Exhibit 10.1
ASSET PURCHASE
AGREEMENT
THIS AGREEMENT
(the “Agreement”) is
made and entered into as of December 18, 2006 by and among
Southwest Eagle, LLC, a Minnesota limited liability company
(“Southwest”) and wholly-owned subsidiary of Southwest
Casino Corporation, a Minnesota corporation, Richard F. Fabiano,
Frank R. Spadafore, Dorian N. Lange and Pinnacle Casinos and
Resorts, LLC , a Michigan limited liability company (Messrs.
Fabiano, Spadafore, and Lange and Pinnacle Casinos and Resorts, LLC
are referred to collectively in this Agreement as
“Pinnacle”) and Colorado Casino Resorts, Inc. ,
a Texas corporation, Double Eagle Resorts, Inc. , a Colorado
corporation, and Gold Creek Ventures, LLC , a Colorado
limited liability company (Colorado Casino Resorts, Inc., Double
Eagle Resorts, Inc. and Gold Creek Ventures, LLC are referred to
collectively in this Agreement as “CCRI”). Southwest,
Pinnacle and CCRI are sometimes referred to in this Agreement as a
party or the parties.
Background
A.
CCRI, through its ownership of Double Eagle Resorts, Inc., a
Colorado corporation, and Gold Creek Ventures, LLC, a Colorado
limited liability company, owns certain assets used in connection
with the operation of the Double Eagle Hotel and Casino and the
Gold Creek Casino in Cripple Creek, Colorado (these casinos are
referred to collectively in this Agreement as the “Double
Eagle”).
B.
The current shareholders of CCRI have entered into a Stock Purchase
Agreement with Pinnacle dated October 7, 2005 under which Pinnacle
will acquire all of the outstanding shares of CCRI.
C.
On August 10, 2006, Southwest entered into a non-binding Term Sheet
(the “Term Sheet”) with Pinnacle that describes the
basic terms and conditions under which Southwest would buy all of
the assets and assume certain related liabilities of CCRI used in
connection with operation of the Double Eagle other than the real
property. The Term Sheet contemplated entry by the parties into
this binding purchase agreement, which states the terms of the
purchase as revised after execution of the Term Sheet.
D.
Pinnacle desires to sell to Southwest, and Southwest desires to
purchase from Pinnacle, a right under the terms of a Stock Purchase
Agreement between Pinnacle and current shareholders of CCRI dated
October 7, 2005 (the “Pinnacle Purchase Agreement”) to
acquire the operating assets and certain related liabilities of
CCRI,in accordance with the terms and conditions stated in this
Agreement.
E.
Pinnacle desires to cause CCRI, simultaneous with the CCRI
Acquisition to sell to Southwest, and Southwest desires to purchase
from CCRI, all of the assets and certain related liabilities owned
and used by CCRI in connection with or relating to operation of the
Double Eagle in accordance with the terms and conditions in this
Agreement.
F.
To ease the regulatory burden associated with the sale of the
gaming operations of CCRI, which are licensed by the Colorado
Division of Gaming, Southwest desires to purchase the gaming
operations of CCRI from CCRI simultaneous with the closing of the
sale of CCRI stock to Pinnacle under the Pinnacle Purchase
Agreement (the “CCRI Acquisition”).
Agreement
NOW, THEREFORE, in consideration of
the Recitals, which are an integral part of this Agreement, and the
mutual covenants and agreements in this Agreement and other good
and valuable consideration, the receipt and sufficiency of which
Southwest, Pinnacle and CCRI acknowledge, the parties, intending to
be legally bound, agree as follows:
Section
1.
Purchase and Sale of Right to Acquire Operating
Assets . Subject to
the terms and conditions stated in this Agreement, Pinnacle agrees
to sell to Southwest, and Southwest agrees to buy from Pinnacle, a
right (the “Operations Purchase Right”) to acquire the
operating assets and certain related liabilities of the Double
Eagle that Pinnacle will acquire upon closing the CCRI
Acquisition.
Section
2.
Purchase Price for Right to Acquire Operating
Assets . As full
payment for the sale and transfer of the Operations Purchase Right,
Southwest will pay to Pinnacle the aggregate amount of $8,625,000
(the “Operations Purchase Right Purchase Price”) as
follows:
(a)
$7,625,000.00 by issuing to Pinnacle promissory notes in the form
attached to this Agreement as Exhibit 2 (the “Notes”);
and
(b)
$1,000,000.00 by means of electronic transfer of funds at
Closing.
The Operations Purchase Right
Purchase Price will be reduced at the Closing by the amount that
cash on hand is less than $3,300,000.00, if any.
Section
3.
Purchase and Sale of Assets and Assumption of
Liabilities . Subject
to the terms and conditions stated in this Agreement, Pinnacle
agrees, simultaneous with CCRI Acquisition, to cause CCRI to enter
into this Agreement and to sell to Southwest, and Southwest agrees
to buy from CCRI, all of the assets of CCRI used in and relating to
the operation of the Double Eagle, as defined in Section 4 below
(the “Assets”), and certain liabilities of CCRI
directly related to the operation of the Double Eagle as defined in
Section 6 below (the “Assumed Liabilities”).
Section
4.
Acquired Assets .
For purposes of this Agreement, “Assets” means all of
the right, title, and interest that CCRI possesses and has the
right to transfer in and to all assets, other than real property
and improvements, used in connection with the operation of the
Double Eagle including but not limited to personal property, liquor
licenses, and all other assets of every kind and description,
tangible and intangible, that are in any way related to or
affiliated with the operation of the Double Eagle. The Assets are
further identified by highlighting on the consolidated balance
sheet of CCRI to be attached to this Agreement at Closing as
Exhibit 4 and include, without limitation:
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(a)
All inventory of the Double Eagle and equipment, supplies,
materials; all hotel-related assets, including furniture and
fixtures; all gaming-related assets, including gaming equipment,
furniture, fixtures, surveillance equipment, and all restaurant and
bar furniture and fixtures and furnishings; and any other items of
personal property used in the operation of the Double Eagle as of
the date of this Agreement, a listing of which will be mutually
agreed upon between Southwest and CCRI before expiration of the Due
Diligence Period (as defined in
Section of this
Agreement), subject to updating through the Closing
Date;
(b)
Assignment of all real estate and other leases pertaining to the
operation of the Double Eagle, and all other material contracts,
licenses (where applicable) and other written agreements used in or
related to the operation of the Double Eagle as of the date of this
Agreement (collectively, the “Contracts”), subject to
the receipt of any third-party consents, a listing of which
Contracts will be mutually agreed upon between Southwest and CCRI
before expiration of the Due Diligence Period, subject to updating
through the Closing Date;
(c)
All cash in gaming machines, cash registers or elsewhere in, or
required to be in, the Double Eagle, and cash in banks or financial
institutions held for the account or benefit of the operation of
the Double Eagle, which must not be less than
$3,300,000.00;
(d)
Except as otherwise provided in this Agreement, all Accounts
Receivable and Accounts Payable of CCRI relating to the operation
of the Double Eagle;
(e)
All books and records of CCRI relating to operation of the Double
Eagle;
(f)
All customer lists and profiles, customer tracking lists and data,
and any compilations thereof, and all mailing lists;
(g)
All trademarks, trade names and goodwill of the Double Eagle as of
the Closing Date;
(h)
All of the Double Eagle’s sales records, service records, and
parts/equipment manuals;
(i)
All of the Double Eagle’s advertising, promotional and
training materials, signage, and sales displays used to market,
advertise and provide upkeep and betterment of the Double
Eagle;
(j)
All other intellectual property rights and interests in the Double
Eagle, including but not limited to any copyright interests, trade
dress, trademarks, trade names, service marks, patents, and patent
rights, and any and all licenses of the same;
(k)
All of the Double Eagle’s right, title and interest in any
website or Internet domain name used in connection with operation
of the Double Eagle;
(l)
Any and all permits, licenses and certificates that are
transferable and that are used in or useful to the operation of the
Double Eagle;
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(m)
All telephone numbers and directory listings relating to the Double
Eagle;
(n)
All computer software, computer software licenses and source
code(s) used in or relating to the Double Eagle;
(o)
Subject to the receipt of any required third party consents, the
benefit of and the right to enforce express or implied warranties,
if any, that CCRI is entitled to enforce with respect to any of the
Assets;
(p)
All insurance policies relating to the Double Eagle;
(q)
All customer deposits on hand on the Closing Date relating to the
Double Eagle;
(r)
All of the Double Eagle’s accounts with Internet advertisers
and Internet database and search engines;
(s)
All memberships to associations that allow such
transfer;
(t)
Accounts receivable, adjusted as stated in Section 12;
and
(u)
Accounts payable, adjusted as stated in Section 12.
Section
5.
Excluded Assets .
Southwest’s purchase of the Assets shall not include (a) four
vehicles bearing the following Vehicle Identification Numbers:
,
,
,
,
(b) CCRI computers and cell phones then being used by Michael Smith
and Gilbert Sisneros, and (c) office furniture, books, art and
related personal effects owned by Michael Smith and Gilbert
Sisneros , each item of which is identified on Exhibit 5 to
this Agreement. In connection with the exclusion of these assets,
CCRI will assume any outstanding payment obligation related to
these assets, including but not limited to any purchase financing,
insurance and licensing costs.
Section
6.
Assumed Liabilities . For purposes of this Agreement, “Assumed
Liabilities” means the following liabilities and obligations
of CCRI that Southwest will assume at the Closing:
(a)
all liabilities connected with the operation of the Double Eagle
under any leases, agreements and other Contracts included in the
Assets as stated in Section 4(b) of this Agreement; or
(b)
all liabilities otherwise identified by highlighting on the
consolidated balance sheet of CCRI to be attached to this Agreement
at Closing as Exhibit 4.
The parties specifically understand
and agree that except as provided in this Section 6 or otherwise in
this Agreement, Southwest will not assume any liabilities or
obligations of CCRI or the Double Eagle other than the Assumed
Liabilities, and Pinnacle and CCRI must indemnify
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and hold Southwest harmless from and
against any liabilities or obligations other than the Assumed
Liabilities.
Section
7.
Asset Purchase Price . As full payment for the sale and transfer of
the Assets from CCRI to Southwest, Southwest will pay to CCRI the
aggregate amount of $4,000,000.00 (the “Asset Purchase
Price”). The Asset Purchase Price will be adjusted at the
Closing for the prorations referred to in Section 12 of this
Agreement.
Section
8.
Asset Purchase Price Payment . Southwest will pay the Asset Purchase Price by
means of electronic funds transfer as follows:
(a)
On the later of (i) December 29, 2006 or (ii) the date this
Agreement, the Term Sheet, and the lease between Southwest and CCRI
governing the real property used in connection with operation of
the Double Eagle (collectively, the “Transaction
Documents”) are each signed by all parties to those
agreements; Southwest will deposit $250,000 in an escrow account
maintained at the law firm of Mulliken Weiner Karsh Berg &
Jolivet (the “Deposit”). If the transactions
contemplated in this Agreement fail to close on or before June 30,
2007, the Deposit will be returned to Southwest unless Pinnacle is
able to perform its obligations under this Agreement and the
transactions fail to close due to (a) the inability or refusal of
Southwest to perform its obligations under this Agreement or (b)
the failure of Southwest to complete the financing necessary to
close the transactions; in which case the Deposit will be paid to
Pinnacle; and
(b)
The remaining $3,750,000 at the Closing.
Section 9.
Prepaid Rent . In addition to the Asset Purchase
Price, Southwest will pay to CCRI, at Closing, prepaid rent in the
amount of $11,000,000, by means of electronic transfer of
funds.
Section
10.
Allocation of Asset Purchase Price . Southwest and Pinnacle agree, and Pinnacle
agrees to cause CCRI to allocate the Asset Purchase Price for tax
purposes as agreed upon by the parties in consultation with their
tax advisors before the Closing Date. The parties agree to amend
this Agreement to designate an allocation of the Asset Purchase
Price, which will be attached to this Agreement as Exhibit
10 , before the Closing Date. The parties will be bound by that
allocation for federal and state tax purposes, will file all
applicable tax returns and other required tax related schedules and
documents, and must not adopt or otherwise assert tax positions
inconsistent with the agreed upon allocation, provided however,
that nothing in this Agreement requires any party to violate any
law, statute or regulation.
Section
11.
Closing; Possession . The closing of the purchase of the Operations
Purchase Right and the Assets and Assumed Liabilities (the
“Closing”) will take place simultaneous with the
closing of the CCRI Acquisition and at a time and location (which
may include an exchange of documents by electronic means from
several locations) to be determined by the parties on or before
February 28, 2007 or at any later date agreed to by Southwest and
Pinnacle or, if Southwest, CCRI and Pinnacle have not received all
Regulatory Approvals (as defined below), the Closing will take
place within 10 business days after the date on which all
Regulatory Approvals (as defined below) have been received (the
“Closing Date”). For purposes
5
of this Agreement, the term
“Regulatory Approvals” means all federal, state and
local approvals, licenses, and authorizations required by gaming,
liquor licensing and other authorities for Southwest to acquire and
operate the Assets. Southwest’s obligation to close on the
purchase of the Assets is specifically conditioned on obtaining all
Regulatory Approvals, and on the additional conditions precedent
stated in Section 17 of this Agreement. All actions at the Closing
will be considered to be taken simultaneously, and no document,
agreement, or other legal instrument will be deemed to have been
delivered until all items that are to be delivered at the Closing
have been delivered. At the Closing, in addition to the deliveries
required to be made by Southwest, Pinnacle and CCRI in this
Agreement, the parties will take any other actions and execute and
deliver any other instruments, documents and certificates that are
contemplated in this Agreement or as may reasonably be requested by
any party in connection with the consummation of the transactions
contemplated in this Agreement. Possession of the Assets shall be
delivered to Southwest on the Closing Date, or on such other date
as Southwest and CCRI agree to in writing.
Section
12.
Southwest’s Due Diligence Examination;
Inspection .
Commencing as of the date that each and all of this Agreement, the
Term Sheet between Southwest and Pinnacle, and the lease between
Southwest and Pinnacle that Pinnacle will cause CCRI to enter into
simultaneous with the closing of the CCRI Acquisition governing the
real property used in connection with operation of the Double Eagle
(collectively, the “Transaction Documents”) are signed
by the parties, and then continuing for a period of up to 30 days
(the “Due Diligence Period”), Southwest may conduct a
due diligence examination of the Assets. During the Due Diligence
Period, Pinnacle will, and will cause CCRI to, provide Southwest
and its agents with full and complete access at any reasonable time
to public and private records relating to the Operations Purchase
Right, the Assets, the Assumed Liabilities, and the operations of
the Double Eagle, and Pinnacle will, and will cause CCRI to, use
their best efforts to make all requested information and records
available to Southwest and its agents. In connection with
Southwest’s due diligence investigation, Southwest previously
provided Pinnacle and CCRI with a written request containing a
general outline of the scope of the due diligence examination
Southwest wishes to conduct. Pinnacle agrees to, and to cause CCRI
to make all disclosures and provide all materials as requested or
contemplated in Southwest’s due diligence request. Pinnacle
has obtained authorization from CCRI to permit Southwest and its
agents to enter upon the Double Eagle premises in order to inspect
and appraise the business, land and improvements, provided,
however, that Southwest and its agents must at all times comply
with applicable laws; indemnify, protect and hold CCRI harmless
from any and against any liability, damage, cost or expense
incurred by CCRI in connection with any inspection by Southwest;
cause no harm or damage to the business, land and improvements; and
must not allow any liens to be filed against the Double Eagle
premises as a result of the activities of Southwest and its agents.
If Southwest, in its sole discretion, concludes that its due
diligence examination or inspection has revealed unsatisfactory
conditions, Southwest may (i) notify Pinnacle in writing and this
Agreement will terminate immediately and all parties will be
released from all further obligations under this Agreement, or (ii)
provide Pinnacle, at least 7 days before Closing, with a written
description of any unsatisfactory condition(s) that Southwest
requires Pinnacle to correct and resolve or to cause CCRI to
correct and resolve. If this Agreement is terminated, or if the
transaction does not close, Southwest must return to Pinnacle and
CCRI all materials provided to Southwest by Pinnacle or CCRI in
connection with Southwest’s due diligence
examination.
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Section
13.
Sales and Transfer Taxes and Other Prorations
. Pinnacle shall pay or cause CCRI
to pay any sales taxes payable as a result of the transactions
contemplated in this Agreement. In addition, the following items
shall be prorated to the Closing Date (the “Proration
Date”):
(a)
Prepaid or unpaid premiums for those insurance policies assigned to
and accepted by Buyer;
(b)
General real estate taxes for 2006 based upon the then latest
available levy and assessment;
(c)
Unpaid or prepaid municipal impositions, if any, such as license
and permit fees, wastewater fees, and device fees;
(d)
Any other governmental or special district taxes, levies and
charges;
(e)
State and local personal property taxes on the Assets, including
without limitation gaming device fees;
(f)
All utility charges, including without limitation water, gas,
electric, sewer and other utility charges, except that if there are
meters on the land underlying the Double Eagle, then the meters
shall be read immediately before the Closing and CCRI shall pay
amounts due thereon, and there shall be no apportionment (utility
deposits shall be refunded to CCRI without proration, or CCRI shall
be given credit for such deposits at Closing);
(g)
Accounts Receivable of the Double Eagle reflected on the books and
records of CCRI;
(h)
Accounts Payable of the Double Eagle reflected on the books and
records of CCRI; and
(i)
Such other items as are customarily adjusted in similar
transactions.
Section
14.
Pinnacle’s Representations, Warranties and Covenants
regarding Pinnacle . Pinnacle represents, warrants and covenants to
Southwest, as of the date of this Agreement and as of the Closing
Date, as follows:
(a)
Organization, Authority and Validity . Pinnacle is the sole
owner of the Operations Purchase Right and has the power and
authority to enter into this Agreement and the related documents
and to sell the Operations Purchase Right on the terms and subject
to the conditions stated in this Agreement. This Agreement and the
related documents constitute valid and binding obligations of
Pinnacle enforceable in accordance with their terms.
(b)
No Conflicting Agreements . Pinnacle is not a party to any
contract, agreement or other obligation that is in or will become
in default or subject to any acceleration or penalty by reason of
the execution and consummation of this Agreement.
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(c)
Litigation; Administrative Proceedings; Licensure . Except
as stated on Schedule 13(c) to this Agreement: (i) there is
no present or threatened claim of any kind or nature against or
relating to the Operations Purchase Right; (ii) there is no present
or threatened dispute that adversely affects, or may adversely
affect, the Operations Purchase Right; and (iii) neither Pinnacle
nor the Operations Purchase Right are subject to any pending or
threatened litigation, proceeding or administrative or regulatory
investigation.
(d)
Third Party Consents . Except as stated on Schedule 13(d) to
this Agreement, no consents or approvals are required from any
third party for Pinnacle to carry out the transactions contemplated
in this Agreement.
(e)
Brokers and Finders . Except for Pinnacle’s agreement
to pay half of the brokerage fee commission owed to Grainger
Realty, LLC under the Pinnacle Purchase Agreement, Pinnacle has not
authorized any person to act as financial advisor, broker, finder
or other intermediary that might be entitled to any fee,
commission, expense reimbursement or other payment of any kind from
Southwest or CCRI as a result of the transaction contemplated in
this Agreement. Notwithstanding the foregoing, Pinnacle
understands, represents and warrants that CCRI and Pinnacle are
solely responsible for the payment of, and must pay, the Grainger
Realty commission and Pinnacle is solely responsible for the
payment of, and must pay, any other such commission.
Section
15.
Pinnacle’s and CCRI’s Representations, Warranties
and
