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EXHIBIT 99.B
ASSET PURCHASE AGREEMENT
BETWEEN
GOLD DUST MOTEL, INC.
JOHN E. CAVANAUGH
AND
BLACK HAWK GAMING & DEVELOPMENT
COMPANY, INC.
JANUARY 7, 2000
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TABLE OF CONTENTS
Page
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RECITALS .........................................................................................................1
1. DEFINITIONS..............................................................................................1
2. PURCHASE AND SALE........................................................................................9
2.1 PURCHASED ASSETS................................................................................9
2.2 ASSET EXCEPTIONS................................................................................9
2.3 BUYER ASSUMPTIONS AND INDEMNITIES...............................................................9
2.4 SELLERS' INDEMNITIES............................................................................9
2.5 PURCHASE PRICE.................................................................................10
2.6 PAYMENT........................................................................................10
2.7 EXISTING SECURED LOANS.........................................................................10
2.8 ADJUSTMENTS AND PRORATIONS.....................................................................10
3. INVESTIGATIONS..........................................................................................12
4. REPRESENTATIONS, WARRANTIES AND COVENANTS OF SELLERS....................................................15
5. REPRESENTATIONS, WARRANTIES AND COVENANTS OF BUYER......................................................29
6. CONDITIONS PRECEDENT TO CLOSING.........................................................................31
7. COVENANTS OF SELLERS....................................................................................35
8. SELLERS' CLOSING DOCUMENTS..............................................................................37
9. BUYER'S CLOSING DOCUMENTS...............................................................................38
10. CONFIDENTIALITY.........................................................................................39
11. OTHER COVENANTS OF THE BUYER AND SELLERS................................................................40
12. CLOSING; CLOSING DATE...................................................................................43
13. LOSS BY FIRE, OTHER CASUALTY OR CONDEMNATION............................................................43
14. TERMINATION AND EXTENSIONS..............................................................................45
15. INDEMNIFICATIONS........................................................................................48
16. BROKERS.................................................................................................51
17. MISCELLANEOUS...........................................................................................51
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT ("Agreement") is made this 7th day of
January, 2000, by and between Gold Dust Motel, Inc., a Nevada corporation doing
business as Gold Dust West ("Company") and John E. Cavanaugh, an individual
("Shareholder"), collectively "Sellers," and Black Hawk Gaming & Development
Company, Inc., a Colorado corporation ("Buyer").
RECITALS
A. In this Agreement all capitalized words and terms shall have the
respective meanings and be construed as provided in Section 1 and shall be
deemed to incorporate those words and terms as a part of this Agreement in the
same manner and with the same effect as if they were fully set forth.
B. Shareholder is the owner of the Cavanaugh Property and Lessee of the
Piazzo Property, all of which he leases to Company pursuant to the terms of the
Cavanaugh Lease.
C. Buyer desires to buy the Purchased Assets and Sellers agree to sell
to Buyer the Purchased Assets on the terms and for the considerations set forth
in this Agreement.
IN CONSIDERATION OF THE FOREGOING RECITALS and of the mutual
considerations, covenants and agreements provided below, the Sellers and the
Buyer agree as follows:
1. DEFINITIONS.
For the purpose of this Agreement each of the following terms shall
have the meanings specified with respect thereto, unless a different meaning
clearly appears from the context:
1.1 "Assignment of Equipment Leases and Contracts" shall mean the
assignment of the executed leases and purchase contracts pertaining to certain
of the FF&E of the Motel/Casino Facility to be executed by Company or the
Shareholder, as appropriate, and delivered to Buyer on the Closing Date under
the terms of which the Company or the Shareholder, as appropriate, assigns these
agreements to Buyer, a copy of which is attached as Exhibit 1.
1.2 "Assignment of Piazzo Lease" shall mean the Assignment of Piazzo
Lease to be executed by Shareholder and delivered to Buyer on the Closing Date
under the terms of which the Shareholder assigns, transfers, sets over, sells
and conveys to Buyer all of his right, title and interest in and to the Piazzo
Lease and the Piazzo Trust substitutes Buyer for Shareholder and releases
Shareholder from all further liability, a copy of which is attached as Exhibit
2.
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1.3 "Assignment of Sierra Development Operating Lease" shall mean the
Assignment of the Sierra Development Operating Lease to be executed by Company
and delivered to Buyer on the Closing Date under the terms of which the Company
assigns the Sierra Development Operating Lease to Buyer, with the consent of the
tenant thereto, if required, a copy of which is attached as Exhibit 3.
1.4 "Assignment of Tradenames" shall mean the Assignment of Tradenames,
Trademarks and Servicemarks to be executed by Sellers and delivered to Buyer on
the Closing Date under the terms of which Sellers assign, transfer, set over and
convey to Buyer all of their right, title and interest in and to all tradenames,
trademarks and servicemarks and all goodwill associated therewith and any and
all state and federal applications and registrations used in connection with or
relating to the Motel/Casino Operation. A copy of the Assignment of Tradenames
is attached as Exhibit 4.
1.5 "Assignment of Warehouse Lease" shall mean assignment of the
Warehouse Lease to be executed by Company and delivered to Buyer on the Closing
Date under the terms of which Company assigns the Warehouse Lease to Buyer, a
copy of which is attached as Exhibit 5.
1.6 "Bankroll Funds" shall mean all Cash, including without limitation,
all cash in cashier's cages, vaults, cash registers, Gaming Devices (as defined
in NRS 463.0155), and associated equipment (as defined in NRS 463.0136) and
bankroll held on the Premises as of the Transfer which are used in connection
with the Motel/Casino Operation, less:
(a) the percentage owned by vendors participating in revenues;
(b) all progressive slot liabilities (less resets); and
(c) the aggregate amount of slot fills (loads) equal to $80
for all nickel machines and $200 for all quarter machines.
1.7 "Buyer" shall mean Black Hawk Gaming & Development Company, Inc., a
Colorado corporation or any assignee thereof which must be a Subsidiary.
1.8 "Buyer Assumed Liabilities" shall mean the liabilities to be
assumed by Buyer on the Closing Date more particularly described on the Schedule
of Buyer Assumed Liabilities attached as Exhibit 6.
1.9 "Buyer Assumption and Indemnity Agreement" shall mean the agreement
under which Buyer assumes the Buyer Assumed Liabilities and further indemnifies
and holds Company and Shareholder harmless from any and all duties, obligations
and liabilities existing as of the Transfer and all duties, obligations and
liabilities which may thereafter arise relating to or on account of the Buyer
Assumed Liabilities, a copy of which Buyer Assumption and Indemnity Agreement is
attached as Exhibit 7.
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1.10 "Buyer's Closing Documents" shall mean the agreements and
documents set forth in Section 9 below, each of which is to be executed by Buyer
and/or delivered to Sellers on the Closing Date and all other consents,
certificates, documents and instruments to be delivered by Buyer pursuant to the
terms of this Agreement.
1.11 "Cash" shall mean, when used in connection with any Person, all
monetary and other items owned by that Person that are treated as cash in
accordance with GAAP, consistently applied.
1.12 "Cavanaugh" shall mean John E. Cavanaugh, a married man.
1.13 "Cavanaugh Lease" shall mean a collective reference to:
(a) the Lease dated February 25, 1998 by and between
Cavanaugh, as lessor, and Company, as lessee, pursuant to which, among
other things, Cavanaugh subleases the Piazzo Property to Company,
record notice of which is granted pursuant to that certain Amended and
Restated Memorandum of Lease which is recorded in the Official Records
of Washoe County, Nevada on March 30, 1998, in Book 5183 at Page 924 as
Document No. 2194305. This Lease covers Parcel 1.
(b) the Lease dated May 3, 1976 (the "Original Motel Lease"),
by and between Cavanaugh Properties, a general partnership, as lessor,
and Company, as lessee, as modified by: (i) Addendum to lease executed
by Company and Cavanaugh Properties dated May 2, 1997 (with the
interest of Cavanaugh Properties as lessor under the Original Motel
Lease, as so modified, having been assigned to John E. Cavanaugh and
Barbara A. Cavanaugh pursuant to an Assignment executed by Cavanaugh
Property on August 15, 1977; (ii) the Second Addendum to lease executed
by Company and by John E. Cavanaugh and Barbara A. Cavanaugh dated June
30, 1981; and (iii) the Third Addendum to Lease executed by Company and
by John E. Cavanaugh and Barbara A. Cavanaugh dated October 28, 1982;
with record notice of the Original Motel Lease, as so modified, having
been granted pursuant to the Memorandum of Lease which was recorded in
the Official Records of Washoe County, Nevada on August 23, 1989 in
Book 2954 at Page 312 as Document No. 1345095; and with the interest of
Barbara A. Cavanaugh, as a lessor under the Original Motel Lease, as so
modified, having been conveyed to Cavanaugh pursuant to that certain
Deed which was recorded in the Official Records of Washoe County,
Nevada on March 16, 1995 in Book 4264 at Page 857 as Document No.
1878541; all pursuant to which Cavanaugh leases to Company Parcels 2
and 3 of the Premises set forth on Exhibit 14 attached;
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(c) the Lease dated March 30, 1998, by and between Cavanaugh,
as lessor, and Company, as lessee, record notice of which has been
granted pursuant to the Memorandum of Lease which is recorded in the
Official Records of Washoe County, Nevada on March 31, 1998, in Book
5184 at Page 941 as Document No. 2194594 pursuant to which Cavanaugh
leases to Company Parcel 4 of the Premises set forth on Exhibit 14
attached; and
(d) the Lease dated January 1, 1999, by and between Cavanaugh,
as lessor, and Company, as lessee, record notice of which has been
granted pursuant to a Memorandum of Lease which is recorded in the
Official Records of Washoe County, Nevada on April 5, 1999 in book 5632
at Page 596 as Document No. 2324945 pursuant to which Cavanaugh leases
to Company Parcel 5 of the Premises set forth in Exhibit 14 attached;
all together with any further extensions, renewals, amendments, restatements and
other modifications of any of such Leases.
1.14 "Cavanaugh Lease Cancellation Agreement" shall mean the agreement
to be executed between Shareholder and Company under the terms of which the
Cavanaugh Lease is cancelled on the Closing Date. A copy of the Cavanaugh Lease
Cancellation Agreement is attached as Exhibit 8.
1.15 "Cavanaugh Property" shall mean that real property which is
particularly described as Parcels 2 through 5 on Exhibit 14 attached.
1.16 "Closing Date" shall mean the last day of the month in which all
conditions precedent set forth in Section 6 have occurred, but in no event shall
the Closing Date extend beyond March 31, 2001.
1.17 "Company" shall mean Gold Dust Motel, Inc., a Nevada corporation.
1.18 "Company Closing Documents" shall mean the agreements and
documents set forth in Section 8 below, certain of which are to be executed by
Company and/or delivered to Buyer on the Closing Date and all other consents,
certificates, documents and instruments to be delivered by Company pursuant to
the terms of this Agreement.
1.19 "Deed" shall mean the Deed to be executed by Shareholder and
spouse and recorded in the Official Records of Washoe County, Nevada, on the
Closing Date conveying the Premises (save and except for the Piazzo Lease which
will be evidenced by the Assignment of Piazzo Lease), improvements and other
appurtenances more particularly therein described to Buyer. A copy of the Deed
is attached as Exhibit 9A.
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1.20 "EBITDA" shall mean, with reference to the Company, for any twelve
month period the sum of (i) the net income for that period, plus (ii) interest
expense for that period, plus (iii) the aggregate amount of federal and state
taxes on or measured by income for that period (whether or not payable during
that period), plus (iv) depreciation and amortization for that period, plus (v)
the loss from the sale or abandonment of assets (or less the gain realized) for
that period, plus (vi) extraordinary non-recurring expenses paid by the Company
for the benefit of Shareholder or Shareholder's family, as shall be computed in
accordance with Exhibit 9B by the independent certified public accountant
("CPA") regularly used by the Company and verified by the CPA selected by Buyer
for this purpose. The twelve month period to be used to calculate the Purchase
Price ("Purchase Price EBITDA") will be the twelve months immediately prior to
the month in which the Closing Date occurs. The EBITDA calculated in accordance
with this Agreement for the twelve month period ending September 30, 1999 is
$5,300,000. The schedule used to compute the foregoing EBITDA is attached as
Exhibit 9B and shall be used to compute Purchase Price EBITDA.
1.21 "Equipment Leases and Contracts" shall mean the executed leases
and purchase contracts pertaining to FF&E at the Motel/Casino Facility where
Company or the Shareholder is the lessee or vendee, as the case may be, as set
forth on the Schedule of Equipment Leases and Contacts attached as Exhibit 10A.
1.22 "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended, or any successor law, and the rules and regulations issued
pursuant to that act or any successor law.
1.23 "Escrow Agreement" shall mean that agreement pursuant to which the
Purchase Deposit shall be held and disbursed which agreement is attached as
Exhibit 10B.
1.24 "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any successor law, and the rules and regulations issued pursuant to
that act or any successor law.
1.25 "Exhibit" shall mean those documents identified as such and
attached hereto and incorporated by this reference.
1.26 "Existing Secured Loans" shall mean the existing loans: (i) to the
Company from Wells Fargo Bank, National Association and David R. Belding which
are secured by Deeds of Trust dated March 30, 1998 and recorded in the Official
Records of Washoe County as Documents No. 2194306 and 2194311, respectively; and
(ii) from Wells Fargo Bank, National Association to Shareholder which is secured
by a Deed of Trust dated January 12, 1999 and recorded in the Official Records
of Washoe County in Book 5545 at Page 716 as Document No. 2298895.
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1.27 "FF&E" shall mean collective reference to any and all furnishings,
fixtures and equipment, including, without limitation, all Gaming Devices and
associated equipment which have been installed or are to be installed or used in
connection with the operation of the Motel/Casino Facility and in connection
with any other business operation conducted on the Premises and those items of
furniture, fixtures and equipment which have been purchased or leased or are
hereafter purchased or leased by Company in connection with the Motel/Casino
Facility or in connection with any other business operation conducted on the
Premises.
1.28 "Fee Property" shall mean Parcels 2, 3, 4 and 5 of the Premises as
described on Exhibit 14 attached.
1.29 "GAAP" shall mean reference to generally accepted accounting
principles applied on a consistent basis from period to period.
1.30 "Gold Dust Bill of Sale" shall mean the Bill of Sale to be
executed by Company and delivered to Buyer on the Closing Date, a copy of which
is attached as Exhibit 11.
1.31 "Gold Dust Operating Assets" shall mean those assets owned by
Company used in connection with the Motel/Casino Operation that are more
particularly described on Exhibit 12 attached.
1.32 "Governmental Authority" shall mean any federal, state, regional,
county or municipal governmental agency, board, commission, officer or official
whose consent or approval is required or whose regulations must be followed as a
prerequisite to (i) the continued operation and occupancy of the Premises and
the Motel/Casino Operation by Buyer, and/or (ii) the performance of any act or
obligation or the observance of any agreement, provision or condition of
whatever nature as set forth in this Agreement by Buyer, Company and/or
Shareholder.
1.33 "Joint Closing Instructions" shall mean the Joint Closing
Instructions to be given by Sellers and Buyer to Title Company setting forth the
terms and conditions for the closing of this transaction on the Closing Date. A
copy of the Joint Closing Instructions are attached as Exhibit 13.
1.34 "Motel/Casino Facility" shall mean the motel and casino business
and related activities conducted by Company in and on the Premises and all
improvements now or hereafter situate thereon, presently conducted under the
style and name of "Gold Dust Motel and Casino," together with all other related
activities which are conducted on the Premises by Company.
1.35 "Motel/Casino Operation" shall mean the gaming and motel business,
including restaurant and bar operations, conducted on the Premises under the
name and style of "Gold Dust West."
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1.36 "Nevada Gaming Authorities" shall mean collective reference to the
State Gaming Control Board and the Nevada Gaming Commission, or any agency of
any state, county, city or other political subdivision which has jurisdiction
over the gaming activities of Company at the Motel/Casino Facility.
1.37 "Pension Plan" means any "employee pension benefit plan" that is
subject to Title IV of ERISA and which is maintained for employees of Company or
any of its ERISA Affiliates.
1.38 "Person" means an individual, firm, corporation, trust,
association, partnership, joint venture, tribunal or other entity.
1.39 "Piazzo Lease" shall mean the Lease Agreement dated November 24,
1975 wherein:
(a) Chester J. Piazzo, Darlene Piazzo, Lincoln E. Piazzo and
Helen J. Piazzo are the lessors and John E. Cavanaugh and Barbara A.
Cavanaugh are the lessees of the Piazzo Property; and
(b) the Piazzo Option is granted to the lessees thereunder;
record notice of which Lease Agreement is given pursuant to a
Memorandum of Lease recorded in the Official Records of Washoe County,
Nevada on November 25, 1975 in Book 932 at Page 820 as Document No.
386577, as the Lease Agreement is amended by an Addendum to Lease
recorded in the Official Records of Washoe County, Nevada on July 26,
1977 in Book 1108 at Page 339 as Document No. 478005, a Supplement to
Lease recorded in the Official Records of Washoe County, Nevada on July
26, 1977 in Book 1108 at Page 351 as Document No. 478006, an Amendment
to Lease recorded in the Official Records of Washoe County, Nevada on
July 26, 1977 in Book 1108 at Page 335 as Document 478007, a document
entitled "Agreement" recorded in the Official Records of Washoe County,
Nevada on July 26, 1977 in Book 1108 at Page 358 as Document No.
478008; with:
(i) all interest of Lincoln E. Piazzo and Helen
J. Piazzo in the Piazzo Property having been
conveyed to Chester J. Piazzo and Darlene
Piazzo pursuant to that certain Deed of
Conveyance recorded in the Official Records
of Washoe County, Nevada on September 26,
1984 in Book 2071 at Page 558 as Document
No. 952043;
(ii) all interest of Barbara A. Cavanaugh under
the Piazzo Lease having been assigned to
Cavanaugh pursuant to an Assignment of Lease
recorded in the Official Records of Washoe
County, Nevada on November 8, 1991 in Book
3360 at Page 364 as Document No. 1522682;
and
(iii) all interest of Chester J. Piazzo and
Darlene Piazzo in the Piazzo Property having
been conveyed to the Piazzo Trust pursuant
to
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that certain Grant Deed recorded in the
Official Records of Washoe County, Nevada on
February 12, 1992 in Book 3417 at Page 325
as Document No. 1545623.
1.40 "Piazzo Property" shall mean Parcel 1 of the Premises as shown on
Exhibit 14 attached.
1.41 "Piazzo Trust" shall mean Chester J. Piazzo and Darlene Piazzo as
Co-Trustees of the C. & D. Piazzo Family Trust created by Trust Agreement dated
January 8, 1992 and their successors in interest as owners of the Piazzo
Property.
1.42 "Premises" shall mean collective reference to the Fee Property,
the Piazzo Property, and all buildings and improvements situate thereon, as
described on Exhibit 14 attached.
1.43 "Purchased Assets" shall mean all those items set forth on
Schedule of Purchased Assets, attached as Exhibit 15.
1.44 "Purchase Deposit" shall mean the sum of Five Hundred Thousand
Dollars ($500,000) to be deposited with the Title Company into the escrow
account, together with all interest earned thereon, if any, or at the Buyer's
election, a $500,000 letter of credit in favor of Sellers from Wells Fargo Bank,
N.A. in the form attached hereto as Exhibit 10B.
1.45 "Purchase Price" shall have the meaning set forth in Section 2.5.
1.46 "Retained Assets" shall mean all those items set forth on the
Schedule of Retained Assets, a copy of which is attached as Exhibit 16. The
Retained Assets shall include all of the Company's Bankroll Funds, bank accounts
and notes receivable.
1.47 "Retained Payables" shall mean the payables to be paid by Sellers
as set forth in the Schedule of Retained Payables, a copy of which is attached
as Exhibit 17.
1.48 "Sellers" shall mean the collective reference to Company and
Shareholder.
1.49 "Shareholder" shall mean John E. Cavanaugh, a married man.
1.50 "Shareholder's Bill of Sale" shall mean the Bill of Sale to be
executed by Shareholder and delivered to Buyer on the Closing Date, a copy of
which is attached as Exhibit 18.
1.51 "Shareholder's Closing Documents" shall mean the agreements and
documents set forth in Section 8 below, certain of which are to be executed by
Shareholder and/or delivered to Buyer on the Closing Date and all other
consents, certificates, documents and instruments to be delivered by Shareholder
pursuant to the terms of this Agreement.
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1.52 "Sierra Development Operating Lease" shall mean the Lease dated
July 27, 1998 between Sierra Development Company and Company granting Sierra
Development Company the right to operate a race and sports book in the Premises.
1.53 "Subsidiary" shall mean, with respect to any Person (the "Owner"),
any corporation or other Person of which securities or other interests having
the power to elect a majority of that corporation's or other Person's board of
directors or similar governing body, or otherwise having the power to direct the
business and policies of that corporation or other Person (other than securities
or other interests having such power only upon the happening of a contingency
that has not occurred) are held by the Owner or one or more of its subsidiaries.
1.54 "Title Company" shall mean First American Title Company of Nevada,
a Nevada corporation, 5310 Kietzke Lane, Reno, Nevada 89511.
1.55 "Title Report" shall mean reference to the Title Commitment for
the issuance of a Title Policy (ALTA-1970) with standard exceptions deleted,
issued by Title Company dated as of December 16, 1999, Order No. 1999-11354RB, a
copy of which is attached as Exhibit 19.
1.56 "Transfer" shall mean reference to the midnight which follows
11:59 p.m. on the last day of the month in which all conditions precedent as set
forth in Section 6 have occurred, except as to the Bankroll Funds, the transfer
of which shall be made upon counts as agreed between the Company and Buyer.
1.57 "Warehouse Lease" shall mean the lease effective the 1st day of
January, 1992 between Company and Trust B established by the Will of Mitchell
Armanko, Deceased, granting Company the right to lease a warehouse located at
255 Washington Street, Reno, Nevada.
2. PURCHASE AND SALE.
2.1 PURCHASED ASSETS. On the Closing Date, Sellers agree to sell,
transfer and convey to Buyer and Buyer agrees to purchase for the considerations
and on the terms hereinafter provided, the Purchased Assets. Delivery of the
Purchased Assets to Buyer and possession of the Premises by Buyer shall occur as
of the Transfer. All of the Purchased Assets shall be assembled for delivery on
Transfer at 444 Vine Street, Reno, Nevada.
2.2 ASSET EXCEPTIONS. The Purchased Assets do not include and Sellers
shall reserve and retain all right, title and interest in and to the Retained
Assets.
2.3 BUYER ASSUMPTIONS AND INDEMNITIES. Buyer shall assume the Buyer
Assumed Liabilities and shall indemnify and hold Company and Shareholder
harmless from all liabilities relating thereto on and after the Transfer by
execution of the Buyer Assumption and Indemnity Agreement.
2.4 SELLERS' INDEMNITIES. Sellers shall be responsible for the payment
of the Retained Payables as set forth on the Schedule of Retained Payables and
any and all liabilities
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of Sellers other than Buyer Assumed Liabilities and shall indemnify Buyer from
any liability relating thereto.
2.5 PURCHASE PRICE. The Purchase Price of the Purchased Assets shall be
the sum of (a) Twenty Six Million Five Hundred Thousand Dollars ($26,500,000),
(b) plus the net amount payable to Sellers or less the net amount receivable
from the Sellers under Section 2.8 below, and (c) plus the Bankroll Funds.
2.6 PAYMENT. On the Closing Date, Buyer shall pay the Purchase Price,
less the Bankroll Funds to Sellers in cash. The Purchase Deposit and interest,
if any, will be returned to Buyer by the escrow agent. Provided a Closing has
occurred, within eighteen (18) hours after the Transfer, Buyer shall pay to
Sellers in cash an amount equal to the Bankroll Funds agreed between Sellers and
Buyer.
2.7 EXISTING SECURED LOANS. As part of the Closing, Company and
Shareholder shall be obligated to discharge the Existing Secured Loans and to
cause all liens and security interests securing any indebtedness of Sellers
including, without limitation, the lien of any existing deeds of trust and
equipment leases to be released. If on the Closing Date there is any other
security interest, lien or encumbrance on the Premises, or the equipment or any
other Purchased Assets or any portion thereof, which is capable of being
satisfied by the payment of money, then Sellers shall use all or any portion of
the cash portion of the Purchase Price as is necessary to either discharge,
satisfy or bond over the same, and shall deliver to Buyer at the Closing (as
hereinafter defined) any instruments, in recordable form, sufficient to release,
satisfy or bond over the security interests, liens and encumbrances and to
permit the Title Company or any other necessary person to remove the security
interests, liens or encumbrances, as an exception to the Title Policy, or as a
lien on personal property, or otherwise, together with a sum equal to the cost
of recording or filing the instrument, if any. The existence of any security
interests, liens and encumbrances shall not be deemed objections to title if
Sellers comply with this requirement.
2.8 ADJUSTMENTS AND PRORATIONS. The following matters and items shall
be apportioned pursuant to GAAP between the parties hereto or, where applicable,
credited in total to a particular party, as of the Transfer and the net amount
shall be paid by the Sellers or deducted from the Purchase Price by the Buyer,
as the case may be, upon the Closing Date:
(a) Taxes and Assessments. Taxes (other than prepaid or
accrued gaming taxes and/or fees), including, but not limited to, real
estate, personal property, business, occupation, unemployment taxes,
and sales taxes, if any (based on the most current available
information), and water and sewer charges shall be prorated as of the
Transfer. The proratable figures for the fiscal year for which the
taxes or other items were assessed or charged on the basis of
applicable governmental records, will be readjusted when the actual
bills are available. Buyer shall receive a credit for any unpaid real
estate taxes for the fiscal year 2000-2001. Any real estate taxes
assessed for the fiscal year 2001-2002 will be prorated as of the date
that billings are received with respect thereto, with Sellers being
responsible for the taxes accrued with respect
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to all periods prior to the Transfer, and Buyer being responsible for
all subsequent periods. Any accrued or existing special assessments
pertaining to the Premises which are shown on the Title Report shall be
paid by the Sellers prior to Closing. Buyer shall assume any special
assessments pertaining to the Premises which are assessed after the
date of the Title Report.
(b) Utility Payments. Telephone payments and payments for the
supply of heat, steam, electric power, gas, lighting and any other
utility service will be prorated as of the Transfer. All deposits, if
any, made by Sellers or Company as security under any public service
contracts shall be credited to Company if they remain on deposit for
the benefit of Buyer. Where possible, cut off rates will be secured for
all utilities as of the Transfer.
(c) Guest Ledgers. Company shall receive a credit for all
guest ledger receivables agreed to be acceptable to Buyer as
collectible as of the Transfer, provided that each party shall receive
a credit equal to one-half of the amount of transient guest room
rentals for the night of the Transfer; no guest ledger receivables
which have been set up with respect to rooms that have been
complimented shall be recognized for the purpose of this subparagraph.
(d) Insurance. Both Company and Shareholder's insurance, if
any, shall be cancelled as of the Transfer and they shall retain all
prepaid premiums. Buyer shall arrange for immediate effectiveness of
its own insurance coverage as of the Transfer. To the extent Buyer
assumes any insurance, prepaid premiums shall be prorated as of the
Transfer.
(e) Rent Payments. All prepaid rents or accrued rents on the
Piazzo Lease and the Warehouse Lease shall be prorated as of the
Transfer and credited, as the case may be, to the Sellers or the Buyer.
(f) Compensation. Compensation of the staff and other
employees of the Motel/Casino Operation will be prorated as of the end
of their respective shifts. All costs of accrued employee benefits
(sick leave, vacation leave, health, dental and life insurance
benefits, 401(k) plans, etc., if any) shall be determined as of the
date of the Transfer and shall be paid by the Company.
(g) Prepaid Expenses; Retained Payables; Accrued Expenses. The
Sellers shall be credited with all prepaid expenses, including
maintenance and service contracts, which have been paid by them prior
to the Closing Date but which are allocable under GAAP to periods after
the Transfer. The Sellers shall pay all Retained Payables as of the
minute prior to the Transfer. The Sellers shall pay or be charged with,
and the Buyer shall receive credit for, all expenses which have been
accrued in accordance with GAAP at the Closing Date, but which will be
paid after the Closing Date.
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(h) Basis of Allocations. In making apportionments, all
prepaid rents, prepaid guest charges (except as provided in subsection
(c) above) and similar items shall be prorated on the basis of the
number of days of occupancy before and after the Transfer; all prepaid
taxes, charges and impositions shall be prorated on the basis of the
number of days of the applicable tax year, or on the basis of unit
costs, if this is not practicable, on the basis of the number of days
before and after that time.
3. INVESTIGATIONS.
(a) Investigations. Buyer acknowledges that it has inspected
the Premises and is purchasing it on the basis of that inspection and
Sellers' representations and warranties as herein contained and all
other agreements and documents required to be delivered by Sellers
prior to or on the Closing Date. Nevertheless, Buyer wishes to have
continued access to the Premises from the date hereof through the
Closing Date. Buyer shall be permitted to conduct further
investigations of the Premises in accordance with Section 3(b). Such
investigation may include: a physical inspection of the Premises,
including soil, geological and other tests, engineering evaluations of
the mechanical, electrical, HVAC and other systems; review of all
governmental matters affecting the Premises, including zoning,
environmental and building permit and occupancy matters; review and
verification of all financial and other information provided by Sellers
relating to the operation of the Premises, review of the condition of
title to the Premises; and review of such other matters pertaining to
the Premises as Buyer deems advisable. Sellers shall provide Buyer with
all information reasonably requested pursuant to Buyer's investigations
within a reasonable period of time (taking into account the nature and
scope of the request) following Buyer's request.
(b) Access to Information and the Premises. At any reasonable
time prior to the Closing Date and with prior notification to Sellers,
Buyer, its agents and representatives shall be entitled: (i) to enter
onto the Premises to perform inspections and tests of the Premises,
including all leased areas (subject to the rights of the tenants) and
structural and mechanical systems, (ii) to examine and copy any and all
books and records, if any, maintained by Sellers or their agents
relating to receipts and expenditures pertaining to the Premises, and
(iii) to interview the tenants. Sellers shall provide Buyer with all
information in Sellers' possession or control that is reasonably
requested by Buyer within a reasonable period of time after Buyer's
request (taking into account the nature and scope of the request).
Buyer agrees to indemnify, defend (with counsel reasonably acceptable
to Sellers) and hold harmless Sellers from and against all claims,
demands, liabilities and damages arising or resulting from Buyer's
investigations of the Premises, provided, however, that Buyer shall not
be liable to Sellers for any claims, demands, liabilities or damages
arising or resulting from facts or conditions at the Premises that
existed prior to Buyer's investigations commenced or that were
discovered by Buyer during the course of its investigations. Buyer also
agrees: (A) to promptly restore the Premises to their condition prior
to the making of any tests and inspections, (B) to conduct its
investigations in a manner which will not disrupt Sellers' business
operations at the Premises, (C) not to perform, prior to Closing,
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any drilling or other invasive testing at the Premises without
obtaining the prior written consent of Sellers, which consent shall not
be unreasonably withheld or delayed and (D) to coordinate its
investigations, prior to Closing, with Sellers, and to use Buyer's
reasonable efforts to provide Sellers with advance notice of any
on-site investigation in order to afford Sellers an opportunity to have
a representative present during such on- site investigation. The
obligations set forth in the two preceding sentences shall survive the
termination of this Agreement. Buyer and its agents and contractors
shall provide Sellers with evidence of liability insurance coverage (to
be reasonable in scope and amount) with respect to all site testing and
other on-site investigations to be performed on the Premises prior to
the Closing Date (and all such insurance coverage shall name Sellers as
additional insureds). Buyer shall deliver to Sellers, promptly after
Buyer's receipt of the same, a copy of any and all environmental
reports, preliminary title reports and commitments, CLTA or ALTA
surveys, soils reports, and engineering and structural reports
respecting the Premises obtained by Buyer from Buyer's contractor or
contractors in the course of Buyer's investigation of the Premises, as
well as any and all test results obtained by Buyer in connection
therewith. Buyer's obligations in the preceding sentence shall survive
the termination of this Agreement.
(c) Sellers' Deliveries of Documents and Information. Prior to
execution hereof by all parties, Sellers shall have delivered to Buyer
a full and accurate list and reasonably complete details concerning
each item described below and a copy of each document to the extent
such copies were in the possession or control of Sellers or any
affiliate, agent or related party of Sellers.
(i) Copies of any and all title policies
(together with endorsements), title
commitments, title reports, certificates of
title, and any documentation relating to
liens, encumbrances, deeds of trust,
mortgages, judgments, rights-of-way or
easements, covenants, conditions or
restrictions, other exceptions or matters of
record relating to or affecting real
property which is part of the Premises,
together with a proper legal description for
such real property.
(ii) A copy of any and all purchase agreements
and other conveyances pursuant to which
Sellers obtained ownership of the Premises,
together with all amendments, modifications,
and schedules and exhibits attached thereto.
(iii) All reciprocal easement agreements and
similar agreements which are in effect with
any other interested party with respect to
the Premises, all as amended or otherwise
modified.
(iv) Copies of all certificate(s) of occupancy,
zoning variances, licenses, permits,
authorizations and approvals relating to the
Premises from governmental authorities
having jurisdiction over
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the Premises, together with copies of any
other material notices and agreements in
Sellers' possession relating thereto.
(v) Copies of any and all environmental permits,
notices, demands, action letters, reports,
assessments, audits, directives from any
federal, state or local agency,
documentation of remedial procedures, or
other documentation, which is in Sellers'
possession or control, relating to
environmental matters relating to or
affecting the Premises or any adjoining
properties including, but not limited to,
the identification, to the best of Sellers'
knowledge, of which portion of the Premises
has ever been or is now being used for the
generation, manufacture, storage, treatment,
disposal, release or threatened release of
any hazardous substance, as that term is
defined by the Comprehensive Environmental
Response Compensation and Liability Act of
1980 and Nevada state law descriptions;
identification, to the best of Sellers'
knowledge, of all waste disposal sites on
the Premises; identification of the
locations of underground tanks and lines on
the Premises, whether in use or abandoned,
with a history of any spillage or leakage; a
description, to the best of Sellers'
knowledge, of storage, treatment and
disposal practices with respect to wastes
generated by the Premises; a summary of all
environmental testing done by Sellers or at
Sellers' request at the Premises together
with written reports concerning such testing
or environmental matters affecting the
Premises (including all available Phase I,
Phase II, and soils reports relating to the
Premises) and any written estimates about
future expenditures for environmental
programs relating thereto; identification,
to the best of Sellers' knowledge, of all
records regarding compliance history with
environmental permits including air, water,
underground storage, maritime, waste and
sewer permits under federal, state, and
local rules and regulations; identification,
to the best of Sellers' knowledge, of known
events of noncompliance with permits and
other environmental regulation, and
disclosure, to the best of Sellers'
knowledge, of any anticipated changes in
permit compliance levels; and any other
reports on the environmental condition of
the Premises.
(vi) A copy of the bill or bills issued for the
most recent year for which bills have been
issued for all real estate taxes (including
assessed value) and personal property taxes
and a copy of any and all notices pertaining
to real estate taxes or assessment
applicable to the Premises. Sellers shall
promptly deliver to Buyer a copy of any such
bills or notices received by Sellers after
the date hereof even if received after the
Closing Date. A complete schedule
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setting forth when personal and real
property tax payments were made and the date
on which such payments are due and payable
each year, and a schedule describing any
ongoing tax disputes, together with copies
of all revenue agents' reports and
correspondence with respect to any pending
federal, state, provincial or similar tax
proceedings for any open years.
(vii) A complete copy of all surveys, reports or
recommendations prepared by or for Sellers,
or in Sellers' possession or control, which
relate to the Premises' compliance with
Title III of the Americans With Disabilities
Act and the regulations promulgated
thereunder.
(viii) Copies of all leases relating to the
Premises, and the Warehouse Lease.
(ix) Any other documents and information
reasonably requested by Buyer relating to
the Premises.
4. REPRESENTATIONS, WARRANTIES AND COVENANTS OF SELLERS.
Sellers and each of them, jointly and severally, represent and warrant
to Buyer as follows. All representations and warranties are true and correct as
of the date hereof and, except as otherwise expressly provided herein, will be
true and correct on the Closing Date.
(a) Organization. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Nevada, and has all requisite power and authority to own, lease and
operate the Premises and to carry on its business as now being
conducted. The Company has heretofore furnished or made available to
Buyer complete and correct copies of the Company's Articles of
Incorporation and all amendments thereto (the "Articles") to the date
hereof, and such Articles are in full force and effect.
(b) Power and Authority. Each Seller has full power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby
have been duly and validly authorized in accordance with the Articles
and any requisite approvals of shareholders and directors have been
obtained. This Agreement has been duly and validly executed and
delivered by each Seller and is a valid and binding agreement of each
Seller, enforceable against them in accordance with its terms, except
as such enforcement may be subject to bankruptcy, insolvency,
moratorium and other principles relating to or limiting rights of
parties generally contracting.
(c) Compliance.
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(i) Except as set forth in Schedule 4(c)(i),
since June 30, 1999, Sellers have been and
are in compliance with all (A) material
applicable laws and regulations of federal,
state and local governmental authorities
applicable to the Premises and the
Motel/Casino Operation and other business
conducted on the Premises (collectively the
"Business") and Sellers are not aware of any
claim of violation, or of any actual
violation, of any such laws and regulations,
except where such failure or violation
(whether actual or claimed) would not have a
material adverse effect on the Premises or
the financial results or performance of the
Business, and (B) material applicable
federal, state or local statutes,
ordinances, rules, regulations, permits,
consents, approvals, licenses, judgments,
orders, decrees, injunctions or other
authorizations governing or relating to the
Company's casino, liquor related activities
and gaming activities and operations,
including, without limitation, the Gaming
Control Act ("Nevada Gaming Act"), as
amended, and the rules and regulations
promulgated thereunder, or applicable to the
Premises, the Business or the Company.
Neither Seller has received any written
claim, demand, notice, complaint, court
order or administrative order from any
governmental authority since June 30, 1999,
asserting that a license of it or them, as
applicable, under any gaming laws should be
revoked or suspended or that any such party
is not in full compliance with such license.
(ii) Except as set forth in Schedule 4(c)(ii),
since June 30, 1999: (i) Sellers are, and
have been, in full compliance with all of
the terms and requirements of each award,
decision, injunction, judgment, order,
ruling, subpoena, or verdict (each, an
"Order") entered, issued, made, or rendered
by any court, administrative agency, or
other governmental entity, officer or
authority or by any arbitrator to which it,
or the Premises owned or used by them, is or
has been subject, and (ii) no event has
occurred or circumstance exists that may
constitute or result in (with or without
notice or lapse of time) a violation of or
failure to comply with any term or
requirement of any Order to which either
Seller or the Premises is subject, except
where such non-compliance, violation or
failure to comply would not have a material
adverse effect on the Premises or the
financial performance of the Business.
Neither Seller has received, at any time
since June 30, 1999, any notice or other
communication (whether oral or written)
regarding any actual, alleged, possible, or
potential violation of, or failure to comply
with, any term or requirement of any Order
to which either Seller has or the Premises
is or has been subject, except as
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would not have a material adverse effect on
the Premises or the Business.
(iii) Except as set forth on Schedule 4(c)(iii),
no investigation or review by any government
entity, officer or authority, including
without limitation any investigation or
review by any gaming authority or relating
to compliance with gaming laws, with respect
to either Seller, the Premises or the
Business is, to their knowledge, pending or
threatened, nor has any government entity,
officer or authority indicated to any of
them an intention to conduct the same.
(d) Consents and Approvals; No Violation. Except as disclosed
on Schedule 4(d), the execution and delivery of this Agreement and
related documents do not, and the consummation of the transactions
contemplated hereby and the performance by Sellers of their obligations
thereunder will not:
(i) conflict with or violate any provisions of
the Company's Articles or Bylaws;
(ii) require any consent, approval, order,
authorization or permit of, or registration,
filing or notification to, any governmental
or regulatory authority or agency, except
for (a) the possible filing of a
notification and report form by Sellers
under the Hart-Scott- Rodino Antitrust
Improvements Act of 1976, as amended (the
"HSR Act"), (b) Buyer obtaining all
necessary approvals under the Nevada Gaming
Act and any other applicable gaming or
liquor law, including those required by the
Nevada Gaming Authorities and liquor
regulatory authorities and (c) the possible
filing of a notification required by Chapter
612 of the Nevada Revised Statutes;
(iii) result in any conflict with or violation of
or the breach of or constitute a default
(with notice or lapse of time or both)
under, or give rise to any right of
termination, cancellation or acceleration or
guaranteed payments under or to a loss of a
material benefit under, any of the terms,
conditions or provisions of any guarantee,
note, bond, indenture, lease, mortgage,
license, franchise, agreement or other
instrument or obligation to which either
Seller is a party or by which either Seller
may be bound, except for such conflicts,
violations, breaches, defaults, or rights of
termination, cancellation or acceleration,
or losses as to which requisite waivers or
consents have been obtained or will be
obtained prior to the Closing Date;
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(iv) violate the provisions of any Order, decree,
statute, rule or regulation applicable to
either Seller; or
(v) result in the creation of any lien, charge
or encumbrance upon the Premises or the
Business under any agreement or instrument
to which either Seller is a party or by
which either Seller is bound.
(e) Labor Matters. Except as set forth in Schedule 4(e)
hereto, the Company employs all personnel working at the Premises or in
the Business and is not a party to any collective bargaining or other
labor union contract applicable to persons employed by the Company, no
collective bargaining agreement is being negotiated by the Company and
the Company has no knowledge of any material activities or proceedings
(i) involving any unorganized employees of the Company seeking to
certify a collective bargaining unit or (ii) of any labor union to
organize any of the employees of the Company. There is no labor
dispute, strike or work stoppage against the Company pending or, to the
Sellers' knowledge, threatened which may interfere with the operation
of the Premises or the Business.
(f) Premises.
(i) Exhibit 14 identifies all real property
owned or leased by Sellers.
(ii) Upon transfer of the Premises to Buyer at
Closing as contemplated by this Agreement,
Buyer shall acquire good and valid title
thereto, free and clear of any and all
liens, encumbrances, equitable interests,
easements, restrictions of any kind
including any restrictions on use, transfer,
receipt of income or exercise of any other
attribute of ownership, leases, subleases,
concession agreements, options to purchase,
options to lease, options to joint venture
or jointly develop, conditions, covenants,
assessments, defects, claims or other
exceptions of any nature whatsoever, except
for the exceptions described on Schedule
4(f) or as shown on the policies of title
insurance or preliminary title reports (if
more recent) attached as part of such
schedule ("Permitted Exceptions").
(iii) The Premises complies with, and is operated
in accordance with, all material applicable
laws affecting the Premises or the
ownership, improvement, development,
possession, use, occupancy or operation
thereof, and with any and all Permitted
Exceptions affecting the Premises, except
where the failure to comply, individually or
in the aggregate, would not have a material
adverse effect on the ownership, value or
use of the Premises or the financial
performance of the Business. There are no
material defects in the physical condition
of the Premises, including the
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FF&E, except for defects which, individually
or in the aggregate, would not have a
material adverse effect on the ownership,
value or use of the Premises and except for
ordinary wear and tear the tangible portions
of the Premises are structurally sound, are
in good operating condition and repair, and
are adequate for the uses to which they are
being put, and none of the tangible portions
of the Premises is in need of maintenance or
repairs except for ordinary, routine
maintenance and repairs that are not
material in nature or cost. The Premises are
sufficient for the continued conduct of the
Business after the Closing Date in
substantially the same manner as the
Business has been conducted since June 30,
1999. Neither Seller has received any notice
from any governmental body (A) requiring it
to make any material repairs or changes to
the Premises or the improvements located on
the Premises or (B) giving notice of any
material governmental actions pending or
threatened relating to the Premises.
(iv) There is no action, proceeding,
investigation or litigation pending (or, to
the best knowledge of Sellers, contemplated
or threatened): (A) to take all or any
portion of the Premises, or any interest
therein, by eminent domain; (B) to modify
the zoning of, or other governmental rules
or restrictions applicable to, the Premises
or the use or development thereof; (C) for
any street widening or changes in highway or
traffic lanes or patterns in the immediate
vicinity of the Premises; or (D) otherwise
relating to the Premises or the interests of
Sellers therein, or which otherwise would
interfere with the use, ownership,
improvement, development and/or operation of
the Premises.
(v) No portion of the Premises or, to the best
of Sellers' knowledge, the roads immediately
adjacent to the improvements located on the
Premises, has any defect or condition which
would materially impair the current use of
the Premises or pedestrian or vehicular
access to the Premises.
(vi) All improvements on the Premises are in
material compliance with current building
codes, to the extent applicable and Sellers
have not received any written notices of any
material violations of any applicable
building codes relating to the Premises
which have not been remedied.
(vii) The Premises are connected to and serviced
by adequate water, sewage disposal, gas and
electricity facilities in accordance with
all material applicable laws, statutes,
ordinances, rules and
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regulations of all public or quasi public
authorities having or claiming jurisdiction
thereover. All material systems (heating,
air conditioning, electrical, plumbing and
the like) for the current operation of the
Premises are operable and in good condition
(ordinary wear and tear excepted).
(viii) There are no material commitments to or
agreements with any governmental authority
or agency (federal, state or local)
affecting the Premises or the Business that
are not described in or listed in a Schedule
hereto.
(ix) There are no contracts or other obligations
outstanding for the sale, exchange or
transfer of any of the Premises or any
interest therein, or any portion of it or
the business operated thereon, other than
the sale, exchange or transfer of assets in
the ordinary course of business.
(x) Sellers have held a nonrestricted gaming
license at the Motel/Casino Facility since
prior to July 1, 1992 and the Motel/Casino
Facility has not ceased nonrestricted gaming
operations since July 1, 1992.
(xi) Sellers are unaware of any circumstances or
conditions concerning the Motel/Casino
Facility which would prohibit Buyer from
selling alcoholic beverages on the Premises.
(g) Environmental Matters.
(i) "CERCLA" means the Comprehensive
Environmental Response, Compensation and
Liability Act of 1980, as amended.
"Environmental Claim" means, with respect to
any Person, any written notice, claim,
demand or other communication (collectively,
a "claim") by any other person alleging or
asserting such person's liability for
investigatory costs, cleanup costs,
Governmental Authority response costs,
damages to natural resources or other
Premises, personal injuries, fines or
penalties arising out of, based on or
resulting from (A) the presence, or release
into the environment, of any Hazardous
Material at any location, whether or not
owned by such person, or (B) circumstances
forming the basis of any violation, or
alleged violation, of any Environmental Law.
The term "Environmental Claim" shall
include, without limitation, any claim by
any Governmental Authority for enforcement,
cleanup, removal, response, remedial or
other actions or damages pursuant to any
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applicable Environmental Law, and any claim
by any third party (other than workers
compensation claims arising from isolated
incidents) seeking damages, contribution,
indemnification, cost recovery, compensation
or injunctive relief resulting from the
presence of Hazardous Materials or arising
from alleged injury or threat of injury to
health, safety or the environment.
"Environmental Law" means any law,
regulation or order relating to the
regulation or protection of human health,
safety or the environment or to emissions,
discharges, releases or threatened releases
of Hazardous Materials into the environment
(including without limitation ambient air,
soil, surface water, ground water, wetlands,
land or subsurface strata), or otherwise
relating to the manufacture, processing,
distribution, use, treatment, storage,
disposal, transport or handling of Hazardous
Materials.
"Hazardous Materials" includes (A) any
"hazardous substance," as defined by CERCLA
or any other similar substance or waste
regulated pursuant to any similar state or
local law, regulation or ordinance; (B) any
"waste" or "hazardous waste," as defined by
the Resource Conservation and Recovery Act,
as amended, or any other similar substance
or waste regulated pursuant to any similar
state or local law, regulation or ordinance;
(C) any pollutant, contaminant, material,
substance or waste regulated by the Clean
Water Act, as amended, or any other similar
substance or waste regulated pursuant to any
similar state or local law, regulation or
ordinance; (D) any pollutant, contaminant,
material, substance or waste regulated by
the Clean Air Act, as amended, or any other
similar substance or waste regulated
pursuant to any similar state or local law,
regulation or ordinance; (E) any petroleum
product; (F) any polyclorinated biphenyls;
or (G) any radioactive material or
substances.
"Release" means release, spill, emission,
leaking, pumping, injection, deposit,
disposal, discharge, dispersal, leaching or
migration into the indoor or outdoor
environment or into or out of any real or
personal property or any fixture, including
the movement of Hazardous Materials through
or in the air, soil, surface water or
groundwater.
(ii) Except as set forth in Schedule 4(g), with
paragraph references corresponding to those
set forth below, to the best knowledge of
Sellers:
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(A) the Premises at all times have
been, and continue to be, operated
by the Sellers in material
compliance with all Environmental
Laws;
(B) there have been no past, and there
are no pending or threatened (1)
claims, complaints, notices,
requests for information or
investigations with respect to any
alleged material violation of any
Environmental Law by them, or (2)
complaints, notices or inquiries to
or investigations of either Seller
regarding potential liability under
any Environmental Law by either
Seller;
(C) there have not been, at the
Premises any Releases of Hazardous
Materials and there are no
citations, notices or orders of
noncompliance issued and
outstanding to either Seller under
any Environmental Law;
(D) each Seller is in material
compliance with all permits,
certificates, approvals, licenses
and other governmental
authorizations relating to
environmental matters and necessary
for its Business, and no order has
been issued, no Environmental Claim
has been made, no penalty has been
assessed and no investigation or
review has occurred or is pending
or threatened, by any Person with
respect to any alleged failure by
any of them to have any license or
permit required under applicable
Environmental Laws in connection
with the conduct of its Business or
operations or to comply with any
Environmental Laws or with respect
to any generation, treatment,
storage, recycling, transportation,
discharge, disposal or release of
any Hazardous Material generated by
them;
(E) there are no underground storage
tanks, active or abandoned,
including petroleum storage tanks,
under the Premises; and
(F) there are no facts upon which
either Seller may reasonably be
expected to become liable under any
Environmental Law in any material
respect.
(h) Subsidiaries. The Company does not have any Subsidiaries
and does not directly or indirectly own, have an ownership or other
interest in, or control any corporation, partnership, joint venture,
limited liability company, proprietorship or other entity.
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(i) Financial Statements. The Company has delivered to Buyer
copies of the Company's balance sheet as of June 30, 1999 and the
statements of income and retained earnings and cash flows for the three
years then ended, all of which have been audited by Grant Thornton LLP,
and for the interim period commencing July 1, 1999 and ending October
31, 1999 (collectively, the "Financial Statements"). The Financial
Statements are based upon the information contained in the books and
records of the Company and fairly and accurately present the financial
condition of the Company as of the dates thereof and results of
operations and cash flows of the Business for the periods referred to
therein and in accordance with GAAP consistently applied. The monthly
financial statements generated by the Company from and after the
interim period delivered and to be delivered to Buyer were and will be
prepared on a basis consistent with the methods and procedures used to
prepare the Financial Statements subject, in the case of the interim
financial statements, to normal recurring year-end adjustments (the
effect of which will not, individually or in the aggregate, be
material) and the absence of notes, which if presented, would not
differ materially from those in the audited statements. The Company
shall deliver to the Buyer monthly financial statements within thirty
(30) days from the close of any month prior to the Closing Date. In
addition, the Company specifically covenants that it will obtain and
immediately provide to Buyer financial statements audited by Grant
Thornton LLP within ninety (90) days after its fiscal year ending June
30, 2000.
(j) Absence of Undisclosed or Contingent Liabilities. The
Company does not have any liabilities (whether accrued, absolute,
contingent, unliquidated or otherwise, whether due or to become due,
whether known or unknown, and regardless of when asserted) in
connection with the Premises or the Business except as set forth in the
Financial Statements or that are current liabilities incurred in the
ordinary course of business consistent with the past practice after
June 30, 1999 and prior to the Closing Date and which are neither
material in amount nor inconsistent with any of the representations or
warranties made herein.
(k) No Material Adverse Changes. Since June 30, 1999 and as
set forth in Schedule 4(k), there has not been any materially adverse
change in the properties, assets, results of operation or condition
(financial or otherwise) of Sellers, the Business, or in the Premises,
including customer or employee or supplier relations.
(l) Tax Matters. For the purposes hereof, the term "Taxes"
means all taxes, charges, fees, levies or other assessments, including
without limitation, all gaming taxes, gross receipts, sales, use, ad
valorem, transfer, franchise, license, withholding, payroll,
employment, workmen's compensation, social security, unemployment,
excise, estimated, severance, stamp, occupation, real or personal or
other taxes, customs, duties, fees, assessments or charges of any kind
whatsoever including, without limitation, all interest and penalties
thereon, and additions to tax or additional amounts imposed by any
taxing authority, domestic or foreign, upon Sellers or either of them
or the Premises. All Taxes due from or required to be remitted by each
Seller with respect to the Business and the Premises for the taxable
periods ending on or prior to, and the
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portion of any interim period up to, the Closing Date have been fully
and timely paid or, to the extent not yet due or payable, have been
adequately provided for on the Financial Statements or on the books and
records of each Seller; and there are no levies, liens, or other
encumbrances relating to Taxes existing, or to the knowledge of either
Seller, threatened or pending with respect to any of the Premises, the
Business or Sellers' other assets. The sale of assets contemplated in
this Agreement qualifies as an occasional sale under chapters 372, 374
and 377 of the Nevada Revised Statutes.
(m) Employee Benefit Plans.
(i) The Company is the only entity or person
that has employed personnel in the Business
since its inception. Except as provided in
writing to Buyer and as listed on Schedule
4(m), with respect to all employees and
former employees of the Company and all
dependents and beneficiaries of such
employees and former employees, (A) the
Company does not maintain or contribute to
any non-qualified deferred compensation or
retirement plans, contracts or arrangements,
(B) the Company does not maintain or
contribute to any qualified defined
contribution plans as defined in Section
3(34) of ERISA or Section 414(i) of the Code
(hereinafter defined), (C) the Company does
not maintain or contribute to any qualified
defined benefit plans as defined in Section
3(35) of ERISA or Section 414(j) of the
Code, and (iv) the Company does not maintain
or contribute to any employee welfare
benefit plans as defined in Section 3(1) of
ERISA.
(ii) To the extent required (either as a matter
of law or to obtain the intended tax
treatment and tax benefits), each employee
benefit plan as defined in Section 3(3) of
ERISA which the Company does maintain or to
which it does contribute (collectively, the
"Plans") has been administered in compliance
with its terms and Company believes
complies, both in form and operation, with
the applicable provisions of ERISA
(including, but not limited to, the funding
and prohibited transactions provisions
thereof), the Code and other applicable
laws. With respect to the Plans, (A) all
required contributions which are due have
been made and a proper accrual has been made
in the Company's financial statements for
all contributions which were due but not
paid in previous fiscal years or are due in
the current fiscal year, (B) there are no
actions, suits or claims pending, other than
routine uncontested claims for benefits, and
(C) there have been no prohibited
transactions as defined in Section 406 of
ERISA or Section 4975 of the Code.
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(iii) The Company does not contribute (and has not
ever contributed) to any multi-employer
plan, as defined in Section 3(37) of ERISA.
The Company has no actual or potential
liabilities under Section 4201 of ERISA for
any complete or partial withdrawal from a
multi-employer plan. The Company has no
actual or potential liability for death or
medical benefits after separation from
employment, other than (A) death benefits
under the employee benefit plans or programs
(whether or not subject to ERISA) that will
be set forth in writing to Buyer, and (B)
health care continuation benefits described
in Section 4980B of the Code.
(iv) Each Plan maintained by the Company which is
intended to be a qualified plan within the
meaning of Section 401 of the Code has been
determined by the Internal Revenue Service
to be so qualified, and neither Seller is
aware of any fact or circumstance which
would adversely affect the qualified status
of any such Plan. No Plan maintained by the
Company has been subject to a "reportable
event" (as defined in Section 4043 of ERISA)
or any event requiring disclosure under
Section 4062(e) or 4063(a) of ERISA. The
actuarial present value of accumulated
benefits (both vested and unvested) of each
such Plan which is a defined benefit plan is
fully funded in accordance with the
actuarial assumptions used by the Pension
Benefit Guaranty Corporation to determine
the level of funding required in the event
of the termination of such Plan. No employee
benefit plan that is subject to the minimum
funding requirements of Part 3 of Subtitle B
of Title I of ERISA or Section 412 of the
Code.
(v) All reports and information required to be
filed with the Department of Labor, Internal
Revenue Service, and Pension Benefit
Guaranty Corporation or with plan
participants and their beneficiaries with
respect to each Plan have been filed, and
all annual reports (including Form 5500
series) of such Plan were certified without
qualification by each Plan's accountants and
actuaries to the extent, and in the manner,
required under ERISA.
(vi) There has been no violation of the
"continuation coverage requirements" of
former Section 162(k) of the Code (as in
effect for tax years beginning on or before
December 31, 1988), of Section 4980B of the
Code (as in effect for tax years beginning
on and after January 1, 1989) and of Part 6
of Subtitle B of Title I of ERISA with
respect to any welfare Plan to which such
continuation coverage requirements apply.
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(vii) Other than such continuation of benefit
coverage under group health plans as is
required by applicable law (as described in
(vi) above), the Company does not maintain
retiree life or retiree health plans
providing for continuing coverage for any
employee or any beneficiary of an employee
after the employees' termination of
employment.
(viii) The Company is not bound by any employment
agreement or other legally binding
arrangement providing for severance pay or
retirement benefits with respect to any
present or former officer or other employee
of the Company.
(ix) The Company did not formerly maintain or
contribute to any Plan which has been
terminated.
(n) Employee Health and Safety. The Company has not violated
in any material respect and has no material liability, and has not
received a notice or charge asserting any violation of or liability
under, OSHA or, to the best of the Sellers' knowledge, any other
federal or state acts (including rules and regulations thereunder)
regulating or otherwise affecting employee health and safety.
(o) Representations Concerning Solvency. Neither Seller has
incurred, and does not intend to incur, and has no reasonable basis to
believe that it will incur, any debts beyond its ability to pay as they
become due. Each Seller has assets greater than their respective debts.
Buyer may rely on such representations in asserting that Buyer has no
reasonable cause to believe that either Seller is or will become
insolvent as a result of the transactions contemplated hereby. Each
Seller has undertaken the transactions described herein in good faith,
considering its obligations to any Person to whom it owes a right to
payment, whether or not the right is reduced to judgment, liquidated,
unliquidated, fixed, contingent, matured, unmatured, disputed,
undisputed, legal, equitable, secured or unsecured and has undertaken
the transaction described herein without any intent to hinder, delay or
defraud its creditors. Neither Seller will conceal and has not
concealed this transaction or the proceeds of such transaction from any
of its respective creditors. Neither Seller has removed or concealed
any assets from its creditors and will not incur debt that is
significantly greater than its normal and customary debts in the
ordinary course. Neither Seller contemplates and neither has reason to
contemplate that it will seek protection under the bankruptcy laws and
believes in good faith that it will receive consideration reasonably
equivalent to the value of the property being sold to Buyer.
(p) Correct and Complete Copies. Any certificates of occupancy
for the Premises, and all other contracts or documents required to be
delivered to Buyer pursuant to this Agreement are, or will be once
delivered, true, correct and complete copies. To the best of Sellers'
knowledge, each Seller has delivered to Buyer all documents, reports
and other materials described in Section 3(c) above.
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(q) Leases True and Correct. The copies of the Piazzo,
Warehouse and Sierra Development Operating Leases (collectively the
"Leases") delivered to Buyer are true, correct and complete. The Leases
are in full force and effect, without default by any party and without
any claim made for the right of setoff, except as expressly provided by
the terms of such Leases or as disclosed to Buyer in writing at the
time of such delivery. The Leases constitute the entire agreements
between Sellers and the other parties to the Leases, have not been
amended, modified or supplemented, except for such amendments,
modifications and supplements delivered to Buyer, and neither Seller
has any other interest as lessee or lessor under any other lease used
in connection with the operation of the Premises or the Business.
(r) Assumed Equipment Leases and Contracts True and Correct.
True, complete and correct copies of the assumed equipment leases and
contracts listed on Exhibit 1 and Exhibit 10A will be delivered to
Buyer prior to execution hereof. The assumed equipment leases and
contracts are in full force and effect, without default by any party
and without any claims made for the right of setoff, except as
expressly provided by the terms of such assumed equipment leases and
contracts or as disclosed to Buyer in writing at the time of their
delivery. The assumed equipment leases and contracts constitute the
entire agreements with such contractors relating to the Premises and
the Business, have not been amended, modified or supplemented, except
for such amendments, modifications and supplements delivered to Buyer,
and there are no other agreements with any third parties. Each Seller
has performed in all material respects all obligations required to be
performed by it under each such assumed equipment leases and contract
and no condition exists or event has occurred which with notice or
lapse of time would constitute a default or a basis for delay,
non-performance, termination, modification or acceleration or maturity
or performance by either Seller or by any other party thereto. Other
than as contemplated herein, there are no renegotiations of, attempts
to renegotiate, or outstanding rights to renegotiate any material
amounts paid or payable to either Seller under current or completed
agreements, contracts or commitments which constitute the assumed
equipment leases and contracts. All assumed equipment leases and
contracts have been entered into in the ordinary course of business and
have been entered into without the commission of any act or any
consideration having been paid or promised that is or would be in
violation of any applicable federal, state or local statutes,
ordinances, rules, regulations, permits, licenses or other
authorizations. All necessary consents to the assignment of the
equipment leases and contracts listed on Exhibit 1 and on Exhibit 10A
have been obtained.
(s) Permits. Sellers possess or have obtained all material
licenses, permits, certificates, approvals, easements, and
rights-of-way, and proofs of dedication, required from any and all
governmental authorities having jurisdiction over the Premises or the
Business or from private parties for the present use and operation of
the Premises and the Business, to assure the provision of legally
required parking on the Premises and to assure vehicular and pedestrian
ingress to and egress from the Premises at all access points currently
being used.
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(t) No Construction Contracts. As of the Closing Date, there
will be no outstanding contracts made by Sellers for the construction
or repair of any improvements to the Premises or the building subject
of the Warehouse Lease which have not been fully paid for and Sellers
shall cause to be discharged all mechanics' or materialmen's liens
arising from any labor or materials furnished to the Premises prior to
the Closing Date. It is specifically understood that among other things
the Company intends to complete the repainting of the hotel, complete
the facade to the casino and complete other refurbishments at a cost of
approximately $400,000 all of which the Company shall have paid prior
to the Closing Date.
(u) Insurance Matters. Neither Seller has received any written
notice from any insurance carrier or any of the tenants of any defects
or inadequacies in the Premises or the Business, or in any portion
thereof, which would materially and adversely affect the insurability
thereof or the cost of such insurance. Except as set forth on Schedule
4(u), there are no pending insurance claims.
(v) Legal Proceedings. Except as set forth in Schedule 4(v),
there are no, and during the last three years there have not been any,
claims, actions, suits, proceedings (arbitration or otherwise) or, to
the knowledge of each Seller, after due inquiry, investigations
involving or affecting each Seller or any assets or properties of
either Seller, or any directors, officers or shareholders of the
Company or, to the knowledge of Sellers, any employee of or vendor to
the Company, before or by any court, government, governmental agency or
instrumentality (federal, state, local or foreign), or before an
arbitrator of any kind. Except as described in Schedule 4(v), no such
pending claim, action, suit, proceeding or investigation, if determined
adversely, would either individually or in the aggregate result in a
liability in excess of $25,000 in the case of any single action or
$50,000 in the case of all such actions or in the aggregate or could
result in the loss or diminution of any benefit or privilege presently
available to or enjoyed by either Seller that would otherwise be
transferable to Buyer hereunder. To the knowledge of Sellers after due
inquiry, except as described in Schedule 4(v), no such claim, action,
suit, proceeding or investigation is presently threatened or
contemplated. There are no unsatisfied judgments, penalties or awards
against or affecting either Seller or any of its assets or properties.
Except as disclosed in Schedule 4(v), there is no Order or other
decision entered, issued, made or rendered by any court, arbitrator,
government or governmental agency or instrumentality to which either
Seller or any of their assets or properties is subject. To the
knowledge of each Seller, neither Seller or any officer, director,
trustee or employee of the Company is subject to any Order that
prohibits such officer, director, trustee or employee from engaging in
or continuing any conduct, activity or practice relating to any
business.
(w) No Merger. None of the representations or warranties made
in this Agreement shall merge into any instrument or conveyance
delivered at Closing, and all such representations and warranties shall
survive the Closing Date for the period described in Section 15 hereof.
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(x) Complimentaries; Clubs. The Company is not, and will not
be, committed to any slot-club liability or any complimentary
arrangement for food or beverage or lodging for any guest or customer
as of the Closing Date or any period thereafter which has not been
taken into account in determining its "current liabilities," as
determined in accordance with GAAP consistently applied and consistent
with the Company's past practice.
(y) Customer Database. To Sellers' best knowledge, neither of
the Sellers nor any employee, representative, affiliate, agent, officer
or director of the Company has delivered, and neither of the Sellers
shall knowingly permit any employee, representative, agent, officer or
director of the Company to deliver the Company's customer database file
or records to a third party (other than mailing houses to process such
information on behalf of the Company) or allow a third party access to
the Company's customer database files and records. The Company's
customer database files and records are updated and maintained by the
Company regularly and shall be updated and maintained by the Company
through the Closing Date in accordance with past practice.
(z) Tradenames. Attached as Exhibit 4 to this Agreement is an
Assignment of all tradenames, trademarks, copyrights and their
registrations ("Tradenames"), owned by Sellers or in which Sellers have
any right, license, or for which Sellers have made application. To the
best of Sellers' knowledge, Sellers have not infringed, and by their
use of their Tradenames, is not infringing on any United States or
state trade name, trademark or copyright belonging to any other person,
firm or corporation and, to the best of Sellers' knowledge, the use of
the Tradenames by Buyer will not conflict with, infringe on or
otherwise violate the rights of others. Sellers' specifically
represent, warrant and covenant that they will, prior to or at Closing,
change the corporate name "Gold Dust Motel, Inc." to a different name
not using "Gold Dust," "Gold," "Dust" or any variation thereof by
amendment to the Company's Articles of Incorporation and will assign
the name "Gold Dust Motel, Inc." to the Buyer.
(aa) Material Misstatements or Omissions. Neither this
Agreement nor any other document, certificate or statement furnished to
Buyer by or on behalf of Sellers or either of them in connection with
this Agreement contains any untrue statement of a material fact, or
omits any material fact necessary to make the statements contained
herein or therein not misleading in light of the context in which they
were made.
(bb) Continued Accuracy. Each Seller shall use all reasonable
efforts to cause their representations and warranties set forth in this
Section 4 to be true and correct on and as of the Closing Date.
5. REPRESENTATIONS, WARRANTIES AND COVENANTS OF BUYER.
Buyer represents, warrants and covenants to Sellers as of the date of
the execution and delivery of this Agreement, as follows. All representations
and warranties are true and correct
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as of the date hereof and, except as otherwise expressly provided herein, will
be true and correct as of the Closing Date.
(a) Good Standing; Binding Documents. Buyer is a corporation
duly organized, validly existing and in good standing under the laws of
the State of Colorado, and is not insolvent. This Agreement has been,
and all the documents to be delivered by Buyer to Sellers at the
Closing will be, duly authorized, executed and delivered by the
signatories hereto, and in the case of the documents to be delivered
will be, legal and binding obligations of the signatories thereto
enforceable in accordance with their respective terms (except to the
extent that such enforcement may be limited by applicable bankruptcy,
insolvency, moratorium and other principles relating to or limiting
rights of contracting parties generally), and do not, and in the case
of the documents to be delivered will not, violate any provisions of
any agreement to which Buyer is a party or to which it is subject.
There are no pending, or to Buyer's knowledge, threatened legal
proceedings or actions against Buyer that could impair Buyer's ability
to perform its duties and obligations under this Agreement or any
agreement to be entered into or delivered by Buyer in connection with
this Agreement.
(b) Employment. Buyer shall hire all of Sellers' personnel at
the Premises immediately following the Closing Date and shall assume
all of such personnel's accrued employee benefits; provided however the
Buyer shall not be obligated to assume any of the Company's employee
benefit or other plans. In accordance with Section 2.8(f), all costs of
accrued employee benefits (sick leave, vacation leave, health and life
insurance benefits, 401(k) plans, etc., if any) shall be credited to
Buyer at the time of Closing. Nothing herein contained shall prevent
Buyer from exercising its right to fire or transfer any employee after
the Closing Date. On the Closing Date, the Company shall issue to all
of its employees payroll checks, dated as of the Closing Date, for all
earned salary, wages, sick pay and other compensation and benefits (net
of usual withholdings) owed to such employees for their services
rendered through the Closing Date other than payment of compensation
and bonuses arising under those severance and bonus agreements
identified on Schedule 5(b) hereto which are not yet due and payable
and the payment of which are and remain the sole responsibility of
Sellers. The Company shall comply with all provisions of federal and
state law relating to the continuation of health insurance benefits for
terminated employees. Buyer shall be responsible for providing WARN Act
notices required under the Workers Adjustment Retraining and
Notification Act, if and to the extent required, in connection with all
employee terminations of the Company's employees effected after the
Closing Date, and shall be solely responsible for, and will hold
Sellers harmless from, any WARN Act liability arising as a result of
any employee termination occurring after the Closing Date. Sellers,
however, shall be solely responsible for and shall hold Buyer harmless
from any WARN Act liability arising from any employee terminations
occurring on or prior to the Closing Date.
(c) Notification of Change. Buyer shall promptly notify
Sellers of any event or circumstance which makes any representation or
warranty of Buyer to Sellers under
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33
this Agreement materially untrue or misleading or any covenant of Buyer
under this Agreement incapable of being performed.
(d) Liquor and Gaming Licenses. Buyer shall, at its own
expense, forthwith apply for and diligently pursue the issuance of
liquor licenses and non-restricted gaming licenses from the Nevada
Gaming Authorities and from all other Governmental Authorities having
jurisdiction for the conduct by the Buyer of the Buyer's contemplated
gaming, motel, restaurant and cocktail business at the Premises from
and after the Transfer. The applications shall comply with the
requirements of the Nevada Gaming Act and the regulations promulgated
thereunder and other laws and regulations as applicable. The Buyer
shall take all reasonable actions to obtain approval of the non-
restricted gaming licenses from the Nevada Gaming Authorities prior to
March 31, 2001 and shall diligently and in good faith process its
applications and avoid taking any action that would delay the
investigation and processing thereof by the Nevada Gaming Authorities
and other appropriate Governmental Authorities and shall avoid any
delays in scheduling the applications for hearing before the Nevada
Gaming Authorities. The Sellers shall cooperate fully and in good faith
with the Buyer, as and to the extent the Buyer may reasonably request,
in processing the application and the Sellers shall execute and deliver
all certificates, instruments and documents as the Buyer may reasonably
request in connection therewith.
(e) Material Misstatements or Omissions. Neither this
Agreement nor any other document, certificate or statement furnished to
Sellers by or on behalf of Buyer in connection with this Agreement
contains any untrue statement of a material fact, or omits any material
fact necessary to make the statements contained herein or therein not
misleading in light of the context in which they were made.
(f) Continued Accuracy. Buyer shall use all reasonable efforts
to cause its representations and warranties set forth in this Section 5
to be true and correct on and as of the Closing Date.
6. CONDITIONS PRECEDENT TO CLOSING.
(a) Buyer's Conditions Precedent. The following shall be
conditions precedent to Buyer's obligation to consummate the purchase
and sale transaction contemplated herein (the "Buyer's Conditions
Precedent"):
(i) All representations and warranties of
Sellers in Section 4 shall be true and
correct as of the Closing Date and all
agreements, covenants and obligations of
Sellers under this Agreement to be performed
or complied with on or before the Closing
Date shall have been performed or complied
with and Sellers shall have executed and
delivered to Buyer a certificate to that
effect in the form attached as Schedule
6(a)(i) hereto ("Sellers' Certificate").
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(ii) No material breach or default by either
Seller shall have occurred hereunder that
has not been cured to Buyer's reasonable
satisfaction. Buyer shall provide Sellers
with written notice of any material breach
or default by Sellers promptly upon Buyer's
discovering that such breach or default
exists.
(iii) The applicable waiting periods, if any,
under the HSR Act shall have expired or been
terminated.
(iv) The Nevada Gaming Authorities shall have
determined that Buyer is a suitable
purchaser for the Premises and shall have
approved the sale of the Premises and shall
have licensed the Buyer's ability to assume
control and operation of the Premises and
the Business as of the Closing Date.
Approvals from all other applicable
counties, cities and other municipalities
having jurisdiction over the gaming and
liquor operations on the Premises shall have
been obtained. No certificate of occupancy
or any liquor or gaming license shall have
been revoked or suspended by the responsible
governmental agency.
(v) Sellers shall have executed and delivered to
Buyer at the Closing the documents which
they are required to so execute and deliver
pursuant to Section 8.
(vi) Buyer shall have received the legal opinion
of Bible, Hoy & Trachok in the form attached
hereto as Schedule 6(a)(vi).
(vii) The Closing shall not directly or indirectly
(with or without notice or lapse of time),
violate, contravene, materially conflict
with or result in a violation of any law and
shall not violate any order or decree of any
court or governmental body of competent
jurisdiction, and no suit, action,
proceeding or investigation shall have been
brought or threatened by any Person (other
than Buyer or an affiliate of Buyer) which
questions the validity or legality of this
Agreement or the transactions contemplated
hereby.
(viii) Each of the Company and the Shareholders
shall have entered into a Confidentiality
and Non-Competition Agreement in the form
attached hereto as Exhibits 21A and 21B,
respectively.
(ix) The Buyer shall have received an Alta
Owner's and Lender's policy of Title
Insurance which does not deviate materially
from the Title Report and which shall
include all endorsements reasonably
requested by Buyer or Lender and which shall
also include leasehold coverage as to the
Piazzo property.
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Each of Buyer's Conditions Precedent may be waived in whole or
in part by Buyer by written notice to Sellers and at Closing, all
Buyer's Conditions Precedent set forth herein shall either be satisfied
or so waived. Sellers shall use all reasonable efforts to ensure that
Buyer's Conditions Precedent are satisfied prior to the Closing Date
contemplated hereunder.
(b) Sellers' Conditions Precedent. The following shall be
conditions precedent to Sellers' obligation to consummate the purchase
and sale transaction contemplated herein (the "Sellers' Conditions
Precedent"):
(i) Buyer shall have delivered the Purchase
Price (subject to the prorations and
adjustments provided for in this Agreement),
and, if applicable, escrow agent shall have
delivered the Purchase Deposit and interest,
as required hereunder.
(ii) All representations and warranties of Buyer
in Section 5 shall be true and correct as of
the Closing Date and all agreements,
covenants and obligations of Buyer under
this Agreement to be performed or complied
with on or before the Closing Date shall
have been performed or complied with and
Buyer shall have executed and delivered to
Sellers a certificate to such effect in the
form attached at Schedule 6(b)(ii) hereto
("Buyer's Certificate").
(iii) No material breach or default by Buyer shall
have occurred hereunder that has not been
cured to Sellers' reasonable satisfaction.
Sellers shall provide Buyer with written
notice of any material breach or default by
Buyer promptly upon Sellers' discovering
that such breach or default exists.
(iv) The Closing shall not directly or indirectly
(with or without notice or lapse of time),
violate, contravene, materially conflict
with or result in a violation of any law and
shall not violate any order or decree of any
court or governmental body of competent
jurisdiction, and no suit, action,
proceeding or investigation shall have been
brought or threatened by any Person (other
than Sellers or an affiliate of Sellers)
which questions the validity or legality of
this Agreement or the transactions
contemplated hereby.
(v) The applicable waiting periods, if any,
under the HSR Act shall have expired or been
terminated.
(vi) The Nevada Gaming Authorities shall have
determined that Buyer is a suitable
purchaser for the Premises and shall have
approved the sale of the Premises and shall
have licensed the Buyer's
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ability to assume control and operation of
the Premises and the Business as of the
Closing Date. Approvals from all other
applicable counties, cities and other
municipalities having jurisdiction over the
gaming and liquor operations on the Premises
shall have been obtained. No certificate of
occupancy or any liquor or gaming license
shall have been revoked or suspended by the
responsible governmental agency.
(vii) Buyer shall have executed and delivered to
Sellers at the Closing the documents which
it is required to so execute and deliver
pursuant to Section 9.
(viii) Sellers shall have received the legal
opinion of Jones & Keller, P.C. in the form
attached hereto as Schedule 6(b)(viii).
Each of Sellers' Conditions Precedent may be waived in whole
or in part by Sellers by written notice to Buyer and at Closing, all
Sellers' Conditions Precedent set forth herein shall either be
satisfied or so waived. Buyer shall use all reasonable efforts to
ensure that such Sellers' Conditions Precedent are satisfied prior to
the Closing Date contemplated hereunder.
(c) Mutual Conditions Precedent.
(i) Prior to execution hereof, Buyer and Sellers
shall have agreed upon and executed a joint
certificate generally allocating the
Purchase Price among the Premises and
Purchased Assets as set forth in Exhibit 20;
provided however that Exhibit 20 may be
modified by mutual agreement of the parties
prior to Closing if, based on additional
information coming to the attention of the
parties, such modification is appropriate.
Buyer and Sellers acknowledge that such
allocation shall have been arrived at by
arm's length negotiation, and Buyer and
Sellers hereby agree, subject to the
requirements of Section 1060 of the Internal
Revenue Code of 1986, as amended (the
"Code"), and the Treasury Regulations
promulgated thereunder, in good faith to
endeavor to report consistently, in any tax
return completed or filed by such party, the
sale of the Premises and Purchased Assets
pursuant to this Agreement in accordance
with the allocation. Sellers shall provide
to Buyer, and Buyer shall provide to
Sellers, all information for Part 1 of U.S.
Treasury Department Form 8594 which will
enable Buyer and Sellers each to make, in a
timely manner, all filings (including
supplemental filings) deemed appropriate by
Sellers or Buyer pursuant to Section 1060 of
the Code, and the Treasury Regulations
promulgated thereunder. All information
provided by Sellers and Buyer in
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compliance with this paragraph shall be
complete and accurate in all respects.
(ii) Within 30 days after the date of this
Agreement, Buyer and the Company shall, if
required, prepare and file proper
notification forms and affidavits in
compliance with the HSR Act. Buyer and the
Company shall each pay one-half of all fees
payable to Governmental Authorities in
connection with such filings. If, following
the filing of such forms, any Governmental
Authority shall challenge the transaction
contemplated hereby, or request additional
filings or information, Buyer and the
Company shall take preliminary steps to
attempt to ascertain the nature of the
challenge and the likelihood that the
Governmental Authority will permit the
transaction contemplated hereby to proceed
notwithstanding the challenge. After taking
such preliminary steps, neither Buyer nor
the Company shall have any obligation to
contest such challenge or make or provide
any such filing or information, and each
shall be entitled, at its option, to
withdraw its filing and terminate this
Agreement.
(d) As used herein, the term "Condition Precedent" shall refer
to any of Buyer's Conditions Precedent or Sellers' Conditions Precedent
or the Mutual Conditions Precedent.
7. COVENANTS OF SELLERS.
Sellers hereby covenant to Buyer, as follows:
(a) Prior to the Closing, Sellers shall neither execute any
new material leases, nor terminate, renew, amend or modify any existing
lease without Buyer's prior written consent. Buyer's consent to any
such matter shall be deemed given by Buyer if Buyer fails to respond to
Sellers' written request for such consent within ten (10) business days
after Buyer's receipt thereof.
(b) Prior to the Closing, neither Seller shall, without the
prior written consent of Buyer, which consent shall not be unreasonably
withheld or delayed: (i) enter into any new contract with respect to
the Premises or the Business which will survive the Closing, nor (ii)
renew, amend or modify any assumed contract (provided Sellers may amend
or modify any assumed contract in the ordinary course of business and
such amendment or modification does not give rise to any additional
obligation that would be assumed by Buyer that exceeds Five Thousand
and no/Dollars ($5,000) for a single assumed contract and Fifty
Thousand and no/Dollars ($50,000) in the aggregate for all assumed
contracts, and provided all such assumed contracts remain terminable by
Sellers and their successors upon no more than thirty (30) days notice
to the other party thereunder). Buyer's consent to any such matter
shall be deemed given by Buyer if
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Buyer fails to respond to Sellers' written request for such consent
within ten (10) business days after Buyer's receipt thereof; provided
however, nothing in this subsection shall prevent the Sellers from
leasing, purchasing or acquiring Gaming Devices, by installment
contract or otherwise, or entering into participation agreements with
respect thereto, if deemed by the Sellers to be in the best interest of
the Business.
(c) The existing insurance policies, or equivalent coverage,
shall remain continuously in force through the Closing Date.
(d) At all times prior to the Closing, Sellers shall operate,
and manage the Premises in a manner consistent with Sellers' past
practices and the provisions of this Agreement, shall maintain present
services, shall maintain the Premises in good repair and working order,
and shall perform in all material respects when due all of Sellers'
obligations under any leases and the assumed contracts and otherwise in
accordance in all material respects with applicable permits, licenses
and laws, ordinances, rules and regulations affecting the Premises or
the Business. Sellers shall, in the ordinary course of business of
operating the Premises or the Business, replace any inventory or
supplies that are depleted, and any inventory, furniture, fixtures,
equipment or supplies that are damaged, become obsolete or inoperable
in the ordinary course of business after the date hereof. Except as
otherwise provided herein, Sellers shall deliver the Premises to Buyer
at the Closing in substantially the same condition as it was on the
date hereof, normal wear and tear excepted. None of the Purchased
Assets shall be removed from the Premises, unless replaced by Purchased
Assets of equal or greater utility and value.
(e) The Company shall maintain its books and records in
accordance with past practices, shall pay all bills and invoices for
labor, goods, materials and services of any kind relating to the
Premises or the Business, and employee salary, worker's compensation
and other accrued benefits, together with all applicable payroll taxes,
that became due and payable during the period on or prior to the
Closing.
(f) After the date hereof and prior to the Closing, no part of
the Premises, or any interest therein, will be alienated, liened,
encumbered or otherwise transferred.
(g) Sellers shall not take any action, fail to take any action
or permit to occur any event which would breach any of its covenants
contained herein or cause any of their representations or warranties to
be untrue if made immediately after such event or which would have been
required (or result in any situation which would be required) to be
disclosed hereunder had such action or inaction been taken or failed to
have occurred or had such event occurred prior to the date hereof.
Sellers shall notify Buyer of any material change in any condition with
respect to the Premises or the Business, or of any event or
circumstance which makes any representation or warranty of Sellers
under this Agreement untrue or misleading, or any covenant of Sellers
under this Agreement incapable or less likely of being performed
promptly after Sellers become aware thereof.
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(h) On the Closing Date, Sellers shall deliver possession of
the Premises and the building subject of the Warehouse Lease to Buyer,
free of any tenants other than under the Sierra Development Operating
Lease.
(i) There will not be any material change in the compensation
and benefits of any personnel employed in the Business except for
changes in the ordinary course of business consistent with past
practice.
(j) From and after the date of this Agreement and until the
Closing Date, neither Seller nor other agents retained by or acting on
behalf of them shall, directly or indirectly, solicit, initiate or
encourage, or enter into any agreement with, or hold discussions with,
any corporation, partnership, person or other entity or group (other
than Buyer) seeking to make a proposal regarding a sale or purchase of
the Premises or the equity interests of Sellers or a merger,
consolidation, sale, business combination, strategic alliance or
purchase of assets or other similar transaction involving Sellers.
8. SELLERS' CLOSING DOCUMENTS.
On the Closing Date, Sellers shall deliver or cause to be delivered to
Buyer the following:
(a) Fee simple title to the Fee Property as evidenced by the
Deed free and clear of all liens, exceptions and encumbrances other
than as set forth in the Title Report.
(b) ALTA Owner's Policy of Title Insurance issued by Title
Company insuring Buyer's title to the Fee Property to be free and clear
of all liens and encumbrances except for items 1 through 13 (all taxes
and assessments current), and 14 through 25, as shown on the Title
Report, which shall include leasehold coverage as to the Piazzo
Property. Buyer has elected to purchase an ALTA Owner's and Lender's
Policy of Title Insurance and any endorsement thereto as Buyer and
Lender may desire. Buyer shall pay all costs, charges and expenses,
including, without limitation, the cost of an ALTA survey, relating to
ALTA coverage to the extent the costs, charges and expenses exceed the
amount Sellers would have paid for a CLTA Owner's Policy of Title
Insurance.
(c) The Assignment of Sierra Development Operating Lease with
lessee's consent attached.
(d) The Assignment of Piazzo Lease with lessor's consent
attached.
(e) The Assignment of Warehouse Lease with lessor's consent
attached.
(f) The Cavanaugh Lease Cancellation Agreement.
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(g) The Gold Dust Bill of Sale.
(h) The Shareholder's Bill of Sale.
(i) Assignment of Tradenames.
(j) Assignment of Equipment Leases and Contracts.
(k) The Joint Closing Instructions.
(l) The opinion of Bible, Hoy & Trachok.
(m) An executed copy of the tax allocation schedule in the
form attached hereto as Exhibit 20.
(n) An executed copy of the Non-Competition Agreements in the
forms attached hereto as Exhibits 21A and 21B.
(o) A Seller's Certificate executed by Sellers.
(p) List of accrued employee benefits as of the Closing Date,
as contemplated in Section 2.8(f).
(q) Good standing certificate for the Company from the
Secretary of State of Nevada.
(r) Certified copies of the corporate resolutions of the
Company's Board of Directors and Shareholders authorizing the execution
and delivery of this Agreement and consummation of the transactions
contemplated hereunder.
(s) Any other documents, instruments or agreements reasonably
necessary to close the transaction as contemplated by this Agreement.
9. BUYER'S CLOSING DOCUMENTS.
On or before Closing, Buyer shall deliver to Sellers:
(a) The Purchase Price, less the Sellers' share of closing
costs and prorations, by wire transfer of immediately available funds
or cashier's check.
(b) The Buyer Assumption and Indemnity Agreement.
(c) The opinion of Jones & Keller, P.C.
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(d) An executed copy of the tax allocation schedule in the
form attached hereto as Exhibit 20.
(e) An executed copy of the Non-Competition Agreements in the
forms attached hereto as Exhibits 21A and 21B.
(f) A Buyer's Certificate executed by Buyer.
(g) The Joint Closing Instructions.
(h) Any other documents, instruments or agreements reasonably
necessary to close the transaction as contemplated by this Agreement.
10. CONFIDENTIALITY.
(a) Disclosures. Prior to the Closing Date, Buyer shall treat
as confidential and shall not disclose or use, and will direct its
representatives not to disclose or use, to the detriment of Sellers,
any information with respect to the Premises or Business which was
obtained by Buyer as a result of its investigations, or furnished by
the Sellers or its representatives to the Buyer or its representatives
at any time or in any manner in connection with the purchase and sale
transaction contemplated by this Agreement (the "Transaction"). Upon
termination of this Agreement, Buyer shall either (i) return to Sellers
all of the information which Buyer received from Sellers during its
investigation, or (ii) immediately destroy all of such information and
certify in writing to Sellers that it has done so. The confidentiality
and non-disclosure obligations contained in this Section 10 shall not
apply if, and to the extent, the Buyer can demonstrate that: (a) the
information was known to Buyer (as established by written documents
existing before disclosure of such information by Sellers) prior to the
earlier of its investigation or its receipt of such information from
Sellers, (b) the information is or becomes part of the public domain
other than by Buyer's (or its representatives) direct or indirect act,
(c) the information is legally disclosed to Buyer by a third-party
without confidential or proprietary restrictions, or (d) similar
information is independently developed by Buyer without access to
Sellers' information. In the event that Buyer or its representatives
are at any time requested or required by any court or any other duly
authorized governmental entity (by oral questions, interrogatories,
requests for information or documents, subpoena, or similar process) to
disclose any of the information from its investigation or received from
Sellers, Buyer agrees to provide the Sellers with prompt notice of such
request(s) so that Sellers may seek an appropriate protective order
and/or waive compliance with the provisions of this Section 10.
(b) Communications. Prior to the Closing, neither Buyer nor
Sellers will (and each will direct its representatives not to) make,
directly or indirectly, any public comment, statement, or communication
with respect to, or otherwise to disclose or to permit the disclosure
of the existence of discussions regarding the Transaction or any of the
conditions, or other aspects of the Transaction; provided, however,
that Buyer
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and Sellers may discuss with and provide information regarding the
Transaction, (i) as required by securities disclosure laws, (ii) to the
media and to stock analysts, investment bankers and other financial
analysts, so long as such discussions and the information provided by
the disclosing party is within the scope of any press release approved
by Buyer and Sellers (and such information does not address issues or
provide information which was not addressed or provided in such joint
press release), and (iii) to Buyer's and Sellers' respective lenders,
attorneys, accountants, advisors and other representatives (provided
Buyer or Sellers, as the case may be, concurrently informs all of such
persons and entities of the confidential nature of such information).
Further, Buyer shall have the right to contact and provide information
regarding the Transaction to the Nevada Gaming Authorities and any
other governmental or regulatory authority. If either Buyer or Sellers
are required by law to make any disclosures which would otherwise be
disallowed by this Section 10, the party intending to make such
disclosure must first provide to the other party for review and
approval (which shall not be unreasonably withheld or delayed) the
content of the proposed disclosure, the reasons that such disclosure is
required by law, and the time and place that the disclosure will be
made.
The obligations set forth in this Section 10 shall survive the
termination of this Agreement.
11. OTHER COVENANTS OF THE BUYER AND SELLERS.
(a) Tax Considerations. Buyer agrees that the Shareholder may
assign his interest in the Cavanaugh Property to an exchange
facilitator for the purpose of completing an exchange of the Cavanaugh
Property in a transaction which will qualify for treatment as a tax
deferred exchange pursuant to the provisions of Section 1031 of the
Code and applicable state revenue and taxation code sections (a "1031
Exchange"). Buyer agrees to cooperate with the Shareholder in
implementing any assignment and 1031 Exchange provided that such
cooperation shall not entail any additional expense to the Buyer or
cause the Buyer any liability whatsoever beyond Buyer's existing
obligations under this Agreement. No assignment by the Shareholder
shall relieve Shareholder from any of his obligations hereunder, nor
shall the Shareholder's ability to consummate a tax deferred exchange
be a condition to the performance of the Shareholder's obligations
under this Agreement.
(b) Costs. Costs and expenses relating to the Transaction
shall be borne and paid as follows:
(i) All documentary stamp or transfer taxes and
fees and recording fees relating to the Deed
shall be borne and paid by Company and all
sales, use or similar taxes, if any,
relating to the Premises and the Purchased
Assets shall be paid by the Company and the
Company shall deliver a receipt prior to or
at Closing from the
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Nevada Department of Taxation showing that
it has paid all sales taxes due and owing.
(ii) The Company shall have paid all required
state unemployment taxes through the date of
Closing and shall deliver at Closing a
letter to such effect from the Nevada
Department of Employment Security.
(iii) The Buyer has elected to purchase an ALTA
Owner's and Lender's Policy of Title
Insurance and endorsements as provided in
Section 8(b). The Company shall be
responsible for the payment of that portion
of the premium which would equal the cost of
a CLTA Owner's Policy of Title Insurance and
Buyer shall be responsible for all costs,
charges and expenses in excess of that
amount.
(iv) The costs and expenses of Title Company for
the escrowing of the monies and documents as
contemplated herein and by the Joint Closing
Instructions shall be paid one-half by
Company and one-half by Buyer.
(v) Except as otherwise specifically provided in
this Agreement, Sellers and Buyer shall bear
their own costs and expenses arising out of
the negotiation, execution, delivery and
performance of this Agreement and the
consummation of the transactions
contemplated herein including, without
limitation, legal and accounting fees and
expenses.
(c) Gaming Taxes and Fees. Buyer shall be responsible for the
payment of all expenses relating to the approval of Buyer for a
non-restricted gaming license for the Premises and shall further be
responsible for all gaming taxes and fees relating to the transfer of
the Purchased Assets to Buyer which may be assessed by the Nevada
Gaming Authorities pursuant to Chapter 463 of the Nevada Revised
Statutes or the Regulations promulgated thereunder and all gaming taxes
and fees accruing after the Transfer.
(d) Possession. Possession of the Premises and the
Motel/Casino Operation shall be given to Buyer as of the Transfer as
follows:
(i) The Sellers will give the Buyer possession
of the Premises at the Transfer. The Company
will be entitled to retain all cash relating
to the Motel/Casino Operation other than in
Bankroll Funds, which Buyer shall purchase.
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(ii) The cash in the buckets, currency acceptors,
drop boxes and hoppers (or slot drops) in
all Gaming Devices shall be collected and
counted as a portion of the Bankroll Funds,
except that all $.05 Gaming Devices shall
have $80 in fills (loads) and all $.25
Gaming Devices shall have $200 of fills
(loads) as of the Transfer which shall not
be deemed Bankroll Funds.
(iii) With respect to progressive jackpots, if
any, the Company shall be responsible for
the accrued liability shown by the
progressive meter readings (less resets) on
the machines as of the Transfer and the
books and records of the Company.
(iv) As soon as practicable, Company and Buyer
will agree upon a transition plan containing
full details of the procedures for the
transfer of the Bankroll Funds and the
operations of the casino embodying the
understandings set forth in this Section.
(v) Buyer understands that Company, in the
normal course of business, has conducted
special events or promotions designed to
attract customers to the Motel/Casino
Operation, one or more of which special
events or promotions involved the issuance
of discount or other customer entitlement
coupons. Buyer agrees to accept and honor
all valid and unexpired discount or
entitlement coupons tendered to the
Motel/Casino Operations after the Transfer.
Company shall indemnify Buyer from all
expenses in excess of $10,000 relating to
any promotional discounts and coupons which
are issued prior to the Transfer but
redeemed subsequent thereto.
(vi) Sellers shall pay all costs up to an
aggregate amount of Fifty Thousand and
no/100 Dollars ($50,000) incurred in
obtaining a Business License from the City
of Reno and any related approvals or permits
for the Premises including the cost of any
repairs or improvements required to be made
to the buildings situated thereon by the
City's Fire Department and/or Building
Department. Any such costs shall have been
paid at the Transfer by the Sellers, or
shall be deducted from the Purchase Price
and paid by the Buyer at Closing. In the
event the costs incurred in obtaining the
Business License and any other required
approval, license or permit for the
Premises, including the cost of any repairs
or improvements required to be made to the
buildings situated thereon, exceed the sum
of $50,000. Buyer may pay any costs incurred
for any remodeling or additional
improvements to the Premises which are
required by the City of Reno as a condition
for the Business License and any other
required
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approval, license or permit and any costs
incurred in satisfying any requirement
imposed by the City's Fire Department and/or
Building Department. If such costs exceed
$50,000, the Buyer may elect not to pay them
and terminate this Agreement under Section
14(a)(iv) hereof.
12. CLOSING; CLOSING DATE.
Subject to the satisfaction of all terms and conditions set forth in
this Agreement, and unless extended pursuant to Section 14 below, the closing of
the sale and purchase herein contemplated (the "Closing") shall occur on the
Closing Date defined in Section 1.16 above, at the offices of Bible, Hoy &
Trachok in Reno, Nevada.
13. LOSS BY FIRE, OTHER CASUALTY OR CONDEMNATION.
(a) Destruction or Damage. In the event that prior to the
Closing Date, the Premises, or any material part thereof, is destroyed
or damaged, Buyer shall have the right exercisable by giving notice to
Sellers within fifteen (15) days after Buyer learns of the same, to
terminate this Agreement. If Buyer does not elect to so terminate, then
Buyer shall accept the Premises on the Closing Date in its then
physical condition with no reduction in the Purchase Price and Buyer
shall be entitled to receive (i) an assignment of all of Sellers'
rights to any insurance proceeds payable by reason of such damage or
destruction, and Sellers shall execute and deliver to Buyer a written
assignment thereof (together with all of Sellers' right to compromise,
settle or adjust any claims to such proceeds) at or prior to the
Closing and (ii) a credit against the Purchase Price for any deductible
or self insured retention on any insurance policy or obligated person
responsible for such claim, deductible or retention. Sellers shall
cooperate with Buyer and take all reasonable actions requested by Buyer
in order to give effect to and carry out the intent and terms of such
assignment provided that in no event shall Sellers be required to incur
any cost or expense in doing so (and, subject to the foregoing, Sellers
shall be relieved of any further obligation with respect to the
collection of such proceeds). Sellers shall not compromise, settle or
adjust any claims to such proceeds without Buyer's prior written
consent, and any proceeds received by Sellers prior to the Closing Date
shall be deposited into escrow and disbursed to Buyer at the Closing.
(b) Condemnation. In the event that prior to the Closing Date,
the Premises, or any part thereof, is taken or becomes condemned or
becomes the subject of a pending or threatened taking, condemnation or
rezoning by any governmental, quasi- governmental or public authority,
under Chapter 279 of the Nevada Revised Statutes or otherwise, Buyer
shall have the right to proceed as set forth in this Section 13.
(i) Buyer shall have the right exercisable by
giving notice to Sellers within fifteen (15)
days after Buyer learns of the same, to
terminate this Agreement in the event that
the condemnation or taking is, or would be
if consummated, a Material Taking
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Condition. As used herein, a "Material
Taking Condition" shall have occurred in the
event that the Premises or any portion
thereof is condemned or taken such that (A)
access to or egress from the Premises or any
portion thereof (as such access and egress
exists on the date of this Agreement) shall
be materially impaired) or (B) Buyer
determines reasonably and in good faith that
its plans to develop and operate the
Premises as a gaming and liquor
establishment will be materially and
adversely affected thereby. Buyer shall
include in any such termination notice
Buyer's good faith explanation supporting
Buyer's determination that a Material Taking
Condition has occurred. In the event Buyer
delivers any such termination notice,
neither party shall have any further rights
or obligations hereunder except that any
Purchase Deposit with interest, if any,
shall be immediately refunded to Buyer or in
the alternative, any letter of credit in
favor of Sellers shall be immediately
cancelled.
(ii) If Buyer does not terminate the Agreement
pursuant to the foregoing provisions of this
Section 13(b), then Buyer shall be required
to proceed to Closing, subject to the other
terms and Conditions Precedent set forth in
this Agreement, and Buyer shall accept the
Premises on the Closing Date subject to such
condemnation or taking with no reduction in
the Purchase Price, in which case Buyer
shall be entitled to receive an assignment
of all of Sellers' rights to any
condemnation or taking awards or proceeds
payable by reason of such condemnation or
taking awards, or proceeds payable by reason
of such condemnation or taking, and Sellers
shall execute and deliver to Buyer a written
assignment thereof (together with all of
Sellers' rights to compromise, settle or
adjust any claims to such awards or
proceeds) at or prior to the Closing. Upon
Sellers' delivery of such assignment,
Sellers shall cooperate with Buyer and take
all reasonable actions requested by Buyer in
order to give effect to and carry out the
intent and terms of such assignment,
provided that in no event shall Sellers be
required to incur any cost or expense in
doing so (and, subject to the foregoing,
Sellers shall be relieved of any further
obligation with respect to the collection of
such awards and proceeds). If Buyer proceeds
under this clause (ii), Sellers shall not
compromise, settle or adjust any claims to
such awards or proceeds without Buyer's
prior written consent and any awards or
proceeds received by Sellers prior to the
Closing Date shall be deposited in the
Closing escrow and disbursed to Buyer
hereunder.
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(c) Notice. Sellers agree to give Buyer written notice of any
condemnation or taking, or threatened condemnation or taking, and any
damage or destruction of the Premises, promptly after learning of the
same. The provisions of this Section 13 shall survive the Closing.
14. TERMINATION AND EXTENSIONS.
(a) Termination.
(i) The Buyer may terminate this Agreement, if no later
than March 31, 2000, the result of Buyer's
investigations conducted pursuant to Section 3
discloses any fact or circumstance that makes any of
Sellers' representations or warranties materially
incorrect or inaccurate in which event the Purchase
Deposit and interest, if any, on deposit with the
escrow agent shall be immediately returned to Buyer
or, in the alternative, the Buyer's letter of credit
shall be immediately cancelled and the Buyer shall
have no further rights hereunder or remedies against
the Sellers for breach of their representations and
warranties.
(ii) If the Closing has not occurred by January 31, 2001
through no fault of the Sellers, this Agreement
shall, subject to the extensions in (v) and (vi)
below, automatically terminate, and the Purchase
Deposit and interest, if any, shall be paid to the
Sellers. Upon termination under this subsection
(ii), neither party shall have any further remedies
against the other.
(iii) If the Closing has not occurred by January 31, 2001,
subject to the extensions in (v) and (vi) below,
only because of the Sellers' refusal to close, the
Purchase Deposit and interest, if any, shall be
returned to Buyer or its letter of credit cancelled,
and Buyer shall retain any legal remedies it may
have against Sellers; if the Closing has not
occurred by January 31, 2001, subject to the
extensions in (v) and (vi) below, because of a
failure of any of the conditions set forth in
Section 6(a)(i)-(ix), except Section 6(a)(iv), the
Buyer shall have the right to (A) proceed to Closing
on the same terms and conditions set forth in this
Agreement, or (B) terminate this Agreement and
receive the Purchase Deposit and interest, if any,
from the escrow agent, or in the alternative,
immediately cancel the letter of credit. Upon
termination under this subsection (B), the Buyer
shall only have rights and remedies against the
Sellers for breach of Sellers' representations or
warranties which were not true on the date of
execution of this Agreement or a breach of this
Agreement under Sections 2.7, 3(b), 7 or 11(b)(ii).
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(iv) If the Closing does not occur because of Buyer's
termination of this Agreement under Section
11(d)(vi) or Section 13, the Purchase Deposit and
all other sums on deposit with the escrow agent
shall be immediately returned to Buyer or, in the
alternative, the Buyer's letter of credit shall be
immediately cancelled and the Buyer shall have no
legal remedies against the Sellers.
(v) Subject to the foregoing, this Agreement shall
automatically terminate on January 31, 2001 unless
Buyer has deposited into escrow with an escrow
agent pursuant to an escrow agreement satisfactory
to Buyer and Sellers the sum of Fifty Thousand
Dollars ($50,000) (the "First Escrow Payment"), in
which event this Agreement shall continue in full
force and effect through February 28, 2001.
(vi) If the Closing has not occurred on or before
February 28, 2001, through no fault of the Sellers,
then this Agreement shall automatically terminate
on March 1, 2001 and the escrow agent shall pay the
First Escrow Payment to the Sellers unless Buyer
has deposited into escrow the sum of Fifty Thousand
Dollars ($50,000) (the "Second Escrow Payment"), in
which event this Agreement shall continue in full
force and effect through March 31, 2001.
(vii) If the Closing has not occurred by March 31, 2001
through no fault of the Sellers, both the First and
Second Escrow Payments, plus the Purchase Deposit
shall be paid to the Sellers and this Agreement
shall be terminated as of 12:01 a.m. April 1, 2001.
Upon termination under this subsection (vii)
neither party shall have any further remedies
against the other.
(viii) Any amounts deposited by Buyer under (iii) and (iv)
above shall be paid to the Buyer if a Closing
occurs.
(ix) The Buyer, at its expense, will immediately engage
a reputable engineering firm to perform an industry
standard Phase I environmental report on the
Premises which shall include an examination of the
structures on the Premises and a report with
respect to any asbestos problem. Such report shall
be completed as soon as possible, but no later than
March 31, 2000. If the results of the report are
materially unsatisfactory in the Buyer's reasonable
business judgment and if the Seller declines to
fully satisfy, at its sole expense, the
recommendations set forth in the report, including
all necessary remediation measures, the Buyer shall
have the right to: (A) proceed to Closing on the
same terms
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and conditions set forth in this Agreement, or (B)
terminate this Agreement and receive the Purchase
Deposit and interest, if any, from the escrow
agent, or in the alternative, immediately cancel
the letter of credit; provided however, if Buyer
elects to proceed to Closing under alternative (A)
it will satisfy, at its sole expense, the
recommendations set forth in the report and, unless
the Sellers had actual, conscious knowledge of the
defects causing the recommendations, the Buyer
shall have no legal remedy against the Sellers for
such defects.
(x) The Buyer at its expense will immediately engage a
reputable firm to conduct an ALTA survey of the
Premises. Such report shall be completed as soon as
possible but not later than March 31, 2000. If the
survey discloses the existence of easements or items
are reflected which, in the Buyer's reasonable
discretion, adversely affect Title or the Buyer's
ability to utilize or expand the improvements on the
Premises or other defects which materially deviate
from the Title Report and the Seller declines, at
its sole expense, to cause such easements to be
removed or to cure such defects, the Buyer shall
have the right to: (A) proceed to Closing on the
same terms and conditions set forth in this
Agreement; or (B) terminate this Agreement and
receive the Purchase Deposit and interest, if any
from the escrow agent, or in the alternative,
immediately cancel the letter of credit. Upon any
such termination, the Buyer shall have no further
legal remedies against the Sellers.
(xi) The Buyer at its expense will immediately engage a
reputable law firm to determine that the provisions
of NRS 463.1605 and applicable local ordinances do
not restrict the Nevada Gaming Authorities from
granting Buyer a nonrestricted gaming license at the
Premises. The determination shall be completed as
soon as possible but not later than March 31, 2000.
If the determination discloses facts which, in the
Buyer's reasonable discretion, adversely affect the
Buyer's ability to utilize or expand the
improvements on the Premises, the Buyer shall have
the right to: (A) proceed to Closing on the same
terms and conditions set forth in this Agreement; or
(B) terminate this Agreement and receive the
Purchase Deposit and interest, if any, from the
escrow agent or, in the alternative, immediately
cancel the letter of credit. Upon any such
determination, the Buyer shall have no further legal
remedies against the Sellers.
(xii) Thirty days prior to Closing, accountants for the
Company and accountants for the Buyer shall
calculate the Company's EBITDA
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according to Exhibit 9B. If such EBITDA is less than
$5,100,000 for the twelve months immediately
preceding the month in which the Closing is to occur,
the Buyer shall have the right to: (A) proceed to
Closing on the terms and conditions set forth in this
Agreement; or (B) terminate this Agreement and
receive from the escrow agent all amounts deposited
under (iii) and (iv) above along with the Purchase
Deposit and interest, if any, or in the alternative,
cancel the letter of credit. Upon termination under
subsection (B) hereof, the Buyer shall have no
further legal remedies against the Sellers.
15. INDEMNIFICATIONS.
(a) Indemnification by Sellers. Sellers, jointly and severally
as the Company and the Shareholder, shall indemnify, defend and hold
harmless Buyer, and its officers, directors, shareholders, employees,
agents, representatives and affiliates (collectively, "Buyer
Indemnified Persons") against and in respect of any and all losses,
costs, expenses (including, without limitation, costs of investigation
and defense and reasonable attorneys' fees), claims, damages,
obligations, liabilities or diminution in value, whether or not
involving a third-party claim (collectively, "Damages"), arising out
of, based upon or otherwise in respect of: (i) any third party claim
related to the Premises or the Business and arising from any act,
conduct or omission of Sellers or their affiliates occurring at any
time or times before or on the Closing Date; or (ii) any liability or
obligation of Buyer as a result of Sellers' or Buyer's failure to
comply with bulk sales or bulk transfer laws or to pay sales taxes, if
any, resulting from the sale of assets contemplated by this Agreement.
(b) Indemnification by Buyer. Buyer shall indemnify, defend
and hold harmless the Company, its officers, directors, employees,
agents, representatives and affiliates, and the Shareholders
(collectively, "Sellers Indemnified Persons"), against and in respect
of any and all Damages, arising out of, based upon or otherwise in
respect of any third party claim related to the Premises or the
Business and arising from any act, conduct or omission of Buyer or its
affiliates, occurring at any time or times after the Transfer.
(c) Procedure for Indemnification -- Third Party Claims.
(i) Within 15 days after receipt by an indemnified party
of notice of the commencement of any proceeding
against it to which the indemnification in this
Section 15 relates, such indemnified party shall, if
a claim is to be made against an indemnifying party
under Section 15, give notice to the indemnifying
party of the commencement of such proceeding, but
the failure to so notify the indemnifying party will
not relieve the indemnifying party of any liability
that it may have to any indemnified party, except to
the
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extent that the indemnifying party demonstrates that
the defense of such proceeding is materially
prejudiced by the indemnified party's failure to
give such notice.
(ii) If any proceeding referred to in paragraph (i) above
is brought against an indemnified party and it gives
notice to the indemnifying party of the commencement
of such proceeding, the indemnifying party will be
entitled to participate in such proceeding and, to
the extent that it wishes (unless (x) the
indemnifying party is also a party to such
proceeding and the indemnified party determines in
good faith that joint representation would be
inappropriate, or (y) the indemnifying party fails
to provide reasonable assurance to the indemnified
party of its financial capacity to defend such
proceeding and provide indemnification with respect
to such proceeding), to assume the defense of such
proceeding with counsel reasonably satisfactory to
the indemnified party and, after notice from the
indemnifying party to the indemnified party of its
election to assume the defense of such proceeding,
the indemnifying party will not, as long as it
diligently conducts such defense, be liable to the
indemnified party under Section 15 for any fees of
other counsel or any other expenses with respect to
the defense of such proceeding, in each case
subsequently incurred by the indemnified party in
connection with the defense of such proceeding, If
the indemnifying party assumes the defense of a
proceeding, without reservation of rights, (aa) it
will be conclusively established for purposes of
this Agreement that the claims made in that
proceeding are within the scope of and subject to
indemnification; (bb) no compromise or settlement of
such claims may be effected by the indemnifying
party without the indemnified party's consent unless
(A) there is no finding or admission of a violation
of laws by the indemnified person (or any affiliate
thereof) or any violation of the rights of any
entity or person and no effect on any other claims
that may be made against the indemnified party, and
(B) the sole relief provided is monetary damages
that are paid in full by the indemnifying party; and
(cc) the indemnifying party will have no liability
with respect to any compromise or settlement of the
claims underlying such proceeding effected without
its consent (which shall not be unreasonably
withheld or delayed). If notice is given to an
indemnifying party of the commencement of any
proceeding and the indemnifying party does not,
within thirty (30) business days after the
indemnified party's notice is given, give notice to
the indemnified party of its election to assume the
defense of such proceeding, the indemnifying party
will be bound by any
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determination made in such proceeding or any
compromise or settlement effected by the indemnified
party.
(iii) Notwithstanding the foregoing, if an indemnified
party determines in good faith that there is a
reasonable probability that a proceeding may
adversely affect it or its affiliates other than as
a result of monetary damages for which it would be
entitled to indemnification under this Agreement,
the indemnified party may, with respect to those
issues, by notice to the indemnifying party, assume
the exclusive right to defend, compromise or settle
such proceeding, but the indemnifying party will not
be bound by any determination of a proceeding so
defended or any compromise or settlement effected
without its consent (which may not be unreasonably
withheld or delayed).
(d) Procedure for Indemnification -- Other Claims. A claim for
any matter under Section 15(a)(ii) shall be governed by the procedures
set forth in (c) immediately above.
(e) Limitations and Requirements -- Sellers Indemnification.
(i) Except as may otherwise expressly be provided in
this Agreement and in the absence of fraud or
intentional misrepresentation by Sellers, no claim
for indemnification arising out of or based upon
Section 15(a)(i), or
(ii) shall be made unless a claim arises and written
notice pursuant to Section 15(c) or 15(d) is
delivered to the indemnifying party on or prior to
the end of the thirty-sixth month following Closing.
(f) Limitations and Requirements -- Buyer's Indemnification.
(i) Except as may otherwise expressly be provided in
this Agreement and in the absence of fraud or
intentional misrepresentation by Buyer, no claim or
indemnification arising out of or based upon any
representation or warranty pursuant to Section 15(b)
shall be made unless a claim arises and written
notice pursuant to Section 15(c) is delivered to the
indemnifying party on or prior to the end of the
thirty-sixth month following Closing.
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16. BROKERS.
Sellers and Buyer each represent and warrant to the other that no
brokerage commission, finder's fee or other compensation is due or payable by
reason of either's actions in the transactions contemplated hereby. Each party
agrees to indemnify and hold the other harmless from and against any Damages
incurred by the other by reason of any breach or inaccuracy of the
representation and warranty contained in this Section 16. The parties'
respective obligations under this Section 16 shall survive the termination of
this Agreement.
17. MISCELLANEOUS.
(a) Entire Agreement. Except for the other transaction
documents expressly contemplated by this Agreement, this Agreement is
the entire agreement among the parties hereto with respect to the
subject matter hereof and supersedes all prior agreements between the
parties with respect to the matters contained in this Agreement. Any
waiver, modification, consent or acquiescence with respect to any
provision of this Agreement or with respect to any failure to perform
in accordance therewith shall be set forth in writing and duly executed
by or on behalf of the party to be bound thereby. No waiver by any
party of any breach hereunder shall be deemed a waiver of any other or
subsequent breach.
(b) Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original, but all of
which when taken together shall constitute one and the same instrument.
The signature page of any counterpart may be detached therefrom without
impairing the legal effect of the signature(s) thereon provided such
signature page is attached to any other counterpart identical thereto
except having additional signature pages executed by other parties to
this Agreement attached thereto.
(c) Time of the Essence. Time is of the essence in the
performance of and compliance with each of the provisions and
conditions of this Agreement.
(d) Notices. Any communication, notice or demand of any kind
whatsoever which either party may be required or may desire to give to
or serve upon the other or upon any title company or escrow holder
hereunder shall be in writing and delivered by personal service
(including express or courier service), by electronic communication
whether by e-mail, telegram or telecopying (with confirmed receipt
required), or by registered or certified mail, postage prepaid, return
receipt requested, addressed as follows:
If to Sellers: John E. Cavanaugh, President
Gold Dust Motel, Inc.
Post Office Box 2959
Reno, Nevada 89509
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With a copy to: Paul A. Bible, Esq.
Bible, Hoy & Trachok
201 West Liberty Street
Third Floor
Reno, Nevada 89501
Telecopy No.: (775) 786-7426
If to Buyer: Black Hawk Gaming & Development Co., Inc.
Post Office Box 21
240 Main Street
Black Hawk, Colorado 80422
Attention: Stephen R. Roark
Telecopy No.: (303) 582-0239
With a copy to: Samuel E. Wing, Esq.
Jones & Keller, P.C.
World Trade Center
1625 Broadway, 16th Floor
Denver, Colorado 80202
Telecopy No.: (303) 893-6506
Any party may change its address for notice by written notice given to
the other in the manner provided in this Section 17(d). Any such
communication, notice or demand shall be deemed to have been duly given
or served on the date personally served, if by personal service, one
(1) day after the date of confirmed dispatch, if by electronic
communication, or on the date shown on the return receipt or other
evidence of delivery, if mailed.
(e) No Other Representations. The making, execution and
delivery of this Agreement by the parties hereto has been induced by no
representations, statements, warranties or agreements other than those
expressly set forth herein.
(f) Saving Clause. Wherever possible, each provision of this
Agreement shall be interpreted in such a manner as to be valid under
applicable law, but, if any provision which is not so material that it
comprises the essence of this Agreement shall be invalid or prohibited
thereunder, such invalidity or prohibition shall be construed as if
such invalid or prohibited provision had not been inserted herein and
shall not affect the remainder of such provision or the remaining
provisions of this Agreement.
(g) Standards of Interpretation. (i) The language in all parts
of this Agreement shall be in all cases construed simply according to
its fair meaning and not strictly for or against any of the parties
hereto for any reason (including by virtue of the fact that this
Agreement may have been drafted or prepared by counsel for one of the
parties, it being recognized that both Buyer and Sellers, and their
respective counsel, contributed materially and substantially to the
preparation of this Agreement). Wherever
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the words "include" or "includes" are used in this Agreement, they
should be interpreted in a non-exclusive manner as though the words
"without limitation" immediately followed the same. Section headings of
this Agreement are solely for convenience of reference and shall not
govern the interpretation of any of the provisions of this Agreement;
and (ii) the representations and warranties contained in Section 4
above, and elsewhere in this Agreement, shall in each and every event
whereby an exercise of discretion or a statement to the "best
knowledge", "best of knowledge" or "knowledge" is required on behalf of
any party to this Agreement be deemed to require that such exercise of
discretion or statement be in good faith, with due diligence, to the
best efforts of each such party and be exercised always in a reasonable
manner and within reasonable times.
(h) Survival of Representations and Warranties. All
representations and warranties contained herein or made in writing by
or on behalf of any party to this Agreement in connection herewith
shall survive the execution and delivery of this Agreement for a period
of thirty-six months following the Closing.
(i) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Nevada without
regard to conflicts of law principles. Any action or proceeding seeking
to enforce any provision of, or based upon any right arising out of
this Agreement shall be brought by and against the parties in the
United States District Court for the District of Nevada in Reno, Nevada
or, in the event that the dollar jurisdictional amount for federal
court jurisdiction is not met, then such action shall be brought in the
Court in Washoe County, Nevada, and each of the parties hereto hereby
consents to the jurisdiction of such courts in any such action or
proceeding and waives any objection to venue laid therein.
(j) Remedies. The limitation of remedies contained in Sections
11(d)(vi), 13 and 14 is not intended to restrict any other legal
remedies the parties may have against each other arising under this
Agreement.
(k) Attorneys' Fees. If any action is brought by either party
against the other party hereunder, the prevailing party shall be
entitled to recover from the other party reasonable attorneys' court
costs and expenses incurred in connection with the prosecution or
defense of such action. For purposes of this Agreement, the term
"attorneys' fees" or "attorneys' fees and costs" shall mean the fees
and expenses of counsel to the parties hereto, which may include
printing, duplicating and other expenses, air freight charges, and fees
billed for law clerks, paralegals and other persons not admitted to the
bar but performing services under the supervision of an attorney.
(l) Binding Agreement; Assignment. This Agreement shall be
binding upon and inure to the benefit of each of the parties hereto and
to their legatees, legal representatives, executors or administrators,
respective transferees, successors, and assigns; provided, however,
that neither this Agreement nor any of the rights or
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obligations of Sellers or Buyer hereunder shall be transferred or
assigned, without the prior written consent of the other party;
provided Buyer shall have the right to assign all of its right, title
and interest under this Agreement to any Subsidiary of Buyer at any
time prior to the Closing, whereupon such assignee shall succeed to all
of the rights and obligations of Buyer hereunder but Buyer shall
nevertheless remain liable for all its obligations hereunder.
(m) Exhibits. All Exhibits and Schedules attached hereto are
incorporated herein by reference. All Exhibit, Schedule and Section
references in this Agreement refer to the sections of and the schedules
and exhibits attached to this Agreement, unless the context clearly
indicates otherwise.
(n) No Joint Venture. Notwithstanding anything to the contrary
contained herein, this Agreement shall not be deemed or construed to
make the parties hereto partners or joint venturers, it being, the
intention of the parties to merely create the relationship of Sellers
and Buyer with respect to the property to be conveyed as contemplated
hereby.
(o) No Recording. This Agreement shall not be recorded or
filed in the public land or other public records of any jurisdiction by
either party and any attempt to do so may be treated by the other party
as a breach of this Agreement.
(p) Bulk Sales. The parties hereto waive compliance with all
applicable bulk sales laws, including, without limitation, the Uniform
Commercial Code Bulk Transfer provisions.
[SIGNATURES CONTAINED ON NEXT PAGE]
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
COMPANY:
SHAREHOLDER: GOLD DUST MOTEL, INC.
/s/ John E. Cavanaugh By: /s/ John E. Cavanaugh
- ------------------------------- ------------------------------------
John E. Cavanaugh
Its: President
BLACK HAWK GAMING & DEVELOPMENT
COMPANY, INC.
By: /s/ Stephen R. Roark
-----------------------------------
Its: President
[SIGNATURES CONTAINED ON NEXT PAGE]
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APPROVED and ACCEPTED:
For valuable consideration, I hereby consent to this Agreement and I
agree to be bound by its terms and conditions. I further agree to
execute any and all documents, deeds, conveyances or other instruments
necessary to consummate the transactions and acts described herein.
/s/ Leslie A. Cavanaugh
- ------------------------
Leslie A. Cavanaugh, wife of John E. Cavanaugh
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EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
1 Assignment of Equipment Leases and Contracts
2 Assignment of Piazzo Lease
3 Assignment of Sierra Development Operating Lease
4 Assignment of Tradenames
5 Assignment of Warehouse Lease
6 Buyer Assumed Liabilities
7 Buyer Assumption and Indemnity Agreement
8 Cavanaugh Lease Cancellation Agreement
9A Deed
9B EBITDA Calculation Schedule
10A Equipment Leases and Contracts
10B Equipment re: Purchase Deposit or form of letter of credit
11 Gold Dust Bill of Sale
12 Gold Dust Operating Assets
13 Joint Closing Instructions
14 Premises
15 Purchased Assets
16 Retained Assets
17 Retained Payables
18 Shareholder's Bill of Sale
19 Title Report
20 Allocation of Purchase Price Among the Assets
60
21A Form of Confidentiality and Non-Competition Agreement--John E.
Cavanaugh
21B Form of Confidentiality and Non-Competition Agreement--
Gold Dust Motel, Inc.
61
LIST OF SCHEDULES
TO
ASSET PURCHASE AGREEMENT
62
Schedule No. Description
- ------------ -----------
4(c)(i) Exceptions to compliance
4(c)(ii) Exception to legal proceedings
4(c)(iii) Exceptions to investigations
4(d) Exceptions to consents and approvals
4(e) Exceptions to labor matters
4(f) Exceptions to title
4(g) Exceptions re: environmental issues
4(k) No material adverse change
4(m) Employee benefit plans
4(u) Pending insurance claims
4(v) Pending legal proceedings
5(b) Severance and bonus agreements
6(a)(i) Sellers' Certificate
6(a)(vi) Opinion of Bible, Hoy & Trachok
6(b)(ii) Buyer's Certificate
6(b)(viii) Opinion of Jones & Keller, P.C.
63
ADDENDUM NO. 1
TO
ASSET PURCHASE AGREEMENT
This Addendum No. 1 to the Asset Purchase Agreement dated January 7, 2000
is executed simultaneously therewith by and between Gold Dust Motel, Inc., John
E. Cavanaugh and Black Hawk Gaming & Development Company, Inc.
12. References to the Hart-Scott-Rodino Antitrust Improvements
Act of 1976 (HSR Act) and to the Workers Adjustment Retraining and
Notification Act (WARN Act) are hereby deleted since the parties
believe neither Act is applicable to the transactions contemplated in
the Asset Purchase Agreement (Agreement). If prior to closing the
Agreement circumstances cause the parties to believe that compliance
with either or both Acts is required, they shall proceed as set forth
in the Agreement.
13. Sections 6(a)(iii) and 6(b)(v) of the Agreement are hereby
deleted and will be deemed to be conditions to closing only if
required based on circumstances described in the last sentence of
paragraph 1 above.
14. Except as modified herein, all terms and conditions in the
Agreement continue in full force and effect.
GOLD DUST MOTEL, INC., a Nevada
corporation, dba GOLD DUST WEST
By /s/ John E. Cavanaugh
----------------------------
JOHN E. CAVANAUGH, President
/s/ John E. Cavanaugh
-------------------------------
JOHN E CAVANAUGH
BLACK HAWK GAMING &
DEVELOPMENT COMPANY, INC.,
a Colorado corporation
By /s/ Stephen R. Roark
----------------------------
STEPHEN R. ROARK, President