trespass, nuisance, strict liability,
etc. claiming damages or seeking other relief in connection with Hazardous
Materials), and the Subject Company has not received any written notice
from any Governmental Authority or any other Person, and, to the Knowledge
of Seller's Management Employees, no claim has been threatened, that any
aspect of the Subject Company, including assets, is, or has been, in
violation of any Environmental Law or environmental Permit or that the
Subject Company may be responsible for remediation of any Hazardous
Materials at any location;
(iii) to the Knowledge of Seller's Management Employees,
there have not been any releases on Real Property or on any property or
facility previously owned, leased or otherwise operated by the Subject
Company of any Hazardous Materials in such form or quantity as to make the
Subject Company liable under any Environmental Law; and
(iv) to the Knowledge of Seller's Management Employees, no
condition exists or event has occurred which, with or without notice or the
passage of time or both, would constitute a violation of any Environmental
Laws or would give rise to any liability, suit or proceeding, or any Lien
on the Real Property or on any of the assets of the Subject Company or any
Affiliate under any Environmental Laws.
(b) To the Knowledge of Seller's Management Employees, Section
2.12(b) of the Seller Disclosure Schedule identifies: (i) all material
environmental audits, assessments or occupational health studies undertaken by
the Subject Company, or its agents, or by any Governmental Agency, or by any
third party, relating to or affecting the Subject Company, the Casino or the
Real Property; and (ii) all material citations issued under OSHA or similar
Laws, relating to or affecting the Subject Company or the Casino;
(c) To the Knowledge of Seller's Management Employees, Section
2.12(c) of the Seller Disclosure Schedule contains a list of the assets of the
Subject Company that contain asbestos or asbestos-containing material. The
Subject Company has operated, and continues to operate, in material compliance
with all Environmental Laws governing the handling, use and exposure to, and
disposal of, asbestos or asbestos-containing materials.
8
2.13 [Intentionally omitted.]
2.14 CONTRACTS. Section 2.14 of the Seller Disclosure Schedule lists
---------
any written or oral agreement or Contract not made in the ordinary course
consistent with past practice which is (a) to be performed in whole or in part
at or after the date of this Agreement, (b) to which any officer, director,
employee, independent contractor or agent is a party, or which provides benefits
to any such persons, including, without limitation, severance payments, change
of control payments and the like, or (c) that the Seller or the Subject Company
reasonably anticipates will involve the annual payment of more than $25,000
after the date hereof (collectively, the "SUBJECT COMPANY AGREEMENTS"). All of
the Subject Company Agreements are in full force and effect, and neither the
Subject Company nor, to the Knowledge of Seller's Management Employees, any
other party thereto, is in breach thereunder and no event has occurred that with
notice (or with lapse of time) or otherwise, would cause the Subject Company or,
to the Knowledge of Seller's Management Employees, any other party thereto to be
in breach thereunder. True, complete and correct copies of each of the Subject
Company Agreements have been made available to Purchaser by Seller or the
Subject Company.
2.15 REAL PROPERTY. Section 2.15 of the Seller Disclosure Schedule sets
-------------
forth a complete and accurate list of all the real estate presently owned or
leased by the Subject Company (the "REAL PROPERTY"), including real estate which
is held under real property leases (the "REAL PROPERTY LEASES"). Section 2.15
of the Seller Disclosure Schedule lists all Real Property Leases, true and
complete copies of which have been provided to Purchaser. The Real Property
consists of all real estate used by the Subject Company in the operation of its
business. Except as set forth in Section 2.15 of the Seller Disclosure
Schedule, to the Knowledge of Seller's Management Employees, the activities
carried on by the Subject Company in all buildings, facilities, installations,
fixtures and other structures or improvements included as part of, or located on
or at, the Real Property, and all such buildings, facilities, installations,
fixtures and other structures, comply in all material respects with all
applicable Laws. All of the Real Property Leases are in full force and effect,
and neither the Subject Company nor, to the Knowledge of Seller's Management
Employees, any other party thereto, is in breach thereunder and no event has
occurred that with notice (or with lapse of time) or otherwise, would cause the
Subject Company or, to the Knowledge of Seller's Management Employees, any other
party thereto to be in breach thereunder. No default exists nor, to the
Knowledge of Seller's Management Employees, does there exist any current fact or
circumstances which could reasonably be expected to give rise to any such
default with respect to the Real Property Lease covering the premises currently
occupied by the Casino.
2.16 BANK ACCOUNTS. Section 2.16 of the Seller Disclosure Schedule
-------------
sets forth the names and locations of each bank or other financial institution
at which the Subject Company has an account (giving the account numbers) or safe
deposit box and the names of all Persons authorized to draw thereon or have
access thereto, and the names of all Persons, if any, now holding powers of
attorney or comparable delegation of authority from the Subject Company and a
summary statement thereof.
2.17 ACCOUNTS RECEIVABLE. Section 2.17 of the Seller Disclosure
-------------------
Schedule contains a true and accurate aging schedule of all accounts receivable
of the Subject Company as of March 21, 2005 ("ACCOUNTS RECEIVABLE") and all
loans and advances to third parties ("ADVANCES").
2.18 NO OTHER REPRESENTATIONS OR WARRANTIES. Except for the
--------------------------------------
representations and warranties of Seller expressly contained in this Agreement,
neither Seller, nor the Subject Company nor any other Person acting for either
of them makes any other representation or warranty, express or implied, and
Seller hereby disclaims any such representation or warranty, with respect to the
execution, delivery or performance by Seller of this Agreement notwithstanding
the delivery or disclosure to Purchaser or any of its Affiliates or any other
Person of any documentation or other information by Seller or the Subject
Company or any of their respective representatives or any other Person with
respect to any of such matters. Without limiting the generality of the
foregoing, Seller and the Subject Company disclaim any representations and
warranties that could be deemed to have been made in any of the information set
forth in any confidential descriptive memorandum furnished to Purchaser.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to Seller that:
9
3.1 ORGANIZATION; AUTHORITY AND ENFORCEABILITY. Purchaser is a Nevada
------------------------------------------
limited liability company duly organized, validly existing and in good standing
under the laws of its jurisdiction of organization. Purchaser has the power and
authority to enter into this Agreement and to carry out its obligations
hereunder. The execution and delivery of this Agreement and the consummation of
the transactions provided for hereby have been duly authorized by the Board of
Directors (or Managers) of Purchaser and no other proceeding on the part of
Purchaser is necessary to authorize the execution or delivery of this Agreement
or the consummation of any of the transactions contemplated hereby. This
Agreement has been duly executed and delivered by Purchaser and, assuming due
authorization, execution and delivery by Seller and by the Subject Company,
constitutes a legal, valid and binding obligation of Purchaser, enforceable
against it in accordance with its terms, except as such enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium and similar laws
relating to or affecting creditors generally and by general equitable principles
(regardless of whether such enforceability is considered in a proceeding in
equity or law).
3.2 NO BREACH. Neither the execution and delivery of this Agreement
---------
nor the performance by Purchaser of its obligations hereunder nor the
consummation of the transactions provided for hereby does or will:
(a) conflict with or violate any provision of the articles of
organization or any other governing document of Purchaser;
(b) violate, conflict with or result in the breach or termination
of, or constitute a default or event of default (or an event which with notice,
lapse of time, or both, would constitute a default or event of default), under
the terms of, any Contracts or Permits to which Purchaser is a party or by which
it or any of its properties or assets are bound; or
(c) constitute a violation by Purchaser of any Laws or Judgments,
except in the case of (b) or (c) for any such matters that would not, either
individually or in the aggregate, have a material adverse effect on the ability
of Purchaser to perform its obligations under this Agreement.
3.3 CONSENTS. No Consent is required to be made or obtained by
--------
Purchaser in connection with the execution, delivery or enforceability of this
Agreement or the consummation of any of the transactions provided for hereby,
except for: (a) the Required Regulatory Consents and (b) such other consents,
approvals, orders, authorizations, registrations, declarations and filings the
failure of which to be obtained or made would not have a material adverse effect
on the financial condition or results of operations of Purchaser or impair in
any material respect its ability to perform its obligations under this
Agreement.
3.4 BROKERS. No person has acted directly or indirectly as a broker,
-------
finder, consultant, intermediary or financial advisor for Purchaser in
connection with the transactions contemplated hereby and no Person is entitled
to any fee or commission or like payment from Purchaser in respect thereof based
in any way on any agreement, arrangement or understanding made by or on behalf
of Purchaser.
3.5 ACTIONS AND PROCEEDINGS. There is no Proceeding pending or, to the
-----------------------
knowledge of Purchaser, threatened against Purchaser or any of its Affiliates
that questions the validity of this Agreement or any action taken or to be taken
by Purchaser in connection with, or which seeks to enjoin or obtain monetary
damages in respect of, the consummation of the transactions contemplated hereby,
or which would reasonably be expected to impair materially Purchaser's ability
to effect the Closing.
3.6 ACQUISITION OF SHARES. Purchaser acknowledges that the Shares have
---------------------
not been registered under the Securities Act of 1933, as amended, or under any
state securities laws and represents that the Shares are being acquired by
Purchaser for its own account and not with a view to or in connection with any
disposition thereof in violation of the Securities Act of 1933, as amended, or
the rules and regulations thereunder, or any applicable state securities of
"blue sky" laws. Purchaser is an "ACCREDITED INVESTOR" as such term is defined
in Rule 501 of the Securities Act of 1933, as amended.
10
ARTICLE IV
ADDITIONAL AGREEMENTS
4.1 FURTHER ASSURANCES. Subject to the terms and conditions herein
------------------
provided, following the Closing each of the parties hereto agrees to use its
best efforts to take, or cause to be taken, all actions and to do, or cause to
be done, all things necessary, proper or advisable under all applicable Laws to
make effective the transactions contemplated by this Agreement.
4.2 TAX MATTERS.
-----------
(a) Seller Liability for Taxes. Except as expressly set forth in
--------------------------
Section 5.10, Seller shall indemnify and hold harmless the Purchaser Group (as
defined in Section 5.10 below) for, from and against (i) any liability for Taxes
attributable to a breach of, or inaccuracy in, any representation or warranty of
Seller contained in Section 2.9 hereof (the "TAX REPRESENTATIONS"); (ii) any
liability for Taxes of the Subject Company attributable to any Pre-Closing Tax
Period in excess of the amount specifically reserved for such Tax liability as
reflected in the Closing Balance Sheet; and (iii) any liability for Taxes under
Treas. Reg. Sec.1.1502-6 (or any similar provision under state, local or foreign
law) attributable to any Pre-Closing Tax Period. For the avoidance of doubt,
except as expressly set forth in Section 5.10, Seller's obligation to indemnify
Purchaser pursuant to this Section 4.2(a) is unconditional and not subject to
any limitation on Seller's obligations pursuant to Sections 5.10, 5.11, 5.12 or
any other provision of this Agreement.
(b) Purchaser Liability for Taxes. Purchaser shall be liable for
-----------------------------
and indemnify Seller for the Taxes of the Subject Company other than those
described in Section 4.2(a) for (i) any taxable year or period that begins after
the Closing Date and (ii) with respect to any taxable year or period beginning
before and ending after the Closing Date, the portion of such taxable year
beginning after the Closing Date.
(c) Short Taxable Year. For purposes of Sections 4.2(a) and (b),
------------------
whenever it is necessary to determine the liability for Taxes of the Subject
Company for a portion of a taxable year or period that begins before and ends
after the Closing Date, the determination of the Taxes of the Subject Company
for the portion of the year or period ending on, and the portion of the year or
period beginning after, the Closing Date shall be determined by assuming that
the Subject Company had a taxable year or period which ended at the close of
business on the Closing Date, except that (i) real, personal and intangible
property Taxes and exemptions, allowances or deductions that are calculated on
an annual basis, such as the deduction for depreciation, shall be apportioned on
a daily basis and (ii) gaming taxes shall be calculated on an annual basis and
apportioned between the portion of the year ending on the Closing Date and the
portion of the year beginning after the Closing Date in proportion to the
adjusted gross proceeds determined for the gaming tax in each portion of the
year using the weighted average gaming tax rate for the calendar year ending on
December 31, 2004.
(d) Adjustment to Purchase Price. Except as expressly set forth
----------------------------
in Section 5.10 hereof, any payment by Purchaser or Seller under this Section
4.2 or Section 5.10 shall be treated as an adjustment to the Purchase.
(e) Tax Returns. Seller shall file or cause to be filed when due
-----------
all Tax Returns that are required to be filed by or with respect to the Subject
Company for taxable years or periods ending on or before the Closing Date and
shall timely pay any Taxes due in respect of such Tax Returns. Purchaser shall
file or cause to be filed when due all Tax Returns that are required to be filed
by or with respect to the Subject Company for taxable years or periods beginning
before and ending after the Closing Date; provided, however, that to the extent
Seller is liable in all or part for the Taxes shown on such Tax Returns, (i) at
least thirty (30) days prior to the due date for filing any such Tax Return
(taking into account any applicable extensions), Purchaser shall furnish Seller
with a completed copy of any such Tax Returns for Seller's review and comment
and (ii) no such Tax Returns shall be filed with any taxing authority without
Seller's prior written consent, such consent not to be unreasonably withheld.
Any such Tax Return described in the preceding sentence shall be prepared on a
basis consistent with the past practices of the Subject Company and in a manner
that does not distort taxable income (e.g., by deferring income or accelerating
deductions). Purchaser shall file or cause to be filed when due all Tax Returns
that are required to be filed by or with respect to the Subject Company for
taxable years or periods ending after the Closing Date and shall remit any Taxes
due in respect of such Tax Returns. Seller shall pay to Purchaser the Taxes for
which Seller is
11
liable pursuant to Section 4.2(a) but which are payable with respect to Tax
Returns to be filed by Purchaser pursuant to the previous sentence within ten
days prior to the due date for the filing of such Tax Returns. All Tax Returns
including the Closing Date shall be filed on the basis that the relevant taxable
period ended on and included the Closing Date, unless the relevant taxing
authority will not accept a Tax Return filed on such a basis.
(f) Contests. Purchaser shall promptly notify Seller in writing
--------
upon receipt by Purchaser or the Subject Company of notice of any pending or
threatened federal, state, local or foreign income or franchise tax audits or
assessments which may materially affect the tax liabilities of the Subject
Company for which Seller would be required to indemnify Purchaser pursuant to
Section 4.2(a). Seller shall have the sole right to represent the Subject
Company's interests in any tax audit or administrative or court proceeding
relating to taxable periods ending on or before the Closing Date, and to employ
counsel of its choice at its own expense. Seller shall not be entitled to
settle, either administratively or after the commencement of litigation, any
claim for Taxes that would materially adversely affect the liability for Taxes
of Purchaser or the Subject Company for any period after the Closing Date
without the prior written consent of Purchaser; provided that such consent shall
not be unreasonably withheld or delayed and shall not be necessary to the extent
that Seller has indemnified Purchaser against the effect of any such settlement.
Seller shall be entitled to participate, at its own expense, in the defense
of any claim for Taxes for a year or period that includes and ends after the
Closing Date that may be the subject of indemnification by Seller pursuant to
Section 4.3(a) and, with the written consent of Purchaser (which shall not be
unreasonably withheld or delayed), and at its sole expense, may assume the
entire defense of such tax claim. Neither Purchaser nor the Subject Company may
agree to settle any Tax claim for the portion of the year or period ending prior
to or on the Closing Date which may be the subject of indemnification by Seller
under Section 4.3(a) without the prior written consent of Seller; provided that
such consent shall not be unreasonably withheld or delayed.
(g) Assistance and Cooperation. After the Closing Date, each of
--------------------------
Seller and Purchaser shall:
(1) assist (and cause their respective Affiliates to
assist) the other party in preparing any Tax Returns or reports which
such other party is responsible for preparing and filing in accordance
with this Section 4.2;
(2) cooperate fully in preparing for any audits of, or
disputes with taxing authorities regarding, any Tax Returns of the
Subject Company;
(3) make available to the other and to any taxing
authority as reasonably requested all information, records, and
documents relating to Taxes of the Subject Company;
(4) provide timely notice to the other in writing of any
pending or threatened tax audits or assessments of the Subject Company
for taxable periods for which the other may have a liability under
this Section 4.2; and
(5) furnish the other with copies of all correspondence
received from any taxing authority in connection with any tax audit or
information request with respect to any such taxable period.
(h) Tax Sharing Agreements. Seller shall have caused the
----------------------
provisions of any Tax sharing agreement between Seller or any of its Affiliates
(other than the Subject Company) and the Subject Company to be terminated on or
before the Closing Date. After the Closing Date, no party shall have any rights
or obligations under any such Tax sharing agreement.
4.4 PRESS RELEASES; PUBLIC ANNOUNCEMENTS. Purchaser and Seller will
------------------------------------
consult with each other as to the form, substance and timing of the initial
public disclosure of matters related to this Agreement, or any of the
transactions contemplated hereby, and no public disclosure will be made by one
without the consent of the other, which consent will not be unreasonably
withheld or delayed; provided that each of Purchaser and Seller may make
12
such disclosures as are necessary to comply with any requirement of Law or the
rules of any stock exchange after making good faith efforts under the
circumstances to consult in advance with the other.
4.5 USE OF NAME. From and after the Closing Date, Seller and its
-----------
Affiliates will not directly or indirectly use (without prior permission from
Purchaser in writing) in any manner any trademark, trade name, service mark,
patent or copyright (including any registration of or pending application for
any of the foregoing) owned by the Subject Company. Notwithstanding the
foregoing, Seller and its Affiliates may use the existing stock of printed
materials containing any trademark, trade name, service mark, patent or
copyright (including any registration of or pending application for any of the
foregoing) until exhausted.
4.6 INTERCOMPANY INDEBTEDNESS. On or prior to the Closing Date, Seller
-------------------------
shall cause the Subject Company to pay in full any and all outstanding
intercompany indebtedness of the Subject Company.
4.7 NON-SOLICITATION. For a period of three (3) years from and after
----------------
the Closing Date, neither Seller nor any of Seller's Affiliates shall, directly
or indirectly employ, solicit for employment or encourage to leave their
employment, any person who was during the one-year period prior to such
employment, solicitation or encouragement or is an officer or employee of the
Subject Company (excluding the employees set forth on Schedule 4.7).
4.8 WITHDRAWAL OF EXCESS CASH. Prior to, or simultaneously with, or
-------------------------
within one business day after the Closing, the parties acknowledge and agree
that Parent or Seller may withdraw cash from the accounts of the Subject Company
such that the working capital of the Subject Company on the Closing Date will be
approximately equal to Target Working Capital.
ARTICLE V
MISCELLANEOUS
5.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations
------------------------------------------
and warranties made by either party pursuant to this Agreement shall survive and
continue in full force and effect until the close of business on July 31, 2006,
except that the representations and warranties in Section 2.9 (Taxes and Tax
Returns) and 2.12 (Environmental Matters) shall survive until the expiration of
the applicable statute of limitations with respect thereto, and the
representations and warranties in Sections 2.1 (Organization), 2.2 (Authority;
Enforceability), and 2.3 (Ownership of Capital Stock) shall survive forever.
Any claim for breach thereof must be asserted in writing by the expiration date
for such representation and warranty set forth in this Section 5.1 (the
"EXPIRATION DATE").
5.2 COSTS AND EXPENSES. Each of the parties to this Agreement shall
------------------
bear its own expenses incurred in connection with the negotiation, preparation,
execution and closing of this Agreement and the transactions provided for
hereby.
5.3 NOTICES. All notices or other communications required or permitted
-------
by this Agreement shall be effective upon receipt and shall be in writing and
delivered personally or by overnight courier, or sent by facsimile, as follows:
If to Purchaser, to:
CGC Holdings, L.L.C.
3040 Post Oak Blvd., Suite 675
Houston, Texas 77002
Attn: Cathy Porter
Fax: (713) 621-6919
13
If to Seller, to:
Isle of Capri Black Hawk, L.L.C.
c/o Isle of Capri Casinos, Inc.
1641 Popps Ferry Road
Biloxi, Mississippi 39503
Attn: Greg Guida
Fax: (228) 396-2634
With a copy to:
Mayer, Brown, Rowe & Maw LLP
190 South LaSalle
Chicago, Illinois 60603
Attn: Paul W. Theiss
Christian W. Fabian
Fax: (312) 706-8535
or to such other address as hereafter shall be furnished as provided in this
Section 5.3 by any of the parties hereto to the other parties hereto.
5.4 COUNTERPARTS. This Agreement may be executed in any number of
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute a single instrument.
5.5 ENTIRE AGREEMENT. This Agreement (including the Seller Disclosure
----------------
Schedule and the Purchaser Disclosure Schedule) sets forth the entire
understanding and agreement between the parties as to the matters covered herein
and supersedes and replaces any prior understanding, agreement or statement of
intent, in each case, written or oral, of any and every nature with respect
thereto.
5.6 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED IN ALL RESPECTS BY
-------------
THE LAWS OF THE STATE OF COLORADO, INCLUDING VALIDITY, INTERPRETATION AND
EFFECT, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
5.7 NO THIRD PARTY RIGHTS; ASSIGNMENT. Except as expressly provided
---------------------------------
below, this Agreement is intended to be solely for the benefit of the parties
hereto and is not intended to confer any benefits upon, or create any rights in
favor of, any Person other than the parties hereto and shall not be assignable
without the prior written consent of the other parties. Notwithstanding the
foregoing, or anything contained in this Agreement to the contrary, that
Purchaser shall be permitted to assign, without consent of Seller or Parent, all
of its rights hereunder to any purchaser of the Subject Company if such sale by
Purchaser is on account of the receipt by Purchaser or its affiliates of an
Acquisition Notice, as provided in that certain letter agreement of even date
herewith between the parties hereto.
5.8 WAIVERS AND AMENDMENTS. No modification of or amendment to this
----------------------
Agreement shall be valid unless in a writing signed by the parties hereto
referring specifically to this Agreement and stating the parties' intention to
modify or amend the same. The failure of a party hereto at any time or times to
require performance of any provision hereof shall in no manner affect its right
at a later time to enforce the same. Any waiver of any term or condition of
this Agreement must be in a writing signed by the party sought to be charged
with such waiver referring specifically to the term or condition to be waived,
and no such waiver shall be deemed to constitute a waiver of any other breach of
the same or of any other term or condition of this Agreement.
5.9 INTERPRETATION. When a reference is made in this Agreement to a
--------------
Section, Exhibit or Schedule, such reference shall be to a Section of, or an
Exhibit or Schedule to, this Agreement unless otherwise indicated. The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include," "includes" and "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation."
14
5.10 AGREEMENT TO INDEMNIFY.
----------------------
(a) Subject to the terms and conditions of Sections 5.10, 5.11 and
5.12, Seller and Parent hereby agree to indemnify, defend and hold harmless
Purchaser and any parent, subsidiary (including without limitation, the Subject
Company from and after the Closing Date) or Affiliate of any thereof and their
respective officers and directors, agents and representatives and Persons
claiming by and through any of them (the "PURCHASER GROUP"), for, from and
against all demands, claims, actions, causes of action, assessments, losses,
damages, liabilities, costs and expenses, including, without limitation,
interest, penalties and reasonable attorneys' fees and expenses (collectively,
"DAMAGES"), directly or indirectly asserted against, resulting to, imposed upon
or incurred by the Purchaser Group or any member thereof, at any time prior to
the Expiration Date, by reason of or resulting from (i) any breach of or
inaccuracy in any representation or warranty of Seller contained in or made
pursuant to this Agreement (other than Tax Representations, which are addressed
in Section 4.2(a)) or any other agreement or document executed in connection
herewith, (ii) any breach of or failure by Seller to perform any covenant of
Seller contemplated in this Agreement) or any other agreement or document
executed in connection herewith, (iii) any and all Proceedings pending on the
Closing Date or (iv) the matters set forth in Section 2.8 of the Seller
Disclosure Schedule (collectively, "PURCHASER CLAIMS"). Notwithstanding
subparagraph (a)(i) above or Section 4.2(a), and subject to Seller's performance
of its covenants under subparagraph (c) below, Purchaser shall not be entitled
to collect any payment from Seller or Parent hereunder on account of any
Purchaser Claim based upon a breach or inaccuracy of a representation or
warranty by Seller to the extent, and only to the extent, that (A) Seller or
Parent reasonably demonstrates that Purchaser's designee to the board of Seller
had actual knowledge of such breach or inaccuracy on or before the Closing Date
or (B) Seller or Parent reasonably demonstrates that (w) the breach or
inaccuracy in any representation or warranty of Seller contained in or made
pursuant to this Agreement (including Tax Representations addressed in Section
4.2(a)) was based wholly upon events or circumstances occurring or existing on
or before the date Seller first acquired the Subject Company, (x) Seller's
Management Employees were unaware of such events or circumstances as of the date
Seller first acquired the Subject Company, and (y) Seller's Management Employees
were unaware of such events or circumstances as of the date of this Agreement
(referred to herein as a "SELLER'S PASS-THROUGH CLAIM").
(b) Subject to the terms and conditions of Sections 5.10, 5.11 and
5.12, Purchaser hereby agrees to indemnify, defend and hold harmless Seller and
any parent, subsidiary or Affiliate of any thereof and their respective officers
and directors, agents and representatives and Persons claiming by and through
any of them (the "SELLER GROUP"), from and against all Damages, directly or
indirectly asserted against, resulting to, imposed upon or incurred by the
Seller Group or any member thereof, at any time before prior to the Expiration
Date, by reason of or resulting from (i) any breach of any representation or
warranty of Purchaser contained in or made pursuant to this Agreement or any
other agreement or document executed in connection herewith, (ii) any breach of
or failure by Purchaser to perform any covenant or obligation of Purchaser
contemplated in this Agreement, or (iii) the conduct of the operations of the
Subject Company from and after the Closing (collectively, "SELLER CLAIMS," and,
together with Purchaser Claims, "CLAIMS").
(c) With respect to any Purchaser's Claim that Seller believes or
asserts is a Seller's Pass-Through Claim, Seller shall promptly notify Purchaser
of same and promptly deliver such notice or take such other actions in
accordance with the applicable provisions of the agreement or agreements
pursuant to which Seller acquired the Subject Company necessary or desirable
preserve or protect any and all rights Seller may have against any Person from
whom Seller might be reasonably entitled to recover on account of such claim.
Purchaser shall, at its own expense, have the right to employ counsel of its own
choosing to prosecute Seller's claim against such Persons and generally to
control all aspects of such claim. Seller shall cooperate with all reasonable
requests of Purchaser or its representatives in connection with efforts to
collect on such claim, including, without limitation, making available to
Purchaser and its representatives all records and other material reasonably
requested by Purchaser which is under the control of, or otherwise available to,
Seller. Seller shall, at Seller's expense, upon reasonable request, make
available to Purchaser and its representatives Seller's personnel possessing
information pertinent to such claim. The proceeds, if any, of any recovery on
account of such Seller's Pass-Through Claim shall be for the benefit of, and be
paid over to, Purchaser.
(d) Any indemnification hereunder shall be calculated after deduction
of (i) any amounts actually paid to the Indemnified Party or, if such
Indemnified Party is Purchaser, to the Subject Company or Purchaser, under any
insurance policies in respect of the Damages, net of any costs incurred by the
Indemnified Party to obtain such
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amount or as a result of receiving such amount; and (ii) any net tax benefit to
the Indemnified Party, or in the event the Indemnified Party is the Subject
Company, the Subject Company, to the extent actually realized by such party.
5.11 CONDITIONS OF INDEMNIFICATION. The obligations and liabilities of
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Seller and Purchaser, as the case may be, under Section 5.10 (herein referred to
as the "INDEMNIFYING PARTY"), with respect to Claims made by third parties shall
be subject to the following terms and conditions:
(a) Upon obtaining knowledge thereof, the Person to whom such
Claim relates (the "INDEMNIFIED PARTY") shall promptly notify the Indemnifying
Party of such Claim but the omission so to notify the Indemnifying Party will
not relieve the Indemnifying Party from any liability it may have to the
Indemnified Party under Section 5.10 unless, and only to the extent that, such
omission so to notify results in the loss of substantive rights or defenses.
(b) If the Indemnifying Party acknowledges its obligations to
indemnify and hold harmless hereunder, the Indemnifying Party shall have the
right to employ such counsel as is reasonably acceptable to the Indemnified
Party to defend any such Claim asserted against the Indemnified Party; provided,
however, that if the defendants in any such action include both the Indemnifying
Party and the Indemnified Party and the Indemnified Party shall have reasonably
concluded that there may be legal defenses or rights available to the
Indemnified Party which are substantially different from or in actual or
potential conflict with those available to the Indemnifying Party, the
Indemnified Party shall have the right to select one law firm to act at the
Indemnifying Party's expense as separate counsel, on behalf of such Indemnified
Party (or, if there be more than one, all Indemnified Parties). The Indemnified
Party shall have the right to participate in the defense of any such Claim. The
Indemnified Party shall not settle any Claim without the consent of the
Indemnifying Party, which consent shall not be unreasonably withheld. The
Indemnified Party shall make available to the Indemnifying Party and its
representatives all records and other material required by them for their use in
contesting any Claim asserted by a third party against the Indemnified Party.
(c) Anything in this Section 5.11 to the contrary notwithstanding,
(i) if there is a reasonable probability that a Claim may materially and
adversely affect an Indemnified Party other than as a result of money damages or
other money payments, such Indemnified Party shall have the right to defend, at
its own cost and expense, and to compromise or settle such Claim with the
consent of the Indemnifying Party, and (ii) the Indemnifying Party shall not,
without the written consent of the Indemnified Party, settle or compromise any
Claim or consent to the entry of any judgment which does not include as an
unconditional term thereof the giving by the claimant or the plaintiff to the
Indemnified Party of a release from all liability in respect of such Claim.
(d) Notwithstanding the provisions of Section 5.10 to the
contrary, Seller and Parent, on the one hand, and Purchaser on the other hand,
shall not have any liability or obligation to the other, and no claim shall be
asserted against the other, for any Damages under Section 5.10(a)(i) or Section
5.10(b)(i), as applicable, unless and until the aggregate amount of Damages
exceeds $50,000 (the "Basket"); provided, however, that in the event the
aggregate amount of such Damages exceeds the Basket, the Basket shall not limit
the Damages that may be claimed by and Seller and Parent, on the one hand, and
Purchaser on the other hand, and such party shall be entitled to collect the
entire amount of all Damages thereunder. Notwithstanding the foregoing, under
no circumstances shall any party be liable or obligated to indemnify any other
party under the provisions of Section 5.10(a)(i) or Section 5.10(b)(i), as
applicable, for Damages in an aggregate amount in excess of the Purchase Price.
5.12 EFFECTS OF INVESTIGATION. Except as set forth in Section 5.10, any
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due diligence review, audit or other investigation or inquiry undertaken or
performed by or on behalf of Purchaser shall not limit, qualify, modify or amend
the representations, warranties or covenants of, or indemnities by, Seller made
or undertaken pursuant to this Agreement, irrespective of the knowledge and
information received (or which should have been received) therefrom by
Purchaser.
5.13 EXCLUSIVE REMEDY. The parties acknowledge that, except in the
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event of fraud, their sole and exclusive remedy for any inaccuracy or breach of
any representation or warranty contained in this Agreement shall be the
indemnification provisions set forth in this Article V.
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5.14 SEVERABILITY. If any provision of this Agreement shall be held
------------
invalid, illegal or unenforceable, the validity, legality or enforceability of
the other provisions hereof shall not be affected thereby, and there shall be
deemed substituted for the provision at issue a valid, legal and enforceable
provision as similar as possible to the provision at issue.
5.15 WAIVER OF JURY TRIAL. EACH PARTY HERETO WAIVES THE RIGHT TO A
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TRIAL BY JURY IN ANY DISPUTE IN CONNECTION WITH OR RELATING TO THIS AGREEMENT OR
ANY MATTERS DESCRIBED OR CONTEMPLATED HEREIN OR THEREIN, AND AGREE TO TAKE ANY
AND ALL ACTION NECESSARY OR APPROPRIATE TO EFFECT SUCH WAIVER.
[Signatures on Following Page.]
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IN WITNESS WHEREOF, this Agreement has been executed and delivered as of
the date first written above.
COLORADO GRANDE ENTERPRISES, INC.
By: /s/ TIMOTHY M. HINKLEY
Name: Timothy M. Hinkley
Title: President
IC HOLDINGS COLORADO, INC.
By: /s/ TIMOTHY M. HINKLEY
Name: Timothy M. Hinkley
Title: President
ISLE OF CAPRI BLACKHAWK, L.L.C.
By: /s/ TIMOTHY M. HINKLEY
Name: Timothy M. Hinkley
Title: President
CGC HOLDINGS, L.L.C.
By: /s/ H. THOMAS WINN
Name: H. Thomas Winn
Title: President
STOCK PURCHASE AGREEMENT SIGNATURE PAGE