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EXHIBIT 10.1
AMENDED AND RESTATED PURCHASE AGREEMENT
THIS AMENDED AND RESTATED PURCHASE AGREEMENT (this "Agreement") is
made and entered into as of the 12th day of November, 1996, by and between
BLACK HAWK GAMING & DEVELOPMENT COMPANY, INC., a Colorado corporation
("Seller"), and DIVERSIFIED OPPORTUNITIES GROUP LTD., an Ohio limited liability
company, or its nominee(s) as described in Section 29 ("Purchaser").
RECITALS
Seller desires to sell to Purchaser certain Shares (as hereinafter
defined) and issue to Purchaser certain convertible notes (the "Notes") in the
aggregate principal amount of $6,000,000, and Purchaser desires to acquire the
Shares and the Notes from Seller. Seller and Purchaser acknowledge that this
Agreement is intended to memorialize their understanding of their agreements
contained in that certain letter of intent dated as of May 29, 1996 by and
between Seller and Purchaser, as subsequently modified.
AGREEMENTS
NOW, THEREFORE, in consideration of the foregoing Recitals and of the
warranties, representations, agreements and undertakings hereinafter set forth,
the parties hereto do hereby represent, warrant, covenant and agree as follows:
1. CERTAIN DEFINITIONS
For the purposes of this Agreement, the terms defined in this Section
1 shall have the meanings set out below. All capitalized terms not defined in
this Section 1 shall have the meanings ascribed to them in other parts of this
Agreement.
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(a) "Closing Date" shall mean November 12, 1996, as of
the close of business, or such other date as to which the parties may agree in
writing.
(b) "Closing" shall mean the closing on the Closing Date
of the transactions contemplated by this Agreement.
(c) "Annual Statement" shall mean Seller's Consolidated
Balance Sheet at December 31, 1995 and 1994 and the accompanying Consolidated
Statements of Income, Consolidated Statements of Cash Flows and Consolidated
Statements of Shareholders' Equity for Seller's three fiscal years then ended,
together with the schedules and notes related thereto, accompanied by the
applicable report of Deloitte & Touche L.L.P. ("Deloitte"), Certified Public
Accountants, as filed with the Securities and Exchange Commission ("SEC").
(d) "Interim Statement" shall mean Seller's unaudited
Consolidated Balance Sheet at September 30, 1996 and the accompanying
Consolidated Statements of Income and Statements of Cash Flow for the 9-month
period then ended, together with the notes relating thereto, as filed with the
SEC.
(e) "Xxxxxx Annual Statement" shall mean the Xxxxxx Hotel
Venture's (the "Xxxxxx") Balance Sheet at December 31, 1995 and 1994 and the
accompanying Statements of Income, Statements of Cash Flow and Statements of
Venturers' Investments and Advances for the Xxxxxx'x three fiscal years, then
ended, together with the schedules and notes related thereto, accompanied by
the applicable report for Deloitte, as filed with the SEC.
(f) "Financial Statements" shall mean the Annual
Statement and Interim Statement and the Xxxxxx Annual Statement.
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(g) "Material Adverse Effect" shall mean any event which
would, in the aggregate, have a material adverse effect upon the business,
assets, financial condition or results of operations of any of Seller on a
consolidated basis, the Xxxxxx or the Joint Venture (as hereinafter defined).
(h) "NASD" shall mean the National Association of
Securities Dealers, Inc.
(i) "NASD Approval" shall mean the approval of Seller's
shareholders as required by the rules and regulations of the NASD by virtue of
its Shares being traded on the National Market tier of the NASDAQ Stock Market
for Purchaser's acquisition of certain Shares upon conversion of the Second
Note (as hereinafter defined).
(j) "Purchaser Material Adverse Effect" shall mean any
event which would, in the aggregate, have a material adverse effect upon the
business, assets, financial condition or results of operations of Purchaser.
(k) "Shares" shall mean shares of Seller's common stock,
$.001 par value.
2. ISSUANCE OF NOTES; OTHER PURCHASES; PRICE; SECURITY
Seller agrees to issue and sell to Purchaser, and Purchaser
agrees to purchase from Seller, the Notes and certain of the Shares for the
purchase price and upon and subject to the terms, provisions and conditions
hereinafter set forth.
(a) (i) Issuance of First Note. At Closing, Seller
shall issue and Purchaser shall acquire a Note in the principal amount of
$1,500,000 (the "First Note"). The First Note shall be in substantially the
form and substance of Exhibit A attached hereto and incorporated herein by
reference. The First Note shall contain, among other things, interest at a
variable rate per annum equal to Purchaser's cost of funds (estimated at LIBOR
+ 2%) and an annual facility
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fee equal to 1/4 of 1% of the amount of the principal amount outstanding.
Interest due on the First Note shall be payable on a quarterly basis. In
addition, the First Note shall provide that until the entire principal balance
of the Note is converted Seller shall pay Purchaser a profit participation
equal to 40% of the amount of cash flow distributed by the LLC (as hereinafter
defined) to Seller. Unless sooner converted as hereinafter described, the
principal due on the First Note shall be due and payable on the second
anniversary of the Closing Date. All or any portion of the unpaid principal
due shall be convertible into Shares at a conversion price of $5.25 per Share
at any time upon the election of Purchaser and, if not yet fully converted,
shall, unless the provisions of Article XI of the Operating Agreement (as
hereinafter defined) for the LLC apply, be automatically converted into Shares
at such time as (i) Purchaser has acquired or received all necessary and
appropriate regulatory, licensing and other approvals from the Colorado
Division of Gaming (the "Division"), the Colorado Limited Gaming Control
Commission (the "Commission") and the state and local liquor licensing
authorities and (ii) the Commission approves the issuance to the LLC (as
hereinafter defined) of a retail gaming license. Pursuant to the terms of an
Assignment, Pledge and Security Agreement (the "Assignment") of even date
herewith, the First Note shall be secured by a first priority lien on 100% of
Seller's membership interest in the LLC and the products and proceeds thereof,
including but not limited to its capital interest, interest in the net profits
and net cash flow of the LLC, and all other rights and privileges associated
with Seller's membership in the LLC.
(ii) Issuance of Second Note. Upon obtaining the
NASD Approval, Seller shall immediately issue and deliver to Purchaser and
Purchaser shall acquire a note in the principal amount of $6,000,000 (the
"Second Note") and the First Note shall be canceled. The
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Second Note shall be dated as of the Closing Date, contain all of the other
terms and conditions of the First Note and shall be secured in the same manner
as the First Note. The First Note and the Second Note are sometimes
collectively referred to hereinafter as the "Note" or the "Notes". It is the
intention of the parties that the Note is convertible into 1,142,857 Shares in
the aggregate. At the time of the issuance of the Second Note, Seller shall
issue a certificate to Purchase affirming that the representations and
warranties of Seller contained in this Agreement are true and correct as of the
date of the issuance of the Second Note with the same effect as if made on and
as of such date. In the event Seller does not obtain NASD Approval, Purchaser
shall have no further obligation to make any investment in or loan to Seller
beyond the $1,500,000 loan for the First Note. At such time, the Note shall be
deemed to have been canceled, the Shares acquired by Purchaser pursuant to
Section 2(a)(iii) below, shall be deemed to have been redeemed, and Purchaser
shall be deemed to have made a $2,500,000 capital contribution to the LLC and
the parties' interests in the LLC shall be adjusted in accordance with the
provisions of Section 4.2 of the Operating Agreement (as hereinafter defined).
(iii) Purchase of Shares. Seller shall sell and
Purchaser shall purchase 190,476 Shares at a price of $5.25 per Share for a
total purchase price of $1,000,000.
(b) Payment of Purchase Price for the Shares and the
Note. The purchase price for the Shares and the Notes shall be paid as
follows:
(i) $2,500,000, the aggregate purchase price for
the 190,476 Shares and the First Note, shall
be paid to Seller by wire transfer or by
certified or bank check at the Closing.
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(ii) Provided Seller obtains the NASD Approval,
the balance of $4,500,000 shall be paid by
wire transfer or by certified or bank check
at such time as the lender to the LLC
requires such amount to be invested in the
LLC, or at such time as otherwise agreed to
by Seller and Purchaser.
(c) Use of Proceeds. Seller shall use the
proceeds to be received from Purchaser's acquisition of Shares and Purchaser's
loans described in Sections 2(a) and 2(b), above, solely to fund Seller's
capital contributions to the LLC.
(d) Additional Purchases of Shares by Xxxxxxxx, Day and
Xxxxx. Pursuant to certain convertible notes (the "Subscription Notes") being
executed by Xxxxxx X. Xxxxxxxx ("Xxxxxxxx"), Xxxxx X. Day ("Day") and Xxxxxxx
X. Xxxxx ("Xxxxx"), such parties shall be obligated to acquire up to in the
aggregate 142,857 Shares at a purchase price of $5.25 per Share upon the terms
and the conditions set forth in the Subscription Notes, which Subscription
Notes shall contain terms and conditions materially agreeable to Purchaser and
Seller. The purchase price to be paid by such parties for the Subscription
Notes pursuant to this Section 2(d) shall be paid to the Seller in cash at the
time Purchaser makes the payment described in Section 2(b)(ii).
(e) Share Adjustments. Notwithstanding any contrary
provision herein, in the event that subsequent to the date hereof there shall
be any change in the issued and outstanding Shares by reason of a stock
dividend, stock split, combination of shares, recapitalization, merger,
separation, reorganization, liquidation, consolidation, split- up, combination
or exchange of Shares, or transaction or event having an effect similar to any
of the foregoing, the number of and price
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for Shares to be acquired upon conversion of the Notes or hereunder and the
number of, and price for, Options (as hereinafter defined) to be granted
hereunder, shall be appropriately adjusted.
3. AGREEMENTS REGARDING SHARES OF CERTAIN KEY SHAREHOLDERS AND
BOARD OF DIRECTORS.
(a) At or prior to the Closing, Purchaser and/or Xxxxxxx
X. Xxxxxx (Xx. Xxxxxx being hereinafter referred to as "Xxxxxx"), Xxxxxxxx and
Day shall have entered into a Shareholders' Agreement (the "Shareholders'
Agreement") with respect to the Shares owned or subscribed to by each of them
or their controlled entities or Shares which may be acquired upon conversion of
the Note. The Shareholders' Agreement shall be in the form of Exhibit B
attached hereto and shall provide, among other things, for a pro rata right of
first refusal among such parties.
(b) At or prior to Closing, Seller's Board of Directors
(the "Board") shall consist of seven persons, three of whom shall be nominees
of Purchaser. In addition at or prior to Closing, Xxxxxx shall be elected as
Chief Executive Officer and Co-Chairman of the Board of Seller.
(c) The Shareholders' Agreement shall provide for
Xxxxxxxx and Day to cause their Shares to be voted for the purpose of (i)
effecting the provisions of subparagraph (b) above and (ii) calling or causing
Seller to call a special meeting of shareholders of Seller to occur on or
before January 31, 1997 (the "Special Meeting") in order to approve Purchaser's
acquisition of the Shares which may be acquired upon conversion of the Note and
to approve the proposals set forth in Section 3(d) below.
(d) The Shareholders' Agreement shall also contain
provisions whereby Xxxxxxxx and Day agree to vote or continue to vote at the
Special Meeting or otherwise, as the
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case may be, their Shares in favor of the following proposals which will become
effective at such time as Purchaser owns 820,000 or more Shares:
(i) The expansion of the Board to nine members
with Purchaser being entitled to nominate five members to the Board.
(ii) Adopting staggered terms for Seller's Board
in accordance with Section 0-000-000 of the Colorado Business Corporation Act
and nominees of Seller and Purchaser shall be nominated in each of three
classes so created on terms agreeable to the parties. No later than the next
annual meeting of shareholders following such time as Purchaser owns 820,000 or
more Shares, directors shall be nominated to the three classes as follows:
Class I shall have three directors (one nominee of Seller and two nominees of
Purchaser), Class II shall have three nominees (two nominees of Seller and one
of Purchaser) and Class III shall have three nominees (two nominees of
Purchaser and one of Seller).
(iii) Electing Xxxxxx as Chief Executive Officer
and Chairman of the Board of Directors of Seller.
(iv) If determined necessary by counsel to Seller
and Purchaser, an appropriate "poison pill" plan shall be submitted to Seller's
shareholders at such special meeting or at the next regularly scheduled meeting
of shareholders in order to protect Seller and its shareholders from
unwarranted and unwanted takeover attempts by unrelated third parties.
Pursuant to the Shareholders' Agreement, Xxxxxxxx and Day shall
appoint Xxxxxx as their proxy to vote their shares in accordance with this
Section 3.
(e) At or prior to Closing, Purchaser and Seller shall
execute and deliver a Registration Rights Agreement (the "Registration
Agreement") in the form of Exhibit C attached
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hereto. The Registration Agreement shall provide for the registration of all
Shares acquired by Purchaser hereunder, including any Shares acquired pursuant
to the Shareholders' Agreement.
4. AGREEMENTS REGARDING JOINT VENTURE AND MASTER JOINT VENTURE
(a) At or prior to Closing, Purchaser and its affiliates
and Seller shall restructure that certain Joint Venture (the "Joint Venture")
which was previously formed by Seller and Purchaser's affiliate pursuant to a
certain Joint Venture Agreement dated December 15, 1994, as amended. The Joint
Venture shall be restructured into a limited liability company formed under the
laws of the State of Colorado (the "LLC"). At or prior to Closing, the parties
shall enter into the Operating Agreement for the LLC (the "Operating
Agreement") on terms mutually agreeable to the parties.
(b) At or prior to Closing, Seller and Purchaser shall
also have entered into a twenty year Master Joint Venture Agreement (the
"Master Joint Venture Agreement") on terms mutually agreeable to Seller and
Purchaser.
5. REPRESENTATIONS AND WARRANTIES BY SELLER
As a material inducement to Purchaser to enter into this
Agreement, Seller represents, warrants to and, where applicable, covenants with
Purchaser that as of the date hereof and as of the Closing Date:
(a) Due Organization. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Colorado, and each of Seller and the Xxxxxx has full corporate power and
authority to own its properties and to carry on its business as it is now being
conducted, is duly qualified to do business and is in good standing in all
jurisdictions in which it is required to be so qualified, except where the
failure to so qualify or be in good
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standing would not, in the aggregate, have a Material Adverse Effect, and has
received all necessary authorizations, consents, licenses and approvals of the
Division, the Commission and other governmental authorities material to the
ownership of its properties and assets and to the conduct of its business.
(b) Power and Authority; No Conflicts. Seller has full
power and authority (corporate or otherwise) to enter into and carry out the
terms of this Agreement. The execution and delivery by Seller of this
Agreement and the other documents and instruments to be executed and delivered
by Seller pursuant hereto and thereto and the consummation of the transactions
contemplated hereby and thereby by Seller have been duly authorized by the
requisite vote of the Board of Seller. This Agreement has been duly and
validly executed by Seller, and constitutes, and when executed and delivered,
each other document and instrument to be executed and delivered by Seller
pursuant hereto will constitute, a valid and binding agreement of Seller
enforceable against it in accordance with their respective terms subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditors'
rights generally and except to the extent that the enforceability of rights and
remedies may be limited by general principles of equity. The execution and
delivery of this Agreement does not, and, subject to any requisite governmental
or other consents or approvals, the consummation of the transactions
contemplated hereby will not, (i) violate any provision of the Articles of
Incorporation, as amended, of Seller, or the Bylaws of Seller, (ii) violate or
conflict with any law, ordinance, rule, regulation, order, judgment or decree
to which Seller or the Xxxxxx is subject or by which Seller or the Xxxxxx is
bound, or (iii) except as contemplated hereunder or set forth on Schedule 5(b),
violate or conflict with or constitute a material default (or an event
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which, with notice or lapse of time, or both, would constitute a default)
under, or will result in the termination of, or accelerate the performance
required by, or result in the creation of any lien, security interest, charge
or encumbrance upon any of the properties or assets under, any term or
provision of any material contract, commitment, understanding, arrangement,
agreement or restriction of any kind or character to which either Seller or the
Xxxxxx is a party or by which any of their respective assets or properties may
be bound or affected. Except for any required approval of Seller's
shareholders, the Division, the Commission and/or state and local liquor
licensing authorities, no consent, approval, authorization or action by any
federal, state, local or foreign governmental agency, instrumentality,
commission, authority, board or body (collectively, "Governmental Agency" or
"Governmental Authority") or any other third party is required in connection
with the execution and delivery by Seller of this Agreement and the other
documents and instruments to be executed and delivered by Seller pursuant
hereto or the consummation by Seller of the transactions contemplated herein or
therein.
(c) Capital Structure. The authorized capital stock of
Seller as of the date of this Agreement consists solely of Forty Million
(40,000,000) Shares, of which 2,481,567 are issued and outstanding, and Ten
Million (10,000,000) shares ("Preferred Shares") of a preferred class, $.001
par value, of which none are issued and outstanding. Except as set forth on
Schedule 5(c), no Shares or Preferred Shares are held as treasury shares. All
of the outstanding shares of capital stock of Seller have been duly authorized
and validly issued and are fully paid and nonassessable and free from
preemptive rights. Schedule 5(c) sets forth a list of each stock option,
warrant or other right to acquire securities of Seller (an "Option")
outstanding on the date of this Agreement. Seller's partners at the Casino
have no rights to acquire Shares or other securities of
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Seller. There are no outstanding options, warrants, convertible securities,
subscriptions or other rights or agreements providing for the issuance or
delivery of any additional shares of capital stock of Seller, except the
Options.
(d) Valid Issuance of Shares. The Shares issuable upon
conversion of the Note have been duly and validly reserved for issuance, and
when issued and delivered in accordance with the terms of the Note, will be
duly and validly issued, fully paid and nonassessable.
(e) Subsidiaries. Except as set forth on Schedule 5(e),
Seller has no subsidiaries, either wholly or partially owned and except for the
Xxxxxx and the Joint Venture, Seller has no interest as a partner or otherwise
in any partnership, joint venture or other business enterprise.
(f) SEC Documents. Seller has made available to
Purchaser a true and complete copy of each report, schedule, registration
statement and definitive proxy statement filed by Seller with the SEC since
March 31, 1994 (as such documents have since the time of their filing been
amended, the "Seller SEC Documents") which are all of the documents (other than
preliminary material) that Seller was required to file with the SEC since such
date. As of their respective dates, the Seller SEC Documents complied in all
material respects with the requirements of the Securities Act of 1933 or the
Securities Exchange Act of 1934, as the case may be, and the rules and
regulations of the SEC thereunder applicable to such Seller SEC Documents, and
none of the Seller SEC Documents contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. The financial statements of Seller
included in the Seller SEC Documents comply as to form in all material respects
with
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applicable accounting requirements and with the published rules and regulations
of the SEC with respect thereto, have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis during
the periods involved (except as may be indicated in the notes thereto or, in
the case of the unaudited statements, as permitted by Form 10-Q of the SEC) and
fairly present (subject, in the case of the unaudited statements, to normal,
recurring audit adjustments) the consolidated financial position of Seller as
at the dates thereof and the consolidated results of its operations and cash
flows for the periods then ended. To the best of its knowledge Seller is not
now, nor has it ever been, the subject of any inquiry or other investigation by
the SEC ("SEC Investigation"), nor, to the best knowledge of Seller, is any
such SEC Investigation pending or threatened.
(g) Title to Assets. Each of Seller, the Xxxxxx and the
Joint Venture has good, marketable and valid title in and to all of its assets,
including all real, personal and intangible property, and, except as set forth
on Schedule 5(g), each holds its assets free and clear of any mortgage,
conditional sale agreement, title retention agreement, security interest,
lease, pledge, hypothecation, lien or other encumbrance.
(h) Condition of Assets. All of the assets (whether
owned or leased) that are necessary for the conduct of the business of Seller,
the Xxxxxx and the Joint Venture are in normal operating condition, free from
defects other than such minor defects as do not materially interfere with the
continued use thereof in normal operations.
(i) Insurance. Each of Seller, the Xxxxxx and the Joint
Venture (a) maintains insurance policies with licensed insurance carriers on
such assets, properties and businesses and against such risks as is customary
for companies engaged in its business, or (b) has reserved on
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the Financial Statements sufficient funds to cover all losses known to it
arising from such risks. Schedule 5(i) sets forth a list and brief description
(specifying the insurer and describing each pending claim thereunder) of all
policies, binders or reserves of fire, liability, workers' compensation,
vehicular and other insurance or self-insurance held by or on behalf of Seller,
the Xxxxxx and the Joint Venture. All such policies are in full force and
effect and insure against risks and liabilities to an extent and in a manner
customary in the industry in which such parties operate. Except for claims
identified on Schedule 5(i), there are no outstanding unpaid claims under any
such policy, binder or reserve. Except as set forth on Schedule 5(i), there
will be no liability of Seller, the Xxxxxx and the Joint Venture as of the
Closing Date, under any such insurance policy or ancillary agreement with
respect thereto in the nature of a retroactive rate adjustment, loss sharing
arrangement or other actual or contingent liability arising wholly or partially
out of events occurring prior to the Closing Date. None of the Seller, the
Xxxxxx nor the Joint Venture has received notice of cancellation or nonrenewal
of any such policy or binder. There is no inaccuracy in any application for
such policies or binders, or any failure to pay premiums due.
(j) Dividends and Distributions. From December 31, 1995
to the date hereof, Seller has not declared or paid any dividends on any Shares
or Preferred Shares, nor has it made any other payments or distributions
thereon to its shareholders.
(k) Seller Data. Seller has made available to Purchaser
its corporate minutes, articles and regulations, books and records, all
material contracts, all loan documentation, all notes, all leases, evidence of
all bank accounts, an accurate and complete list of each insurance policy
currently providing coverage for the real and personal property owned, operated
or leased together with copies of such policies, information regarding employee
compensation and benefit
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plans, a list of all outstanding workers compensation and unemployment claims,
all licenses and permits that Seller has with respect to its operations and
with respect to the operations of the Xxxxxx and the Joint Venture, and all
outstanding citations or complaints relating to environmental, health or safety
laws or regulations (collectively, the "Seller Data"). Seller acknowledges
that Purchaser has relied on the Seller Data in deciding to execute this
Agreement and consummate the transactions contemplated hereby.
(l) Undisclosed Liabilities. Except as set forth in
Schedule 5(l), none of the Seller, the Xxxxxx nor the Joint Venture has any
liabilities or obligations of any nature, secured or unsecured (absolute,
accrued, contingent or otherwise and whether due or to become due), except (i)
liabilities and obligations that are fully reflected, reserved against or
disclosed in the Financial Statements, and (ii) liabilities and obligations
incurred in the ordinary course of business consistent with past practice.
(m) Investigation or Litigation. Except for the
investigation with respect to the check cashing and bad check collection
practices of the Xxxxxx, and as set forth on Schedule 5(m), there is no
investigation or review pending or to the best knowledge of Seller threatened
by any Governmental Agency or other party or person with respect to Seller, the
Xxxxxx or the Joint Venture; nor has any Governmental Agency or other party or
person indicated in writing to Seller an intention to conduct any such
investigation or review; nor, to the knowledge of Seller, is there any valid
basis for any such investigation or review. Except as set forth on Schedule
5(m), there is no claim, action, suit or proceeding pending before or, to the
best knowledge of Seller, threatened against or affecting Seller, the Xxxxxx or
the Joint Venture at law or in equity by, any
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Governmental Agency or other party or person, nor is there, to the best
knowledge of Seller, any valid basis for any such claim, action, suit or
proceeding.
(n) Certain Agreements. Except as disclosed in the
Seller SEC Documents filed prior to the date of this Agreement or in Schedule
5(n) as of the date of this Agreement, Seller is not a party to any oral or
written (i) consulting agreement not terminable on 60 days' or less notice,
(ii) agreement with any executive officer or other key employee of Seller, or
(iii) agreement or plan, including any stock option plan, stock appreciation
rights plan, any of the Plans (as defined in Section 5(o)), restricted stock
plan or stock purchase plan, any of the benefits of which will be increased, or
the vesting of the benefits of which will be accelerated, by the occurrence of
any of the transactions contemplated by this Agreement or the value of any of
the benefits of which will be calculated on the basis of any of the
transactions contemplated by this Agreement.
(o) Employee Benefits.
(i) Schedule 5(o) contains a true and complete
list of each bonus, deferred compensation, incentive compensation, stock
purchase, stock option, severance or termination pay, hospitalization or other
medical, life or other insurance, supplemental unemployment benefits,
profit-sharing, pension, retirement or other employee benefit plan, program,
practice, agreement or arrangement, including, without limitation, each
"employee benefit plan" as defined in section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), sponsored, maintained,
contributed to or required to be contributed to by Seller or any trade or
business, whether or not incorporated (an "ERISA Affiliate"), whose employees
would, for the purposes of applying certain provisions of the Internal Revenue
code of
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1986, as amended (the "Code"), be aggregated with the employees of Seller under
Section 414(b), (c), (m), (n) and/or (o) of the Code or which would be deemed
to be a member of a "controlled group" within the meaning of Section
4001(a)(14) of ERISA of which Seller is also a member, for the benefit of
current or former employees or directors of Seller and/or such ERISA Affiliate
(the "Plans").
(ii) Each of the Plans has been operated and
administered in all material respects in accordance with applicable laws,
including but not limited to ERISA and the Code. No violation of Section 404
of ERISA has occurred with respect to any Plan.
6. There are no pending, or to the best knowledge of Seller,
threatened or anticipated claims (other than routine claims for benefits) by,
on behalf of or against any of the Plans or any trusts related thereto.
(a) Labor Matters. Seller has not entered into any
collective bargaining agreements or any other agreements with any labor
organization or any other person or group claiming to represent or bargain
collectively for any of Seller's, the Xxxxxx'x or the Joint Venture's
employees. Except as set forth in Schedule 5(p), there are no unfair labor
practice charges, lawsuits, grievances or administrative charges pending or to
the best knowledge of Seller threatened, concerning or affecting Seller, the
Xxxxxx or the Joint Venture. Seller has received no written notice nor has
there been any proceeding or adjudication questioning whether or alleging or
determining that Seller, the Xxxxxx or the Joint Venture, is not in compliance,
in all material respects, with all federal, state and local laws and
regulations with respect to employment, employment practices and terms and
conditions of employment.
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(b) Taxes. Except as set forth in Schedule 5(q), Seller
has (i) timely filed all tax returns, schedules, declarations, and tax-related
documents including, without limitation, all Forms 5500 pertaining to the Plans
(collectively, "Returns") required to be filed in any jurisdictions to which it
or the Xxxxxx is or has been subject, (ii) timely paid in full all taxes,
interest and penalties with respect thereto subject to audit by the taxing
authorities by such jurisdictions and timely made all deposits of tax required
by all applicable taxing jurisdictions, (iii) fully accrued on its books an
amount sufficient to pay all taxes not yet due but related to operations
through the date hereof and will have accrued all taxes not yet due but which
will become due through the Closing Date, (iv) made timely payments of all
taxes required to be deducted and withheld from the wages paid to employees,
and (v) otherwise satisfied, in all material respects, all legal requirements
applicable to it with respect to all aforementioned obligations to taxing
jurisdictions. All Returns filed by Seller accurately reflect in all material
respects their income, expenses, deductions, credits and loss carryovers and
the taxes due and are otherwise accurate and complete in all material respects
and have not been amended. Seller has delivered to Purchaser true and complete
copies of all federal and state income and franchise tax returns for each of
the taxable years ended December 31, 1991 through December 31, 1995, inclusive.
Except as set forth on Schedule 5(q), Seller has no knowledge that an audit of
any of the federal income tax returns of Seller or the Xxxxxx is in progress
and has no reason to believe that any such audit is contemplated. For purposes
of this Section, "tax" and "taxes" (when not modified by other words such as
"income" or "franchise") shall include all income, gross receipts, franchise,
excise, real and personal property, and other taxes imposed by any federal,
state, municipal, local, or other governmental agency, including assessments in
the nature of taxes.
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(c) Absence of Certain Changes. Since December 31, 1995,
except as disclosed in the Seller SEC Documents, none of Seller, the Xxxxxx nor
the Joint Venture has suffered any Material Adverse Effect.
(d) Conduct of Business. Since the close of business on
September 30, 1996, except as set forth in Schedule 5(s), Seller has not, and
prior to the Closing Date will not have, without the prior written consent of
Purchaser:
(i) Issued, sold, redeemed, reclassified or
purchased any Shares or Preferred Shares or
other corporate securities, warrants or debt
instruments or, except as contemplated by
Section 8(c), granted any Options or other
rights in connection therewith.
(ii) Incurred, paid or settled any obligations,
commitments or liabilities, absolute,
accrued, contingent or otherwise, except
obligations, commitments or liabilities to
perform sales contracts, purchase orders or
similar commitments, in each case incurred,
paid or settled in normal amounts and in the
regular and ordinary course of Seller's
business.
(iii) Incurred any continuing contract or
commitment or other liability for the future
purchase of materials, supplies or equipment
which is not in the regular and ordinary
course of the business, or any contracts or
commitments for capital expenditures in
excess of Twenty-Five Thousand Dollars
($25,000) individually or One Hundred
Thousand Dollars ($100,000) in the aggregate.
(iv) Conducted its business other than in the
regular and ordinary course thereof.
(v) Sold, assigned, transferred, encumbered or
granted a security interest in respect of any
of its assets.
(vi) Entered into any pension, retirement,
deferred compensation, profit sharing, bonus,
retainer, consulting, welfare or incentive
compensation plan or arrangement, or any
contract, or any fringe or other benefits or
arrangements, of, with or for any officer,
director, employee or any other person; or
granted any increase in the compensation
payable, or to become payable, by Seller to
any of its officers, directors, employees or
other persons (other than
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customary merit increases of nonofficers), or
in any bonus, insurance, pension or other
benefit plan made for or with any of them.
(vii) Terminated any material contract, agreement,
license or other instrument to which it is a
party other than in the regular and ordinary
course of business.
(viii) Changed its Articles of Incorporation, Bylaws
or any aspect of its corporate structure.
(ix) Agreed to do any of the things or made any
commitment to take any of the types of action
specified in (i) through (viii) above.
(e) Legal Compliance. Each of the Seller, the Xxxxxx and
the Joint Venture has complied in all material respects with all applicable
laws, rules, regulations, and ordinances of any Governmental Agency (including
without limitation, all laws and regulations of the Division and the
Commission) having jurisdiction, any trademark, tradename or copyright rules
and regulations, and any zoning, occupational safety or environmental
protection laws or any laws relating to the employment of labor. None of
Seller, the Xxxxxx nor the Joint Venture is in violation of, or in default
under, any terms or provisions of any mortgage, indenture, security agreement,
lease, license, contract, agreement, instrument, order, arbitration award,
judgment, injunction or decree. Except with respect to the Casino
Investigation, Seller has not received any notice nor has there been any
proceeding or adjudication questioning whether or alleging or determining that
the business of Seller, the Xxxxxx or the Joint Venture is or has been
conducted in violation of any law, ordinance, regulation, order, decree,
judgment or injunction. Seller has not received any notice nor has there been
any proceeding or adjudication questioning whether or alleging or determining
that they have not obtained all permits, licenses and other authorizations
which relate to the assets or the business of Seller, the Xxxxxx or the Joint
Venture. Seller has not received any written
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notice nor has there been any proceeding or adjudication questioning whether or
alleging or determining that any of such parties is not in compliance in all
material respects with all material terms and conditions of such permits,
licenses and authorizations.
(f) Environmental Protection.
(i) Each of Seller, the Xxxxxx and the Joint
Venture is in compliance with all Environmental Laws (as hereinafter defined)
applicable to the business of such parties. Seller has disclosed to Purchaser
all outside consultants' reports, internal memoranda, legal documents and any
other information, written or otherwise (including without limitation, phase 1
and phase 2 reports) in Purchaser's possession relating to its and their
compliance with all Environmental Laws.
(ii) "Environmental Laws" means all U.S. federal,
state, local and foreign laws and regulations relating to pollution or
protection of human health or the environment (including, without limitation,
ambient air, surface water, ground water, land surface or subsurface strata).
(g) Copyrights, Trademarks, Trade names, Etc. Schedule
5(v) contains an accurate and complete list of all material copyrights,
trademark registrations, trademark applications, service marks, trade names and
assumed names used in Seller's, the Xxxxxx'x or the Joint Venture's business.
Seller has not received written notice nor has there been any proceeding or
adjudication questioning whether or alleging or determining that the use
thereof by Seller the Xxxxxx or the Joint Venture infringes on or conflicts
with any existing patents, trademarks or copyrights or any other rights of any
person. Seller has nor received any written notice of any material claim of a
third party to the use of any such names.
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(h) Contracts. Each contract and commitment (whether
written or oral) that individually involves potential future payments by or to
Seller, the Xxxxxx or the Joint Venture of $50,000 or more is disclosed on
Schedule 5(w) (except as otherwise indicated therein) and copies of such
written contracts or commitments have been provided to Purchaser. Seller is
not, nor has it been during the past three years, a partner in any partnership
or a party to any joint venture.
(i) Full Disclosure. There is no fact known to Seller
which has not been disclosed to Purchaser in writing, that has caused, or would
reasonably be anticipated to result in, a Material Adverse Effect.
7. Representations and Warranties of Purchaser. As a material
inducement to Seller to enter into this Agreement, Purchaser represents,
warrants to and, where applicable, covenants with Seller that as of the date
hereof and as of the Closing Date:
(a) Due Organization. Purchaser is a limited liability
company duly organized, validly existing and in good standing under the laws of
the State of Ohio, has the requisite power and authority to own its properties
and to carry on its business as it is now being conducted.
(b) Power and Authority No Conflicts. Purchaser has the
requisite power and authority to enter into and carry out the terms of this
Agreement. The execution and delivery of this Agreement and the other
documents and instruments to be executed and delivered by Purchaser pursuant
hereto and the consummation of the transactions contemplated hereby and thereby
by Purchaser have been duly authorized by the Manager of Purchaser. This
Agreement has been duly and validly executed and delivered by Purchaser and
constitutes, and when executed and delivered, the other documents and
instruments to be executed and delivered by Purchaser will constitute, valid
and binding agreements of Purchaser, enforceable against Purchaser in
accordance
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with their respective terms subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights generally and except to the extent
that the enforceability of rights and remedies may be limited by general
principles of equity. The execution and delivery of this Agreement does not,
and, subject to any requisite governmental or other consents or approvals
(including without limitation, licensing approval of the Division and the
Commission), the consummation of the transactions contemplated hereby and
thereby will not, (i) violate any provision of the Articles of Organization or
the Operating Agreement of Purchaser, (ii) violate or conflict with any law,
ordinance, rule, regulation, order, judgment or decree to which Purchaser is
subject or by which Purchaser is bound (other than violations or conflicts
which individually or in the aggregate would not have a Purchaser Material
Adverse Effect or which would not prevent or delay the consummation of the
transactions contemplated hereby), or (iii) violate or conflict with or
constitute a default (or an event which, with notice or lapse of time, or both,
would constitute a default) under, or will result in the termination of, or
accelerate the performance required by, or result in the creation of any lien,
security interest, charge or encumbrance upon any of the properties or the
assets under, any term or provision of any contract, commitment, understanding,
arrangement, agreement or restriction of any kind or character to which
Purchaser is a party or by which Purchaser or any of its assets or properties
may be bound or affected (other than, in any such instance, violations,
conflicts, defaults, terminations, accelerations, liens, security interests,
charges or encumbrances which individually or in the aggregate would not have a
Purchaser Material Adverse Effect or which would not prevent or delay the
consummation of the transactions contemplated hereby). Except for approval of
Seller's shareholders, any required licensing approval of the Division, the
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Commission and state and local liquor licensing authorities, no consent,
approval, authorization or action by any Governmental Agency or any other third
party is required in connection with the execution and delivery by Purchaser of
this Agreement and the other documents and instruments to be executed and
delivered by Purchaser pursuant hereto or the consummation by Purchaser of the
transactions contemplated herein or therein.
(c) Investment Purpose. The Shares to be acquired by
Purchaser upon conversion of the Note are being acquired for Purchaser's own
account and not with the view to or for resale in connection with, any
distribution or public offering thereof within the meaning of the Securities
Act of 1933 (the "1933 Act"). Purchaser understands that the Shares have not
been registered under the 1933 Act by reason of their contemplated issuance in
a transaction believed to be exempt from the registration and prospectus
delivery requirements of the 1933 Act pursuant to Section 4(2) thereof, and in
transactions believed to be exempt from the registration and/or qualification
provisions of the appropriate state securities laws. Purchaser has such
knowledge and experience in financial and business matters that it is capable
of independently evaluating the risks and merits of purchasing or acquiring the
Shares.
(d) Gaming Approval. To the best of Purchaser's
knowledge, there are no facts or circumstances which exist which would preclude
Purchaser from obtaining any necessary approval from the Division and the
Commission and/or the appropriate state and local liquor licensing authorities.
8. CLOSING
The Closing hereunder shall take place on the Closing Date by
the use of facsimile, U.S. Mail and overnight courier.
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9. UNDERTAKINGS.
(a) Prior to the date hereof, Purchaser and its agents
and representatives commenced and, from and after the date hereof, shall be
permitted to continue Purchaser's due diligence review of Seller, in
anticipation of the Closing, and shall have full access to all relevant
information regarding Seller, its assets, the business and the Shares to
determine that all financial and other information has been and will be
provided to Purchaser is reasonably accurate. Purchaser acknowledges that such
information shall be and remain confidential until the Closing. In the event
the transactions contemplated by this Agreement do not close, Purchaser shall
return to the Seller all documents previously furnished to Purchaser by the
Seller. Purchaser and its agents and representatives hereby agree that they
will not divulge or use any confidential or other proprietary information
regarding Seller, except to the extent (i) required by law, (ii) otherwise
available from third parties, or (iii) previously known to Purchaser from
sources other than the Seller.
(b) Seller shall not divulge or use any confidential or
proprietary information regarding the Purchaser, except to the extent (i)
required by law, (ii) otherwise available from third parties, or (iii)
previously known to Seller from sources other than the Purchaser.
(c) At or prior to Closing, Seller's 1996 Employees'
Incentive Stock Option Plan (the "1996 Plan") shall have been expanded in a
manner satisfactory to Seller and Purchaser to provide for additional grants of
Options as follows: Options for 180,000 Shares to Purchaser's employees
(including Xxxxxx) as determined by Purchaser and Options for 120,000 Shares to
Seller's officers and employees as determined by Seller's Board. The exercise
price of such Options shall be $5.625 per Share. The vesting schedule for the
Options shall be 1/3 upon
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conversion of the entire unpaid principal balance of the Note, and 1/3 each
upon the first and second anniversary dates of such conversion. Options held
by certain officers and employees of Seller as approved by Purchaser shall be
amended in order to change the exercise price of such Options to $5.625 per
Share.
10. [INTENTIONALLY OMITTED]
11. Governmental Regulation.
(a) The parties hereto acknowledge that the business of
Seller and the proposed business of the Joint Venture is subject to stringent
government regulation including supervision by the Division and the Commission.
(b) The parties also acknowledge that Purchaser and
certain of its affiliates are presently seeking appropriate gaming licenses
from the Division (Xxxxxx has already obtained a key employee license), and
that no assurance can be given that such licenses will be issued or when such
licenses may be issued.
(c) If any license, registration, application or other
form of required governmental filing for the Xxxxxx Hotel Casino (the "Xxxxxx
Casino"), the LLC's planned casino or otherwise, is denied, reserved, revoked
or suspended for any reason, including, but not limited to the participation of
a person unacceptable or unsuitable to the Division and the Commission or other
Governmental Authority, the affected party hereto (either Seller, Purchaser or
Xxxxxx) shall take all measures necessary to remedy or correct the deficiency.
In the case where the Division, the Commission or other Governmental Authority
denies or reserves approval for gaming operations or other business operations
of a party hereto because of the participation of an unacceptable or unsuitable
person, that party shall forthwith expel such person(s) and substitute
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a person(s) acceptable to the Division, the Commission or other Governmental
Authority, or otherwise take measures to remedy or correct the deficiency.
(d) Pursuant to the Operating Agreement for the LLC (the
"Operating Agreement"), Purchaser and/or its affiliate has certain rights to
acquire Seller's interest in the LLC. Further, a member's interest in the LLC
may be automatically divested upon the occurrence of certain events. In the
event such rights to acquire Seller's interest have been exercised or Seller's
interest is divested and thereafter Seller exercises and fulfills certain
repurchase rights contained in the Operating Agreement, the parties intend that
Purchaser would thereafter be issued 1,142,857 Shares as part of the
consideration to be paid by Seller as part of the repurchase right (relating to
40% of Seller's Membership Interest (as defined in the Operating Agreement))
and all of the terms and conditions of this Agreement would apply.
12. CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER
The obligations of Purchaser hereunder are subject to the
following conditions, any of which may be waived in writing by Purchaser:
(a) Representations and Warranties True at Closing. The
representations and warranties of Seller contained in this Agreement shall be
true and correct on the Closing Date and the date of issuance of the Second
Note with the same effect as if made on and as of such dates. All Schedules
and all other information furnished to Purchaser pursuant to this Agreement
shall be updated by Seller as of the Closing Date and the date of issuance of
the Second Note, if so required. The updating of said Schedules shall not, in
any manner, affect the representations and warranties of Seller nor relieve
Seller from any liability thereunder.
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(b) Performance of Agreements and Conditions. Seller,
Xxxxxxxx and Day shall have performed and complied with all agreements and
conditions required by this Agreement to be performed and complied with by
Seller, Xxxxxxxx and Day as the case may be, prior to or at the Closing Date or
the date of issuance of the Second Note, as the case may be.
(c) President's Certificate. Seller shall have delivered
to Purchaser a certificate from its President, dated the Closing Date,
certifying in such detail as Purchaser may reasonably request to Seller's
fulfillment of the conditions specified in subsections (a) and (b) above and
such other evidence as to Seller's compliance with the provisions of this
Agreement as Purchaser reasonably may request.
(d) Due Diligence Completion. Purchaser shall have
completed its due diligence investigation contemplated by Section 8(a) and such
investigation shall not, in Purchaser's sole discretion, have disclosed any
material variances from information heretofore provided by Seller to Purchaser.
(e) Injunction. On the Closing Date there shall not be
in effect any injunction, writ, temporary restraining order or any other order
of any nature issued by a court or other governmental body or agency of
competent jurisdiction directing that the transaction provided for herein not
be consummated as herein provided, nor shall there be any litigation or
proceeding pending or threatened in respect of the transaction contemplated
hereby.
(f) Shareholders' Agreement. Xxxxxxxx, Day and Xxxxxx
shall have entered into the Shareholders' Agreement.
(g) Registration Agreement. Seller and Purchaser shall
have entered into the Registration Agreement.
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(h) LLC. Seller and Purchaser shall have entered into
all documents necessary to restructure the Joint Venture into the LLC.
(i) Master Joint Venture Agreement. Seller and Purchaser
shall have entered into the Master Joint Venture Agreement.
(j) Delivery of the Note, the Shares and Security
Documents. Seller shall have delivered to Purchaser the Note, certificates for
the 190,476 Shares and shall have delivered all other instruments, certificates
and other documents required to be delivered hereunder in order to grant
Purchaser the security interests referenced in Section 2(a).
(k) Condition of Business and Properties. Between the
date of this Agreement and the Closing Date, each of Seller, the Xxxxxx and the
Joint Venture shall have continued to operate its business in its regular and
ordinary course. On and before the Closing Date, the business and property of
Seller, the Xxxxxx and/or the Joint Venture shall not have been adversely
affected in any material way as a result of fire, accident or other casualty
(whether or not covered by insurance) or any labor dispute or act of God or the
public enemy or as the result of any judicial, administrative or governmental
proceeding or other event or condition.
(l) Governmental Approval. Purchaser shall have obtained
licensing approval from the Division and the Commission, if required, and any
other necessary governmental or regulatory approval.
(m) Employment Agreements. Seller shall have entered
into the employment agreements in form satisfactory to Purchaser, in its sole
discretion, with Xxxxxx, Xxxxx and Xxxxxxx Xxxxxxxx.
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(n) Opinion of Counsel. Purchaser shall have received a
legal opinion from Xxxxx & Xxxxxx P.C., counsel for Seller, dated as of the
Closing Date, which opinion shall be mutually agreeable to Purchaser's counsel
and Seller's counsel.
(o) Delivery of Documents. Seller shall have delivered
or caused to have been delivered to Purchaser the documents contemplated by
Section 15 not otherwise hereinabove specified.
Seller represents and warrants that it has not caused, and it
covenants and agrees that it shall not cause, any event that would prevent the
satisfaction of all of the conditions set forth in this Section 11. Seller
covenants and agrees to take all action reasonably required to satisfy such
conditions.
13. CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER
The obligations of Seller hereunder are subject to the
following conditions, any of which may be waived in writing by Seller:
(a) Representations and Warranties True at Closing. The
representations and warranties of Purchaser contained in this Agreement shall
be true and correct on the Closing Date and the date of issuance of the Second
Note with the same effect as if made on and as of such dates.
(b) Performance of Agreements and Conditions. Purchaser
shall have performed and complied with all agreements and conditions required
by this Agreement to be performed or complied with by Purchaser prior to or at
the Closing Date and the date of issuance of the Second Note, as the case may
be.
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(c) President's Certificate. Purchaser shall have
delivered to Seller the certificate of Purchaser's President, dated the Closing
Date, certifying in such detail as Seller reasonably may request to Purchaser's
fulfillment of the conditions specified in subsections (a) and (b) above and
such other evidence as to Purchaser's compliance with the provisions of this
Agreement as Seller reasonably may request.
(d) Opinion of Counsel. Purchaser shall have delivered
to Seller an opinion of Xxxx Xxxxxx & Parks, counsel for Purchaser, dated the
Closing Date, which opinion shall be mutually agreeable to Purchaser's counsel
and Seller's counsel.
(e) Injunction. On the Closing Date there shall not be
in effect any injunction, writ, temporary restraining order or any order of any
nature issued by a court or other governmental body or agency directing that
the transactions provided for herein not be consummated as herein provided, nor
shall there be any litigation or proceeding pending or threatened in respect of
the transactions contemplated hereby.
(f) Delivery of Documents. Purchaser shall have
delivered to Seller the documents contemplated by Section 15 not otherwise
hereinabove specified.
Purchaser represents and warrants that it has not caused, and it
covenants and agrees that it shall not cause, any event that would prevent the
satisfaction of all of the conditions set forth in this Section 12. Purchaser
covenants and agrees to take all action reasonably required to satisfy such
conditions.
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14. INDEMNIFICATION BY SELLER
Seller shall and hereby does indemnify and hold Purchaser
harmless from and against and in respect of any and all loss, damage and
expense incurred by Purchaser, resulting from, arising out of, attributable to,
or in any manner connected with:
(i) Any matter in respect of which Seller shall
have made any misrepresentation, breached any
warranty made pursuant to this Agreement or
failed to fulfill any covenant or agreement
on the part of Seller contained in this
Agreement or in any Exhibit, Schedule or
certificate or other document delivered, or
to be delivered, by Seller to Purchaser in
connection with this Agreement;
(ii) Any liability of Seller actual or contingent,
current or deferred, not disclosed in the
Financial Statements, or any Exhibit or
Schedule furnished pursuant hereto; and
(iii) Any and all actions, suits, proceedings,
demands, assessments or judgments, costs and
expense (including reasonable legal and
accounting fees and investigation costs)
incident to the foregoing and the enforcement
thereof.
If any event shall occur or any circumstance arise which might give
rise to a claim in respect of any matter against which Seller has indemnified
Purchaser hereunder, Purchaser promptly shall give notice thereof to Seller.
If the matter as to which indemnification may be sought is a claim by a third
party, such notice shall be given within thirty (30) days after said claim
shall have been presented to the President of Purchaser; otherwise such notice
shall be given promptly after the President of Purchaser shall determine that
the matter is one as to which indemnification is sought. Unless the parties
otherwise agree in writing, Seller shall defend against all such third-party
claims or otherwise satisfy said claims, at its sole cost and expense, through
counsel and accountants designated by it and approved by Purchaser, which
approval shall not be withheld unreasonably. Purchaser shall have the right to
participate with Seller in the
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defense of any such matter and shall make available to Seller the business
records of Purchaser for said purpose. If Seller, after receipt of
notification from Purchaser of a third-party claim, fails to protest, defend or
settle any such third-party claim, demand, suit or proceeding promptly,
diligently and in good faith, Purchaser shall have the right at its discretion
to settle, defend or pay the same, in which event, Seller's indemnity shall
extend to and include the amount of said settlement or payment and/or the costs
and legal expenses of such defense.
15. INDEMNIFICATION BY PURCHASER
Purchaser shall and hereby does indemnify and hold Seller
harmless from and against and in respect of any and all loss, damage and
expense incurred by Seller, resulting from, arising out of, attributable to, or
in any manner connected with:
(a) Any matter in respect of which Purchaser shall have
made any misrepresentation, breached any warranty
made pursuant to this Agreement or failed to fulfill
any covenant or agreement on the part of Purchaser
contained in this Agreement or in any Exhibit,
Schedule or certificate or other document delivered,
or to be delivered, by Purchaser to Seller in
connection with this Agreement; and
(b) Any and all actions, suits, proceedings, demands,
assessments or judgments, costs or expenses
(including reasonable legal and accounting fees and
investigation costs) incident to the foregoing and
the enforcement thereof.
If any event shall occur or any circumstance arises which might give
rise to a claim in respect of any matter against which Purchaser has
indemnified Seller hereunder, Seller shall give notice thereof to Purchaser
within thirty (30) days after said claim shall have been presented to it and,
unless the parties otherwise agree in writing, Purchaser shall defend against
said claim or otherwise satisfy said claim, at its sole cost and expense,
through counsel and accountants designated by Purchaser and approved by Seller,
which approval shall not be unreasonably
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withheld. Seller shall have the right to participate with Purchaser in the
defense of any such matter and shall make available to Purchaser the business
records of Seller for said purpose. If Purchaser, after receipt of
notification from Seller of a thirty-party claim, fails to protest, defend or
settle any such third-party claim, demand, suit or proceeding promptly,
diligently and in good faith, Seller shall have the right in its discretion to
settle, defend or pay the same, in which event, Purchaser's indemnity shall
extend to and include the amount of said settlement or payment and/or the costs
and legal expenses of such defense.
16. DOCUMENTS TO BE DELIVERED AT CLOSING
At the Closing on the Closing Date:
(a) Seller shall deliver or cause to be delivered to
Purchaser the following:
(i) The First Note being issued to Purchaser at
Closing and the documents required in order
to grant Purchaser the security interests and
the certificates for the 190,476 Shares
referenced in Section 2(a);
(ii) The Shareholders' Agreement referred to in
Section 3(a);
(iii) The Registration Agreement referred to in
Section 3(d);
(iv) The documents necessary to restructure the
Joint Venture into the LLC and the Master
Joint Venture Agreement referred to in
Section 4;
(v) The certificate referred to in Section 11(c),
(vi) A copy of the Seller's Articles of
Incorporation and Bylaws certified as of the
Closing Date by the Secretary thereof;
(vii) The Employment Agreements referred to in
Section 11(m);
(viii) The opinion of counsel referred to in Section
11(n);
(ix) Certified resolutions of Seller's Board of
Directors authorizing and approving this
transaction; and
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(x) Subscription Agreements executed by each of
Xxxxxxxx, Day and Xxxxx to evidence their
purchase obligations contained in Section
2(d); and
(xi) All other instruments not herein specifically
provided for but which are reasonably
necessary or desirable to effectuate the
purpose of this Agreement.
(b) Purchaser and/or Xxxxxx shall deliver to Seller the
following:
(i) The purchase price due at Closing pursuant to
Section 2(c);
(ii) The Shareholders Agreement referred to in
Section 3(c);
(iii) The Registration Agreement referred to in
Section 3(d);
(iv) The documents necessary to restructure the
Joint Venture into the LLC and the Master
Joint Venture Agreement referred to in
Section 4;
(v) Certified resolutions of the Manager of
Purchaser authorizing this transaction;
(vi) The certificate referred to in Section 12(c);
(vii) The opinion of counsel referred to in Section
12(d); and
(viii) All other instruments not herein specifically
provided for but which are reasonably
necessary or desirable to effectuate the
purpose of this Agreement.
17. BROKERAGE
Each party represents and warrants to the other that no person
or persons assisted in or brought about the negotiation of this Agreement in
the capacity of broker, agent, finder or originator on behalf of it. Each
party ("First Party") agrees to indemnify and hold harmless the other from any
claim asserted against such other party for a brokerage or agent's or finder's
or originator's commission or compensation in respect of the transaction
contemplated by this Agreement by any person purporting to act on behalf of
First Party.
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18. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS
All representations, warranties and agreements made by Seller
and Purchaser pursuant hereto shall survive the closing of this transaction.
None of the representations, warranties and agreements shall be affected by any
investigation at any time made by or on behalf of Seller or Purchaser.
19. [INTENTIONALLY OMITTED]
20. REIMBURSEMENT OF EXPENSES OF PURCHASER
Upon the Closing, Seller shall reimburse Purchaser for and/or
pay directly on behalf of and in the name of Purchaser, all the fees and
expenses of Purchaser's attorneys' and accountants' fees incurred on or after
May 29, 1996 in the negotiation and consummation of the transactions
contemplated hereby.
21. BINDING AGREEMENT
All of the terms and provisions of this Agreement shall inure
to the benefit of, be enforceable by and be binding upon and enforceable
against the parties hereto and their respective heirs and personal
representatives, successors and assigns; provided, however, that except as
specified in Section 29 hereof, none of the parties hereto may assign its
rights or duties hereunder. Nothing contained in this Agreement shall confer
any rights or remedies upon any other person, firm or corporation.
22. NOTICES
Any notice or other communication required or permitted
hereunder shall be expressed in writing and delivered in person or sent by
certified or registered mail, return receipt requested, or sent by overnight
courier service such as Federal Express and confirmed by certified
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or registered mail, return receipt requested, or sent by facsimile (receipt
confirmed) to the respective parties at the following addresses, or at such
other addresses as the parties shall designate by written notice to the other:
PURCHASER: Diversified Opportunities Group Ltd.
c/x Xxxxxx Entertainment Ltd.
000 Xxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxx 00000
Attn: Xxxxxxx X. Xxxxxx
Fax No.: (000) 000-0000
Copy To: Xxxx Xxxxxx & Parks
0000 XX Xxxxxxx Xxxxxxxx
000 Xxxxxx Xxxxxx
Xxxxxxxxx, Xxxx 00000
Attn: Xxxxxxx X. Xxxxxxxx, Esq.
Fax No.: (000) 000-0000
SELLER: Black Hawk Gaming & Development Company, Inc.
0000 Xxxxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxxx X. Xxxxx, President
Fax No.: (000) 000-0000
Copy To: Xxxxx & Xxxxxx P.C.
0000 Xxxxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
Attn: Xxxxxx X. Xxxx, Esq.
Fax No.: (000) 000-0000
All notices shall be deemed received on the third business day after mailing or
the first business day after delivery to the overnight courier service or the
same business day if presently delivered or sent by facsimile.
23. SECTION HEADINGS
The section and subsection headings and any table of contents
listing the same contained in this Agreement are for reference purposes only
and shall not affect in any way the
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meaning or interpretation of this Agreement.
24. SCHEDULES AND EXHIBITS
All Schedules and Exhibits referred to in this Agreement are
attached hereto and are hereby incorporated herein and made a part hereof.
25. COUNTERPARTS
This Agreement may be executed in any one or more
counterparts, all of which taken together shall constitute one instrument.
26. COOPERATION
Each party shall cooperate and use its best efforts to
consummate the transaction contemplated herein. In addition, each party shall
cooperate and take such action and execute such other and further documents as
reasonably may be requested from time to time after the Closing Date by any
other party to carry out the terms and provisions and intent of this Agreement.
27. GENDER
Wherever the context of this Agreement so requires or permits,
the masculine herein shall include the feminine or the neuter, the singular
shall include the plural, and the term "person" shall also include
"corporation" or other business entity.
28. ENTIRE AGREEMENT
This Agreement contains the entire agreement between the
parties hereto, and it is understood and agreed that there are no other
covenants, representations or warranties other than those contained herein.
This Agreement may not be changed or modified except by a writing duly executed
by the parties hereto.
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29. WAIVER OF PROVISIONS
The terms, covenants, representations, warranties and
conditions of this Agreement may be waived only by a written instrument
executed by the party waiving compliance. The failure of any party at any time
or times to require performance of any provision of this Agreement shall in no
manner affect the right at a later date to enforce the same. No waiver by any
party of any condition or the breach of any provision, term, covenant,
representation or warranty contained in this Agreement, whether by conduct or
otherwise, in any one or more instances shall be deemed to be or construed as a
further or continuing waiver of any such condition or of the breach of any
other provision, term, covenant, representation or warranty of this Agreement.
30. ASSIGNMENT BY PURCHASER.
Subject to any required approval of the Division, the
Commission and the state and local liquor licensing authorities, Purchaser may
assign its rights and obligations hereunder to corporations, limited liability
companies, partnerships, trusts or other entities which are under common
control with or controlled through equity ownership and/or voting control, by
Purchaser or Xxxxxx; it being acknowledged that (i) any entity managed either
by Xxxxxx Entertainment Ltd. ("JEL") or Xxxxxx, (ii) any entity in which either
JEL or Xxxxxx is one of the trustees and/or one of the beneficiaries or (ii)
any entity in which either JEL or Xxxxxx beneficially owns 15% or more of the
outstanding equity securities constitutes common control.
31. ARBITRATION.
If any dispute shall arise between the parties pursuant to
this Agreement, such dispute shall be settled by arbitration pursuant to this
Section 30. In such event, either party hereto may serve upon the other party
a written notice demanding that the dispute be resolved
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pursuant to this Section 30. To the extent that any provision herein is
inconsistent with any rule of the AAA, this Agreement shall prevail. The
dispute or claim shall be heard in Chicago, Illinois by one (1) neutral
arbitrator, if the parties can agree on the selection of said arbitrator, or if
unable to agree, each party shall select one (1) arbitrator and the two
arbitrators chosen shall select the third arbitrator. If the dispute shall be
heard by three (3) arbitrators, one (1) arbitrator will be selected by the
party initiating the arbitration at the time of the submission to arbitration.
Within seven (7) days after submission, the other party will select an
arbitrator. Within seven (7) days after the first two (2) arbitrators are
chosen, the third arbitrator will be selected. The third arbitrator selected
shall not have any relationship to either of the parties. The arbitrators
shall apply the internal law of the State of Colorado. Said arbitrator(s)
shall be sworn faithfully and fairly to determine the question at issue. The
arbitrator(s) shall afford to the parties a hearing and the right to submit
evidence, with the privilege of cross examination and the right to compel
testimony by applying for subpoena powers to appropriate judicial authority, on
the question at issue, and shall, with all possible speed, make his/their
determination in writing and shall give notice to the parties hereto of such
determination. The concurring determination of the arbitrator, if heard by
one, or of any two of said three arbitrator(s) shall be binding upon the
parties hereto, or, in case no two of the arbitrators shall render a concurring
determination, then the determination of the third arbitrator appointed shall
be binding upon the parties hereto. The decision of the arbitrators shall be
final and binding upon the parties hereto and shall be enforceable in any court
having jurisdiction. Any arbitration shall be conducted in accordance with the
then prevailing Commercial Rules of the American Arbitration Association, or
the successor party thereto from time to time in existence. The fees and
expenses of the arbitrator(s)
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shall be divided equally between the parties so involved. The parties shall
each bear their own expenses (including, but not limited to, attorneys' and
witnesses' fees and expenses) in any arbitration proceedings.
32. GOVERNING LAW
This Agreement shall be governed by and construed under the laws of
the State of olorado.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above set forth.
SELLER:
BLACK HAWK GAMING &
DEVELOPMENT COMPANY, INC.
By: /s/ Xxxxxx X. Xxxxxxxx
----------------------------------
Xxxxxx X. Xxxxxxxx, Chairman
PURCHASER:
DIVERSIFIED OPPORTUNITIES GROUP LTD.
By: XXXXXX ENTERTAINMENT LTD., its
manager
By: /s/ Xxxxx X. Xxxxxxxxxx
----------------------------------
Title: Vice President
----------------------------------
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EXHIBITS AND SCHEDULES
Exhibit Section Reference Description
------- ----------------- -----------
Exhibit A 2(a) First Note
Exhibit B 3(a) Shareholders' Agreement
Exhibit C 3(d) Registration Agreement
Schedule Section Reference Description
-------- ----------------- -----------
5(b) 5(b) Conflicts
5(c) 5(c) Capital Structure
5(e) 5(e) Subsidiaries
5(g) 5(g) Liens
5(i) 5(i) Insurance and Claims
5(l) 5(l) Liabilities
5(m) 5(m) Investigation
5(n) 5(n) Certain Agreements
5(o) 5(o) Plans
5(p) 5(p) Labor Matters
5(q) 5(q) Taxes
5(s) 5(s) Conduct of Business
5(v) 5(v) Proprietary Rights
5(w) 5(w) Contracts
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CONVERTIBLE NOTE
$1,500,000 Boulder, Colorado
November 12, 1996
FOR VALUE RECEIVED, the adequacy of which is hereby acknowledged,
Black Hawk Gaming & Development Company, Inc., a Colorado corporation with its
principal office located at 0000 Xxxxxxxx, Xxxxx 000, Xxxxxxx, Xxxxxxxx 00000
(the "Maker"), hereby promises to pay to the order of Diversified Opportunities
Group Ltd. (the "Holder") with its principal office located at 0000 Xxxx
Xxxxxx, Xxxxxxxxx, Xxxx 00000, the principal sum of One Million Five Hundred
Thousand Dollars ($1,500,000.00), together with interest thereon from the date
hereof until payment in full at the Charged Rate (as defined below). This
Convertible Note (the "Note") is issued pursuant to that certain Amended and
Restated Purchase Agreement of even date herewith (the "Purchase Agreement")
between the Maker and the Holder.
1. Payment of Principal
All principal outstanding hereunder shall be due in one payment, in
full, on November 12, 1998. Principal of and interest on this Note are payable
in lawful money of the United States of America at the Holder's address stated
above, or at such other place as the Holder shall designate to the Maker in
writing.
2. Interest
a. For purposes of this Note, the following terms shall have the
meanings given them in this subsection a.:
i. "Adjusted Eurodollar Rate": For each calendar month
until this Note is paid in full, the rate (rounded
upward, if necessary, to the next one
44
hundredth of one percent) determined by dividing the
Eurodollar Rate for such Interest Period by 1.00
minus the Eurodollar Reserve Percentage;
ii. "Eurodollar Business Day": A day (other than a
Saturday, Sunday or legal holiday) on which banks are
open for business in New York City and on which there
is trading by and between banks in United States
dollar deposits in the interbank Eurodollar market.
iii. "Eurodollar Rate": For each calendar month, the
interest rate per annum (rounded upward, if
necessary, to the next one-sixteenth of one percent)
at which United States dollar deposits are offered to
First Bank National Association (the "Bank") in the
interbank Eurodollar market two Eurodollar Business
Days prior to the first day of such calendar month
for delivery in immediately available funds on the
first day of such month and in an amount
approximately equal to the outstanding principal
amount of the Note and for a thirty (30) day
maturity; provided, that in lieu of determining the
rate in the foregoing manner, the Holder may
substitute the per annum Eurodollar rate (LIBOR) for
United States dollars displayed on the Telerate
Systems, Inc. screen, page 3750 (or other applicable
page), on the first day of such calendar month.
iv. "Eurodollar Reserve Percentage": As of any day, that
percentage (expressed as a decimal) which is in
effect on such day, as prescribed by the Federal
Reserve Board for determining the maximum reserve
requirement (including any basic, supplemental or
emergency reserves) for a member
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bank of the Federal Reserve System, with deposits
comparable in amount to those held by the Bank, in
respect of "Eurocurrency Liabilities" as such term is
defined in Regulation D of the Federal Reserve Board.
The rate of interest applicable to the outstanding
principal balance of the Note shall be adjusted
automatically on and as of the effective date of any
change in the Eurodollar Reserve Percentage.
b. This Note shall bear interest on the unpaid principal amount
at a variable rate per annum equal to the sum of (1) the
Adjusted Eurodollar Rate, plus (2) two percent (2.00%) (the
"Charged Rate"). The Charged Rate shall be adjusted monthly
on the first day of each calendar month and each change in the
Charged Rate shall result immediately, without notice or
demand of any kind, in a corresponding change in the interest
rate under the Note. Interest shall be payable on the last
day of each calendar quarter, and, in the event of a permitted
prepayment, on the date of such prepayment. The Holder shall
provide the Maker with notice of the Charged Rate periodically
in order to permit the Maker to make timely payments
hereunder.
c. Any amount not paid when due under this Note, whether at the
date scheduled for payment or earlier upon acceleration, shall
bear interest until paid in full at a rate per annum equal to
the Charged Rate plus four percent (4.00%) (the "Default
Rate").
3. Facility Fee
Maker shall pay to Holder an annual facility fee (the "Facility Fee")
equal to 1/4 of 1% of the amount of principal outstanding hereunder. The
Facility Fee shall be due and payable to
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Holder on the date hereof and on the same day of each subsequent year until
this Note is paid in full.
4. Security
This Note is be secured by a first priority lien on the Maker's
interest in the LLC (as defined in the Purchase Agreement) equal to 100% of the
Maker's Membership Interest and the products and proceeds thereof, including
but not limited to, its Capital Interest, interest in the Net Profits and Net
Losses and Net Cash Flow of the LLC (each as defined in the Operating Agreement
for the LLC (the "Operating Agreement")), and all other rights and privileges
associated with Maker's membership in the LLC; provided, however, that the
Holder's remedies upon an Event of Default hereunder shall be limited as set
forth in Section 11 b., below. The Holder and BH Entertainment Ltd.
("Entertainment") are the other members of the LLC.
5. Profit Participation. In addition to the interest payable pursuant to
Section 2, until conversion of the entire unpaid principal balance of the Note
in accordance with Section 8, below, Maker shall pay to the Holder, as and when
received by the Maker, 40% of the Net Cash Flow distributed by the LLC to the
Maker.
6. Prepayment Except as may be required by the Commission, the Division
or other Governmental Authority (all as defined in the Purchase Agreement), the
Maker may not prepay this Note without the prior written consent of the Holder.
7. Covenants. So long as any indebtedness under this Note remains
outstanding, Maker shall not, without the prior written consent of the Holder:
a. directly or indirectly declare or pay any dividends or make
any distributions upon any of its common stock or other equity securities;
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b. except with respect to the Maker's obligation to acquire
12,500 shares of its common stock pursuant to a put option incurred by the
Maker when it acquired certain property, directly or indirectly redeem,
purchase or otherwise acquire any of the Maker's common stock or other equity
securities (including, without limitation, options and other rights to acquire
such common stock or other equity securities), or directly or indirectly
redeem, purchase or make any payments with respect to any stock appreciation
rights, phantom stock plans or similar rights or plans;
c. except with respect to the exercise of warrants and options
currently outstanding as shown on Schedule 5(c) to the Purchase Agreement,
authorize, issue or enter into any agreement providing for the issuance
(contingent or otherwise) of (i) any notes or debt securities containing equity
features (including, without limitation, any notes or debt securities
convertible into or exchangeable for capital stock or other equity securities,
issued in connection with the issuance of capital stock or other equity
securities or containing profit participation features) or (ii) any capital
stock or other equity securities (or any securities convertible into or
exchangeable for any capital stock or other equity securities); PROVIDED, that
the Maker may, without the Holder's consent, issue up to an aggregate of
100,000 shares of its common stock;
d. merge or consolidate with any person or permit any subsidiary
to merge or consolidate with any person (other than a wholly-owned subsidiary);
provided, that a subsidiary may merge with another person so long as after such
merger the Maker owns at least 80% of the (i) capital stock of the surviving
corporation possessing the right to vote for the election of directors and (ii)
number of shares of the common stock of the surviving corporation then
outstanding;
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e. sell, lease or otherwise dispose or, or permit any subsidiary
to sell, lease or otherwise dispose of, more than 50% of the consolidated
assets of the Maker and its subsidiaries (computed on the basis of book value,
determined in accordance with generally accepted accounting principles
consistently applied, or fair market value);
f. except with respect to the sale of the Maker's subsidiary
formed for the purpose of obtaining a gaming license in downtown Oklahoma City,
Oklahoma with the Sac and Fox Indian Nation, issue or sell any shares of the
capital stock, or rights to acquire shares of the capital stock, of any
subsidiary to any person (other than the Holder or a permitted assignee of the
Holder) if immediately after such issuance or sale the Maker owns less than 80%
of the (i) capital stock possessing the right to vote for the election of
directors and (ii) the number of shares of the common stock of any subsidiary
then outstanding;
g. liquidate, dissolve or effect a recapitalization or
reorganization in any form of transaction (including, without limitation, any
reorganization into a limited liability company or into partnership or other
non-corporate form);
h. make any amendment to the Articles of Incorporation or the
Maker's bylaws or file a resolution of the Board of Directors with the Colorado
Secretary of State containing any provisions, which would increase the number
of authorized shares of common stock of the Maker or adversely affect or
otherwise impair the rights of the Holder under the Agreement; or
i. create, incur or assume, or permit any subsidiary to create,
incur or assume additional indebtedness in excess of $1,000,000.
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8. Conversion
a. All or any portion of the unpaid principal balance shall be
convertible into shares of common stock of the Maker, $.001 par value per Share
(the "Common Stock") at any time upon the election of the Holder and, if not
yet fully converted, shall, provided the provisions of Article XI of the
Operating Agreement do not apply, automatically be converted, at such time as
(i) the Holder has acquired or received all necessary and appropriate
regulatory, licensing and other approvals (to permit the Holder to convert the
Note and hold the resulting Conversion Shares) from the Colorado Division of
Gaming (the "Division"), the Colorado Limited Gaming Control Commission (the
"Commission") and the state and local liquor licensing authorities and (ii) the
Commission approves the issuance to the LLC of a retail gaming license for the
proposed casino of the LLC. The number of shares of Common Stock into which
this Note may be converted ("Conversion Shares") shall be determined by
dividing the amount of the then unpaid principal balance of this Note specified
in the notice described in Section 8.c. below for conversion by $5.25 (the
"Conversion Price").
b. Any Conversion Shares shall have the registration rights set
forth in the Registration Agreement among the Maker, the Holder and certain
shareholders of the Maker dated of even date herewith.
c. Before the Holder shall be entitled to convert this Note into
Conversion Shares in the event of an optional conversion by the Holder, it
shall give written notice by mail, postage prepaid, to the Maker at its
principal corporate office, of the election to convert the same. Such notice
shall state therein the date on which such conversion will occur. The Maker at
its own expense shall, as soon as practicable thereafter or as soon as
practicable after the issuance of the
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50
retail gaming license for the LLC's casino in the event of an automatic
conversion, issue and deliver at such office to the Holder of this Note a
certificate or certificates for the number of Conversion Shares to which the
Holder of this Note shall be entitled. At the time such certificates are
issued, accrued interest on the amount of principal so converted shall be paid
by the Maker to the Holder. Such conversion shall be deemed to have been made
immediately prior to the close of business on the date of conversion specified
in such written notice, or, on the date of issuance of the retail gaming
license to the LLC in the event of an automatic conversion, and the Holder of
this Note shall be treated for all purposes as the record holder of such
Conversion Shares. To the extent that the entire unpaid principal balance of
this Note is not being converted in Conversion Shares, the Maker of this Note
shall credit the Note on its books to the extent of the principal being
converted by the Holder into Conversion Shares.
d. No fractional share of Common Stock shall be issued upon
conversion of this Note. In lieu of the Maker issuing any fractional share to
the Holder upon the conversion of this Note, the Maker shall pay, in cash, to
the Holder the amount of outstanding principal that is applicable to such
fractional share.
e. At its expense, the Maker shall, as soon as practicable
thereafter, issue and deliver to such Holder at such principal office a
certificate or certificates for the number of Conversion Shares to which the
Holder shall be entitled upon such conversion (bearing such legends as are
required by applicable state and federal securities and other laws in the
opinion of counsel to the Maker), together with any other securities and
property to which the Holder is entitled upon such conversion under the terms
of this Note, including a check payable to the Holder for any cash amounts
payable as described above and for all amounts of interest accrued as of the
date of
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51
conversion. Such conversion shall be deemed to have been made immediately
prior to the close of business on the date specified in such notice and on and
after such date the Holder of this Note entitled to receive the Conversion
Shares shall be treated for all purposes as the record holder of such
Conversion Shares. Upon conversion of this Note and delivery of the check
described above, the Maker shall be forever released from all its obligations
and liabilities under this Note to the extent of the amount of unpaid principal
which the Holder has elected to convert into Conversion Shares.
9. Conversion Price Adjustments.
a. In the event the Maker should at any time or from time to time
after the date of issuance hereof fix a record date for the effectuation of a
split or subdivision of the outstanding shares of Common Stock or the
determination of holders of Common Stock entitled to receive a dividend or
other distribution payable in additional shares of Common Stock or other
securities or rights convertible into, or entitling the holder thereof to
receive directly or indirectly, additional shares of Common Stock (hereinafter
referred to as "Common Stock Equivalents") without payment of any consideration
by such holder for the additional shares of Common Stock or the Common Stock
Equivalents (including the additional shares of Common Stock issuable upon
conversion or exercise thereof), then, as of such record date (or the date of
such dividend distribution, split or subdivision if no record date is fixed),
the Conversion Price of this Note shall be appropriately decreased so that the
number of Conversion Shares issuable upon conversion of this Note shall be
increased in proportion to such increase of outstanding shares.
b. If the number of shares of Common Stock outstanding at any
time after the date hereof is decreased by a combination of the outstanding
shares of Common Stock, then, following
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the record date of such combination, the Conversion Price for this Note shall
be appropriately increased so that the number of Conversion Shares issuable on
conversion hereof shall be decreased in proportion to such decrease in
outstanding shares.
c. In the event of (i) any taking by the Maker of a record of the
holders of any class of securities of the Maker for the purpose of determining
the holders thereof who are entitled to receive any dividend (other than a cash
dividend) or other distribution, or any right to subscribe for, purchase or
otherwise acquire any shares of stock of any class or any other securities or
property, or to receive any other right, or (ii) any capital reorganization of
the Maker, any reclassification or recapitalization of the capital stock of the
Maker or any transfer of all or substantially all of the assets of the Maker to
any other person or any consolidation or merger involving the Maker, or (iii)
any voluntary or involuntary dissolution, liquidation or winding up of the
Maker, the Maker will mail to the Holder of this Note a notice specifying (A)
the date on which any such record is to be taken for the purpose of such
dividend, distribution or right, and the amount and character of such dividend,
distribution or right, (B) the date on which any such reorganization,
reclassification, transfer, consolidation, merger, dissolution, liquidation or
winding up is expected to become effective and the record date for determining
stockholders entitled to vote thereon and (C) the new Conversion Price after
giving effect to the adjustment event, which new Conversion Price shall
represent an appropriate increase or decrease in the Conversion Price to
preserve the proportionate amount of Conversion Shares. Such notice shall be
mailed at least twenty (20) days prior to the date described in clause (A) or
(B) above.
d. The Maker shall at all times reserve and keep available out of
its authorized but unissued shares of Common Stock solely for the purpose of
effecting the conversion of the Note
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into such number of Conversion Shares as shall from time to time be sufficient
to effect the conversion of the Note; and if at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to
effect the conversion of the entire outstanding principal amount of this Note,
in addition to such other remedies as shall be available to the Holder of this
Note, the Maker will use its best efforts to take such corporate action as may,
in the opinion of its counsel, be necessary to increase its authorized but
unissued shares of Common Stock to such number of shares as shall be sufficient
for such purposes.
10. Events of Default
"Event of Default," whenever used herein, means any one or more of the
following defaults shall have occurred and be continuing (whatever the reason
for such Event of Default and whether it shall be voluntary or involuntary or
be effected by operation of law pursuant to any judgement, decree or order of
any court or any order, rule or regulation of any administrative or
governmental body):
i. Default in the payment of any installment of
interest, the Facility Fee, the principal of this Note or any other
amount payable hereunder when such payment becomes due and payable,
whether at maturity, by acceleration or otherwise, and such default
shall continue unremedied for a period of fifteen (15) days;
ii. Default in the performance or breach of any other
agreement, covenant or warranty of the Maker contained in this Note,
and such default or breach shall continue unremedied for a period of
thirty (30) days after the date on which written notice of such
default or breach, requiring the Maker to remedy the same, shall have
been given to the Maker by the Holder, or such longer period provided
that the default is of a nature that
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54
cannot be remedied within 30 days and the Maker has within the thirty
(30) day period instituted curative action and diligently and
continuously pursues such action to completion;
iii. The entry of a decree or order by a court having
jurisdiction adjudging the Maker a bankrupt or insolvent, or approving
as properly filed a petition seeking reorganization, arrangement,
adjustment or composition of or in respect of the Maker under federal
bankruptcy law or any similar federal or state law for the relief of
debtors ("Bankruptcy Law"), or appointing a receiver, liquidator,
assignee, trustee, conservator, sequestrator or assignee in bankruptcy
or insolvency of the Maker or of any substantial part of its property,
or ordering the winding up or liquidation of its affairs, and such
decree or order shall have continued undischarged and unstayed for a
period of thirty (30) days;
iv. The Maker shall commence a voluntary case or shall
consent to the entry of an order for relief in any involuntary case
under Bankruptcy Law, or shall consent to the appointment of or taking
possession by a receiver, liquidator, custodian, sequestrator, trustee
or assignee of any substantial part of its property, or shall make an
assignment for the benefit of creditors, or shall fail generally to
pay its debts as they become due;
v. There shall have occurred any circumstance or event
which, upon the lapse of time, the giving of notice, or both, would
constitute an event of default under any other indebtedness of the
Maker, except if the same is cured or waived within any applicable
grace period;
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vi. The Maker shall have failed to give written notice
within five (5) days after the occurrence of the event or
circumstances described in clause (v), above;
vii. Entertainment delivers a notice to the Maker that
pursuant to the terms of the Operating Agreement, it is electing its
Purchase Right of the Maker's Membership Interest in the LLC, or an
event occurs that pursuant to the terms of the Operating Agreement
would subject all of the Maker's Membership Interest in the LLC to
automatic and immediate termination; or
viii. Breach or default by the Maker of any representation,
warranty, agreement or covenant pursuant to the Purchase Agreement or
any other agreement between the Holder and the Maker.
11. Remedies
a. Subject to subsection b., below, if an Event of Default occurs
and is continuing (unless waived in writing by the Holder), then, and in each
and every case, unless the entire principal of this Note already shall have
become due and payable, the Holder may, by a notice in writing to the Maker,
declare the principal and the accrued interest on this Note to be immediately
due and payable. The principal and accrued interest on this Note shall become
and shall be immediately due and payable upon such declaration.
b. The following provisions shall apply if an Event of Default
shall occur. The principal and accrued interest on this Note shall be
immediately due and payable without any notice or other action being required
on the part of Holder. If the Event of Default consists of Entertainment's
election of a Purchase Right, then the Holder's remedies for this Event of
Default shall be limited to the extent and in the circumstances provided in the
Operating Agreement. If
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the Event of Default is one that causes the automatic termination of the
Maker's Membership Interest, and the Membership Interest of the Holder as a
result increases in accordance with the provisions of the Operating Agreement,
then the Holder shall transfer the Note to the LLC as provided by the Operating
Agreement and shall exercise no remedies thereunder inconsistent with its
obligations as set out under the Operating Agreement. In the event of any
other Event of Default hereunder, then Holder's remedies shall be limited in
the same manner as if the Event of Default consists of Entertainment's election
of the Purchase Right under the Operating Agreement. In any event, provided
all of the applicable provisions of Section 11.2(b) of the Operating Agreement
occur, Holder shall take no further action against the Maker to enforce payment
under the Note, except for the payment of accrued but unpaid interest.
12. Miscellaneous
a. The Maker hereby waives presentment, notice of dishonor,
protest and diligence in bringing suit against the Maker. Acceptance by the
Holder of any payment which is less than the full amount then due and owing
hereunder shall not constitute a waiver of the Holder's right to receive
payment in full at such time or at any prior or subsequent time. The Maker
consents that the time of payment may be extended an unlimited number of times
before or after maturity without notice to the Maker, and that the Maker shall
not be discharged by reason of any such extension or extensions of time. No
delay or omission on the part of the Holder in exercising any right hereunder
shall operate as a waiver of such right or any other right under this Note. A
waiver on any one occasion shall not be construed as a bar to or waiver of any
such right or remedy on any future occasion.
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b. Notwithstanding the foregoing, if at any time implementation
of any provision hereof shall cause the interest contracted for or charged
herein and collectible hereunder to exceed the applicable lawful maximum rate,
then the interest shall be limited to such lawful maximum.
c. The Maker shall be liable for any and all costs and expenses
of collection of the interest required to be paid hereunder, including, without
limitation, reasonable attorneys' fees, arising by virtue of an Event of
Default.
d. This Note shall be subject to and construed in accordance with
the laws of the State of Colorado. If any provision herein shall be
unenforceable, such unenforceable provision shall not render the remaining
provisions hereof unenforceable or invalid.
e. This Note shall be binding upon the Maker and the Maker may
not assign its obligations hereunder without the prior written consent of the
Holder. The Holder may assign its rights hereunder, in whole or in part, to
one or more corporations, limited liability companies, partnerships, trusts or
other entities which are under common control with or controlled through equity
ownership and/or voting control by, the Holder or Xxxxxxx X. Xxxxxx; it being
acknowledged that (i) any entity managed by Xxxxxx Entertainment Ltd. ("JEL")
or Xxxxxxx X. Xxxxxx, (ii) any entity in which either JEL or Xxxxxxx X. Xxxxxx
is one of the trustees and/or one of the beneficiaries or (iii) any entity in
which either JEL or Xxxxxxx X. Xxxxxx beneficially owns 15% or more of the
outstanding equity securities constitutes common control.
BLACK HAWK GAMING & DEVELOPMENT
COMPANY, INC.
By: /s/ Xxxxxxx X. Xxxxx
-------------------------------------
Title: President
----------------------------------
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