EXHIBIT 2.2
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated August 22, 1997, between COLORADO GAMING &
ENTERTAINMENT CO., a Delaware corporation ("Issuer"), and LADBROKE RACING
CORPORATION, a Delaware corporation ("Grantee").
WHEREAS, Grantee and Issuer have entered into an Agreement and Plan of
Merger immediately prior to the execution and delivery hereof (the "Merger
Agreement"); and
WHEREAS, as a condition and inducement to Grantee's pursuit of the
transactions contemplated by the Merger Agreement and in consideration therefor,
Issuer has agreed to grant Grantee the Option (as hereinafter defined):
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements set forth herein and in the Merger Agreement, the parties hereto
agree as follows:
1. GRANT OF OPTION
1.1 Issuer hereby grants to Grantee an unconditional, irrevocable
option (the "Option") to purchase, subject to the terms hereof, up to 1,022,638
fully paid and nonassessable shares of the common stock, $.01 par value, of
Issuer ("Common Stock") at a price per share equal to $6.25; provided, however,
that in the event Issuer issues or agrees to issue any shares of Common Stock at
a price less than such price per share (as adjusted pursuant to Section 5) other
than as permitted by the Merger Agreement, such price shall be equal to such
lesser price (such price, as adjusted if applicable, the "Option Price");
provided further that in no event shall the number of shares for which this
Option is exercisable exceed 19.9% of the issued and outstanding shares of
Common Stock. The number of shares of Common Stock that may be received upon
the exercise of the Option and the Option Price are subject to adjustment as
herein set forth.
1.2 In the event that any additional shares of Common Stock are
issued or otherwise become outstanding after the date of this Agreement (other
than as contemplated under the Merger Agreement or this Agreement and other than
pursuant to an event described in Section 5.2 hereof), the number of shares of
Common Stock subject to the Option shall be
increased so that, after such issuance, such number together with any shares
of Common Stock previously issued pursuant hereto, equals 19.9% of the number
of shares of Common Stock then issued and outstanding without giving effect
to any shares subject or issued pursuant to the Option. Nothing contained in
this Section 1.2 or elsewhere in this Agreement shall be deemed to authorize
Issuer or Grantee to breach any provision of the Merger Agreement.
2. EXERCISE OF OPTION
2.1 The Holder (as hereinafter defined) may exercise the Option, in
whole or part, if, but only if, a Triggering Event (as hereinafter defined)
shall have occurred prior to the occurrence of an Exercise Termination Event (as
hereinafter defined), provided that the Holder shall have sent the written
notice of such exercise (as provided in Section 2.4 within 6 months following
such Triggering Event (or such later period as provided in Section 10). Each of
the following shall be an Exercise Termination Event: (i) the Effective Time of
the Merger; (ii) termination of the Merger Agreement pursuant to the terms
thereof if such termination precedes the occurrence of a Triggering Event or
(iii) the passage of 18 months (or such longer period as provided in Section 10)
after termination of the Merger Agreement if such termination follows or occurs
at the same time as a Triggering Event. The term "Holder" shall mean the holder
or holders of the Option.
2.2 The term "Triggering Event" shall mean the occurrence of any
event which would cause the Merger Agreement to become terminable (i) by Grantee
pursuant to Section 8.1(d) thereof by reason of the failure to satisfy
conditions specified in Section 7.3(a) if at the time of such termination there
is an outstanding Acquisition Proposal (as defined in the Merger Agreement)
which has not been withdrawn by the person making such Acquisition Proposal,
(ii) by Issuer pursuant to Section 8.1(e) of the Merger Agreement or (iii) by
either Grantee or Issuer pursuant to Section 8.1(f) of the Merger Agreement.
2.3 Issuer shall notify Grantee promptly in writing of the occurrence
of any Triggering Event, it being understood that the giving of such notice by
Issuer shall not be a condition to the right of the Holder to exercise the
Option.
2.4 In the event the Holder is entitled to and wishes to exercise the
Option, it shall send to Issuer a written notice (the date of which being herein
referred to as the "Notice Date") specifying (i) the total number of shares it
will purchase pursuant to such exercise and (ii) a place and date not earlier
than three business days nor later than 60 business days from the Notice Date
for the closing of such purchase (the "Closing Date"); provided, however, that
if prior notification to or approval of the Colorado Division of Gaming or any
other regulatory agency is required in connection with such purchase, the Holder
shall promptly file the required notice or application for approval, shall
promptly notify Issuer of such filing, and shall expeditiously process the same
and the period of time that otherwise would run pursuant to this sentence shall
run instead from the date on which any required notification periods have
expired or been terminated or such approvals have been obtained and any
requisite waiting
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period or periods shall have passed. Any exercise of the Option shall be
deemed to occur on the Notice Date relating thereto.
2.5 At the closing referred to in Section 2.4, the Holder shall
(i) pay to Issuer the aggregate purchase price for the shares of Common Stock
purchased pursuant to the exercise of the Option in immediately available funds
by wire transfer to a bank account designated by Issuer; provided that failure
or refusal of Issuer to designate such a bank account shall not preclude the
Holder from exercising the Option and (ii) present and surrender this Agreement
to Issuer at its principal executive offices.
2.6 At such closing, simultaneously with the delivery of immediately
available funds as provided in Section 2.5, Issuer shall deliver to the Holder a
certificate or certificates representing the number of shares of Common Stock
purchased by the Holder and, if the Option should be exercised in part only, a
new stock option agreement substantially in the form of this Agreement and
evidencing the rights of the Holder to purchase the balance of the shares
purchasable hereunder.
2.7 Certificates for Common Stock delivered at a closing hereunder
may be endorsed with a restrictive legend that shall read substantially as
follows:
"The transfer of the shares represented by this
certificate is subject to certain provisions of an
agreement between the registered holder hereof and
Issuer and to resale restrictions arising under
the Securities Act of 1933, as amended. A copy of
such agreement is on file at the principal office
of Issuer and will be provided to the holder
hereof without charge upon receipt by Issuer of a
written request therefor."
It is understood and agreed that: (i) the reference to the resale
restrictions of the Securities Act of 1933 (the "1933 Act") in the above legend
shall be removed by delivery of substitute certificate(s) without such reference
if the Holder shall have delivered to Issuer a copy of a letter from the staff
of the SEC, or an opinion of counsel, in form and substance reasonably
satisfactory to Issuer, to the effect that such legend is not required for
purposes of the 1933 Act; (ii) the reference to the provisions of this Agreement
in the above legend shall be removed by delivery of substitute certificate(s)
without such reference if the shares have been sold or transferred in compliance
with the provisions of this Agreement and under circumstances that do not
require the retention of such reference; and (iii) the legend shall be removed
in its entirety if the conditions in the preceding clauses (i) and (ii) are both
satisfied. In addition, such certificates shall bear any other legend as may be
required by law.
2.8 Upon the giving by the Holder to Issuer of the written notice of
exercise of the Option provided for under Section 2.4 and the tender of the
applicable purchase price in
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immediately available funds, the Holder shall be deemed to be the holder of
record of the shares of Common Stock issuable upon such exercise,
notwithstanding that the stock transfer books of Issuer shall then be closed
or that certificates representing such shares of Common Stock shall not then
be actually delivered to the Holder. Issuer shall pay all expenses, and any
and all United States federal, state and local taxes and other charges that
may be payable in connection with the preparation, issue and delivery of
stock certificates under this Section 2 in the name of the Holder or its
assignee, transferee or designee.
3. COMMON STOCK RESERVED
Issuer agrees: (i) that it shall at all times maintain, free from
preemptive rights, sufficient authorized but unissued or treasury shares of
Common Stock so that the Option may be exercised without additional
authorization of Common Stock after giving effect to all other options,
warrants, convertible securities and other rights to purchase Common Stock; (ii)
that it will not, by charter amendment or through reorganization, consolidation,
merger, dissolution or sale of assets, or by any other voluntary act, avoid or
seek to avoid the observance or performance of any of the covenants,
stipulations or conditions to be observed or performed hereunder by Issuer;
(iii) promptly to take all action as may from time to time be required
(including (x) complying with all premerger notification, reporting and waiting
period requirements specified in the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements
Act of 1976 and regulations promulgated thereunder and (y) in the event prior
approval of or notice to the Colorado Division of Gaming or to any other state
or federal regulatory authority is necessary before the Option may be exercised,
cooperating fully with the Holder in preparing such applications or notices and
providing such information to the Colorado Division of Gaming or such other
state or federal regulatory authority as they may require) in order to permit
the Holder to exercise the Option and Issuer duly and effectively to issue
shares of Common Stock pursuant hereto; and (iv) promptly to take all action
provided herein to protect the rights of the Holder against dilution.
4. OPTION EXCHANGE
This Agreement (and the Option granted hereby) are exchangeable,
without expense, at the option of the Holder, upon presentation and surrender of
this Agreement at the principal office of the Issuer, for other Agreements
providing for Options of different denominations entitling the holder thereof to
purchase, on the same terms and subject to the same conditions as are set forth
herein, in the aggregate the same number of shares of Common Stock purchasable
hereunder. The terms "Agreement" and "Option" as used herein include any
Agreements and related Options for which this Agreement (and the Option granted
hereby) may be exchanged. Upon receipt by Issuer of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this
Agreement, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Agreement, if mutilated, Issuer will execute and deliver a new Agreement of like
tenor and date. Any such new Agreement executed and delivered shall constitute
an additional
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contractual obligation on the part of Issuer, whether or not the Agreement so
lost, stolen, destroyed or mutilated shall at any time be enforceable by
anyone.
5. OPTION ADJUSTMENTS
5.1 In addition to the adjustment in the number of shares of Common
Stock that are purchasable upon exercise of the Option pursuant to Section 1.2
of this Agreement, the number of shares of Common Stock purchasable upon the
exercise of the Option shall be subject to adjustment from time to time as
provided in this Section 5.
5.2 In the event of any change in Common Stock by reason of stock
dividends, split-ups, mergers, recapitalizations, combinations, subdivisions,
conversions, exchanges of shares or the like, the type and number of shares of
Common Stock purchasable upon exercise hereof shall be appropriately adjusted
and proper provision shall be made so that, in the event that any additional
shares of Common Stock are to be issued or otherwise become outstanding as a
result of any such change (other than pursuant to an exercise of the Option),
the number of shares of Common Stock that remain subject to the Option shall be
increased so that, after such issuance and together with shares of Common Stock
previously issued pursuant to the exercise of the Option (as adjusted on account
of any of the foregoing changes in the Common Stock), it equals 19.9% of the
number of shares of Common Stock then issued and outstanding.
5.3 Whenever the number of shares of Common Stock purchasable upon
exercise hereof is adjusted as provided in Section 5.2, the Option Price shall
be adjusted by multiplying the Option Price by a fraction, the numerator of
which shall be equal to the number of shares of Common Stock purchasable prior
to the adjustment and the denominator of which shall be equal to the number of
shares of Common Stock purchasable after the adjustment.
6. REGISTRATION RIGHTS
Upon the occurrence of a Triggering Event that occurs prior to an
Exercise Termination Event, Issuer shall, at the request of the Holder delivered
within 12 months (or such later period as provided in Section 10) of such
Triggering Event (whether on its own behalf or on behalf of any subsequent
holder of this Option (or part thereof) or any of the shares of Common Stock
issued pursuant hereto), promptly prepare, file and keep current a registration
statement under the 1933 Act covering any shares issued and issuable pursuant to
this Option and shall use its reasonable best efforts to cause such registration
statement to become effective and remain current in order to permit the sale or
other disposition of any shares of Common Stock issued upon total or partial
exercise of this Option ("Option Shares") in accordance with any plan of
disposition requested by Holder. Issuer will use its reasonable best efforts to
cause such registration statement first to become effective and then to remain
effective for such period not in excess of 180 days from the day such
registration statement first becomes effective or such shorter time as may be
reasonably necessary to effect such sales
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or other dispositions. The Holder shall have the right to demand two such
registrations. The Issuer shall bear the costs of such registrations
(including, but not limited to, Issuer's attorneys' fees, printing costs and
filing fees, but excepting underwriting discounts or commissions, brokers'
fees and the fees and disbursements of the Holder's counsel related thereto).
The foregoing notwithstanding, if, at the time of any request by the Holder
for registration of Option Shares as provided above, Issuer is in
registration with respect to an underwritten public offering of shares of
Common Stock, and if in the good faith judgment of the managing underwriter
or managing underwriters, or, if none, the sole underwriter or underwriters,
of such offering the inclusion of the Option Shares would materially
interfere with the successful marketing of the shares of Common Stock offered
by Issuer, the number of Option Shares otherwise to be included in the
registration statement contemplated hereby may be reduced; provided, however,
that after any such required reduction the number of Option Shares to be
included in such offering for the account of the Holder shall constitute at
least 25% of the total number of shares to be sold by the Holder and Issuer
in the aggregate; and provided further, however, that if such reduction
occurs, then the Issuer shall file a registration statement for the balance
as promptly as practicable thereafter as to which no reduction pursuant to
this Section 6 shall be permitted or occur and the Holder shall thereafter be
entitled to one additional registration. Each such Holder shall provide all
information reasonably requested by Issuer for inclusion in any registration
statement to be filed hereunder. If requested by any such Holder in
connection with such registration, Issuer shall become a party to any
underwriting agreement relating to the sale of such shares, but only to the
extent of obligating itself in respect of representations, warranties,
indemnities and other agreements customarily included in such underwriting
agreements for Issuer. Upon receiving any request under this Section 6 from
any Holder, Issuer agrees to send a copy thereof to any other person known to
Issuer to be entitled to registration rights under this Section 6, in each
case by promptly mailing the same, postage prepaid, to the address of record
of the persons entitled to receive such copies. Notwithstanding anything to
the contrary contained herein, in no event shall Issuer be obligated to
effect more than two registrations pursuant to this Section 8 by reason of
the fact that there shall be more than one Holder as a result of any
assignment or division of this Agreement.
7. OPTION REPURCHASE
7.1 At any time after the occurrence of a Repurchase Event (as
defined below) (i) at the request of the Holder, delivered prior to an Exercise
Termination Event (or such later period as provided in Section 10), Issuer shall
repurchase the Option from the Holder at a price (the "Option Repurchase Price")
equal to (x) the amount by which (A) the market/offer price (as defined below)
exceeds (B) the Option Price, multiplied by the number of shares for which this
Option may then be exercised and (ii) at the request of the owner of Option
Shares from time to time (the "Owner"), delivered prior to an Exercise
Termination Event (or such later period as provided in Section 10), Issuer shall
repurchase such number of the Option Shares from the Owner as the Owner shall
designate at a price (the "Option Share Repurchase Price") equal to (x) the
market/offer price multiplied by the number of Option Shares so designated. The
term "market/offer price" shall mean the highest of (i) the price per
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share of Common Stock at which a tender or exchange offer therefor has been
made, (ii) the price per share of Common Stock to be paid by any third party
pursuant to an agreement with Issuer, (iii) the highest closing price for
shares of Common Stock within the six-month period immediately preceding the
date the Holder gives notice of the required repurchase of this Option or the
Owner gives notice of the required repurchase of Option Shares, as the case
may be, or (iv) in the event of a sale of all or substantially all of
Issuer's assets, the sum of the net price paid in such sale for such assets
and the current market value of the remaining net assets of Issuer as
determined by a nationally recognized investment banking firm selected by the
Holder or the Owner, as the case may be, and reasonably acceptable to Issuer,
divided by the number of shares of Common Stock of Issuer outstanding at the
time of such sale. In determining the market/offer price, the value of
consideration other than cash shall be determined by a nationally recognized
investment banking firm selected by the Holder or Owner, as the case may be,
and reasonably acceptable to Issuer.
7.2 The Holder and the Owner, as the case may be, may exercise its
right to require Issuer to repurchase the Option and any Option Shares pursuant
to Section 7.1 by surrendering for such purpose to Issuer, at its principal
office, a copy of this Agreement or certificates for Option Shares, as
applicable, accompanied by a written notice or notices stating that the Holder
or the Owner, as the case may be, elects to require Issuer to repurchase this
Option and/or the Option Shares in accordance with the provisions of this
Section 7. As promptly as practicable, and in any event within five business
days after the surrender of the Option and/or certificates representing Option
Shares and the receipt of such notice or notices relating thereto, Issuer shall
deliver or cause to be delivered to the Holder the Option Repurchase Price
and/or to the Owner the Option Share Repurchase Price therefor or the portion
thereof that Issuer is not then prohibited under applicable law and regulation
from so delivering.
7.3 To the extent that Issuer is prohibited under applicable law from
repurchasing the Option and/or the Option Shares in full, Issuer shall
immediately so notify the Holder and/or the Owner and thereafter deliver or
cause to be delivered, from time to time, to the Holder and/or the Owner, as
appropriate, the portion of the Option Repurchase Price and the Option Share
Repurchase Price, respectively, that it is no longer prohibited from delivering,
within five business days after the date on which Issuer is no longer so
prohibited; provided, however, that if Issuer at any time after delivery of a
notice of repurchase pursuant to Section 7.2 is prohibited under applicable law
from delivering to the Holder and/or the Owner, as appropriate, the Option
Repurchase Price and the Option Share Repurchase Price, respectively, in full
(and Issuer hereby undertakes to use its reasonable best efforts to obtain all
required regulatory and legal approvals and to file any required notices as
promptly as practicable in order to accomplish such repurchase), the Holder or
Owner may revoke its notice of repurchase of the Option or the Option Shares
whether in whole or to the extent of the prohibition, whereupon, in the latter
case, Issuer shall promptly (i) deliver to the Holder and/or the Owner, as
appropriate, that portion of the Option Purchase Price or the Option Share
Repurchase Price that Issuer is not prohibited from delivering; and (ii)
deliver, as appropriate, either (A) to the Holder, a new Agreement evidencing
the right of the Holder to
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purchase that number of shares of Common Stock obtained by multiplying the
number of shares of Common Stock for which the surrendered Agreement was
exercisable at the time of delivery of the notice of repurchase by a
fraction, the numerator of which is the Option Repurchase Price less the
portion thereof theretofore delivered to the Holder and the denominator of
which is the Option Repurchase Price, or (B) to the Owner, a certificate for
the Option Shares it is then so prohibited from repurchasing. If an Exercise
Termination Event shall have occurred prior to the date of the notice by
Issuer described in the first sentence of this Section 7.3, or shall be
scheduled to occur at any time before the expiration of a period ending on
the thirtieth day after such date, the Holder shall nonetheless have the
right to exercise the Option until the expiration of such 30-day period.
7.4 For purposes of this Section 7, a Repurchase Event shall be
deemed to have occurred upon the occurrence of any of the following events or
transactions after the date hereof:
(i) the acquisition by any person (other than Grantee or any
Grantee Subsidiary) of beneficial ownership of 50% or more of the then
outstanding Common Stock; or
(ii) the consummation of any Acquisition Transaction described in
Section 2.2(i) hereof.
8. [RESERVED]
9. [RESERVED]
10. EXTENSION OF TIME PERIODS
The 30-day, 6-month, 12-month or 18-month periods for exercise of
certain rights under Sections 2, 6, 7, 9 and 12 shall be extended: (i) to the
extent necessary to obtain all regulatory approvals for the exercise of such
rights including, without limitation, any approvals required from the Colorado
Division of Gaming and the State of Colorado Limited Gaming Control Commission
(for so long as the Holder is using commercially reasonable efforts to obtain
such regulatory approvals), and for the expiration of all statutory waiting
periods; and (ii) to the extent necessary to avoid liability under Section 16(b)
of the 1934 Act by reason of such exercise.
11. ISSUER REPRESENTATIONS AND WARRANTIES
Issuer hereby represents and warrants to Grantee as follows:
(a) Issuer has full corporate 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
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have been truly and validly authorized by the Board of Directors of Issuer
and no other corporate proceedings on the part of Issuer are necessary to
authorize this Agreement or to consummate the transactions so contemplated.
This Agreement has been duly and validly executed and delivered by Issuer.
(b) Issuer has taken all necessary corporate action to authorize and
reserve and to permit it to issue, and at all times from the date hereof through
the termination of this Agreement in accordance with its terms will have
reserved for issuance upon the exercise of the Option, that number of shares of
Common Stock equal to the maximum number of shares of Common Stock at any time
and from time to time issuable hereunder, and all such shares, upon issuance
pursuant thereto, will be duly authorized, validly issued, fully paid,
nonassessable, and will be delivered free and clear of all claims, liens,
encumbrance and security interests and not subject to any preemptive rights.
12. ASSIGNMENT
Neither of the parties hereto may assign any of its rights or
obligations under this Agreement or the Option created hereunder to any other
person, without the express written consent of the other party, except that
Grantee may assign all or any portion of the Option to any affiliate of Grantee.
13. BEST EFFORTS
Each of Grantee and Issuer will use its best efforts to make all
filings with, and to obtain consents of, all third parties and governmental
authorities necessary to the consummation of the transactions contemplated by
this Agreement, including without limitation any required filings with and
consents from the State of Colorado Limited Gaming Control Commission and the
Colorado Division of Gaming for approval to acquire the shares issuable
hereunder.
14. SPECIFIC PERFORMANCE
The parties hereto acknowledge that damages would be an inadequate
remedy for a breach of this Agreement by either party hereto and that the
obligations of the parties hereto shall be enforceable by either party hereto
through injunctive or other equitable relief.
15. SEVERABILITY
If any term, provision, covenant or restriction contained in this
Agreement is held by a court or a federal or state regulatory agency of
competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions and covenants and restrictions contained in this Agreement
shall remain in full force and effect, and shall in no way be affected, impaired
or invalidated. If for any reason such court or regulatory agency determines
that the Holder is not permitted to acquire, or Issuer is not permitted to
repurchase
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pursuant to Section 7, the full number of shares of Common Stock provided in
Section 1.1 hereof (as adjusted pursuant to Section 1.2 or 5 hereof), it is
the express intention of Issuer to allow the Holder to acquire or to require
Issuer to repurchase such lesser number of shares as may be permissible,
without any amendment or modification hereof.
16. NOTICES
All notices, requests, claims, demands and other communications
hereunder shall be deemed to have been duly given when delivered in person, by
fax, telecopy, or by registered or certified mail (postage prepaid, return
receipt requested) at the respective addresses of the parties set forth in the
Merger Agreement.
17. GOVERNING LAW
This Agreement shall be governed by and construed in accordance with
the laws of the State of Delaware, regardless of the laws that might otherwise
govern under applicable principles of conflicts of laws thereof.
18. COUNTERPARTS
This Agreement may be executed in two or more counterparts, each of
which shall be deemed to be an original, but all of which shall constitute one
and the same agreement.
19. EXPENSES
Except as otherwise expressly provided herein, or in the Merger
Agreement, each of the parties hereto shall bear and pay all costs and expenses
incurred by it or on its behalf in connection with the transactions contemplated
hereunder, including fees and expenses of its own financial consultants,
investment bankers, accountants and counsel.
20. ENTIRE AGREEMENT
Except as otherwise expressly provided herein or in the Merger
Agreement, this Agreement contains the entire agreement between the parties with
respect to the transactions contemplated hereunder and supersedes all prior
arrangements or understandings with respect thereof, written or oral. The terms
and conditions of this Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective successors and permitted assignees.
Nothing in this Agreement, expressed or implied, is intended to confer upon any
party, other than the parties hereto, and their respective successors except as
assignees, any rights, remedies, obligations liabilities under or by reason of
this Agreement, except as expressly provided herein.
21. DEFINITIONS
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Capitalized terms used in this Agreement and not defined herein shall
have the meanings assigned thereto in the Merger Agreement.
22. LIMITATION ON PROFIT
22.1 Notwithstanding any other provision of this Agreement, in no
event shall Grantee's Total Profit (as hereinafter defined) exceed the lesser of
(i) $3,000,000 or (ii) when added to any Termination Fee paid pursuant to
Section 6.4(b) of the Merger Agreement, $4,500,000, and, if it otherwise would
exceed such amount, Grantee, at its sole election, shall either (i) reduce the
number of shares of Common Stock subject to this Option, (ii) deliver to Issuer
for cancellation Option Shares previously purchased by Grantee, (iii) pay cash
to Issuer, or (iv) any combination thereof, so that Grantee's actually realized
Total Profit shall not exceed such amount after taking into account the
foregoing actions.
22.2 As used herein the term "Total Profit" shall mean the aggregate
amount (before taxes) of the following: (i) (x) the amount received by Grantee
pursuant to Issuer's repurchase of the Option (or any portion thereof) or any
Option Shares pursuant to Section 7, less, in the case of any repurchase of
Option Shares, (y) Grantee's purchase price for such Option Shares, as the case
may be, (ii) (x) the net cash amounts received by Grantee pursuant to the sale
of Option Shares (or any other securities into which such Option Shares are
converted or exchanged) to any unaffiliated party, less (y) Grantee's purchase
price of such Option Shares, and (iii) any Notional Total Profit (as defined
below).
22.3 As used herein, the term "Notional Total Profit" with respect to
any number of shares as to which Grantee may propose to exercise this Option
shall be the Total Profit determined as of the date of such proposal assuming
that this Option were exercised on such date for such number of shares and
further assuming that such shares, together with all other Option Shares held by
Grantee and its affiliates as of such date were sold for cash at the closing
market price for the Common Stock as of the close of business on the preceding
trading day (less customary brokerage commissions).
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IN WITNESS WHEREOF, Grantee and Issuer have executed this Agreement as of
the date first above written.
COLORADO GAMING & ENTERTAINMENT CO.
/s/ Xxxxxxx X. Xxxxxx, Xx.
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By: Xxxxxxx X. Xxxxxx, Xx.
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Its: President
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LADBROKE RACING CORPORATION
/s/ Xxxx Xxxx
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By: Xxxx Xxxx
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Its: President and Chief Operating Officer
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