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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
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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 Covenants regarding CCRI . Pinnacle represents,
warrants and covenants to Southwest as of the date of thi
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