Exhibit 10.1A
ASSET PURCHASE AND SALE AGREEMENT
THIS ASSET PURCHASE AND SALE AGREEMENT (this "Agreement") is made and
entered into as of the 15 day of January, 1999 ("Effective Date"), by and
between GREATER DUBUQUE RIVERBOAT ENTERTAINMENT COMPANY, L.C., an Iowa limited
liability company ("Seller") and AB CAPITAL, L.L.C., a Delaware limited
liability company or its permitted designee ("Buyer").
WHEREAS, subject to the terms and conditions set forth in this Agreement,
Seller desires to sell, transfer, assign and convey to Buyer, and Buyer desires
to purchase and acquire from Seller, the operating assets of Seller used in
connection with Seller's gaming excursion riverboat business (the "Business")
berthed in Dubuque, Iowa; and
WHEREAS, concurrently with the execution and delivery of this Agreement,
Buyer is entering into the Real Property Purchase and Sale Agreement with Harbor
Community Investment, L.C., an Iowa Limited Liability Company ("HCI"), pursuant
to which, among other things, Buyer has agreed to purchase and acquire from HCI,
and HCI has agreed to sell, transfer, assign and convey to Buyer, certain real
property of HCI, the purchase and sale of which is a condition to closing the
transactions contemplated by this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein and for other good and valuable consideration the receipt and
sufficiency of which hereby are acknowledged, Seller and Buyer hereby agree as
follows:
1. Purchase and Sale. Subject to the terms and conditions set forth in
this Agreement, Seller hereby agrees to sell, transfer, assign and convey to
Buyer, and Buyer hereby agrees to purchase and acquire from Seller, all of the
following (collectively, the "Seller's Assets"):
(a) The gaming excursion riverboat, ▇▇▇▇▇▇▇ ▇▇ (Official No. 973800)
and Diamond ▇▇ ▇▇ (Official No. 973801), that is operated from Dubuque,
Iowa, together with all fixtures and improvements located on or used in
connection with the riverboat (the "▇▇▇▇▇▇▇ ▇▇ Riverboat");
(b) All owned or leased (to the extent assignable) slots, video
poker, video keno, wheel of fortune and other video gaming devices, slot
stands, ▇▇▇▇▇ ▇▇▇▇ tables, Caribbean Stud tables, roulette tables, crap
tables, poker tables, keno, coin counting and wrapping equipment, and all
other gaming equipment and paraphernalia used or held for use directly or
indirectly in the Business as itemized on attached Schedule 1 (b)
(collectively the "Gaming Equipment");
(c) All tangible personal property used or held for use directly or
indirectly in the operation of the Business, including, without
limitation, computer equipment,
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computer software to the extent owned or assignable under existing
arrangements, and all service equipment, kitchen equipment, decorations,
china, glasswares, linens, silverware, owned uniforms in use or held for
future use, furniture, furnishings and other equipment and vehicles (the
"Personal Property");
(d) All inventories, including all food and beverages, maintenance
and housekeeping supplies, and other supplies of all kinds, subject to
such depletion and including such re-supplies as shall occur and be made
in the ordinary course of business (the "Inventories");
(e) All documents and books and records related to the Seller's
Assets or the operations of the Business, including, without limitation,
customer lists and player lists, casino files, copies of accounting
records and copies of financial statements (the "Records");
(f) All rights under agreements, contracts, options and leases of
whatever nature, including, without limitation, the DRA Operating
Agreement and the Third Party Confidentiality Agreement, and all other
property and rights of every kind and nature owned or held by Seller on
the Closing Date (which agreements, contracts, options or leases, to the
extent involving payment obligations, individually or in the aggregate, in
excess of $10,000, are listed on Schedule 1(f));
(g) All intangible property owned or leased by Seller, including,
without limitation, goodwill, operating and training manuals, federal,
state, and local certifications and other permits (to the extent
assignable), manuals and plans relating to the Business or its operations,
customer lists, supplier lists and other documents relating to the
operation of the Seller's Assets, trademarks and trade names, mailing
lists used in the Business and all contract rights, leases, and other
items of intangible personal property relating to the ownership or
operation of the Business (the "Intangibles");
(h) All other assets that are used or held for use directly or
indirectly in connection with the maintenance and operation of the
Seller's gaming business, whether located within the Seller's portside
facility, on the ▇▇▇▇▇▇▇ ▇▇ Riverboat or off the ▇▇▇▇▇▇▇ ▇▇ Riverboat; and
(i) Cash on hand in the amount of $2,000,000.00.
2. Excluded Assets. Seller shall not sell, convey, transfer or assign to
Buyer, and Buyer shall not purchase or acquire from Seller, any of the assets
described below (the "Excluded Assets"), and Buyer shall not assume any
liability or obligation directly or indirectly related thereto:
(a) Seller's cash on hand and bank deposits at the time of Closing
in excess of $2,000,000.00;
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(b) All refundable income taxes, accounts receivable and
intercompany loans receivable;
(c) The Seller's corporate records, including, but not limited to,
the Seller's minute book, membership book, financial
statements, income tax returns, and any other record or
document that does not relate to the operational aspect of the
Business;
(d) All items of personal property owned by guests, employees or
other persons furnishing goods or services to the Business;
(e) Refunds, rebates or other claims, or any interest thereon, for
periods or events occurring before the Closing Date or
refunds, rebates or other claims arising from insurance
policies that are terminated by Seller as of the Closing Date;
and
(f) All employee benefit plans of Seller (collectively "Seller's
Plans"), including, but not limited to, any defined
contribution plan, employee welfare benefit plan, life
insurance, death or dismemberment benefit, hospital and
physician benefit and medical, dental and eye vision plans.
3. Purchase Price. The total purchase price that shall be paid by Buyer to
Seller for the Seller's Assets (the "Purchase Price") shall be Seventy-Two
Million Dollars ($72,000,000.00), subject to adjustment based on (i) the
prorations set forth in Section 10.5, and (ii) the Closing Statements. On the
Closing Date, the Purchase Price will be paid in the following manner: (i) Seven
Million Dollars ($7,000,000.00) original face amount of preferred membership
interests in Buyer ("Preferred Membership Interests"), and (ii) $65,000,000.0O
in cash.
3.1 Preferred Membership Interests. The Preferred Membership
Interests shall be evidenced by the membership interest certificates
substantially in the form of Exhibit A attached hereto, to be issued by Buyer to
Seller on the Closing Date in accordance with Section 3 and this Section 3.1.
The Preferred Membership Interests shall (i) entitle the Seller, or any
subsequent holder thereof, to receive Preferred Distributions commencing the
Closing Date at an annual rate of nine percent (9%) of the original face amount
thereof, which distributions shall be cumulative and paid semi-annually (the
"Preferred Distributions"), and (ii) on the eighteenth (18th) month anniversary
of the Closing Date (the "Redemption Date"), be redeemed in part by Buyer in an
original face amount of Three Million Dollars ($3,000,000.00) (the "Minimum
Partial Redemption") at a purchase price (the "Mandatory Redemption Purchase
Price") equal to the sum of Three Million Dollars ($3,000,000.00), plus any
accrued and unpaid Preferred Distributions; provided however, that, subject to
Section 18.2 and Section 4.13 (as limited by Section 18.3), the Mandatory
Redemption Purchase Price shall be reduced or set off by the full amount of any
Claims (as defined in Section 4.13) and Damages (as defined in Section 18.1)
required to be paid by Seller to Buyer under this
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Agreement. The semi-annual payment of the Preferred Distributions and the
Minimum Partial Redemption of the Preferred Membership Interests on the
Redemption Date shall be subject to the terms and covenants of the Buyer's debt
financing arrangements related to the transaction contemplated by this
Agreement; provided, however, that such debt financing arrangements shall permit
the redemption of the Minimum Partial Redemption and the Preferred Distributions
related thereto on the Redemption Date. Mr. ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇. ▇▇▇▇ ▇▇▇▇▇▇, ▇▇.
▇▇▇▇▇ ▇▇▇▇▇▇ and Mr. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ (individually referred to as "Guarantor"
and collectively referred to as "Guarantors") are members of, or are an
affiliate of, the Buyer, and in return and as an inducement for Seller to enter
into the transactions contemplated by this Agreement, the Guarantors, jointly
and severally, hereby absolutely and unconditionally guarantee to Seller the
payment on the Redemption Date of the Minimum Partial Redemption and any and all
accrued and unpaid Preferred Distributions (the "Guaranty"), subject to any
reduction or set off of any Claims and Damages required to be paid by Seller to
Buyer under this Agreement. The Guaranty is an absolute, unconditional and
continuing guaranty of payment and performance of the obligations of the Buyer
under this Section 3.1 regarding the payment on the Redemption Date of the
Minimum Partial Redemption and the Preferred Distributions, and the obligations
of the Guarantors hereunder shall not be released, in whole or in part, by any
action or thing which might be deemed a legal or equitable discharge of a surety
or guarantor, other than irrevocable payment and performance in full of all
obligations regarding the Guaranty. The Guarantors are executing this Agreement
for the purpose of agreeing to and guaranteeing the obligations of the Guaranty
of this Section 3.1. Buyer shall make a good faith effort to provide terms in
its debt financing arrangements that will allow the payment of the Preferred
Distributions on the scheduled Preferred Distribution Date. In the event a
semi-annual Preferred Distribution payment is not made on the scheduled
Preferred Distribution date due to Buyer's inability to make such payments under
its debt financing arrangements, the Buyer shall make such Preferred
Distribution payments at the earliest time that Buyer is permitted to do so
under such debt financing arrangements, but in no event later than the Final
Redemption Date (as defined below). Seller shall have all legal remedies
available to it in the event that (i) Buyer has acted in bad faith associated
with Buyer's failure to pay the Preferred Distributions on the scheduled
Preferred Distribution date or at the earliest time that Buyer is permitted to
do so under its debt financing arrangements, or (ii) all unpaid Preferred
Distributions or all outstanding Preferred Membership Interests have not been
paid or redeemed by Buyer by the Final Redemption Date (as defined below). The
entire outstanding balance of the Preferred Membership Interests shall be
redeemed by Buyer on the date seven (7) years and ninety (90) days after the
Closing Date (the "Final Redemption Date") at a purchase price equal to the sum
of Four Million Dollars ($4,000,000.00), plus any accrued and unpaid Preferred
Distributions, plus any Preferred Membership Interests that were not redeemed on
the Redemption Date and all Preferred Distributions related thereto. The
Preferred Membership Interests shall, at all times during which the Preferred
Membership Interests shall be outstanding, be preferred equity interests in the
operating entity holding the IRGC excursion gambling boat license for Dubuque,
Iowa. In order to further ensure the payment of the Preferred Membership
Interests and the related Preferred Distributions, Buyer shall at the Closing
Date, have at least Six Million Dollars ($6,000,000.00) of membership
equity/capital contributed to the Buyer by its members exclusive of any
Preferred Membership
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Interests to be issued to Seller. Three Million Dollars ($3,000,000.00) of the
Preferred Membership Interests shall be held in escrow subject to the terms of
the Preferred Membership Interest Escrow Agreement, attached hereto as Exhibit
C, and shall be subject to reduction or set-off in accordance with the
provisions of this Section 3.1, Section 18.2 and Section 4.3 (as limited by
Section 18.3).
3.2 Escrow. On the Effective Date, the Buyer shall deposit Two
Million Five Hundred Thousand Dollars ($2,500,000.00) (the "Escrow") in an
interest bearing escrow account (with interest accruing thereon to the credit of
the party hereto that ultimately will receive the Escrow in accordance with the
terms hereof) to be held by American Trust & Savings Bank, Dubuque, Iowa
("Escrow Holder") in accordance with the provisions of this Section 3.2, and as
set forth in the Escrow Agreement attached hereto as Exhibit D. The Escrow, and
the interest earned thereon, shall be applied to and credited against the
Purchase Price on the Closing Date. Buyer shall complete and file with the Iowa
Racing and Gaming Commission ("IRGC") by February 1, 1999, Buyer's application
for a license to conduct gambling games on an excursion gambling boat at
Dubuque, Iowa. For purposes of this Agreement, Buyer's application for a license
to conduct gambling games shall be considered complete when the IRGC deems the
application to be complete enough to commence background investigations of the
applicant; provided, however, that should the IRGC request additional
information in connection with Buyer's gambling license application then that
previously required (including, without limitation, all requisite "Class A"
background applications for Mr. ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇. ▇▇▇▇ ▇▇▇▇▇▇, ▇▇. ▇▇▇▇▇ ▇▇▇▇▇▇
and Mr. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, a "D Business Entity Application", an "IRGC Excursion
Gambling Boat License Application" and fully executed copies of this Agreement
and the Real Property Purchase Agreement), on or prior to the date of this
Agreement, Buyer's obligation to file its gambling license application by
February 1, 1999 shall be extended by a period of time reasonably acceptable to
Buyer and Seller to accommodate such requests for additional information (the
"Extended Filing Date"). Seller shall provide and furnish the information and/or
materials set forth on Schedule 3.2 to assist Buyer in completing the gaming
license application. In the event Buyer has not filed its gambling license
application with the IRGC by February 1, 1999 or by the Extended Filing Date, if
applicable, this Agreement shall be terminated and the Escrow Holder shall
deliver to Seller the Escrow, and all interest accrued thereon, as liquidated
damages and not as a penalty. Upon the termination of this Agreement by Seller
in accordance with the provisions of Section 16 due to (i) the failure by Buyer
to satisfy on or prior to the Closing Date any of the conditions set forth in
Sections 9.1, 9.2, 9.3, 9.4 and 9.5, (ii) Buyer's failure to obtain the
necessary approvals or consents of the IRGC required for the consummation of the
transactions contemplated by this Agreement, (including but without limitation,
approval of Buyer's license to conduct gambling games on an excursion gambling
boat at Dubuque, Iowa) by July 15, 1999, or (iii) Buyer's inability to obtain
financing to close this transaction upon the terms and conditions set forth in
this Agreeement by July 15, 1999, the Escrow Holder shall deliver the Escrow,
and all interest accrued thereon, to Seller. For purposes of the immediately
preceding sentence, Buyer's failure to obtain the necessary IRGC approvals or
consents shall not be deemed to have occurred until such time that Buyer has met
with appropriate officials or representatives of the IRGC on at least two (2)
separate occasions
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(if necessary) at scheduled IRGC meetings (not including any postponements,
continuations or cancellations thereof) to discuss the approval and consent by
the IRGC of Buyer's license application and Buyer's license application has been
denied by the IRGC after such second meeting. Notwithstanding the foregoing,
Buyer shall be deemed to have failed to obtain the necessary approvals and
consents from the IRGC if the Buyer has not obtained such approvals and consents
by July 15, 1999. In the event that this Agreement is terminated pursuant to
Section 16.1 (g) hereof due to a material adverse change in the financial
markets which materially prevents Buyer from obtaining reasonable financing, the
Escrow Holder shall deliver the Escrow, and all accrued interest thereon, to
Seller. Upon the termination of this Agreement in accordance with the provisions
of Section 16 hereof by either Buyer or Seller for any reason other than those
specifically described in this Section 3.2, or as set forth in other provisions
of this Agreement, the Escrow Holder shall deliver the Escrow to Buyer.
3.3 Assumed Obligations. In addition to the payment of the Purchase
Price, Buyer shall, as part of the Closing, assume the specific liabilities,
obligations, contracts, agreements and purchase orders related to the Business
as set forth on Schedule 3.3 (collectively, the "Assumed Obligations").
Notwithstanding any other provisions in this Agreement to the contrary, Buyer
shall assume the Assumed Obligations only to the extent arising or accruing from
and after the Closing Date, and Buyer shall have no duty or obligation
whatsoever with respect to any duties or obligations of Seller or any member of
Seller arising or accruing before the Closing Date (all of which shall be the
sole responsibility and liability of Seller). Notwithstanding any other
provisions in this Agreement to the contrary, Seller shall have no duty or
obligation whatsoever with respect to any duties or obligations of Buyer arising
or accruing under any Assumed Obligations after the Closing Date (all of which
shall be the sole responsibility and liability of Buyer). Except for the Assumed
Obligations, Buyer shall not assume or become obligated or liable with respect
to any obligation or liability of Seller, including, but not limited to, any
liability or obligations of Seller related to any litigation to which Seller is
a party. Subject to the terms and conditions of this Agreement, Buyer and Seller
shall execute and deliver on the Closing Date an Assignment and Assumption
Agreement in the form of Exhibit E attached hereto and incorporated herein by
this reference, (the "Assignment and Assumption Agreement"), pursuant to which
Buyer shall assume the Assumed Obligations and Seller shall assign the Assumed
Obligations. Seller is not in material breach or violation of or default under
any terms of any Assumed Obligation. On or prior to the Closing Date, Seller
shall obtain the necessary consents or approvals required in connection with the
Seller's assignment of the Assumed Obligations.
3.4. Excluded Obligations. Notwithstanding any other provision of
this Agreement to the contrary, except for the Assumed Obligations, Buyer shall
not assume or become obligated or liable with respect to any obligation of
Seller, including, without limitation, the following (collectively, the
"Excluded Obligations"):
(a) obligations and liabilities of Seller now existing or that
may arise before the Closing Date with respect to any account payable or other
payables related to the
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Business, except to the extent that Buyer receives a credit with respect thereto
on the Closing Statements;
(b) obligations and liabilities of Seller now existing or that
hereafter may exist with respect to any litigation of Seller, whether or not
described on Schedule 4.6.1;
(c) obligations and liabilities accrued as of the Closing Date
to employees and former employees of Seller, including, without limitation, any
compensation, severance pay, accrued vacation time, personal time, sick-leave
time, salary, bonus, fringe benefits of any kind, welfare benefits, pension
benefits, and other benefits or claims, including, without limitation, welfare
payments and obligations under the Consolidated Omnibus Budget Reconciliation
Act of 1985, as amended ("COBRA");
(d) obligations and liabilities of Seller incurred in
connection with or relating to the transfer of the Seller's Assets, including,
without limitation, state and local gaming fees and taxes, any federal, state,
or local transfer or other tax incurred by reason of such transfer, except for
sales taxes as described in Section 3.5;
(e) liabilities for federal, state, or local income, sales or
other taxes, except as provided in Section 3.5;
(f) obligations and liabilities of Seller relating to workers
compensation claims, liquor liability claims, employment practices liability
claims and all other claims of employees, agents or representatives of Seller
prior to the Closing Date;
(g) any other obligation or liability of Seller arising or
relating to the period before the Closing Date; and
(h) obligations and liabilities of Seller now existing or that
hereafter may exist with respect to the Seller's Plans.
Seller shall indemnify, defend, and hold harmless Buyer from all of
the liabilities and obligations of Seller not expressly assumed by Buyer under
this Agreement and all claims, suits, actions, losses, damages, costs and
expenses, including, without limitation, reasonable attorneys' fees and
disbursements, arising therefrom or from any failure by Seller or the members of
Seller to pay or discharge such liabilities and obligations (including, without
limitation, any Excluded Obligation) as and when they become due. Buyer shall
indemnify, defend, and hold harmless Seller from all of the Assumed Obligations
and all claims, suits, actions, losses, damages, costs and expenses, including,
without limitation, reasonable attorneys' fees, arising therefrom or from any
failure by Buyer to pay or discharge the Assumed Obligations as and when they
become due after the Closing Date.
3.5 Sales Tax. Buyer shall pay all state and local sales taxes due
as a result of the consummation of the sale of the Seller's Assets. Buyer agrees
to indemnify and hold
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Seller harmless for any claims, damages, liabilities, penalties and fines
related to any state and local sales tax and the pay off costs, expenses and
legal fees incurred in any audit, administrative review or subsequent legal
action related to qualification for such exemption, and Seller shall use its
best efforts to cooperate with Buyer relating to achieving such qualification.
The Seller has not made more than one other sale of a vessel or any gaming
equipment during the twelve (12) month period ending on the Effective Date.
Seller shall be responsible for and shall pay all gaming taxes related to
operations of the Business prior to Closing and shall be responsible and pay all
transfer taxes related to the sale of the Seller's Assets pursuant to the terms
of this Agreement other than state and local sales taxes described in this
Section 3.5.
3.6 Employees and Employee Benefits.
3.6.1 Buyer agrees to offer to retain the twelve (12)
employees of Seller listed on Schedule 3.5.1 for a period of not less than six
(6) months from the Closing Date on terms comparable to current terms of
employment with Seller. Seller agrees that Buyer may interview Seller's key
employees. Access to employees and agents of Seller shall be subject to
reasonable notice by Buyer to Seller and the prior approval of ▇▇▇▇▇ ▇▇▇,
Seller's Chief Operating Officer, or a person designated by ▇▇▇▇▇ ▇▇▇ to make
such approval on behalf of ▇▇▇▇▇ ▇▇▇, which approval shall not be withheld
unreasonably.
3.6.2 Seller shall provide Buyer with an accurate and complete
list of all employees whose employment was terminated during the one (1) year
period immediately preceding the Closing Date. Buyer agrees that Buyer shall
offer employment commencing on the day after the Closing Date to at least that
number of Seller's employees such that an insufficient number of employees will
experience an "employment loss" as defined in the U.S. Worker Adjustment and
Retraining Notification Act ("WARN"), as amended, 29 U.S.C. Section 2101, et.
seq., or similar Iowa law, and the Seller will not have experienced a "plant
closing" or "mass layoff" as defined in the WARN Act or similar Iowa law, on
account of Buyer's purchase of the Seller's Assets to trigger any 60 day notice
requirement under the WARN Act on or before the Closing Date. Buyer shall be
solely responsible and liable for providing any required notice of termination
to Seller's employees and otherwise complying with the provisions of the WARN
Act or other applicable law.
3.6.3 Buyer agrees to the continuation of, or the replacement
with plans providing a comparable benefit to, the defined contribution plan,
employee welfare benefit plans and the life insurance, death and dismemberment
benefit, hospital and physician benefit, medical, dental and eye vision plans
for employees as described on Schedule 3.6.3 for a period of not less than one
(1) year from the Closing Date.
3.7 Allocation of Purchase Price. Buyer and Seller acknowledge that
the purchase and sale contemplated by this Agreement constitutes an "applicable
asset acquisition" within the meaning of Section 1060(c) of the Internal Revenue
Code of 1986, as amended. Buyer shall deliver to Seller a proposed allocation of
the Purchase Price among the Seller's
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Assets (the "Allocation") as soon as practicable after the date of this
Agreement. Such Allocation shall be based on the results of a professional
appraisal performed by an appraisal firm acceptable to Buyer and Seller, the
fees and expenses of which shall be borne equally by Buyer and Seller. Neither
Buyer nor Seller will take a position inconsistent with the allocation of the
Purchase Price as determined pursuant to this Section 3.7; provided, however,
that, if the Internal Revenue Service takes a position with respect to either
Buyer or Seller that is inconsistent with such allocation, then either Buyer or
Seller, as the case may be, may take a protective position adopting the Internal
Revenue Service's contention until the controversy has been resolved.
3.8 Transfer Documents. On the Closing Date, Seller shall sell,
assign, transfer and convey the Seller's Assets to Buyer by deed, ▇▇▇▇ of sale,
assignments and such other applicable title transfer documents as may be
required to sell, assign, transfer and convey marketable title thereto, or a
valid and subsisting leasehold estate in any Seller's Assets held under a lease.
At the Closing, Seller shall deliver to Buyer control and possession of all the
Seller's Assets.
3.9 Unpaid Assessments. If, on the Closing Date, Seller's Assets or
any part thereof are or will be subject to assessments that are to become due
and payable after the Closing Date, all such assessments shall be obligations
and liabilities of Seller and shall be paid by Seller on or prior to the Closing
Date, or, at the election of Seller, offset against the Purchase Price;
provided, that there shall be no obligation, liability or offset for any unpaid
portion of assessments which will benefit the Buyer after the Closing Date. All
assessments which Seller's Assets are subject to as of the Closing Date are
listed as liabilities on Schedule 3.9 hereto (which schedule shall be updated as
of the Closing Date). On the Closing Date, Buyer and Seller shall prorate the
unpaid assessments based on the benefits received or to be received by the
respective party prior to or subsequent to the Closing Date.
4. Representations and Warranties of Seller. Seller represents and
warrants to Buyer as follows, which representations and warranties are true and
accurate on the date hereof, and shall be true and accurate on the Closing Date.
The following representations and warranties of Seller shall survive the Closing
for a period of eighteen (18) months, except for the representations and
warranties in Section 4.1 (Organization, Standing and Authority of Seller),
Section 4.3 (Marketable Title) and Section 4.8 (Taxes) which shall survive
Closing indefinitely and for representations and warranties in Section 4.6
(Litigation) which shall survive Closing for the applicable statutes of
limitation and appeal period of any litigation associated with Seller.
4.1 Organization, Standing and Authority of Seller. Seller is a
limited liability company duly organized, validly existing and in good standing
under the laws of the State of Iowa. Seller is duly licensed and qualified to do
business in the State of Iowa. Seller has the power and authority to execute,
deliver and perform this Agreement and has taken all action required by law for
such execution, delivery and performance. This Agreement is a valid and legally
binding agreement of Seller enforceable in accordance with its terms except to
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the extent that enforcement thereof may be limited by (a) bankruptcy,
reorganization, moratorium, fraudulent conveyance or similar laws now or
hereafter in effect relating to creditors' rights generally and (b) general
principles of equity (regardless of whether enforceability is considered in a
proceeding at law or in equity). There are no contractual or other limitations
on Seller's power to enter into this Agreement and to consummate the
transactions contemplated hereby other than the requirement to obtain the
approval of the IRGC.
4.2 No Conflict. The execution, delivery and performance of this
Agreement by Seller and the consummation of the transactions contemplated by
this Agreement are not contrary to the Articles of Organization or Operating
Agreement of Seller. Except as set forth on Schedule 4.2, the execution,
delivery or performance of this Agreement by Seller and the consummation of the
transactions contemplated by this Agreement will not (a) with the passage of
time, the giving of notice or otherwise, result in a violation or breach of, or
constitute a default under, any term or provision of any indenture, mortgage,
deed of trust, lease, instrument, contract, agreement or other restriction to
which Seller is a party or to which any of Seller's Assets is subject, (b)
result in the creation of any lien or other charge on any of the Seller's Assets
or have a material adverse effect on the Business, (c) result in an acceleration
or termination of any note, loan or security agreement or similar agreement or
instrument to which Seller is a party or by which any of Seller's Assets are
bound, or (d) result in a violation of any order, judgment, decree, rule,
regulation or law applicable to Seller. Seller shall remove any restrictions on
performance of this Agreement by Seller as listed on Schedule 4.2 on or before
the Closing Date.
4.3 Marketable Title; Seller's Assets. Seller has good and
marketable title to the Seller's Assets, including, without limitation, all
leasehold estates and all other tangible and intangible assets, free and clear
of Encumbrances (as defined below) except for Encumbrances (a) that are
reflected in the Seller's financial statements, (b) that constitute statutory
liens arising in the ordinary course of business or (c) that have been consented
to in writing by Buyer (collectively, the "Permitted Liens"). The Permitted
Liens do not in any way detract from or interfere with the use or operation of
the Seller's Assets in the ordinary course of business. Seller and Buyer
acknowledge that a portion of the Purchase Price shall be used to pay off and
release all liens, defects of title, pledges, security interests, charges,
claims and encumbrances of any kind whatsoever (collectively "Encumbrances") on
the Seller's Assets. Upon consummation of the transactions contemplated hereby,
Buyer shall receive the Seller's Assets free and clear of any Encumbrances.
Seller's Assets include all assets and all contract rights and other intangible
property used to conduct the Business as such Business was conducted by Seller
as of the Effective Date. To the best of Seller's knowledge, there are no
physical or mechanical defects in or to the vessels that constitute the ▇▇▇▇▇▇▇
▇▇ Riverboat. The vessels that constitute the ▇▇▇▇▇▇▇ ▇▇ Riverboat are, to the
best of Seller's knowledge, structurally sound and in seaworthy condition and
repair and are in substantial compliance with all applicable governmental laws,
rules and regulations, and have been operated and maintained in all material
respects consistent with sound maritime practices. Seller has no builders or
manufacturers specifications for the ▇▇▇▇▇▇▇ ▇▇ Riverboat. All required
quarterly
10
and annual Coast Guard inspections of the ▇▇▇▇▇▇▇ ▇▇ Riverboat have been
satisfactorily completed and the ▇▇▇▇▇▇▇ ▇▇ Riverboat has in place a current
Certificate of Inspection and Seller is not in receipt of any notice or other
written indication of noncompliance from the Coast Guard or other federal or
local governmental authority.
4.4 Leases. Seller has received no notice of any material default
under or breach of, or of any event that would constitute a material default
under or breach of, any of the covenants, conditions, restrictions, rights of
way, leases or easements affecting the Seller's Assets or any portion thereof,
and no such material default or breach exists. All leases pursuant to which any
of the Seller's Assets are held are listed on Schedule 4.4 and are valid,
subsisting and enforceable leases and, except as set forth on Schedule 4.4,
Seller is not in material default under any of such leases, and there are no
oral or written modifications or amendments to any of such leases. As of the
Closing Date, Seller will have obtained the necessary consents for all leases to
be assigned and transferred to Buyer under this Agreement. Except as set forth
on Schedule 4.4, Seller is not a lessor, sub-lessor or grantor under any lease,
sub-lease, consent, license or other instrument granting to another person or
entity any right to the possession, use, occupancy or enjoyment of any of the
real property used by Seller in the conduct of the Business.
4.5 DRA Operating Agreement. Seller has delivered to Buyer a true
and complete copy of the Operating Agreement between Seller and Dubuque Racing
Association, Ltd. (the "DRA"), dated February 23, 1993, as subsequently amended
(the "DRA Operating Agreement"). Seller has received no notice of any material
default under or breach of, or of any event that would constitute a material
default under or breach of the DRA Operating Agreement and no such material
default or breach exists. For so long as Buyer agrees to operate the Business
subject to the terms and conditions of the DRA Operating Agreement, DRA will
have no right of first refusal or option to purchase any of the Seller's Assets
after the Closing Date. On or prior to the Closing Date, Seller shall have made
all payments required to be made by Seller under the DRA Operating Agreement and
that are due and payable on or prior to the Closing Date.
4.6 Litigation. Except as set forth on Schedule 4.6.1, Seller is not
a party to any suit, claim, action or proceeding pending or, to the best of
Seller's knowledge, threatened by or before any court, administrative or
regulatory body, or governmental agency, or to any investigation pending or, to
the best of Seller's knowledge, threatened by any governmental agency which
there is a substantial likelihood of a judgment, order, decree, liability or
other determination adversely affecting the consummation by Seller of the
transactions contemplated by this Agreement or affecting Seller or any of the
Seller's Assets or the Business. Except as set forth on Schedule 4.6.2, neither
Seller nor any of the Seller's Assets is subject to any order, writ, injunction
or decree of any court, administrative body or regulatory body or governmental
agency.
4.7 Financial Statements; Financial Condition. Exhibit F attached
hereto and incorporated herein by this reference sets forth copies of Seller's
audited financial
11
statements for the calendar years 1994, 1995, 1996 and 1997 ("Seller's Financial
Statements"). The Seller's Financial Statements, including, without limitation,
the unaudited balance sheet of Seller, dated as of September 30, 1998, a true
and complete copy of which was delivered to Buyer on or prior to the date
hereof, (i) are complete, in accordance with the books and records of Seller,
(ii) accurately reflect the assets, liabilities and financial condition and
results of operations indicated thereby, and (iii) have been prepared in
accordance with GAAP consistently applied and contain or reflect all necessary
adjustments for a fair presentation of Seller's financial condition and the
results of operations for the periods covered by the Seller's Financial
Statements. Seller is not in default with respect to any material term or
condition of any indebtedness or liability. Except as set forth on Schedule 4.7,
since the date of Seller's Balance Sheet dated as of December 31, 1997, none of
the following has occurred or arisen in the operation of the Business:
(a) Any change, event or condition that has had or reasonably may be
expected to have, in any one case or in the aggregate, a material adverse effect
on Seller, the Business or any of the Seller's Assets;
(b) Any casualty, loss, damage or destruction to any of the Seller's
Assets;
(c) (i) Except for normal, periodic increases in the ordinary course
of business and consistent with past practices, increase in compensation payable
by Seller to any officer, employee or other representative or agent of Seller
(collectively "Personnel"), and (ii) employee welfare, pension, retirement,
profit-sharing or similar payment or arrangement made or agreed to by Seller for
any Personnel except pursuant to the existing plans and arrangements described
on Schedule F;
(d) Except as set forth on Schedule 4.7, addition to, modification
of or prepayments of any kind with respect to, the employee benefit plans, of
Seller effecting Personnel other than (i) contributions made for that portion of
Seller's 1998 and 1999 fiscal year through the Closing Date, in accordance with
normal practices of Seller, or (ii) the extension of coverage to other Personnel
who become eligible after December 31, 1997;
(e) Sale, assignment or transfer of any of the properties or assets
of Seller, other than in the ordinary course of business that is consistent with
past practices;
(f) Any new Encumbrance on any of Seller's Assets or the Business
(g) Receipt of any notice or any indication by Seller from any of
Seller's suppliers to the effect that such supplier may stop or decrease the
rate of supplying equipment or other products or services to Seller;
(h) amendment, cancellation or early termination of any material
contract or agreement, permit or license or other instrument relating to
Seller's Assets or the conduct of
12
the Business, other than in the ordinary course of business and consistent with
past practices; or
(i) incurrence of any liability or other obligation not in the
ordinary course of business or involving payments in excess of $25,000 in the
aggregate.
Seller's books of account reflect substantially all of the Seller's
items of income and expense and substantially all of the Seller's assets,
liabilities and accruals, reflect all material items of Seller's income and
expenses, and are prepared and maintained in form and substance adequate for
preparing audited financial statements in accordance with GAAP.
4.8 Taxes. Seller has timely filed or will timely file or cause to
be timely filed all tax returns required by applicable law to be filed before or
as of the Closing Date. All such tax returns and amendments thereto are or will
be true, complete and correct. All taxes payable by Seller, or otherwise arising
from, imposed in connection with, or applicable to the Seller's Assets, the
operations and/or the Business, in respect to any period ending before or as of
the Closing Date, have been or will have been paid on or before the Closing
Date, or, where payment is not yet due, Seller has established, or will
establish or cause to be established on or before the Closing Date, an adequate
accrual for the payment of all such Taxes. Except as set forth on Schedule 4.8,
no tax audits are pending or being conducted with respect to Seller. Seller has
not received notice from the Internal Revenue Service that it intends to audit
Seller for any open year, nor is there an audit currently in progress other than
as set forth on Schedule 4.8. Seller shall withhold proper and accurate amounts
from Seller's employee payrolls for all periods prior to the Closing Date in
material compliance with all tax withholding provisions, including, without
limitation, income tax withholding, social security and unemployment taxes of
applicable local, state and federal laws.
4.9 Employees; ERISA. Schedule 4.9 contains a complete list of the
names of all officers, directors, and employees of Seller, together with the
date of hire of each of such persons and the annual or hourly rate of
compensation, the job title, job description, job classification, and benefit
plan participation of each of such persons on the date of this Agreement. Except
for the obligations set forth in Section 3.6, Buyer shall not have any liability
or obligation whatsoever by reason of the past service, or prior employment by
Seller, of any person, including, without limitation, any liability for past due
compensation, severance pay, sick-leave time, vacation time, personal time,
accrued bonuses or profit sharing under any bonus or profit-sharing program of
Seller, and Seller shall pay all compensation, accrued bonuses and profit
sharing as of the Closing Date in a manner reasonably consistent with past
practices. True and correct copies of the following items have been previously
delivered to Buyer: (a) all profit-sharing, deferred-compensation, bonus,
commission, pension, retirement, welfare or incentive plan or contract to which
Seller is a party or by which Seller is bound; (b) written or other formal
personnel policies; and (c) plans or agreements under which fringe benefits,
including, without limitation, vacation plans or programs, sick leave plans,
hospitalization or other medical insurance plans or programs and related
benefits afforded to any of Seller's employees (all of such plans and agreements
described in the immediately
13
preceding clauses (a), (b) and (c), collectively "Employee Benefit Programs").
Buyer shall have no liability, cost or obligation whatsoever under or by reason
of any severance pay, compensation, accrued vacation time, personal time,
bereavement time, sick-leave time, salary, bonus, fringe benefit, welfare
benefit, pension benefit or other employee benefit or claim of any kind
affecting the employees of Seller prior to the Closing Date. Seller shall have
no liability, cost or obligation whatsoever under or by reason of any
compensation, benefit plan, or bonus or profit sharing program of Buyer
affecting the employees of Buyer after the Closing Date. Seller is, and on the
Closing Date Seller shall have been, in material compliance with all federal and
state laws respecting employment and employment practices, terms and conditions
of employment and wages and hours, and Seller is not, and on the Closing Date
Seller shall not have been, engaged in any unfair labor practice.
4.10 Trademarks. Schedule 4.10 is a schedule listing all tradenames,
trademarks, service marks, trademark licenses, franchises, trademark or
tradename registrations and other assets of a like kind, which is, in whole or
in part, used in connection with the operation of the Business (collectively,
the "Trademarks"). To the best of Seller's knowledge, the Trademarks do not
conflict with the rights of any person, except as set forth on Schedule 4.10.
Seller has not sold or exchanged for consideration any of Seller's customer and
mailing lists used in connection with the Business. Seller has not been charged
with infringement of, nor, to the best of Seller's knowledge, is Seller
threatened to be charged with infringement of, nor has Seller infringed upon,
any unexpired patent, trademark, trademark registration, trade name, service
▇▇▇▇, copyright, copyright registration or other proprietary right of any party.
Seller owns (free of any right or claim of others), or is licensed or otherwise
has the unencumbered right to use, all Trademarks and material technology,
know-how, processes, methods and designs used in the conduct of the business of
the Business as presently being conducted.
4.11 General Compliance with Laws. Except as set forth on Schedule
4.11, Seller is in substantial compliance with all statutes, laws, ordinances
and regulations applicable to Seller or Seller's operations and properties,
including, without limitation, Title 31 of the USCA relating to cash reporting
of transactions. Seller has received no notification alleging any violation
thereof. Seller has not violated any statute, law, ordinance or regulation
applicable to Seller's operations and properties that would (i) materially
affect the consummation of the transactions contemplated by this Agreement or
(ii) materially adversely affect the Business or any of Seller's Assets. The
operations of the Business have not been and are not now in violation of any
federal, state or local law, regulation or order that could have a material
adverse effect on the Business or the ownership of Seller's Assets. Schedule
4.11 contains a list of all licenses, permits, registrations, certificates,
authorizations, consents, filings or declarations, each of which are required by
governmental or regulatory authorities (collectively "Permits"), obtained by
Seller in connection with the operation of the Business and the ownership of
Seller's Assets. All Permits listed on Schedule 4.11 are in full force and
effect and Seller is in substantial compliance therewith. Except as set forth on
Schedule 4.11, the Permits listed on Schedule 4.11, constitute all of the
Permits necessary for the conduct of the Business as presently conducted or
operated by Seller and the ownership of the Seller's
14
Assets. No suspension, cancellation, or termination of any Permit has been made
or threatened by any governmental authority to the effect that the conduct of
the Business fails to comply in any material respect with any law, rule,
regulation or ordinance or that any Permit not listed on Schedule 4.11 is
necessary for the operation of the Business or the ownership of Seller's Assets.
4.12 ADA Compliance. All of the Seller's Assets materially comply
with the provisions of the Americans with Disabilities Act.
4.13 Environmental Conditions. Seller's activities on all property
owned or leased by Seller materially comply with all applicable Environmental
Laws. Except as set forth on Schedule 4.13, Seller has not caused any Release or
threatened Release of any Hazardous Material in, on, under or from any property
owned or leased by Seller. Except as set forth on Schedule 4.13, no judicial or
administrative enforcement action, proceeding, claim, order, directive, notice
of inspection, or notice of noncompliance by any governmental authority pursuant
to any applicable environmental law (together, "Claim") has been made, or is
pending or, to the best of Seller's knowledge, has been threatened against
Seller with respect to either the property owned or leased by Seller or Seller's
operations thereon. Seller has not received any notice from any governmental
authority regarding the compliance or noncompliance of any real property owned
by Seller with any Environmental Law. Seller has not granted or allowed access
to or use of any part of the real property owned by Seller to any individual or
entity to conduct any activity that has caused or threatens to cause the release
of any Hhazardous Mmaterial in or on any of the real property owned by Seller.
Except as provided above, Seller makes no representation or warranty regarding
the compliance of the property owned or leased by Seller with any applicable
environmental laws or with respect to the environmental condition or status of
such property. Seller makes no representation or warranty regarding the
activities, operations or use by any predecessor of Seller of any property owned
or leased by Seller. In addition to any indemnification obligation under Section
18.2, for the eighteen (18) month period commencing the Closing Date, Seller
shall indemnify Buyer for any out of pocket costs or expenses actually incurred
by Buyer during such eighteen (18) month period with respect to any third party
environmental Claim to the extent the event or loss giving rise to the Claim
occurred prior to the Closing Date and to the extent that Buyer has not received
contribution, indemnification or other payment therefor from another party. With
the exception of radiator fluids, waste oils, greases and similar materials
generated in the maintenance of motors used to propel vehicles and vessels,
which materials have all been properly disposed of off-site and otherwise
handled in accordance with applicable Environmental Laws, Seller has used no
quantity of any Hazardous Material and has conducted no Hazardous Material
Activity in, on, under or from any real property or facility (including the
▇▇▇▇▇▇▇ ▇▇) used or operated by Seller in connection with the operation of the
Business. Seller has not placed, maintained or caused to exist any underground
storage tank, asbestos containing material, polychlorinated byphenyl, in the
form of electrical transformers, or landfill or dump on any real property or
facility (including the ▇▇▇▇▇▇▇ ▇▇) used or operated by Seller in connection
with the operation of the Business.
15
The Buyer's right to indemnification under this Section 4.13 shall
be limited as follows: (i) the obligation to indemnify for environmental Claims
includes only indemnification for third party Claims for remediation arising
from actual orders received from the Iowa Department of Natural Resources or the
Federal Environmental Protection Agency, and (ii) except for breaches of
representations contained in this Section 4.13 regarding Seller's activities,
the obligation to indemnify for environmental Claims does not include Claims
arising from property leased from the City of Dubuque, Iowa nor Claims arising
from the lot on which the Ice Harbor Mall is located. Buyer shall not be
entitled to make a Claim for indemnification against Seller pursuant to this
Section 4.13 unless such individual third party environmental Claim, together
with all other environmental Claims, exceeds $200,000.00 (in which case all such
Claims will be paid), provided, however, in no event shall the aggregate of
Claims under this Section 4.13 plus the indemnifiable damages under Section 18.2
exceed $3,000,000.00. Any indemnification obligation of Seller pursuant to this
Section 4.13 shall be applied and offset against the Preferred Membership
Interests as set forth in Section 3.1.
For purposes of this Section 4.13, the following terms shall have
the meanings set forth below:
"Environmental Laws" means any and all federal, state and/or local
laws, regulations and legal requirements that exist on the Closing Date
pertaining to (i) the protection of health, safety and the indoor and outdoor
environment, (ii) the conservation, management or use of natural resources and
wildlife, (iii) the protection or use of surface water and groundwater, (iv) the
management, manufacture, possession, presence, use, generation, transportation,
treatment, storage, disposal, Release, threatened Release, abatement, removal,
remediation or handling of, or exposure to, any Hazardous Material or (v)
pollution (including, without limitation, any Release to air, land, surface
water and groundwater), and includes, without limitation, the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as amended by
the Superfund Amendment and Reauthorization Act of 1986, 42 U.S.C. 6901 et seq.;
the Solid Waste Disposal Act, as amended by the Resource Conservation and
Recovery Act of 1976 and the Hazardous and Solid Waste Amendments of 1984, 42
U.S.C. 6901 et seq.; the Federal Water Pollution Control Act, as amended by the
Clean Water Act of 1977, 33 U.S.C. 1251 et seq.; the Clean Air Act of 1966, as
amended, 41 U.S.C. 7401 et seq.; the Toxic Substances Control Act of 1976, 15
U.S.C. 2601 et seq.; the Hazardous Materials Transportation Act, 49 U.S.C. App.
1801 et seq; the Occupational Safety and Health Act of 1970, as amended, 29
U.S.C. 651 et seq.; the Oil Pollution Act of 1990, 33 U.S.C. 2701 et seq.; the
Emergency Planning and Community Right-to-Know Act of 1986, 42 U.S.C. 11001 et
seq.; the National Environmental Policy Act of 1969, 42 U.S.C. 4321 et seq.; the
Safe Drinking Water Act of 1974, as amended, 42 U.S.C. 300(f) et seq.; any
similar, implementing or successor law to any of the foregoing and any
amendment, rule, regulation, order or directive issued thereunder.
"Hazardous Material Activity" means any activity, event or
occurrence involving a Hazardous Material, including, without limitation, the
manufacture, possession, presence, use, generation, transportation, treatment,
storage, disposal, Release, threatened
16
Release, abatemnent, removal, remediation, handling of or corrective or response
action to any Hazardous Material.
"Hazardous Material" means any substance, chemical, compound,
product, solid gas, liquid, waste, byproduct, pollutant, contaminant or material
that is hazardous or toxic, and includes, without limitation, (i) asbestos,
polycholorinated biphenyls and petroleum; and (ii) any such material classified
or regulated as "hazardous" or "toxic" or as a "contaminant" or "pollutant"
under the laws of the State of Iowa or any Environmental Law.
"Release" means any soiling, migrating, seeping, leaking, pumping,
pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping
or disposing of any Hazardous Material into the indoor or outdoor environment,
including, without limitation, the abandonment or discarding of barrels, drums,
containers, tanks and other receptacles containing or previously containing any
Hazardous Material.
4.14 Labor Disputes and Complaints. Except as set forth on Schedule
4.14, no person, party or labor organization, including, without limitation,
governmental agency of any kind, has made, brought, commenced, or to the best of
Seller's knowledge, threatened any claim or action, within the last two (2)
years, regarding a labor dispute, unfair labor practice, employee representation
proceeding, wage and hour claim, occupational safety and health claims, employee
arbitration, worker's compensation claims or any other labor dispute proceeding
or investigation, with respect to Seller, the Business or any of Seller's
Assets. Seller has not entered into a binding agreement with organized labor
that would cover the employees of Seller. Seller is in material compliance with
all applicable laws respecting employment practices, terms and conditions of
employment and wages and hours. Seller is not subject to any pending or
threatened grievance, labor dispute, strike or work stoppage that affects or
that may affect adversely the Business or any of the Seller's Assets, and there
is no charge or complaint against Seller or any of the Seller's Assets by or
before the National Labor Relations Board, or before any court or other
tribunal, involving any charge of any unfair labor practice.
4.15 Consents. Except for (i) the consent and approval of the IRGC
and other governmental agencies or authorities in connection with the operation
of the Business, (ii) the consent and approval of the Dubuque Racing
Association, Ltd. to the assignment of the Dock Sublease, and (iii) and as set
forth on Schedule 4.15 (which consents shall be obtained by Seller prior to
Closing) and except for consents and approvals already obtained by Seller: (a)
no consent, approval or agreement of any person, entity, party, court, agency or
government is required to be obtained by Seller in connection with the execution
and delivery of this Agreement or the performance of the terms of this Agreement
or the consummation of the transactions contemplated by this Agreement; (b)
Seller's execution and delivery of this Agreement and the performance by Seller
of Seller's obligations under this Agreement do not and will not require any
registration with, consent or approval of, notice to or any action by any person
or governmental authority; and (c) Seller is not required to obtain any permit
of any kind from any regulatory or governmental authority in order to consummate
the
17
transactions contemplated by this Agreement. Seller shall use its best efforts
to obtain before the Closing Date all requisite consents, approvals and
agreements of third parties, including, without limitation, governmental or
other regulatory agencies, foreign or domestic, required to be received by or on
the part of Seller for the execution and delivery of this Agreement and the
performance of its terms.
4.16 Brokerage and Finder's Fees. Except as set forth on Schedule
4.16, neither Seller nor anyone on Seller's behalf has any actual or potential
liability to any broker, finder or agent, and Seller has not agreed to pay any
brokerage fee, finder's fee or commission, with respect to the transactions
contemplated by this Agreement. Seller shall indemnify, hold harmless and defend
Buyer against all claims and liabilities asserted against Buyer, any of the
Seller's Assets, or any combination of them, by any person acting or claiming to
act as a broker or finder on behalf of Seller.
4.17 Options. Except as set forth in the DRA Operating Agreement,
there are no rights of first refusal, options or similar rights granted with
respect to any of the Seller's Assets.
4.18 Affiliate Contracts. Except for employment agreements and
except as specifically identified on Schedule 4.18, there does not exist any
contract, agreement or other arrangement between Seller and (a) any affiliate of
Seller, (b) any entity in which Seller directly or indirectly owns more than a
five percent (5%) interest or (c) any of the managers or members of the Seller.
4.19 Restrictive Agreements. Except for the DRA Operating Agreement
and the excursion gambling riverboat license issued by the IRGC, there are no
contracts or agreements to which Seller is a party or under which the operation
of any of the Seller's Assets is in any way bound that in any way excludes or
restricts the use of the Seller's Assets in competing in any geographic area or
business sector.
4.20 Utilities Access. The ▇▇▇▇▇▇▇ ▇▇ Riverboat has access to all
water, sewer, electric, natural gas, telephone and drainage facilities and all
other utilities to conduct the Business as presently conducted, and such access
has been provided in material compliance with all requirements of applicable
law, rules, ordinances, and regulations.
4.21 Public Improvements. Except as set forth on Schedule 4.21, to
the best of Seller's knowledge, there are no current or proposed plans to widen,
modify, or realign any street or highway and no existing, proposed, or, to the
best of Seller's knowledge, threatened eminent domain proceedings, or private
purchase in lieu of such proceedings, that would affect the Business in any way,
and except as previously disclosed to Buyer, there are no presently planned
public improvements that would or could result in the creation of a special
assessment or similar lien on the Business.
18
4.22 Complimentaries. Seller is not committed to any complimentary
arrangement for food or beverage for any guest or client of the Business as of
the Closing Date, or for any period thereafter, except in accordance with prior
practices and disclosed on Schedule 4.22.
4.23 Customer Database. No employee, representative, agent, or
member of Seller has delivered, and Seller shall not permit any employee,
representative, agent, or member of Seller to deliver, Seller's customer
database files and records to a third party or allow a third party access to
Seller's customer database files and records. Seller's customer data base files
and records employ an electronic player tracking system that collects and stores
information about the guests and clients of the Business, including, without
limitation, gambling preferences, profits and losses and complementary
arrangements. Seller's customer data base files and records are updated and
maintained by Seller regularly and shall be updated and maintained by Seller
through the Closing Date consistent with past practices.
4.24 Material Purchase Orders. Buyer shall acquire all rights and
assume all obligations under all open material purchase orders made in the
ordinary course of business consistent with past practice and existing as of the
Closing Date; provided, however, that Seller shall provide Buyer notice of, and
an opportunity to disapprove, every material purchase order that is in excess of
$50,000.00 and is not in the ordinary course of business as contemplated by and
reflected in the Seller's 1998 and 1999 budgets.
4.25 Adverse Agreements. Seller is not a party to any undisclosed
agreement or instrument or subject to any undisclosed charter or other
restriction or any undisclosed judgment, order, writ, injunction, decree, or
award that materially adversely affects or in the future could materially
adversely affect the Business or any of the Seller's Assets.
4.26 Adverse Facts and Circumstances. Except as set forth on
Schedule 4.26 and except for facts or circumstances with respect to legislative
or regulatory actions upon which Buyer has conducted and relied upon its own due
diligence, Seller does not know of any fact or circumstance that is reasonably
likely to have any material adverse effect on (i) the Business, (ii) the
condition, financial or otherwise, or prospects of Seller, (iii) any of Seller's
Assets. or Seller's rights, title, and interest thereto, or (iv) Seller's
ability to transfer the Seller's Assets on the Closing Date to Buyer free and
clear of all Encumbrances of any kind.
4.27 Accuracy of Information. No statements, representations, and
warranties made by Seller in this Agreement and in the Schedules and Exhibits
attached hereto contain any untrue statement of material fact or omitted a
material fact necessary to make the statements or facts contained therein not
materially misleading, and all lists contained in the Schedules attached hereto
are materially complete and correct. None of the information supplied or to be
supplied in writing on or before the Closing Date by Seller or on behalf of
Seller to Buyer or Buyer's agents or representatives in connection with this
Agreement did contain or will contain, at the respective times when such
information was or is delivered, any untrue statement of a material fact, or
omitted or will omit to state any material fact required to
19
be stated therein or necessary in order to make the statements contained
therein, in the light of the circumstances under which they were made, not
misleading. If at any time after the delivery and before the Closing Seller
becomes aware that any of such information has become untrue or misleading, in
any material respect, Seller promptly shall notify Buyer in writing of such
occurrence.
4.28 Approval of Agreement by Members. This Agreement and each of
the transactions contemplated hereby have been duly approved by Seller's members
at a meeting duly held by Seller prior to the date of this Agreement.
4.29 Maintenance of Insurance. Seller carries insurance (including
self insurance) in such amounts and covering such risks as set forth on Schedule
4.29. Seller is not in default under any of such policies or binders, nor has
Seller failed to give any notice or to present any claim under any such policy
or binder in a due and timely fashion, except where such failure to comply
therewith would not reasonably be expected to have a material adverse effect on
the Business or on any of the Seller's Assets, which insurance is adequate for
the operation of the Business as presently conducted and consistent with
insurance customarily maintained by operators of river boat casinos in the river
boat industry. Schedule 4.29 contains a complete and accurate list in all
material respects of all policies or binders of fire, liability, title, worker's
compensation, liquor liability and other forms of insurance (showing as to each
policy or binder the carrier, policy number, coverage limits, expiration dates,
annual premiums and a general description of the type of coverage provided)
maintained by Seller with respect to the Business or any of Seller's Assets, all
of which policies and binders are in full force and effect on the Closing Date.
All of such policies and binders are sufficient in all material respects to
comply with the terms of all agreements or contracts to which Seller is a party
or with respect to which any of the Seller's Assets are bound. There are no
outstanding unpaid claims under any such policies or binders.
4.30 Disclosure of Confidential Information. Except as required by
law or legal process and except in accordance with the terms and provisions of
those certain confidentiality agreements between Seller and the parties
identified on Schedule 4.30 (the "Third Party Confidentiality Agreements"),
Seller has not disclosed (whether orally or in writing) to any person or entity
(other than Buyer) any confidential information of Seller, including without
limitation, information about future business plans and opportunities, business
secrets or methods, business policies, reports, lists of names of suppliers,
customers and guests or any other confidential information or trade secret of
any type or description. Seller shall be responsible for obtaining any consents
or approvals in connection with the assignment of the Third Party
Confidentiality Agreements to Buyer in accordance with the terms and conditions
of this Agreement.
4.31 Competing Interests. Except as set forth on Schedule 4.31,
neither Seller nor any of Seller's members, affiliates or related parties has
any direct or indirect ownership interest greater than five percent (5%) in any
corporation, partnership, limited
20
liability company, trust or other business entity that is a vendor of any of
Seller's Assets to Seller or with which Seller is affiliated or has a business
relationship.
5. Representations and Warranties of Buyer. Buyer represents and warrants
to Seller as follows, each of which is true and accurate on the date hereof and
shall be true and accurate on the Closing Date. The following representations
and warranties of Buyer shall survive the Closing for a period of eighteen (18)
months.
5.1 Organization, Standing and Authority of Buyer. Buyer is a
limited liability company, duly organized, validly existing and in good standing
under the laws of the State of Delaware. Buyer has the power to execute and
deliver this Agreement and has taken all action required by law for such
execution, delivery and performance. This Agreement is a valid and legally
binding agreement of Buyer enforceable in accordance with its terms except to
the extent that enforcement thereof may be limited by (a) bankruptcy,
reorganization, moratorium, fraudulent conveyance or similar laws now or
hereafter in effect relating to creditors' rights generally and (b) general
principles of equity (regardless of whether enforceability is considered in a
proceeding at law or in equity). Except as set forth on Schedule 5.5, there are
no contractual or other limitations on Buyer's power to enter into this
Agreement or to consummate any of the transactions contemplated by this
Agreement other than the requirement to obtain the consent of the IRGC.
5.2 No Conflict. The execution, delivery and performance of this
Agreement by Buyer, and the consummation of the transactions contemplated by
this Agreement, are not contrary to the articles of organization or operating
agreement of Buyer. Except as set forth on Schedule 5.2, the execution,
delivery, performance or consummation of this Agreement by Buyer will not (a)
with the passage of time, the giving of notice or otherwise, result in a
violation or breach of, or constitute a default under, any term or provision of
any indenture, mortgage, deed of trust, lease, instrument, contract, agreement
or other restriction to which Buyer is a party or to which any of Buyer's
property is subject, (b) result in the creation of any lien or other charge on
any of the assets of Buyer, (c) result in an acceleration or termination of any
loan or security interest agreement or similar agreement or instrument to which
Buyer is a party or (d) result in a violation of any order, judgment, decree,
rule, regulation or law applicable to Buyer.
5.3 Litigation. Except as set forth on Schedule 5.3, Buyer is not a
party to any suit, claim, action or proceeding now pending or threatened before
any court, administrative body or regulatory body, or by any governmental
agency, or any investigation now pending or, to the best of Buyer's knowledge,
threatened by any governmental agency in which there is a substantial likelihood
of a judgment, order, decree, liability or other determination affecting the
consummation by Buyer of the transactions contemplated by this Agreement.
21
5.4 Compliance with Laws. Buyer has not violated any statute, law,
ordinance or regulation applicable to Buyer's operations and properties that
would materially affect the consummation of the transactions contemplated by
this Agreement.
5.5 Consents. Except as set forth on Schedule 5.5, and except with
respect to such consents and licenses required to be obtained from the IRGC or
other governmental agencies or authorities in connection with the operation of
the Business after the Closing Date, (a) no consent, approval or agreement of
any person, entity, party, court or government is required to be obtained by
Buyer or the Members of Buyer in connection with the execution and delivery of
this Agreement or the performance of the terms of this Agreement or the
consummation of the transactions contemplated by this Agreement; (b) Buyer's
obligations under this Agreement do not and will not require any registration
with, consent or approval of, notice to or any action by any person or
governmental authority; and (c) Buyer is not required to obtain any permit of
any kind from any regulatory or governmental authority in order to consummate
the transactions contemplated by this Agreement. Buyer shall use its best
efforts to obtain before the Closing Date all requisite consents of third
parties, including, without limitation, governmental or other regulatory
agencies, foreign or domestic, required to be received by or on the part of
Buyer for the execution and delivery of this Agreement and the performance of
its terms.
5.6 Brokerage and Finder's Fees. Except as set forth on Schedule
5.6, neither Buyer nor anyone on Buyer's behalf has any liability to any broker,
finder or agent, and Buyer has not agreed to pay any brokerage fee, finder's fee
or commission, with respect to the transactions contemplated by this Agreement.
Buyer shall indemnify and hold harmless Seller from and against all claims or
liabilities asserted against Seller by any person acting or claiming to act as a
broker or finder on behalf of Buyer.
6. Seller's Pre-Closing Obligations.
6.1. Seller's Covenants. From the date hereof to the Closing Date,
Seller shall continue to conduct Seller's business in the ordinary course of
business, consistent with past practices, in accordance with standards of
operation existing as of the date hereof and in accordance with Seller's annual
budget or budgets, copies of which have been or will be provided to Buyer on or
prior to the Effective Date. Except for transactions provided for herein, and
without limiting the generality of the foregoing, Seller shall not directly or
indirectly:
(a) Merge or consolidate with or into any corporation, limited
liability company or other entity, or amend its Articles of Organization or
Operating Agreement;
(b) Change or agree to change in any material manner the Business;
(c) Sell, transfer or otherwise dispose of any of the Seller's
Assets outside the ordinary course of business;
22
(d) Sell, assign, transfer or otherwise dispose of the Trademarks;
(e) Except in the ordinary course of business, modify, amend, alter
or terminate any existing material agreement or enter into any material
agreement that extends by its terms beyond the Closing Date or that could not
reasonably be fully performed before the Closing Date;
(f) Fail to pay when due all sums owed to third parties under any
material agreement or otherwise fail to perform fully all of the terms and
covenants imposed on Seller under any material agreement;
(g) Except (i) as otherwise contemplated herein, (ii) as
contemplated in the Seller's 1999 budget, true and complete copies of which are
attached hereto as Schedule 6.1(g), or (iii) as may be necessary pursuant to
Section 6.1(a) hereof, enter into any transaction material in nature or amount
other than in the ordinary course of business, consistent with past practice, or
create or enter into any additional purchase orders that exceed $50,000;
(h) Fail to keep the Seller's Assets insured, or fail to maintain
insurance coverage in accordance with customary industry practice;
(i) Fail to use its best efforts to maintain possession and control
of all of the Seller's Assets, fail to keep in faithful service Seller's
employees, fail to preserve the goodwill of Seller's suppliers, customers and
others having business relations with Seller, or do anything to impair Buyer's
ability to keep and preserve, after the Closing Date, Seller's business existing
on the date hereof;
(j) Fail to maintain the Seller's Assets in its present repair,
order and condition (reasonable wear and use and damage by fire or other
casualty excepted);
(k) Fail to maintain books, accounts and records concerning the
Seller's Assets in the usual regular and ordinary manner on a basis consistent
with that heretofore employed;
(l) Sell, mortgage, lease, buy or otherwise acquire any real estate
or any interest therein, including any leasehold interest, or extend the term of
any leasehold interest;
(m) Fail to materially comply with all laws applicable to any of the
Seller's Assets or to the conduct of the Business;
(n) Fail to furnish to Buyer all information and data presently
available to Seller or Seller's agents that is reasonably necessary or desirable
in order to assist Buyer to secure the permits, licenses, liquor licenses and
approvals required to operate the Business;
23
(o) Fail to purchase and replenish existing inventories and
expenditures for normal and customary business operations as reasonably may be
required for the continued operation of the gaming operations of the Business in
accordance with practices in existence as of the date hereof;
(p) Fail to pay all applicable state and local gaming and liquor
fees and taxes due on or before the Closing Date with respect to the gaming
operations required to be paid in order to maintain any license or permit
necessary for the operation thereof;
(a) Reduce hours of operation;
(r) Change credit policies for customers;
(s) Fail to maintain a level of marketing and other advertising
reasonably comparable to that existing during the three (3) year period
immediately preceding the date of this Agreement;
(t) Except for regular pay increases in the ordinary course of
business (not to exceed 3.5% in the aggregate in any given twelve (12) month
period), increase the rate of compensation payable or to become payable by
Seller to any employee of Sellers, or except for any bonus, profit sharing or
other plans and agreements in existence as of the Effective Date, make, accrue
or become liable for any bonus, profit sharing, termination or incentive payment
to any employee of Seller; or
(u) Mortgage, pledge or subject to any encumbrance of any kind any
of the Seller's Assets.
6.2 Pre-Closing Assistance. Before the Closing Date, at the request
of Buyer, Seller shall use its best efforts to provide reasonably requested
information to Buyer for the purpose of assisting Buyer in obtaining Buyer's
financing, provided, however, that Seller shall have no liability whatsoever for
or associated with such financing other than with respect to any written
information of Seller (related to Seller's current operations and not related to
any proposed or projected operations of Buyer) furnished to Buyer in connection
with such financing. Prior to the Closing Date, Seller shall cause its senior
members of management, including ▇▇▇▇▇ ▇. ▇▇▇, to be available at such time
reasonably requested by Buyer to provide information in the preparation of any
documentation and any road show presentations related to Buyer's financing and
to attend any such road show or other presentation. Buyer's accountants, at
Seller's cost and expense, shall prepare audited financial statements for
Seller's 1998 fiscal year. Buyer shall be responsible for bringing Seller's 1996
and 1997 audited financial statements in compliance with Regulation S-X as
promulgated by the Securities and Exchange Commission. Buyer agrees to indemnify
and hold harmless Seller and any representative or agent of Seller, including,
but not limited to, ▇▇▇▇▇ ▇. ▇▇▇, from any liability, claim, expense or cost
associated with assisting Buyer in obtaining Buyer's financing, provided,
however, that such indemnity shall not apply to the extent such liability,
claim, cost
24
or expense (i) relates to any written information of Seller (related to Seller's
current operations and not related to any proposed or projected operations of
Buyer) furnished to Buyer in connection with such financing, and (ii) arises out
of or results from any malfeasance, fraud, willful misconduct or gross
negligence of Seller or any of Seller's representatives or agents.
7. Conditions Precedent to Closing of Buyer and Seller. The obligations of
Buyer and Seller under this Agreement are subject to the satisfaction of the
following conditions at or before the Closing Date; provided, however, that
satisfaction of any of the following conditions may be waived by the mutual
written agreement of Buyer and Seller.
7.1 Execution and Delivery. All Schedules, together with backup
documentation, Exhibits and other documents to be signed and delivered by each
party hereto to the other shall have been signed and delivered to the other
party hereto.
7.2 Threatened or Pending Litigation. No suit, action, or other
proceeding shall be threatened or pending by or before any court or governmental
agency seeking to restrain or prohibit or to obtain damages or other relief in
connection with this Agreement or the consummation of any of the transactions
contemplated hereby, or which affects or could affect the value of any of the
Seller's Assets or the Business.
7.3 Related Transaction. The consummation of that certain Real
Property Purchase and Sale Agreement between Buyer and Harbor Community
Investment, L.C. ("HCI"), dated the ____ day of January 1999 (the "Real Property
Agreement"), a related transaction, and the simultaneous closing of said real
property acquisition.
7.4 IRGC Approval. Buyer and Seller shall have obtained the approval
of this Agreement by the IRGC.
8. Conditions Precedent to Closing of Buyer. The obligations of Buyer
under this Agreement are subject to satisfaction of the following conditions at
or before the Closing Date; provided, however, that satisfaction of any of the
following conditions may be waived by Buyer.
8.1 Accuracy of Representations and Warranties. The representations
and warranties of Seller contained in this Agreement shall be true and accurate
in all material respects as if made on and as of the Closing Date.
8.2 Performance of Covenants. Seller shall have duly performed all
obligations, covenants and agreements undertaken by Seller under this Agreement
and substantially complied with all terms and conditions applicable to Seller
hereunder to be performed or complied with before the Closing Date, including
without limitation, Seller's obligations under Sections 10.3. 10.5. 13.6. 13.10
and 14.
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8.3 Adverse Changes. Since January 1, 1999, there shall have
occurred (a) no material loss, damage or destruction to any of the Seller's
Assets, and (b) no other event or condition that materially adversely affects or
threatens to materially adversely affect the ability of Buyer to exercise full
rights of ownership with respect to the Business or any of the Seller's Assets.
8.4 Asset Sales. None of the Seller's Assets shall have been sold or
otherwise transferred except in the ordinary course of business, consistent with
past practice and Seller shall have in place the CDS Oasis Slot System to be
assigned to Buyer at Closing.
8.5 Opinion. Buyer shall have received from Seller's counsel an
opinion, dated the Closing Date, in form and substance satisfactory to Buyer and
its respective counsel that:
(a) Seller is duly organized, validly existing and in good
standing under the laws of the State of Iowa, and Seller has the power and
authority to (i) consummate the transactions contemplated by this Agreement,
(ii) execute and deliver this Agreement and the other agreements, documents,
instruments and certificates required to be delivered by Seller thereby and
perform its duties and obligations required to be performed thereunder, and
(iii) own and use its assets and conduct the Business as presently conducted.
(b) This Agreement is a valid and legally binding agreement of
Seller and on the Closing Date will be enforceable against Seller in accordance
with its terms except to the extent that enforcement thereof may be limited by
(a) bankruptcy, reorganization, moratorium, fraudulent conveyance or similar
laws now or hereafter in effect relating to creditors' rights generally and (b)
general principles of equity (regardless of whether enforceability is considered
in a proceeding at law or in equity).
(c) Except as disclosed on Schedule 4.6.1 of the Asset
Purchase and Sale Agreement, such counsel does not know of any suit, action,
arbitration, legal, administrative or other proceeding or governmental
investigation pending or threatened against or affecting Seller seeking to
enjoin the consummation of the transactions contemplated by this Agreement or if
which determined adversely to Seller would have a material adverse effect on
Seller, the Business or any of the Seller's Assets.
(d) Except as disclosed on Schedule 4.2 of the Asset Purchase
and Sale Agreement, neither the execution nor the delivery of this Agreement nor
the consummation of the transactions contemplated by this Agreement will
constitute a default, or any event that would with notice or lapse of time, or
both, constitute a default, under, or violation or breach of (i) Seller's
Articles of Organization, Operating Agreement or, to the best of such counsel's
knowledge, any indenture, license, permit, lease, franchise, mortgage instrument
or other material agreement to which Seller is a party or by which Seller or
Seller's properties may be bound; (ii) any existing federal or Iowa
constitution, statute, regulation or law to which Seller or any of the Seller's
Assets are subject; or (iii) to the best of such
26
counsel's knowledge, any existing judicial or administrative decrees, writ,
judgment or order to which Seller or any of its Assets or subject.
(e) To the knowledge of such counsel, except for the approval
of the IRGC and the approval of the members of Seller and except as set forth on
Schedule 4.15, no consent, approval, waiver, license or authorization by any
person, entity or governmental authority under any federal or Iowa statute or
regulation is required in connection with the execution, delivery and
performance by Seller of this Agreement, or any other agreements, documents,
instruments and certificates required to be delivered by Seller thereby.
(f) Seller's counsel shall provide a normal and customary
Securities Exchange Act of 1934 Section l0b-5 opinion that is customary and
normal in transactions similar to the transaction contemplated by this
Agreement, such opinion subject to review and approval by the Seller's
securities counsel and Buyer's securities counsel, or in the event that Buyer
determines to engage Seller's counsel in connection with the subject securities
transaction, Seller's counsel shall provide a normal and customary Securities
Exchange Act of 1934 Section 10b-5 opinion that is customary and normal in
securities transactions, such opinion subject to review and approval by Seller's
securities counsel and Buyer's securities counsel.
8.6 Officer's Certificate. Buyer shall have received a certificate
from Seller, dated as of the Closing Date and executed by the Chief Operating
Officer of Seller, to the effect that (a) all of the conditions contained in
Sections 7 and 8 have been satisfied; (b) all of the representations and
warranties of Seller contained in this Agreement are true and accurate as of the
Closing Date; and (c) all of the covenants and agreements of Seller contained in
this Agreement and required to be performed before the Closing have been
performed and Seller is not in breach or default of any of Seller's obligations
or representations or warranties contained in this Agreement.
8.7 Attorney General Letter. Buyer shall have received a copy of a
letter from the Iowa Attorney General's office to the Executive Director of the
IRGC to the effect that under Iowa law, in the event that the Dubuque County
Referendum in 2002 does not approve the continuation of riverboat gaming in
Dubuque County, Iowa, a licensee will continue to have the right and the legal
ability to continue the gaming operation on the ▇▇▇▇▇▇▇ ▇▇ Riverboat at the
present site for a period of time of nine (9) years from the date the licensee's
license was originally issued. Seller shall use its best efforts to assist Buyer
in obtaining a copy of the AG Letter.
8.8 Extension of Dubuque City Lease. That certain Lease Agreement
dated as of February 28, 1990, between Dubuque Racing Association ("DRA"), as
Lessee and the City of Dubuque, Iowa, as Lessor, pursuant to which the DRA
subleased the property to Seller, as Lessee, ("Dubuque City Lease") shall have
been extended through the year 2008.
27
8.9 Licenses. Buyer shall have received necessary gaming and liquor
licenses including, but not limited to, a gaming license from the IRGC to
operate a gaming excursion riverboat at Dubuque, Iowa, registrations with the
United States Department of Justice to own and hold gaming devices, applications
with the City of Dubuque, Iowa, the Iowa Department of Commerce, Alcoholic
Beverages Division and the Bureau of Alcohol, Tobacco and Firearms of the U.S.
Department of Justice for all applicable registrations and licenses necessary to
sell alcoholic beverages. In the event that Buyer has not received the foregoing
gaming licenses by July 15, 1999 or the foregoing alcoholic beverage licenses by
July 15, 1999, pursuant to Sections 16.1 and 16.2, this Agreement shall
terminate and the Escrow, and all interest earned thereon, shall be delivered to
Seller.
8.10 Material Limitation. No statute, rule, regulation, executive
order or final decree or preliminary or permanent injunction shall have been
enacted, entered or promulgated that would (a) impose any material limitation on
the ability of Buyer to exercise full rights of ownership with respect to any of
the Seller's Assets, or (b) impose any new or increased fee or tax applicable to
the Business or any of Seller's Assets. In the event the transaction
contemplated by this Agreement does not close by July 15, 1999 due to a material
limitation, as set forth in this Section 8.10, this Agreement shall terminate
and the Escrow, and all interest earned thereon, shall be delivered to Seller.
8.11 Consents. All material notices, consents, approvals and
authorizations to and from any governmental authority or other person or entity
necessary to permit Seller to transfer all of the Seller's Assets to Buyer in
the manner contemplated by this Agreement and to permit Buyer to operate the
Business as presently conducted after the Closing Date, shall have been
obtained.
8.12 1998 Financial Statements. Seller shall have delivered to Buyer
audited financial statements of Seller for the fiscal year ended December 31,
1998.
8.13 Business Interruption Insurance. On or prior to the Effective
Date, Seller shall have obtained, at its sole cost and expense through the
Closing Date, business interruption insurance in such amounts and on terms and
conditions reasonably acceptable to Buyer.
8.14 City Leases. On or prior to the Closing Date, lease agreements,
extensions or similar documents covering all real property owned by the City of
Dubuque that was leased to DRA and subleased to Seller for use in the Business
prior to Closing including, but not limited to, assignment of all parking rights
granted by the City of Dubuque, shall have been finalized, such agreements,
extensions or documents to include terms and conditions satisfactory to Buyer.
Buyer agrees that it will not as a result of an executed City Lease adjust the
Purchase Price or any of the economics of this Agreement and acknowledges that
the only remedy available to Buyer for a City Lease that is unsatisfactory to
Buyer is termination of this Agreement.
28
9. Conditions Precedent to Obligations of Seller. The obligations of
Seller under this Agreement are subject to satisfaction of the following
conditions at or before the Closing Date; provided, however, that satisfaction
of any of the following conditions may be waived by Seller.
9.1 Accuracy of Representations and Warranties. The representations
and warranties of Buyer contained in this Agreement shall be true and accurate
in all material respects as if made at and as of the Closing Date.
9.2 Performance of Covenants. Buyer shall have duly performed all
obligations, covenants and agreements undertaken by Buyer herein and complied
with all terms and conditions applicable to Buyer hereunder to be performed or
complied with before the Closing Date.
9.3 Opinion. Seller shall have received from Buyer's counsel an
opinion, dated the Closing Date, in form and substance satisfactory to Seller
and its respective counsel that:
(a) Buyer is duly organized, validly existing and in good
standing under the laws of the State of Delaware, and Buyer has the power and
authority to (i) consummate the transactions contemplated by this Agreement,
(ii) execute and deliver this Agreement and the other agreements, documents,
instruments and certificates required to be delivered by Buyer thereby and
perform its duties and obligations required to be performed thereunder, and
(iii) own and use the Seller's Assets and conduct the Business as presently
conducted.
(b) This Agreement is a valid and legally binding agreement of
Buyer and on the Closing Date will be enforceable against Buyer in accordance
with its terms except to the extent that enforcement thereof may be limited by
(a) bankruptcy, reorganization, moratorium, fraudulent conveyance or similar
laws now or hereafter in effect relating to creditors' rights generally and (b)
general principles of equity (regardless of whether enforceability is considered
in a proceeding at law or in equity).
(c) Such counsel does not know of any suit, action,
arbitration, legal, administrative or other proceeding or governmental
investigation pending or threatened against or affecting Buyer seeking to enjoin
the consummation of the transactions contemplated by this Agreement or if which
determined adversely to Buyer would have a material adverse effect on Buyer.
(d) To the knowledge of such counsel, neither the execution
nor the delivery of this Agreement nor the consummation of the transactions
contemplated by this Agreement will constitute a default, or any event that
would with notice or lapse of time, or both, constitute a default, under, or
violation or breach of (i) Buyer's Articles of Organization and Operating
Agreement, or any indenture, license, permit, lease, franchise, mortgage
29
instrument or other material agreement to which Buyer is a party or by which
Buyer or Buyer's properties may be bound; (ii) any existing federal or state
constitution, statute, regulation or law to which Buyer is subject; or (iii) any
existing judicial or administrative decrees, writ, judgment or order to which
Buyer is subject.
(e) To the knowledge of such counsel, except for the approval
of the IRGC, no consent, approval, waiver, license or authorization by any
person, entity or governmental authority under any statute or regulation is
required in connection with the execution, delivery and performance by Buyer of
this Agreement, any other agreements, documents, instruments and certificates
required to be delivered by Buyer thereby.
9.4 Litigation. On the Effective Date, (i) Buyer shall have executed
and delivered to Seller in escrow as provided below, a complete release of
Seller, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ and all representatives and agents of Seller, from any
litigation and any claims related to the February 1998 proposed sales
transaction between Seller and Buyer (the "Release"), (ii) Buyer and Seller
shall have executed and delivered to each other a Standstill Agreement in form
and substance acceptable to Buyer and Seller pursuant to which, among other
things, Buyer shall agree not to continue or to commence prosecuting the
foregoing litigation until the earlier to occur of (x) the termination of this
Agreement, or (y) July 15, 1999, and Seller shall agree not to assert in any
future proceeding any equitable "laches" argument (i.e., that Buyer has "sat on
its rights") during the period of negotiations, execution, and performance under
this Agreement, but Seller shall not be precluded, in any subsequent litigation,
from seeking any monetary or other equitable relief, for actions taken during
the period of negotiation, execution, and performance under this Agreement, and
(iii) Buyer shall have paid to Seller in escrow all of Seller's and ▇▇▇▇▇'▇
out-of-pocket legal costs and expenses associated with the litigation regarding
this matter in an amount not to exceed $12,000.00 (the "Litigation Expenses").
The Release and the Litigation Expenses shall be held in escrow in accordance
with the terms and provisions of the Escrow Agreement. The Release and the
Litigation Expenses shall be released from escrow and delivered to Seller (i)
upon Closing, (ii) in the event of Buyer's material breach of any provision of
this Agreement resulting in termination of this Agreement, (iii) in the event
that Buyer is unable to obtain financing to close the transaction contemplated
by this Agreement by July 15, 1999 resulting in termination of this Agreement,
or (iv) in the event that Buyer fails to file its license application by
February 1, 1999 or fails to receive a license from the IRGC by July 15, 1999
resulting in termination of this Agreement.
9.5 Officer's Certificate. Seller shall have received a certificate
from Buyer, dated as of the Closing Date and executed by an officer of Buyer, to
the effect that (a) all of the conditions contained in Sections 7 and 9 have
been satisfied; (b) all of the representations and warranties of Buyer contained
in this Agreement are true and accurate as of the Closing Date; and (c) all of
the covenants and agreements of Buyer contained in this Agreement and required
to be performed before the Closing have been performed and Buyer is not in
breach or default of any of Buyer's obligations or representations or warranties
contained in this Agreement.
30
9.6 Consents. All material notices, consents, approvals,
authorizations and waivers to or from any governmental authority or other person
or entity necessary to permit Seller to transfer all of the Seller's Assets to
Buyer in the manner contemplated by this Agreement shall have been obtained.
9.7 Financing Letter. Seller shall have received from Buyer's
investmnent banker, Jefferies & Company, Inc., a letter addressed to the Seller,
issued on the Effective Date, indicating that, subject to certain customary
terms and conditions, Jefferies & Company, Inc. is highly confident that the
Buyer will be able to obtain financing on terms that allow the Buyer to proceed
with the transaction contemplated herein.
10. Closing. Provided that all of the conditions to the close of the
transaction contemplated by this Agreement as set forth in this Section 10 have
been satisfied, the transaction shall close on the date selected by Buyer that
is at least three (3) but no more than thirty (30) business days after Buyer is
approved by the IRGC to operate an excursion gaming riverboat from Dubuque,
Iowa, but not later than July 15, 1999, unless waived by Seller and Buyer, and
all other conditions contained in Sections 7, 8 and 9 are satisfied or waived
(the "Closing Date"). Buyer shall give Seller written notice specifying the
Closing Date not less than five (5) business days prior thereto.
10.1 Conditions to the Closing. The transaction contemplated by this
Agreement shall not close unless and until:
(a) All parties have delivered all sums and documents required
as provided in Sections 10.3 and 10.4;
(b) All of the conditions set forth in Sections 7, 8 and 9
have been waived or satisfied as provided by this Agreement; and
(c) The Closing Statements have been prepared and delivered in
accordance with the provisions of Section 13.10.
10.2 Delivery of Documents and Delivery of Funds. On the Closing
Date, Buyer shall deliver to Seller all items set forth in Section 10.4, and
Seller shall deliver to Buyer all items set forth in Section 10.3.
10.3 Seller's Deliveries. At the Closing, Seller shall deliver to
Buyer each of the following:
(a) Bills of Sale for the vessels that constitute the
▇▇▇▇▇▇▇ ▇▇ Riverboat;
31
(b) Current U.S. Coast Guard Certificates of Documentation;
(c) Current U.S. Coast Guard Certificates of Inspection;
(d) Current Federal Communications Commission ship-to-shore
radio licenses;
(e) Assignments of all material agreements, including
without limitation, the Third Party Confidentiality
Agreements;
(f) ▇▇▇▇(s) of sale for the Seller's Assets;
(g) Seller's assignment of the Assumed Obligations in
substantially the form of Exhibit A attached hereto; and
(h) Such other documents required to be delivered under this
Agreement.
10.4 Buyer's Deliveries; Payment. At the Closing, Buyer shall
deliver to Seller each of the following:
(a) Application of Documentation for ▇▇▇▇▇▇▇ ▇▇ Riverboat;
(b) Citizenship Declaration for Buyer;
(c) Buyer's assumption of the Assumed Obligations in
substantially the form of Exhibit A attached hereto;
(d) Preferred Membership Interests; and
(e) Cash by wire transfer of funds for the balance of the
Purchase Price.
10.5 Prorations. The following matters and items shall be
apportioned between the parties hereto or, where applicable, credited in total
to a particular party hereto, as of the Closing Date:
(a) Taxes, including, without limitation, real estate, personal
property, business, prepaid gaming and occupation taxes, if any (based on the
most current available information), and water and sewer charges shall be
prorated as of the Closing Date, or charged on the basis of applicable
governmental records, and shall be readjusted when the actual bills are
available pursuant to Section 13.10. Such taxes assessed for the fiscal year
shall be prorated as of the date on which ▇▇▇▇▇▇▇▇ are received with respect
thereto, with Seller being
32
responsible for the taxes accrued with respect to all periods before the Closing
Date, and Buyer being responsible for all subsequent periods.
(b) Telephone and utility services shall be prorated as of the
Closing Date. All deposits, if any, made by Seller as security under any public
service contract shall be credited to Seller if the same remain on deposit for
the benefit of Buyer. Where possible, cut-off meter readings shall be secured
for all utilities as of the Closing Date.
(c) Any amount prepaid or payable under any lease or option
agreement and any accrued rental and any percentage rental under space leases
shall be prorated as and when collected. All security deposits held by Seller,
including customer deposits held in the casino cage, shall be transferred to
Buyer, and all obligations with respect to such security deposits shall be
assumed by Buyer on the Closing Date.
(d) Fees paid or payable for transferable licenses shall be prorated
as of the Closing Date.
(e) With respect to the Seller's Assets and business operations then
sold and conveyed to Buyer, Seller's insurance shall be canceled on the Closing
Date, and Seller shall retain all prepaid premiums and be responsible for any
additional premiums due on or after the Closing Date due to any insurance audit
or retrospective rating adjustments that were incurred prior to Closing and any
payment of claims within the applicable deductibles required to be paid
thereunder. Buyer shall arrange for immediate effectiveness of Buyer's own
insurance coverage as of the Closing Date.
(f) All Excluded Obligations not paid by Seller on or prior to the
Closing Date shall be deducted from the Purchase Price.
(g) On the Closing Date, such other items shall be prorated as are
provided for in this Agreement or as are normally prorated and adjusted in the
sale of a casino business, including, without limitation, all deposits and
prepaid items that inure to the benefit of Buyer (including, but not limited to,
prepaid insurance) and the interest on the Assumed Obligations and on any other
obligations being assumed by Buyer hereunder as of the Closing Date.
In making apportionments, all prepaid rents and similar items shall be
prorated on the basis of the number of days of occupancy before and after the
time set for such adjustments to be made, and all prepaid taxes, charges and
impositions shall be prorated on the basis of the number of days of the
applicable tax year, or on the basis of unit costs or, if this is not
practicable, on the basis of the number of days before and after that time.
11. Closing Documents. As soon as practicable after the date of this
Agreement, Seller shall prepare and submit to Buyer the form of the documents to
be delivered on the Closing Date, including, without limitation, bills of sale,
assignments, assumptions, novations and other title transfer instruments,
together with such other documentation as may be required
33
to consummate the transactions contemplated by this Agreement on the Closing
Date. On the Closing Date, Seller shall deliver to Buyer final, executed ▇▇▇▇(s)
of sale, assignments and other title transfer instruments or documents required
to consummate the transactions contemplated by this Agreement on the Closing
Date on behalf of Seller, and Buyer shall deliver to Seller final, executed
assumption, novation or other agreements or documents required to consummate the
transactions contemplated by this Agreement on the Closing Date on behalf of
Buyer. All instruments required to be recorded shall be in recordable form at
the time of delivery by Seller or Buyer, as the case may be.
12. Further Assurances. At any time and from time to time after the
Closing Date, at the request of Buyer, Seller shall execute and deliver such
further instruments of transfer and assignment and take such other actions as
Buyer reasonably may require to more effectively transfer and assign to and vest
in Buyer the Seller's Assets including, without limitation, (i) to endorse,
without recourse, all checks in the name of Seller, the proceeds of which Buyer
is entitled to hereunder, (ii) to institute and prosecute, in the name of Seller
or otherwise, all proceedings that Buyer may deem appropriate in order to
collect, assert or enforce any claim, right or title of any kind to any of the
Seller's Assets, and (iii) to defend and compromise all actions, suits and
proceedings with respect to any of the Seller's Assets. Seller further agrees
that Buyer shall retain for its own account all amounts collected pursuant to
the foregoing powers, and Seller shall pay or transfer to Buyer, if and when
received, all amounts that are received by Seller on or after the Closing Date
with respect to any of the Seller's Assets.
13. Transfer of Operations.
13.1 Possession of ▇▇▇▇▇▇▇ ▇▇ Riverboat. Seller shall give, assign
and transfer to Buyer complete possession of the ▇▇▇▇▇▇▇ ▇▇ Riverboat at the
Closing Date. Buyer and Seller shall pre-close the transaction not later than
the day immediately preceding the Closing Date. At such pre-closing, Buyer and
Seller shall deliver for inspection all documents required of either party,
except to the extent that any delivery is waived by either party, in accordance
with this Agreement, to complete the transfer of ownership of the Seller's
Assets from Seller to Buyer following the procedures set forth herein to the
extent applicable. Except as provided below, the bars and restaurant and the
casino on the ▇▇▇▇▇▇▇ ▇▇ Riverboat shall be operated by Seller for Seller's
benefit until the Closing Date.
13.2 Chip Redemption. After the Closing Date, Seller shall maintain
a chip redemption center at the portside property and shall redeem Seller's
outstanding chips and tokens in the possession of third parties (the "Chips")
presented to Seller for a period of one hundred twenty (120) days (or such other
period of time as may be approved by the IRGC). Seller shall apply accepted
industry standards in identifying and accepting Chips for redemption. Seller
shall be solely responsible for obtaining the approval of the IRGC for the plan
of redemption described in this Section 13.2 and shall be solely responsible for
publication of the notices and disposition of the Chips as may be required by
the regulations of the IRGC.
34
13.3 Transfer of Gaming Operations. With the exception of the slot
machines, the transfer of the gaming operations associated with the Business,
including the Gaming Equipment, shall take place at the first time after the
Closing Date that the drop boxes for the gaming tables are collected for
counting. Seller shall control and Buyer shall review and verify the physical
count of the drop boxes and gaming tables. All of Seller's Cash in the casino
cages or banks shall be counted.
13.4 Slot Drops. At the Closing Date, the cash or tokens in the
hoppers, buckets (or slot drops) and the ▇▇▇▇ acceptors in all slot machines
shall be collected and counted (by emptying and counting the cash in the loads
of all machines) by Seller and verified by Buyer.
13.5 Progressive Jackpots. Buyer shall receive a credit (less any
seed money deposited in any progressive slot machine or table game by Seller) on
the Closing Statements and shall assume and be responsible for the accrued
liability shown by the progressive meter readings on all progressive slot
machines (including video poker) and all progressive table games as of the
Closing Date.
13.6 Transition Plan. As soon as practicable but in no event later
than five (5) days before Closing, Buyer and Seller shall agree on a transition
plan containing full details of the procedures for the transfer of the
operations of the ▇▇▇▇▇▇▇ ▇▇ Riverboat embodying the understandings set forth in
this Section 13.
13.7 Promotions. Buyer understands that Seller, in the ordinary
course of business, has conducted special events or promotions designed to
attract customers to the ▇▇▇▇▇▇▇ ▇▇ Riverboat, one or more of which special
events or promotions involved the issuance of discount or other customer
entitlement coupons. Buyer agrees to accept and honor all such valid and
unexpired discount or entitlement coupons tendered to the ▇▇▇▇▇▇▇ ▇▇ Riverboat
after the Closing Date in accordance with the terms thereof. All such special
events or promotions involving the use of discount or entitlement coupons are
identified on Schedule 13.6 and copies of all such discount or entitlement
coupons have been provided to Buyer.
13.8 Slot Machine Wide Area Progressive Liability. In the event that
Seller participates in slot machine wide area progressive networks, on the
Closing Date, Buyer shall assume such contracts but shall have the option to
require Seller to deliver an appropriate termination notice consistent with the
terms of any or all of such wide area network contracts. Buyer shall assume all
liability associated with the wide area progressive network contracts.
13.9 Seller's Post Closing Access. For a period of not more than one
hundred twenty (120) days after the Closing Date, Buyer shall make available to
Seller and Seller's representatives, on a rent-free basis, an exclusive license
to use a secured office sufficient for two or three persons for the purpose of
permitting Seller to complete Seller's audit for 1998, if not previously
completed, and to complete Seller's partial year audit for 1999, and for such
other post-closing activities as are reasonably necessary after the Closing
Date. Buyer agrees to
35
staff and provide Seller with access to the existing ▇▇▇▇▇▇▇ ▇▇ Riverboat data
processing equipment for a period of ninety (90) days after the Closing Date.
Buyer further agrees to assist Seller in processing final payrolls, accounts
payable and general ledger runs for Seller on the system at no cost to Seller,
and Seller shall allow Buyer to use the same programs at no cost to Buyer for
Buyer's own transitional use during such ninety (90) period, provided that such
use by Buyer and Seller is not in violation of any applicable software license.
13.10 Closing Statements. Seller shall prepare and deliver to Buyer
on the Closing Date a preliminary closing statement (a "Preliminary Closing
Statement") as of the Closing Date, which shall show the net amount due either
to Seller or Buyer based on (a) items for which a specific credit is provided
for in this Agreement and (b) items not described in Section 10.5 that normally
are prorated and adjusted in the sale of a casino business, which statement
shall be in form and substance acceptable to Buyer. Such net amount shall be
added to or subtracted from the payment of the cash balance of the Purchase
Price to be paid to Seller pursuant to Section 3 on the Closing Date. Within
sixty (60) days after the Closing Date, Buyer shall deliver a final closing
statement (a "Final Closing Statement") to Seller setting forth the final
determination of all items to be included in the Closing Statements. To the
extent that amounts are determined to be owing by Seller to Buyer or by Buyer to
Seller which are not disputed, such amounts shall be settled in cash between
Buyer and Seller. Should Buyer and Seller disagree on the amount due either
Buyer or Seller as reflected in the Preliminary Closing Statement, or the Final
Closing Statement, any such dispute shall be resolved by Buyer's and Seller's
accountants (whose mutual decisions shall be final and binding on each of Buyer
and Seller); provided, however, that should such accountants be unable to
resolve any dispute with respect to the Preliminary Closing Statement within ten
(10) business days of the Closing Date or any dispute with respect to the Final
Closing Statement within ten (10) business days following the Seller's receipt
of the Final Closing Statement from Buyer, such disputes, as the case may be,
shall be resolved by arbitration in the manner provided in Section 37 of this
Agreement. In the event that Buyer's and Seller's accountants are the same
accounting firm, Seller shall be allowed to appoint its own representative to
represent the Buyer with respect to the dispute which representative shall be a
nationally recognized public accounting firm. If at any time within ninety (90)
days after the Closing Date either Buyer or Seller discovers items that should
have been included in the Closing Statements but were omitted therefrom, then
such items shall be adjusted in the same manner as if their existence had been
known at the time of the preparation of the Closing Statements, and any payment
owing as a result thereof shall be made as provided above in this Section 13.
13.11 No Control. Before the Closing Date, Buyer shall not directly
or indirectly control, supervise, direct or interfere with the Seller's Assets
or the operation of the Business or attempt any of the foregoing. Until the
Closing Date, the operations and affairs of Seller are the sole responsibility
of Seller and under Seller's complete control.
14. IRGC Requests for Information. Buyer and Seller shall make available,
upon written request by the IRGC or any of its duly authorized representatives,
the contracts, books, documents and records that are necessary to ascertain the
nature and extent of the agreement
36
between Buyer and Seller in connection with the licensing of Buyer. To the
extent that either party hereto receives such a request, the other party hereto
shall provide copies of such documents to the other in order to respond to such
request.
15. Risk of Loss of Seller's Assets. Between the date of this Agreement
and the Closing Date, Seller assumes all risk of destruction, loss or damage to
the Seller's Assets due to fire or other casualty, and Seller, at Seller's sole
expense, shall, until the Closing Date, keep all of the Seller's Assets fully
insured as presently maintained by Seller. If any of the Seller's Assets is
damaged by fire or other casualty, Buyer and Seller shall have the following
rights and obligations:
(a) If the damage is not substantial (as hereinafter defined), Buyer
shall take title to the Seller's Assets without abatement of the Purchase Price
and be entitled to receive the insurance proceeds arising out of such damage to
the extent Seller has not theretofore used such proceeds to repair such damage.
If the insurance proceeds arising from such damage are not sufficient to repair
such damage or are not paid to Buyer on or prior to the Closing Date, Buyer
shall receive at the Closing a credit against the Purchase Price equal to the
estimated cost of repairing such damage in excess of the insurance proceeds paid
to Buyer, as such amount shall be determined by a qualified independent third
party selected by Buyer and Seller; provided, however, that to the extent any
such insurance proceeds are not actually received by Buyer on or prior to the
Closing Date, the Purchase Price shall be abated by the full amount of the
unpaid portion of the insurance proceeds and Buyer shall assign all of its
rights to such unpaid insurance proceeds to Seller.
(b) If the damage is substantial (as hereinafter defined), Buyer
shall have the option of canceling this Agreement within sixty (60) days of
receiving notice of such damage, or Buyer may accept the Seller's Assets and
thereupon be entitled to receive the insurance proceeds arising out of such
damage (including, without limitation, business interruption insurance proceeds
to the extent the Business is interrupted after the Closing Date), and the
Purchase Price shall be abated to the extent such damage is not covered by the
insurance proceeds, such abatement to be based on the difference between the
amount of the insurance proceeds and the estimated cost to restore the damaged
Seller's Assets as prepared by a qualified independent third party selected by
Buyer and Seller.
(c) If damage occurs, then such damage shall be deemed "substantial"
if the same cannot be substantially repaired or restored within ninety (90) days
after such damage occurs.
(d) Buyer shall receive credit against the Purchase Price for the
fair market value of any Seller's Assets not covered by insurance, which is
lost, damaged, destroyed or stolen between the date of this Agreement and the
Closing Date.
37
16. Termination.
16.1 Grounds for Termination. This Agreement may be terminated at
any time before the Closing Date:
(a) By mutual written agreement of Buyer and Seller;
(b) By Seller if (i) the Buyer fails to deliver the Escrow
amount to Seller by the Effective Date, or (ii) Buyer
fails to file its gambling license application with the
IRGC by February 1, 1999;
(c) By Seller or Buyer if Buyer has not obtained the
approval or consent by the IRGC of Buyer's license to
operate an excursion gambling boat at Dubuque, Iowa by
July 15, 1999;
(d) By Seller if any of the conditions set forth in Section
7 or in Section 9 is not satisfied and has not been
waived by Seller;
(e) By Buyer if any of the conditions set forth in Section 7
or in Section 8 is not satisfied and has not been waived
by Buyer;
(f) By Buyer if there shall have been (A) an outbreak or
escalation of hostilities between the United States and
any foreign power, or (B) an outbreak or escalation or
any other insurrection or armed conflict involving the
United States or any other national or internal calamity
or emergency, and, such outbreak, escalation,
insurrection or armed conflict has materially adversely
impacted the financial, banking and capital markets of
the United States in a manner that has materially
adversely changed the ability of Buyer to obtain
reasonable financing for the transaction contemplated by
this Agreement. Notwithstanding anything in this
Agreement to the contrary, in the event of a material
disruption or material adverse change in the financial,
banking or capital markets of the United States which
causes the Buyer to terminate this Agreement, the Escrow
Holder shall deliver the Escrow, and all interest earned
thereon, to the Seller;
(g) By Buyer if there has been a material disruption or
material adverse change in the financial, banking or
capital markets of the United States and such material
disruption or material adverse change has imposed a
material adverse change in the ability of Buyer to
obtain reasonable financing for the transaction
contemplated by this Agreement. Notwithstanding anything
in
38
this Agreement to the contrary, in the event of a
material disruption or material adverse change in the
financial, banking or capital markets of the United
States which causes the Buyer to terminate this
Agreement, tile Escrow Holder shall deliver the Escrow,
and all interest earned thereon, to the Seller;
(h) By Seller in the event of a material breach of any
provision of this Agreement by Buyer; or
(i) By Buyer in the event of a material breach of any
provision of this Agreement by Seller.
16.2 Automatic Termination. This Agreement shall automatically
terminate in the event that the transaction contemplated by this Agreement has
not closed by July 15, 1999. The Escrow, and all interest earned thereon, shall
be delivered to Seller, as liquidated damages and not as a penalty, in the event
that the Closing has not occurred by July 15, 1999; provided, however, the
Escrow, together with all interest earned thereon, shall be fully refunded to
Buyer if the Closing has not occurred as a result of: (i) the failure to
satisfy any condition to Closing or obligation of Seller set forth in Sections
7, 8 (except subsections 8.9 and 8.10 thereof), 10.3, 10.5, 11, 13.6, 13.10 and
14 of this Agreement arising out of or resulting from an act or omission of
Seller and, in each such case, not within the control of Buyer, or (ii) a breach
of this Agreement by Seller (which breach could reasonably be expected to have
an adverse effect on the Business, the ownership of Seller's Assets or the
ability of Buyer to consummate the transactions contemplated hereby).
16.3 Effect of Termination. If this Agreement is terminated as
permitted in Sections 16.1 or 16.2, then such termination shall be without
liability to either party hereto and any of its respective shareholders,
members, officers, directors, managers, employees, agents, consultants and
representatives; provided, however, that, if such termination results from the
failure of either party hereto to satisfy a condition to the performance of the
obligations under this Agreement of the other party hereto, failure to perform a
covenant of this Agreement or breach by either party hereto of this Agreement or
any representation or warranty or agreement contained herein, or the failure to
consummate and close the transaction by July 15, 1999, then the non-breaching
party hereto shall have the remedies set forth in Section 17.
17. Remedies. The following shall be the exclusive remedies of the parties
hereto in the event of a breach of this Agreement.
17.1 Buyer's Remedies. If Seller materially breaches this Agreement
before the Closing Date, (i) Buyer may terminate this Agreement and recover the
full amount of the Escrow from Escrow Holder, and (ii) Buyer shall have all
legal and equitable remedies available to it.
39
17.2 Seller's Remedies. In the event that: (a) Buyer fails to file
its completed license application with the IRGC by February 1, 1999; (b) Buyer
has not been able to obtain its IRGC license by July 15, 1999; (c) Buyer fails
to obtain financing to close this transaction on the terms and conditions set
forth in this Agreement by July 15, 1999; (d) Buyer is not able to consummate
the transactions contemplated by this Agreement by July 15, 1999, substantially
due to a material limitation described in Section 8.10; or (e) in the event the
Agreement is terminated pursuant to Sections 16.1(f) or 16.1(g); then, and only
in such events, Seller may, as its sole remedy therefor, terminate this
Agreement, and Escrow Holder shall deliver to Seller the Escrow and all accrued
interest thereon. If Buyer materially breaches this Agreement other than as
specifically provided in the preceding sentence, (i) Seller may terminate this
Agreement and Escrow Holder shall deliver to Seller the Escrow and all accrued
interest thereon, and (ii) Seller shall have all other legal and equitable
remedies available to it.
17.3 Attorneys' Fees. If a dispute arises with respect to this
Agreement, then the party prevailing in such dispute shall be entitled to
recover all expenses, including, without limitation, reasonable attorneys' fees
and expenses, incurred in ascertaining such party's rights and in preparing to
enforce and/or defend and in enforcing and/or defending such party's rights
under this Agreement, whether or not it was necessary for such party to
institute suit.
18. Indemnification.
18.1 Buyer's Indemnification. Subject to the provisions of Section
17, for a period of eighteen (18) months after the Closing Date, Buyer shall
indemnify, defend and hold harmless Seller and/or any of Seller's officers,
directors, managers, employees or agents (including, but not limited to,
Seller's financial advisor, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co., Inc.), from and against
any and all incidents, claims, demands, actions, causes of action, suits,
obligations, liabilities, losses, costs, damages or expenses, costs of
investigation and defense, counsel or attorneys' fees, whether under retainer or
salary or otherwise, including, without limitation, interest, penalties and
court costs (collectively, "Damages"), suffered or incurred by Seller and/or any
or all of Seller's officers, directors, managers, employees or agents, which
directly or indirectly arise, result from or relate to (a) any breach of, or any
failure by Buyer to perform, any of Buyer's representations, warranties,
covenants or agreements contained in this Agreement, (b) matters that occur or
arise as a result of Buyer's action or failure to take action after the Closing
Date, except as to such incidents, claims, demands, actions, causes of action,
suits, obligations, liabilities, losses, costs, damages or expenses that are
caused or claimed to be caused by or are a result of the acts or omissions of
Seller or Seller's respective agents or employees, (c) any and all claims of any
kind and description of employees that relate to their, hiring, employment
and/or termination by Buyer, provided that the facts or events giving rise to
such claims occurred after the Closing Date, (d) any and all debts, obligations
and liabilities of Seller specifically assumed by Buyer hereunder and any
Damages resulting from the operation of the Business by Buyer after the Closing
Date, (e) actions or failure to act by Buyer or Buyer's representatives during
the inspection and due diligence of the Business, (f) all obligations and
liabilities arising after the Closing Date related to the contracts, leases and
agreements assumed by the Buyer, and (g) any and all claims made by any broker,
finder or
40
agent claiming a fee or commission through Buyer. Notwithstanding any provision
of this Section 18.1 to the contrary, the obligations of Buyer to indemnify the
Seller for any and all debts, obligations and liabilities of Seller arising from
or related to the assumption of the DRA Operating Agreement, the City Leases or
the CDS Agreement, which obligations, solely to the extent arising on or after
the Closing Date, were specifically assumed by Buyer hereunder, shall extend for
the length of the remaining term of such agreements and shall not be limited to
claims made prior to the eighteenth (18th) month period following the Closing
Date. If and to the extent Seller notifies Buyer in writing of a claim for
indemnification on or prior to the eighteenth (18th) month period after the
Closing Date, Buyer shall continue to be obligated to provide indemnification
hereunder with respect to such claim until such time that such claim is resolved
and satisfied.
18.2 Seller's Indemnification. Subject to the provisions of Section
17, for a period of eighteen (18) months after the Closing Date, Seller shall
indemnify, defend and hold harmless Buyer and/or any or all of their officers,
directors, managers, employees or agents from and against any and all Damages
suffered or incurred by Buyer and/or any or all of their officers, directors,
managers, employees or agents, which directly or indirectly arise, result from
or relate to (a) any breach of, or any failure by Seller to perform, any of
Seller's representations, warranties, covenants or agreements contained in this
Agreement, which shall survive Closing in accordance with the terms of Section
4, (b) matters that occur or arise as a result of action or failure to take
action by Seller or any of Seller's agents, employees or members before the
Closing Date, except as to such incidents, claims, demands, actions, causes of
action, suits, obligations, liabilities, losses, costs, damages or expenses that
are caused solely by or are a direct result solely of the acts or omissions of
Buyer or Buyer's agents or employees, (c) any and all claims of any kind and
description of employees that relate to their hiring, employment and/or
termination by Seller, provided that the facts or events giving rise to such
claims occurred before the Closing Date, (d) any and all debts, obligations and
liabilities of Seller not specifically assumed by Buyer hereunder, including,
without limitation, the Excluded Obligations, and (e) any and all claims made by
any broker, finder or agent claiming a fee or commission through Seller.
Notwithstanding the foregoing, (a) the indemnification obligations of Seller for
breaches of representations and warranties regarding Organization and Standing
(Section 4.1), Title (Section 4.3) and Taxes (Section 4.8) shall continue
indefinitely beyond the eighteen (18) month indemnification period and the
indemnification obligation regarding litigation shall continue for the
applicable statutes of limitation and appeal period related thereto, and (b) if
and to the extent Buyer notifies Seller in writing of a claim for
indemnification on or prior to the eighteenth (18th) month period after the
Closing Date, Seller shall continue to be obligated to provide indemnification
hereunder with respect to such claim until such time that such claim is resolved
and satisfied.
18.3 Limitations on Indemnification. Notwithstanding any other
provision hereof or of any applicable law, Buyer shall not be entitled to make a
claim as a result of a breach of representation, warranty or covenant which
survives the Closing pursuant to Section 4 hereof against Seller unless such
claim, together with all other claims of Buyer under Section 18.2 hereunder, as
well as all claims under the Real Property Agreement, exceed in the
41
aggregate $200,000 (in which case Buyer shall be entitled to the entirety of
such claims); provided, however, that (i) such $200,000 minimum threshold with
respect to indemnifiable Damages shall not apply to any claim for
indemnification made by Buyer under this Agreement with respect to (w) the
breach or inaccuracy of any of the representations or warranties contained in
Section 4.1 (Organization, Standing and Authority), Section 4.3 (Title), Section
4.6 (Litigation) or Section 4.8 (Taxes), (x) the gross negligence, willful
misconduct or fraud of Seller, (y) any Excluded Obligation, or (z) the failure
of Seller to pay the amount of any adjustment to the Purchase Price in
accordance with the provisions of this Agreement (the items described in the
immediately preceding clauses (w), (x), (y) and (z), collectively, the "Seller
Retained Liabilities"), and (ii) except with respect to an indemnification
obligation in respect of a Seller Retained Liability, Seller's indemnification
obligations for Damages under Section 18.2 of this Agreement (including, without
limitation, indemnification obligations with respect to environmental claims
under Section 4.13) shall not exceed in the aggregate (including claims made
under the Real Property Agreement) $3,000,000. The amount of any indemnifiable
Damages under Section 18.2 shall be reduced by (i) any insurance proceeds
actually received with respect thereto (it being understood that after the
satisfaction in full of indemnifiable Damages hereunder, Buyer shall assign to
Seller all of its rights to unpaid insurance proceeds with respect to insurance
coverage, but only to the extent applicable to such Damages), and (ii) the value
of tax benefits actually obtained by Buyer, including without limitation, by way
of exclusion from income, deduction, credit or refund for other taxable periods
as a result of any adjustment. Notwithstanding anything to the contrary in this
Agreement or in the Real Property Agreement, Buyer shall be entitled to satisfy
any claim for indemnification under this Agreement or the Real Property
Agreement, except any indemnification obligation in respect of a Seller Retained
Liability which shall be paid in cash or applied as an offset to the Purchase
Price, by applying and offsetting such indemnification obligation against the
Three Million Dollars of Preferred Membership Interests held in escrow pursuant
to the terms of this Agreement and the Real Property Agreement.
19. No-Shop Agreement. From the date of this Agreement until the earliest
to occur of (a) the date on which this Agreement is terminated, (b) the Closing
Date, (c) July 15, 1999, or (d) such date mutually agreed upon by Buyer and
Seller, neither Seller, Seller's members, Seller's authorized agents nor any of
Seller's affiliates shall, directly or indirectly, solicit, initiate or
encourage the submission of inquiries, proposals or offers from any corporation,
partnership, person or other entity or group relating to any acquisition or
purchase of assets of, or any equity interest in, Seller or of all or any
portion of the Seller's Assets or any tender or exchange offer, merger,
consolidation, business combination, recapitalization, spin-off, liquidation,
dissolution or similar transaction involving, directly or indirectly, Seller
(each an "Acquisition Proposal"). Seller shall immediately notify Buyer of any
contact from any person other than Buyer regarding the possible sale of transfer
of any interest in Seller or of all or any portion of the Seller's Assets and
the identity of the purchaser and the material terms and conditions of any
Acquisition Proposal. Seller shall cease immediately and cause to be terminated
any and all existing discussions or negotiations with any parties (other than
Buyer) conducted heretofore with respect to any Acquisition Proposal and request
that all confidential information furnished on behalf of Seller be returned.
Seller acknowledges and
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agrees that, upon any violation by Seller or an authorized agent of Seller of
this Section 19, Seller shall pay the Buyer an amount (the "Break Up Fee") equal
to the sum of (A) the greater of (x) Five Million Dollars ($5,000,000.00) or (y)
the positive difference, if any, between the aggregate consideration paid or to
be paid pursuant to any Acquisition Proposal completed by Seller at any time
during the one (1) year period following the date of termination of this
Agreement and the Purchase Price; and (B) the costs and expenses incurred by
Buyer and Buyer's financing sources in connection with the negotiation,
preparation and execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby, including without limitation, fees and
expenses of legal counsel, investment bankers, brokers and other agents,
representatives or consultants; provided that in the event a member who is not
an authorized agent of Seller violates the first sentence of this Section 19,
Buyer acknowledges that such member, but not the Seller, shall be liable for the
payment of the Break Up Fee and Buyer shall have no recourse against Seller for
such violation. Any amounts required to be paid by Seller to Buyer under this
Section 19 shall be immediately due and payable upon Seller's failure to
substantially comply in any respect with this Section 19 (it being understood
that, solely with respect to the amount to be paid under the immediately
preceding clause (A), upon Seller's breach of this Section 19, $5,000,000 shall
be immediately due and payable, and, upon consummation of an Acquisition
Proposal, any amount due and owing in excess of $5,000,000 shall be immediately
due and payable). In addition to receipt of the Break Up Fee, Buyer shall have
available to it all legal remedies in the event of a breach or violation of this
Section 19 by Seller.
20. Assignment. Third Parties. Binding Effect. Neither party hereto may
assign this Agreement or any of its rights or obligations hereunder without the
prior written consent of the other party. Nothing contained in this Agreement,
express or implied, is intended to confer upon any person or entity, other than
the parties hereto and their successors in interest, any right or remedy under
or by reason of this Agreement unless so stated expressly herein to the
contrary. All covenants, agreements, representations and warranties of the
parties hereto contained herein shall be binding on and inure to the benefit of
Buyer and Seller and their successors and assigns.
21. Expenses. Except as otherwise provided herein, Buyer and Seller shall
bear all of their own respective expenses, including, without limitation,
counsel and accountants' fees, in connection with the transactions contemplated
by this Agreement.
22. Notices. Any notice or communication to be given under the terms of
this Agreement ("Notice") shall be in writing and shall be personally delivered
or sent by facsimile, overnight delivery or registered or certified mail, return
receipt requested. Notice shall be effective (a) if personally delivered, when
delivered; (b) if by facsimile, on the day of transmission thereof on a proper
facsimile machine with confirmed answer back; (c) if by overnight delivery, on
the day after delivery thereof to a reputable overnight courier service; and (d)
if mailed, at midnight on the third business day after deposit in the mail,
postage prepaid. Notices shall be addressed as follows:
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To Buyer at: AB Capital, L.L.C.
With a copy to: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Fax No. (▇▇▇) ▇▇▇-▇▇▇▇
To Seller at: ▇▇▇▇▇ ▇▇▇, General Manager
Greater Dubuque Riverboat
Entertainment Company, L.C.
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Fax No. (▇▇▇) ▇▇▇-▇▇▇▇
With copy to: ▇▇▇▇▇▇▇ ▇▇▇▇▇, Esq.
Brown, Winick, Graves, Gross,
▇▇▇▇▇▇▇▇▇▇▇ and Schoenebaum, P.L.C.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Fax No. (▇▇▇) ▇▇▇-▇▇▇▇
or at such other address as either Buyer or Seller from time to time may
designate by Notice hereunder.
23. Captions. The captions appearing at the commencement of the Sections
hereof are descriptive only and/or for convenience in reference to this
Agreement and in no way whatsoever define, limit or describe the scope or intent
of this Agreement or in any way affect this Agreement.
24. Waivers and Amendments. The parties hereto may amend this Agreement in
any respect only by mutual written agreement. The waiver of either party hereto
of any breach of any term, covenant or condition of this Agreement shall not be
deemed a continuing waiver of such term, covenant or condition, or a waiver of
any subsequent breach of the same or any other term, covenant or condition of
this Agreement.
25. Further Assurances. Each of the parties hereto shall cooperate in the
effectuation of the transactions contemplated hereby and to execute any and all
additional documents or to take such additional actions as may be reasonably
necessary or appropriate for such purpose.
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26. Schedules and Exhibits. The Schedules and Exhibits described herein
form a part of this Agreement for contractual purposes. Schedules and Exhibits
may be separately bound and initialed by the parties hereto, and such Schedules
and Exhibits as referred to in this Agreement are incorporated in this
Agreement for all purposes. All Schedules and Exhibits referred to in this
Agreement are by reference specifically incorporated in this Agreement and are
made a part hereof as though set forth herein, whether or not attached hereto at
the time of execution of this Agreement.
27. Severability. If any term, provision, covenant or condition of this
Agreement, or any application thereof, is held by a court of competent
jurisdiction to be invalid, void or unenforceable, then the remaining
provisions, covenants and conditions of this Agreement, and all applications
thereof, not held invalid, void or unenforceable, shall continue in full force
and effect and shall in no way be affected, impaired or invalidated thereby.
28. Governing Law. This Agreement shall be construed in accordance with
the laws of the State of Iowa.
29. Gender and Number. Whenever used in this Agreement and as required by
context, the masculine gender includes the feminine and/or neuter, and the
singular number includes the plural.
30. Time is of the Essence. Time is of the essence of this Agreement and
in the performance and enforcement of each of the promises, covenants,
representations and warranties of Buyer and Seller contained herein. For the
purpose of computing any period of time prescribed herein or relating hereto,
the first day shall be excluded. If the period of time is six (6) days or more,
weekends and public holidays shall be included. An act required to be performed
on a day shall be performed at or before the close of business on such day. If
an act is required to be performed on a certain day, and such day is not a
regular business day, then the time of performance or measurement shall be
extended to and include the next regular business day.
31. Entire and Sole Agreement. Subject to the provisions of Section 9.4
hereof, this Agreement, including all Schedules and Exhibits hereto, and all
documents and instruments to be delivered on or before the Closing Date pursuant
to its terms, constitutes the entire agreement between the parties hereto and
supersedes all agreements, representations, warranties, statements, promises and
understandings, whether oral or written, with respect to the subject matter
hereof. The parties hereto further acknowledge and agree that, in entering into
this Agreement and in delivering the documents and instruments to be delivered
on or before the Closing Date, the parties hereto have not in any way relied,
and shall not in any way rely, on any oral agreement, representation, warranty,
statement, agreement in principle, promise or understanding not specifically set
forth in this Agreement, in the Schedules or Exhibits hereto or in such
documents or instruments.
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32. Publicity. Except as may be required in connection with the
submissions or approvals by the parties hereto to the IRGC or as otherwise
required by law, before the Closing no party hereto shall make or cause to be
made any press release or public announcement with respect to any of the
transactions contemplated by this Agreement or the execution of this Agreement
or otherwise communicate with any news media with respect thereto without the
prior written consent of the other party hereto. If any such announcement is so
required by law, then Buyer and Seller shall cooperate as to the timing and
contents of any such press release or public announcement.
33. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
34. Authority. Each entity signing this Agreement, and each agent,
officer, director, manager or employee signing this Agreement on behalf of such
an entity, represents and warrants that this Agreement is duly authorized by and
binding on such entity.
35. Facsimile Transmission. The facsimile transmission by one party hereto
of a signed copy of the signature page of this Agreement to the other party
hereto or such party's agent, followed by a facsimile transmission of an
acknowledgment of receipt thereof, shall constitute the delivery of this
Agreement. Each party hereto shall confirm such delivery by mailing or
personally delivering to the other party hereto or such party's agent an
executed original of this Agreement in its entirety.
36. IRGC Approval. This Agreement is subject to the approval of the IRGC.
Approval of this Agreement by the IRGC shall not in any manner constitute
approval of the Buyer's application to operate an excursion gaming riverboat
from Dubuque, Iowa. The terms of this Agreement, including, but not limited to,
Sections 3.1, 3.2, 7, 8, 9 (including 9.4), 16 and 17 shall be effective and
enforceable on the approval of this Agreement by the IRGC.
37. Arbitration. Any and all questions, disputes or controversies arising
in connection with this Agreement (with the exception of any remedy seeking
equitable relief which shall not be subject to this Section 37), its
interpretation, application, performance, nonperformance or any instructions
executed and delivered hereunder (collectively "Disputes") shall, at the demand
of any party hereto, be determined by arbitration. Buyer and Seller shall
appoint an arbitrator ("Arbitrator") who is licensed by the American Arbitration
Association ("AAA") to arbitrate such Disputes. In the event Buyer and Seller
cannot agree on the selection of the Arbitrator, each party shall select one
Arbitrator who shall together select the Arbitrator who shall arbitrate the
matter. Buyer and Seller shall, within twenty (20) days thereafter, present
their positions with respect to the Disputes to the Arbitrator together with
such other materials as the Arbitrator deems appropriate. The Arbitrator shall
after the submission of the evidentiary materials, submit a written decision on
each Dispute to the Seller and Buyer. Any determination by the Arbitrator with
respect to any Disputes shall be final and binding on each party to this
Agreement. The forum for any arbitration will be Chicago,
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Illinois. The arbitration shall be conducted in accordance with the Commercial
Arbitration Rules of the AAA as in effect for commercial arbitrations conducted
by the AAA. Seller and Buyer agree that the costs of the Arbitrator shall be
borne as determined by the Arbitrator. Judgment upon the award of the Arbitrator
may be entered in any Court having jurisdiction thereof.
IN WITNESS WHEREOF, Buyer and Seller have duly executed and delivered this
Agreement as of the date first written above.
BUYER: SELLER:
AB CAPITAL, L.L.C. GREATER DUBUQUE RIVERBOAT
ENTERTAINMENT COMPANY, L.C., an Iowa
limited-liability company
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
-------------------------------- ------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Chairman
Each of the undersigned executes this Agreement for the purpose of guaranteeing
and agreeing to the obligations contained in Section 3.1 of this Agreement.
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
----------------------------------- ----------------------------------------
▇▇▇▇ ▇▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇ /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
----------------------------------- ----------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
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Illinois. The arbitration shall be conducted in accordance with the Commercial
Arbitration Rules of the AAA as in effect for commercial arbitrations conducted
by the AAA. Seller and Buyer agree that the costs of the Arbitrator shall be
borne as determined by the Arbitrator. Judgment upon the award of the Arbitrator
may be entered in any Court having jurisdiction thereof.
IN WITNESS WHEREOF, Buyer and Seller have duly executed and delivered this
Agreement as of the date first written above.
BUYER: SELLER:
AB CAPITAL, L.L.C. GREATER DUBUQUE RIVERBOAT
ENTERTAINMENT COMPANY, L.C., an Iowa
limited-liability company
By: By:
-------------------------------- ------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Chairman
Each of the undersigned executes this Agreement for the purpose of guaranteeing
and agreeing to the obligations contained in Section 3.1 of this Agreement.
/s/ ▇▇▇▇ ▇▇▇▇▇▇
----------------------------------- ----------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
----------------------------------- ----------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
47