<PAGE> 1
U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000
Commission File Number: 0-8698
CONCORDE GAMING CORPORATION
---------------------------
(Exact name of small business issuer as specified in its charter)
COLORADO 84-0716683
------------------------------ -----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3290 LIEN STREET
RAPID CITY, SOUTH DAKOTA 57709
---------------------------------------
(Address of principal executive offices)
(605) 341-7738
---------------------------
(Issuer's telephone number)
Not Applicable
--------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [X] No [ ]
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: As of, May 18, 2000 there
were 24,070,402 shares of the issuer's $.01 par value common stock outstanding.
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
<PAGE> 2
CONCORDE GAMING CORPORATION
<TABLE>
<CAPTION>
PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements Page No.
--------
<S> <C> <C>
Consolidated Balance Sheet at March 31, 2000 (unaudited) 2
Consolidated Statements of Operations for Three Months Ended March 31, 2000 and 1999
and six months ended March 31, 2000 and 1999 (unaudited) 4
Consolidated Statements of Stockholders' Equity for
Six Months Ended March 31, 2000 and 1999 (unaudited) 5
Consolidated Statements of Cash Flows for 6
Six Months Ended March 31, 2000 and 1999 (unaudited)
Notes to Consolidated Financial Statements (unaudited) 7
Item 2. Management's Discussion and Analysis of Financial 10
Condition and Results of Operations
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 16
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
CONCORDE GAMING CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
MARCH 31, 2000 (Unaudited)
<S> <C>
ASSETS
Current assets
Cash and cash equivalents $ 1,412,881
Trade receivables, less allowance for uncollectible
accounts 430,999
Inventory 67,225
Prepaid expenses
Dock lease 243,619
Other 368,790
Income Tax Refund Claim 139,000
------------
TOTAL CURRENT ASSETS 2,662,514
------------
Property and equipment
Land 1,097,080
Vessel 9,508,131
Gaming equipment, fixtures and furniture 3,809,744
Vehicles 45,319
Leasehold improvements 251,787
------------
14,712,061
------------
Less accumulated depreciation and amortization (1,490,840)
------------
13,221,221
------------
Intangibles and other
Dock rights, net 266,260
Other, principally goodwill, net 1,107,924
Deferred financing costs, net 252,372
------------
1,626,556
$ 17,510,291
============
</TABLE>
See Notes to Consolidated Financial Statements.
2
<PAGE> 4
<TABLE>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
<S> <C>
Notes Payable - Bank $ 200,000
Current maturities of long-term debt 1,040,779
Note payable to related party 7,165,906
Accounts payable 218,500
Accrued expenses
Payroll and payroll taxes 192,891
Accrued interest 88,298
Other 777,341
Income taxes payable 79,811
------------
TOTAL CURRENT LIABILITIES 9,763,526
------------
Long-term debt, less current maturities 7,366,749
------------
Stockholders' equity
Common stock, par value $.01 per share, authorized
500,000,000 shares; issued and outstanding 24,070,402
at March 31, 2000 240,704
Preferred stock, par value $.01 per share, 10,000 shares authorized
no shares issued and outstanding at March 31, 2000 --
Additional paid-in capital 3,899,576
Accumulated deficit (3,760,264)
------------
380,016
------------
$ 17,510,291
============
</TABLE>
3
<PAGE> 5
<TABLE>
<CAPTION>
CONCORDE GAMING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
SIX MONTHS ENDED MARCH 31, 2000 AND 1999 (UNAUDITED)
Three Months Ended March 31 Six Months Ended March 31
2000 1999 2000 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues
Casino 4,220,083 3,991,449 $ 8,090,190 $ 6,753,343
Food and beverage 621,542 431,667 1,118,473 743,195
Other 586,172 425,727 1,110,245 760,375
------------ ------------ ------------ ------------
GROSS REVENUES 5,427,797 4,848,843 10,318,908 8,256,913
Less: promotional allowance (852,540) (610,737) (1,619,649) (1,024,303)
------------ ------------ ------------ ------------
NET REVENUES 4,575,257 4,238,106 8,699,259 7,232,610
------------ ------------ ------------ ------------
Costs and expenses:
Casino 2,090,571 1,891,442 4,504,443 3,123,150
Food and beverage 407,994 337,199 724,031 712,971
Management fees, to minority partner, related party 120,000 45,000 275,367 135,000
Selling, general and administrative 2,040,009 1,759,886 3,389,212 3,209,525
Depreciation and amortization 255,087 253,749 505,642 508,033
Pre-opening and start-up costs -- -- -- 540,952
------------ ------------ ------------ ------------
4,913,661 4,287,276 9,398,695 8,229,631
------------ ------------ ------------ ------------
LOSS FROM OPERATIONS (338,404) (49,170) (699,436) (997,021)
------------ ------------ ------------ ------------
Other income (expense):
Interest income 4,708 2,987 19,274 16,967
Other income (10,147) 45,310 (5,823) 56,822
Interest expense and financing costs: -- --
Related party (244,245) (272,101) (486,414) (522,790)
Other (236,508) (230,323) (476,109) (471,817)
------------ ------------ ------------ ------------
(486,192) (454,127) (949,072) (920,818)
------------ ------------ ------------ ------------
LOSS BEFORE INCOME TAXES (824,596) (503,297) (1,648,508) (1,917,839)
Federal and state income tax benefit (31,200) (111,700) (31,200) (220,000)
------------ ------------ ------------ ------------
NET LOSS
(793,396) (391,597) $ (1,617,308) $ (1,697,839)
============ ============ ============ ============
Basic and diluted loss per share: (0.03) (0.02) $ (0.07) $ (0.07)
============ ============ ============ ============
</TABLE>
See Notes to Consolidated Financial Statements.
4
<PAGE> 6
<TABLE>
<CAPTION>
CONCORDE GAMING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED)
SIX MONTHS ENDED MARCH 31, 2000 AND 1999
- ---------------------------------------------------------------------------------------------------------------------------
Retained
earnings
Number of Additional (accumulated
shares Common stock paid-in capital deficit) Total
-------------- --------------- ----------------- ---------------- -----------
<S> <C> <C> <C> <C> <C>
Balance September 30, 1998 23,673,126 236,731 3,855,246 (1,173,404) 2,918,573
1/99 - Issuance of 140,260 shares of
common stock relating to stock
options exercised 140,260 1,403 19,636 -- 21,039
3/99 - Issuance of 187,016 shares of
common stock relating to stock
bonuses 187,016 1,870 24,312 -- 26,182
3/99 - Issuance of 10,000 shares of
common stock relating to stock
options exercised 10,000 100 1,400 -- 1,500
Net Loss -- -- -- (1,697,839) (1,697,839)
Balance March 31, 1999 24,010,402 $ 240,104 $ 3,900,594 $ (2,871,243) $1,269,455
---------- ---------- ------------ ------------- ----------
5/99 - Correcting Stock Bonus Entry
relating to stock bonuses in 3/99 (13,418) (13,418)
Net Income -- -- -- 728,287 728,287
---------- ---------- ------------ ------------- ----------
Balance September 30, 1999 24,010,402 $ 240,104 $ 3,887,176 $ (2,142,956) $ 1,984,324
---------- ---------- ------------ ------------- ----------
2/00 - Issuance of 10,000 shares of
common stock relating to stock
options exercised 10,000 100 1,400 -- 1,500
3/00 - Issuance of 10,000 shares of
common stock relating to stock
options exercised 10,000 100 1,400 -- 1,500
3/00 - Issuance of 40,000 shares of
common stock relating to stock
options exercised 40,000 400 9,600 -- 10,000
Net Loss -- -- -- (1,617,308) (1,617,308)
---------- ---------- ------------ ------------- ----------
Balance March 31, 2000 24,070,402 $ 240,704 $ 3,899,576 $ (3,760,264) $ 380,016
========== ========== ============ ============= ===========
</TABLE>
See Notes to Consolidated Financial Statements.
5
<PAGE> 7
<TABLE>
<CAPTION>
CONCORDE GAMING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED MARCH 31, 2000 AND 1999 (Unaudited)
2000 1999
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net (loss) $(1,617,308) $(1,697,839)
Adjustments to reconcile net (loss) to net cash flows (used in) operating
activities:
Note payable to related party incurred for payment of interest 308,152 301,042
expense
Depreciation and amortization 505,642 508,033
Other 9,662 163,190
Change in assets and liabilities:
Decrease (increase) in trade receivables 219,137 (237,142)
Decrease (increase) in prepaid expenses and inventory 204,596 (701,504)
Increase (decrease) in accounts payable and accrued expenses 42,197 (2,004,263)
Increase (decrease) in income taxes payable 268,639 (57,872)
----------- -----------
NET CASH (USED IN) OPERATING ACTIVITIES (59,283) (3,726,355)
----------- -----------
Cash flows from investing activities:
Purchase of property and equipment (1,497,856) (400,947)
Purchase of intangibles (237,644) --
Decrease (increase) in other assets 43,719 (372,996)
----------- -----------
NET CASH (USED IN) INVESTING ACTIVITIES 1,691,781) (773,943)
----------- -----------
Cash flows from financing activities:
Net change in short-term borrowings 200,000 (101,000)
Proceeds from borrowings from related party 1,850,000 1,775,000
Proceeds from long-term borrowings -- 9,991,097
Principal payments on long-term borrowings, other (446,192) (6,379,554)
Principal payments on long-term borrowings, related party (519,703) --
Proceeds from sale of stock 13,000 --
----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 1,097,105 5,285,543
----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (653,959) 785,245
Cash and cash equivalents:
Beginning 2,066,840 714,764
----------- -----------
Ending $ 1,412,881 $ 1,500,009
=========== ===========
Supplemental disclosures of cash flow information
Cash payments for:
Interest $ 783,373 $ 928,910
Income taxes -- --
Supplemental Disclosures of Non-Cash Investing Activities
Loan receivable exchanged for accounts payable $ 95,000 --
</TABLE>
See Notes to Consolidated Financial Statements.
6
<PAGE> 8
CONCORDE GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2000
(unaudited)
(1) Summary of Significant Accounting Policies:
Interim Financial Statements
The accompanying unaudited consolidated financial statements of
Concorde Gaming Corporation and its majority-owned subsidiaries (the
"Company") have been prepared in accordance with generally accepted
accounting principles for interim financial information and the rules
and regulations of the U.S. Securities and Exchange Commission.
Accordingly, they do not include all of the information and notes
required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments
(consisting only of normal recurring accruals) considered necessary
for a fair presentation have been included. Operating results for the
six month period ended March 31, 2000 are not necessarily indicative
of the results that may be expected for the year ending September 30,
2000.
The accompanying consolidated financial statements, and related notes
thereto, should be read in conjunction with the audited consolidated
financial statements of the Company, and notes thereto, for the year
ended September 30, 1999 included in the Company's 1999 Annual Report
on Form 10-KSB.
Earnings Per Share
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
March 31, 2000 March 31, 1999
--------------------------------- ---------------------------------
Per Per
Share share
Loss Shares Amount Loss Shares Amount
--------- ---------- ------- ------- ---------- ------
<S> <C> <C> <C> <C> <C> <C>
Basic EPS
Net loss $(793,396) 24,029,853 $(0.03) $(391,597) 23,932,308 $(0.02)
========= ====== ========= ======
Effect of dilutive securities:
Options
Diluted EPS
--------- ---------- ------- --------- ---------- ------
Net loss $(793,396) 24,029,853 $(0.03) $(391,597) 23,932,308 $(0.02)
========= ========== ======= ========= ========== ======
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended Six Months Ended
March 31, 2000 March 31, 1999
---------------------------------- ----------------------------------
Per Per
Share Share
Loss Shares Amount Loss Shares Amount
------------- ------------ ------- ------------- ------------ -------
<S> <C> <C> <C> <C> <C> <C>
Basic EPS
Net loss $(1,617,308) 24,020,183 $(0.07) $(1,697,839) 23,801,293 $(0.07)
=========== ====== =========== ======
Effect of dilutive securities:
Options
Diluted EPS
----------- ---------- ------ ------------ ---------- ------
Net loss $(1,617,308) 24,020,183 $(0.07) $(1,697,839) 23,801,293 $(0.07)
=========== ========== ====== ============ ========== ======
</TABLE>
7
<PAGE> 9
(2) Obligations Related to Casino Princesa
In October 1998, Princesa Partners entered into a Loan Agreement and
Security Agreement (the "Loan Agreement") with a group of lenders,
which provided $8,400,000 in financing (the "Vessel Loan") for the
Princesa, related equipment and working capital. The Vessel Loan is
secured by a ship mortgage and all related furniture, furnishings,
machinery and equipment (including gaming equipment) owned by the
Company. In addition, the Company, and Mr. Lien, guarantee the Vessel
Loan. The Vessel Loan bears interest at 10.375% with interest only
payments through January 1999. Monthly payments of $130,258, including
interest, commenced February 1999 for sixty consecutive months, with
the remaining balance due January 2004. The Vessel Loan also requires
mandatory prepayment of principal in an amount equal to 12% of the
amount of Excess Revenue (as defined below) for each fiscal year,
commencing January 2000. Excess Revenue as defined in the Vessel Loan
equals the excess of (i) the combined earnings of Casino Princesa and
Princesa Partners before taxes, depreciation and amortization minus
the principal and interest paid on the Vessel Loan during the fiscal
year, over (ii) $4,000,000. The Loan Agreement contains typical
covenants with respect to Princesa Partners and Casino Princesa,
including net worth restrictions, debt service requirements and
limitations on the amount of debt that can be incurred.
(3) Segment Information
The Company's reportable segments are strategic business units that
offer similar products and services at separate geographical
locations. They are managed separately because each business requires
different technology and marketing strategies.
There are two reportable segments: the Casino Princesa and Golden
Gates Casino. The Casino Princesa is an offshore gaming vessel which
sails out of Miami, Florida. The Golden Gates Casino is located in
Black Hawk, Colorado.
The accounting policies applied to determine the segment information
are the same as those described in the summary of significant
accounting policies. The interest expense of each segment is
specifically identifiable to debt directly incurred to acquire the
segment's assets. No intercompany allocations or intersegment sales
and transfers have been made.
Management evaluates the performance of each segment based on profit
or loss from operations before income taxes, exclusive of nonrecurring
gains and losses.
Financial information (rounded to nearest thousand) with respect to
the reportable segments is as follows:
(4) Contingencies
On April 15, 1999, the Association for Disabled Americans, Inc., The
Coral Springs Advocacy Committee for the Handicapped, Inc., Daniel
Ruiz, Jorge Luis Rodriquez, Ernst Rosenkrantz and Robert Cohen filed a
lawsuit against the Company and Goldcoast in the United States District
Court for the Southern District of Florida alleging violations of the
Americans with Disabilities Act (the "ADA") with respect to the
Princesa and the facilities at which the Princesa docks. The lawsuit
seeks injunctive relief including an order requiring modifications to
the Princesa and the docking facilities to comply with the ADA, and the
closure of the Princesa and the docking facilities until such
modifications are complete. Although the Company intends to defend the
lawsuit vigorously, the impact, if any, of the lawsuit on the Company
cannot at this time be determined. The parties are currently in
settlement negotiations and the Company believes that the matter will
be ready for trial in October 2000 if not settled.
8
<PAGE> 10
<TABLE>
<CAPTION>
For Three Months Ended March 31
Casino Princesa Golden Gates
----------------------- ------------------------
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Revenues
Casino $ 3,398 $ 2,952 $ 822 $ 1,039
Food and Beverage 595 383 27 48
Other 570 413 16 13
------- ------- ------- -------
Gross Revenue 4,563 3,748 865 1,100
Less Promotional Allowance 837 592 17 18
------- ------- ------- -------
Net Revenue 3,727 3,156 848 1,082
Cost and Expenses
Casino 1,494 1,189 596 702
Food and Beverage 377 278 30 59
Management Fees 120 45 -- --
Selling, General, and Admin 1,554 1,331 179 264
Depreciation and Amortization 168 164 72 74
Interest Expense 217 255 19 7
------- ------- ------- -------
Total Costs and Expenses 3,930 3,262 896 1,106
------- ------- ------- -------
Segment Profit (Loss) $ (203) $ (106) $ (48) $ (24)
======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
For Six Months Ended March 31
Casino Princesa Golden Gates
------------------------ --------------------
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Revenues
Casino $ 6,419 $ 4,611 $ 1,671 $ 2,142
Food and Beverage 1,069 627 50 116
Other 1,077 737 33 24
------- ------- ------- -------
Gross Revenue 8,565 5,975 1,754 2,282
Less Promotional Allowance 1,587 938 33 41
------- ------- ------- -------
Net Revenue 6,978 4,992 1,721 2,241
Cost and Expenses
Casino 3,331 1,754 1,173 1,369
Food and Beverage 667 589 57 124
Management Fees 275 135 - -
Selling, General, and Admin 2,469 2,340 387 514
Depreciation and Amortization 333 340 142 132
Preopening Expense - 541 - -
Interest Expense 437 515 39 20
------- ------- ------- -------
Total Costs and Expenses 7,512 6,214 1,798 2,159
------- ------- ------- -------
Segment Profit (Loss) $ (534) $(1,222) $ (77) $ 82
======= ======= ======= =======
</TABLE>
The following schedule is presented to reconcile amounts in the foregoing
segment information to the amounts reported in the Company's consolidated
financial statements.
9
<PAGE> 11
<TABLE>
<CAPTION>
Three Months Ended March - Six Months Ended March -
2000 1999 2000 1999
------- ------- ------- -------
<S> <C> <C> <C> <C>
Total loss of reportable segments $ (251) $ (130) $ (610) $(1,140)
Unallocated amounts
Income
Interest income 5 3 19 17
Other (10) 45 (6) 57
------- ------- ------- -------
Total income items $ (5) $ 48 $ 13 $ 74
------- ------- ------- -------
Expense
General and administrative 307 165 534 356
Other 17 17 30 36
Corporate interest 245 239 488 460
------- ------- ------- -------
Total expense items $ 569 $ 421 $ 1,052 $ 852
------- ------- ------- -------
Consolidated net loss before income taxes $ (825) $ (503) $(1,649) $(1,918)
======= ======= ======= =======
</TABLE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The statements contained in this report, if not historical, are
forward looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995, and involve risks and uncertainties that could
cause actual results to differ materially from the financial results described
in such forward looking statements. These risks and uncertainties include, but
are not limited to, changes in gaming regulations and tax rates in Colorado,
Florida, and other jurisdictions that could impact the Company's operations,
changes in economic conditions, declining popularity of gaming, competition in
Colorado and Florida and other jurisdictions, and the level and rate of growth
in the Company's operations. The success of the Company's business operations
is in turn dependent on factors such as the effectiveness of the Company's
marketing strategies to grow its customer base and improve customer response
rates, general competitive conditions within the gaming industry and general
economic conditions. Further, any forward looking statement or statements speak
only as of the date on which such statement was made, and the Company
undertakes no obligation to update any forward looking statement or statements
to reflect events or circumstances after the date on which such statement is
made or to reflect the occurrence of unanticipated events. Therefore,
forward-looking statements should not be relied upon as a prediction of actual
future results.
OVERVIEW
Concorde Gaming Corporation, a Colorado corporation (the "Company"), through a
wholly-owned subsidiary, Concorde Cripple Creek, Inc., a Colorado corporation,
owns and operates the Golden Gates Casino ("Golden Gates Casino"), a limited
stakes casino in Black Hawk, Colorado, and, through wholly-owned subsidiaries,
Concorde Cruises, Inc., a South Dakota corporation ("Concorde Cruises") and
Conami, Inc., a Florida corporation ("Conami") owns an 100% interest in two
joint ventures, which own and operate an offshore gaming vessel (the
"Princesa") from Bayfront Park, Miami, Florida. One joint venture, Princesa
Partners, owns the Princesa and, pursuant to a Charter Agreement (the
"Charter") dated October 2, 1998, charters the Princesa to the other joint
venture, Bayfront Ventures, which does business as the "Casino Princesa". The
Casino Princesa commenced operations in October, 1998. Prior to March 31, 2000
the Company, through Concorde Cruises and Conami, owned an 80% interest in each
of Princesa Partners and Bayfront and the remaining 20% of each joint venture
was owned by Goldcoast Entertainment Cruises, Inc. ("Gold Coast").
10
<PAGE> 12
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2000, COMPARED TO THREE MONTHS ENDED MARCH 31,
1999:
Revenues
Net revenues increased 8% to $4,575,257 for the three months ended
March 31, 2000, compared to $4,238,106 for the three months ended March 31,
1999.
Casino Princesa
Casino Princesa net revenues increased 18% to $3,726,996 for the
three months ended March 31, 2000 compared to revenues of $3,156,384 for the
three months ended March 31, 1999 primarily as a result of increased
passengers. The increased passenger count is a result of increased marketing
expenditures.
Golden Gates
Golden Gates net revenues decreased 22% to $848,261 for the three
months ended March 31, 2000, compared to revenues of $1,081,722 for the three
months ended March 31, 1999, primarily as a result of parking lot construction
adjacent to the casino which severely limited customer access to the casino.
The parking lot was partially available in March 2000, and is expected to be
completed in August 2000.
Costs and Expenses
Total costs and expenses increased 15% to $4,913,661 for the three
months ended March 31, 2000, compared to $4,287,276 for the three months ended
March 31, 1999. Except as noted below, the increase in overall expense is
primarily a function of the increased net revenues. Corporate-level general and
administrative costs (not identifiable to a segment) increased 86% to $306,768
for the three months ended March 31, 2000, compared to $164,614 for the three
months ended March 31, 1999. The increase primarily relates to an increase in
investor relations expenses and legal fees. In the third fiscal quarter of
2000, management reduced corporate-level general and administrative costs by
eliminating certain management positions and reducing investor relations
expenses. Management believes these efforts will reduce costs beginning in the
quarter ending June 30, 2000, and will be fully implemented in the quarter
ending September 30, 2000.
Casino Princesa
Casino expenses for Casino Princesa increased 26% to $1,494,264 for
the three months ended March 31, 2000, compared to $1,189,288 for the three
months ended March 31, 1999 The increase primarily related to increased payroll
and repair and maintenance expenditures. Food and beverage expenses for Casino
Princesa increased 36% to $377,677 for the three months ended March 31, 2000,
compared to $277,798 for the three months ended March 31, 1999. This increase
relates to an increase in passenger traffic, which results in an increase in
food and beverage expenses that Casino Princesa pays a third party on a per
capita basis. Management fees to Goldcoast paid pursuant to the Joint Venture
Agreement, were $120,000 for the three months ended March 31, 2000, compared to
$45,000 for the three months ended March 31, 1999, primarily due to a payment
of management fees incurred in the quarter ending December 31, 1999 in the
quarter ending March 31, 2000. On March 31, 2000, Concorde Gaming acquired the
20% interest of Goldcoast in Princesa Partners and Bayfront Ventures and
accordingly there will be no management fees payable to Goldcoast in the
future. Selling, general and administrative expenses increased to $1,553,972
for the three months ended March 31, 2000, compared to $1,330,309 for the three
months ended March 31, 1999, primarily due to increased marketing expenses.
Golden Gates
Casino expenses for Golden Gates decreased 15% to $596,307 for the
three months ended March 31, 2000, compared to $702,154 for the three months
ended March 31, 1999, primarily due to the decrease in customer traffic. Food
and beverage expenses decreased 49% to $30,317 for the three months ended March
31, 2000, compared to $59,401 for the three months ended March 31, 1999,
primarily due to the restaurant being subleased and operated by a third party
beginning
11
<PAGE> 13
in March 1999. Selling, general and administrative expenses decreased 32% to
$179,269 for the three months ended March 31, 2000, compared to $264,033 for
the three months ended March 31, 1999. The change is directly related to the
decrease in customer traffic.
Other Expense. Interest expense and financing costs payable to BHL Capital
decreased to $244,245, for the three months ended March 31, 2000, compared to
$272,101 for the three months ended March 31, 1999. The decrease is due to the
timing of repayments being made early in the quarter ended March 31, 2000,
while the Company borrowed additional amounts late in the quarter ended March
31, 2000. Other interest and financing costs increased to $236,508 for the
three months ended March 31, 2000, compared to $230,323 for the three months
ended March 31, 1999.
Federal and State Income Taxes. The Company recorded a Federal and State income
tax benefit of $31,200 for the three months ended March 31, 2000, compared to a
benefit of $111,700 for the three months ended March 31, 1999. The Company
records an income tax benefit using the estimated effective tax rate for the
fiscal year if the amount of loss incurred is reasonably expected to be offset
by future income or is available for carry back to previous years.
SIX MONTHS ENDED MARCH 31, 2000, COMPARED TO SIX MONTHS ENDED MARCH 31, 1999.
Revenues
Net revenues increased 20% to $8,699,259 for the six months ended
March 31, 2000, compared to $7,232,610 for the six months ended March 31, 1999.
Casino Princesa
Casino Princesa net revenues increased 40% to $6,978,536 for the six
months ended March 31, 2000 compared to revenues of $4,992,014 for the six
months ended March 31, 1999 as a result of increased passengers.
Golden Gates
Golden Gates net revenues decreased 23% to $1,720,723 for the six
months ended March 31, 2000, compared to revenues of $2,240,596 for the six
months ended March 31, 1999, primarily as a result of parking lot construction
adjacent to the casino which severely limited customer access to the casino.
The parking lot was partially available in March 2000, and completion is
expected in August, 2000.
Costs and Expenses
Total costs and expenses increased 14% to $9,398,695 for the six
months ended March 31, 2000, compared to $8,229,631 for the six months ended
March 31, 1999. Corporate-level general and administrative costs (not
identifiable to a segment) increased 50% to $534,096 for the six months ended
March 31, 2000, compared to $356,135 for the six months ended March 31, 1999.
The increase primarily relates to an increase in investor relations expenses
and legal fees. In the third fiscal quarter of 2000, management reduced
corporate-level general and administrative costs by eliminating certain
management positions and reducing investor relations expenses. Management
believes these efforts will reduce costs beginning in the quarter ending June
30, 2000, and will be fully implemented in the quarter ending September 30,
2000.
Casino Princesa
Casino expenses for Casino Princesa were $3,330,959 for the six
months ended March 31, 2000, compared to $1,754,008 for the six months ended
March 31, 1999. As a percentage of casino revenue, casino expenses increased to
51% for the six months ended March 31, 2000 as compared to 38% for the same
period ended March 31, 1999. The increases primarily relate to increased
payroll and repair and maintenance expenditures. Food and beverage expenses for
Casino Princesa increased 13% to $667,254 for the six months ended March 31,
2000, compared to $589,025 for the Princesa's initial six months of operation
ended March 31, 1999 due to increased food and beverage sales. As a percentage
of food and beverage revenues, costs decreased to 62% for the six months ended
March 31, 2000 as compared to 93% for the same period ended March 31, 1999, due
to operational efficiencies. Management fees paid to Goldcoast pursuant to the
Joint Venture
12
<PAGE> 14
Agreement were $275,367 for the six months ended March 31, 2000, compared to
$135,000 for the six months ended March 31, 1999. The increase was due to
increased net income in the fourth quarter of 1999. On March 31, 2000, Concorde
Gaming acquired Goldcoast's 20% interest in Princesa Partners and Bayfront
Ventures and, accordingly, there will be no management fees paid to Goldcoast
in the future. Selling, general and administrative expenses increased to
$2,468,517 for the six months ended March 31, 2000, compared to $2,339,639 for
the six months ended March 31, 1999, primarily due to increased marketing
expenditures. Pre-opening and start-up costs, primarily related to Casino
Princesa, were $0 for the six months ended March 31, 2000, compared to $540,952
for the six months ended March 31, 1999.
Golden Gates
Casino expenses for Golden Gates decreased 14% to $1,173,484 for the
six months ended March 31, 2000, compared to $1,369,142 for the six months ended
March 31, 1999, primarily due to the decrease in customer traffic. Food and
beverage expenses decreased 54% to $56,777 for the six months ended March 31,
2000, compared to $123,946 for the six months ended March 31, 1999, primarily
due to the restaurant being subleased and operated by a third party beginning in
March 1999. Selling, general and administrative expenses decreased 25% to
$386,599 for the six months during the relevant periods ended March 31, 2000,
compared to $513,751 for the six months ended March 31, 1999. The change is
directly related to the decrease in revenues.
Other Expense. Interest expense and financing costs to the related party
decreased to $486,414, for the six months ended March 31, 2000, compared to
$522,790 for the six months ended March 31, 1999. The decrease is due to a
decrease in amounts payable to related parties during the relevant periods.
Other interest and financing costs increased to $476,109 for the six months
ended March 31, 2000, compared to $471,817 for the six months ended March 31,
1999.
Federal and State Income Taxes. The Company recorded a Federal and State income
tax benefit of $31,200 for the six months ended March 31, 2000, compared to a
benefit of $220,000 for the six months ended March 31, 1999. The Company
records an income tax benefit using the estimated effective tax rate for the
fiscal year if the amount of loss incurred is reasonably expected to be offset
by future income or is available for carry back to previous years.
LIQUIDITY AND CAPITAL RESOURCES
The Company had cash and cash equivalents of $1,412,881 at March 31,
2000, compared to $2,066,840 at September 30, 1999, a decrease of $653,959.
During the six months ended March 31, 2000, the Company used cash from
operating activities of $59,283 compared to cash used of $3,726,355 during the
six months ended March 31, 1999, due to a decrease in accrued expenses and
accounts payable.
Investing activities used cash of $1,691,781 during the six months
ended March 31, 2000, compared $773,943 during the six months ended March 31,
1999. The Company used $1,735,500 during the six months ended March 31, 2000,
for the acquisition of property, equipment, and intangibles, compared to
$400,947 during the six months ended March 31, 1999. The 2000 acquisitions
relate to the purchase by Concorde Cruises of the 20% interest in Princesa
Partners and Bayfront Ventures from Goldcoast (see Item 5).
Financing activities provided cash of $1,097,105 during the six months
ended March 31, 2000, compared to cash provided of $5,285,543 during the six
months ended March 31, 1999. Borrowings from a related party provided
$1,850,000 for the six months ended March 31, 2000, compared to $1,775,000 for
the six months ended March 31, 1999. Long-term borrowings from other sources
provided $0 during the six months ended March 31, 2000, compared to $9,991,097
during the six months ended March 31, 1999. Short-term borrowings were
increased by $200,000 during the six months ended March 31, 2000, while
short-term borrowings were reduced by $101,000 during the six months ended
March 31, 1999. Principal payments on long-term debt with a related party were
$519,703 for the six months ended March 31, 2000, compared to $0 for the six
months ended March 31, 1999. Principal payments on other long-term debt were
$446,192 during the six months ended March 31, 2000, compared to $6,379,554
during the six months ended March 31, 1999.
13
<PAGE> 15
The Company has available $650,000 of financing under revolving bank
credit facilities, of which $200,000 of borrowings was outstanding at March 31,
2000. These arrangements mature as follows: $150,000 on May 15, 2000 and
$500,000 on March 1, 2001.
The $500,000 revolving bank credit facility was issued pursuant to the
vessel loan agreement under which the Company has agreed to maintain typical
financial covenants (see Item 2).
Primarily to finance the acquisition of the remaining 20% interest in
Princesa Partners and Bayfront Ventures from Goldcoast and for general working
capital requirements, the Company borrowed an additional $1,850,000 from BHL
Capital Corporation ("BHL"), a corporation controlled by Bruce H. Lien, the
Company's majority shareholder. Interest is payable monthly at 18% per annum,
however, as allowed by the financing arrangement, the Company periodically adds
any unpaid interest into the note principal. The notes payable to BHL at March
31, 2000 of $7,165,906 are due as follows: $1,850,000 is due on demand and
$5,315,906 is due January 1, 2001. Management believes these short-term
borrowings will be refinanced with BHL prior to January 1, 2001.
Management has commenced early negotiations with other financing
sources to refinance the BHL debt in order to achieve more favorable interest
rates. Management is also seeking additional financing to be used to renovate
and expand the Golden Gates facility. There is no assurance that such financing
will be obtained on terms acceptable to the Company, if at all.
Future Operations
The Company's ability to meet its working capital requirements is
dependent upon the future operations of the Casino Princesa and the Golden
Gates Casino. The Company believes that cash flow from casino operations
combined with its existing financing arrangements will be sufficient to meet
its current working capital requirements. The Company believes that the
acquisition of the 20% interest in Bayfront Ventures and Princesa Partners from
Goldcoast (see Item 5) will give management better control over the operation
of Casino Princesa and that management will be able to increase cash flows due
to increased efficiencies.
Factors Affecting the Company's Business and Prospects
There are many factors that affect the Company's business and the
results of its operations, some of which are beyond the control of the Company.
The following is a description of some of the important factors that may cause
the actual results of the Company's operations in future periods to differ from
those currently expected or desired.
o The Company has incurred a significant amount of indebtedness and,
currently the Company's cash flow from operations combined with existing
sources of financing is not sufficient to fund debt service costs.
o Due to the current indebtedness, the Company's ability to obtain
additional financing in the future and the Company's flexibility in
reacting to changes in the industry and economic conditions generally may
be limited.
o The Company's success is partially dependent on its ability to anticipate
changing products and amenities and to efficiently develop and introduce
new products and amenities that will gain customer acceptance. If the
Company is unable to anticipate and introduce such products and amenities,
such inability may have an adverse effect on the Company's business.
o Claims have been brought against the Company and its subsidiaries in
various legal proceedings, and additional legal and tax claims arise from
time to time. It is possible that the Company's cash flows and results of
operations could be affected by the resolution of these claims.
o The Company operates in a very competitive environment, particularly in
Colorado. The growth in the inventory of slot machines in Black Hawk,
Colorado, which has historically increased on a year-to-year basis and has
recently increased
14
<PAGE> 16
substantially, is expected to continue to increase, and the spread of
legalized gaming in other states and countries, could negatively affect
our operating results.
o The Company's gaming operations in Colorado are highly regulated by
governmental authorities. The Company will also be subject to regulation
in Florida if the State of Florida decides to regulate the day-cruise
industry. If the Company conducts gaming activities in any other
jurisdiction, the authorities in that jurisdiction may also subject the
Company to additional regulation. Changes in applicable laws or
regulations could have a significant effect on our operations.
o The Company's business is affected by changes in local, national and
international general economic and market conditions in the locations
where it operates and where its customers live. The Casino Princesa is
particularly affected by the economic situation in Latin America and South
America. Changes in economic conditions could have a material adverse
effect on the Company's business.
o Any plans for future construction to the Golden Gates Casino may be
affected by a number of factors, including time delays in obtaining
necessary governmental permits and approvals and legal challenges. After
beginning such a construction project, the Company may make changes in
project scope, budgets and schedules for competitive, aesthetic or other
reasons, and these changes may also result from circumstances beyond the
Company's control. These circumstances include weather interference,
shortages of materials and labor, work stoppages, labor disputes,
unforeseen engineering, environmental or geological problems and
unanticipated cost increases. Any of these circumstances could give rise
to delays or cost overruns.
o From time to time, various state and federal legislators and officials
have proposed changes in tax laws, or in the administration of the law,
affecting the gaming industry. It is not possible to determine with
certainty the likelihood of possible changes in tax law or its
administration. These changes, if adopted, could have a material negative
effect on the Company's operating results.
o The Company's success is partially dependent on attracting and retaining
highly qualified management and gaming personnel. The Company's inability
to recruit or retain such personnel could adversely affect its business.
o The weather in Florida is a daily risk consideration. Air temperature,
rain, high seas caused by winds, hurricanes and tropical storms affect
daily passenger counts and may cause the cancellation of cruises.
15
<PAGE> 17
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On April 15, 1999, the Association for Disabled Americans, Inc., The
Coral Springs Advocacy Committee for the Handicapped, Inc., Daniel Ruiz, Jorge
Luis Rodriquez, Ernst Rosenkrantz and Robert Cohen filed a lawsuit against the
Company and Goldcoast in the United States District Court for the Southern
District of Florida alleging violations of the Americans with Disabilities Act
(the "ADA") with respect to the Princesa and the facilities at which the
Princesa docks. The lawsuit seeks injunctive relief including an order
requiring modifications to the Princesa and the docking facilities to comply
with the ADA, and the closure of the Princesa and the docking facilities until
such modifications are complete. Although the Company intends to defend the
lawsuit vigorously, the impact, if any, of the lawsuit on the Company cannot at
this time be determined. The parties are currently in settlement negotiations
and the Company believes that the matter will be ready for trial in October
2000 if not settled.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
An Annual Meeting of Shareholders of the Company was held on February
8, 2000 for the purpose of electing directors, approving the Company's 2000
Employee Stock Purchase Plan and to ratify the appointment of the Company's
independent auditors. The following sets forth each of the proposals and the
results of the meeting:
1. Proposal to elect three directors to the Board of Directors.
<TABLE>
<CAPTION>
Shares Voted Shares Voted Against Shares Voted
For Abstained
<S> <C> <C> <C>
Bruce H. Lien 21,861,010 0 104,100
Deanna B. Lien 21,861,010 0 104,100
Jerry L. Baum 21,861,010 0 104,100
</TABLE>
2. Proposal to approve the Company's 2000 Employee Stock Purchase
Plan.
<TABLE>
<CAPTION>
Shares Voted Shares Voted Against Shares Voted
For Abstained
<S> <C> <C>
17,465,770 3,010,634 10,300
</TABLE>
3. Proposal to ratify the Board of Directors' selection of
McGladrey Pullen LLP as the Company's independent auditors
for the fiscal year ending September 30, 1999.
<TABLE>
<CAPTION>
Shares Voted Shares Voted Against Shares Voted
For Abstained
<S> <C> <C>
19,061,176 2,903,934 0
</TABLE>
ITEM 5. OTHER INFORMATION
Pursuant to a Partnership Interest Purchase Agreement (the "Purchase
Agreement") dated as of March 31, 2000 between Concorde Cruises, Goldcoast and
Michael A. Hlavsa and David Grossman, the shareholders of Goldcoast, Concorde
Cruises acquired the 20% interest held by Goldcoast in each of Bayfront
Ventures and Princesa Partners for $1,500,000 (the "Purchase Price"). Thirty
(30%) percent of the Purchase Price was deposited in escrow and, pursuant to an
escrow agreement dated March 31, 2000 between Concorde Cruises, Goldcoast and
National City Bank of Evansville, as escrow agent (the
16
<PAGE> 18
"Escrow Agreement"), is held to be released as follows. Five (5%) percent of
the Purchase Price is available to partially secure the indemnity obligations
of Goldcoast and Messrs. Hlavsa and Grossman under the Purchase Agreement. The
amount of such funds remaining in the escrow account on March 31, 2001, and not
subject to an indemnity claim, will be distributed to Goldcoast. Twenty-five
(25%) percent of the Purchase Price paid to Concorde Cruises if any rule, law,
regulation or statute is adopted or enacted by a federal, state, local or other
governmental or quasi-governmental entity or a decision or proceeding by a
court or other tribunal occurs prior to the last date on which the governor of
the State of Florida may approve a bill passed by the Florida legislature
during the 2000 regular session of the Florida legislature that, in each case,
either (i) prohibits or has a material adverse effect on the business of
Bayfront Ventures and Princesa Partners as conducted on March 31, 2000 or (ii)
permits Class III gaming on Indian reservations. If such event does not occur,
such amount will be released to Goldcoast.
In connection with the transaction and pursuant to a Mutual Release
dated March 31, 2000, Goldcoast released Bayfront Ventures, Concorde Cruises
and the Company and Bayfront Ventures, Concorde Cruises and the Company
released Goldcoast from certain existing obligations. In addition, pursuant to
a consulting agreement dated March 31, 2000 between Concorde Cruises and Mr.
Hlavsa (the "Consulting Agreement"), Concorde Cruises engaged Mr. Hlavsa to
provide management consultant services to Concorde Cruises for a period of two
years, unless terminated earlier pursuant to the terms of the Consulting
Agreement. For such services, Mr. Hlavsa is entitled to be paid $125,000 per
year, and Mr. Hlavsa has the potential to be paid certain bonuses based on the
combined earnings before interest, depreciation, taxes and amortization of
Bayfront Ventures and Princesa Partners.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits:
Exhibit No. Description
10.1 Partnership Interest Purchase Agreement dated as of March
31, 2000 among Concorde Cruises, Inc., Goldcoast
Entertainment Cruises, Inc., Michael A. Hlavsa and David
Grossman. *
10.2 Escrow Agreement dated as of March 31, 2000 by and among
Concorde Cruises, Inc., Goldcoast Entertainment Cruises,
Inc. and First National City Bank of Evansville, as escrow
agent. *
10.3 Assignment of Partnership Interest dated as of March 31,
2000 by and between Concorde Cruises, Inc. and Goldcoast
Entertainment Cruises, Inc. *
10.4 Mutual Release dated as of March 31, 2000 by and among
Goldcoast Entertainment Cruises, Inc., Concorde Gaming
Corporation, Concorde Cruises, Inc. and Bayfront
Ventures. *
10.5 Consulting Agreement dated as of March 31, 2000 by and
between Concorde Cruises, Inc. and Michael A. Hlavsa. *
27 Financial Data Schedule. *
- ---------------------
* Filed herewith.
b. Reports on Form 8-K
There were no reports on Form 8-K filed during the quarter for which
this report is filed.
17
<PAGE> 19
Signatures:
In accordance with the requirements of the Exchange Act, the
registrant caused the report to be signed on its behalf by the undersigned,
thereunto duly authorized.
CONCORDE GAMING CORPORATION
Date: May 22, 2000 By: /s/ Jerry L. Baum
----------------------------------------
Jerry L. Baum, Chief Executive Officer
<PAGE> 20
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
10.1 Partnership Interest Purchase Agreement dated as of March
31, 2000 among Concorde Cruises, Inc., Goldcoast
Entertainment Cruises, Inc., Michael A. Hlavsa and David
Grossman. *
10.2 Escrow Agreement dated as of March 31, 2000 by and among
Concorde Cruises, Inc., Goldcoast Entertainment Cruises,
Inc. and First National City Bank of Evansville, as escrow
agent. *
10.3 Assignment of Partnership Interest dated as of March 31,
2000 by and between Concorde Cruises, Inc. and Goldcoast
Entertainment Cruises, Inc. *
10.4 Mutual Release dated as of March 31, 2000 by and among
Goldcoast Entertainment Cruises, Inc., Concorde Gaming
Corporation, Concorde Cruises, Inc. and Bayfront
Ventures. *
10.5 Consulting Agreement dated as of March 31, 2000 by and
between Concorde Cruises, Inc. and Michael A. Hlavsa. *
27 Financial Data Schedule. *
</TABLE>
- ---------------------
* Filed herewith.
<PAGE> 1
EXHIBIT 10.1
PARTNERSHIP INTEREST PURCHASE AGREEMENT
AMONG
CONCORDE CRUISES, INC.,
GOLDCOAST ENTERTAINMENT CRUISES, INC.,
MICHAEL A. HLAVSA
AND
DAVID GROSSMAN
========================
Dated as of March 31, 2000
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
Article I DEFINITIONS.......................................................................1
Section 1.01. Definitions............................................................1
Article II SALE AND PURCHASE OF PARTNERSHIP INTERESTS.......................................5
Section 2.01. Sale and Purchase......................................................5
Section 2.02. Purchase Price.........................................................5
Section 2.03. Escrow.................................................................6
Section 2.04. Closing................................................................6
Section 2.05. Deliveries by the Shareholders and Goldcoast...........................6
Section 2.06. Deliveries by Buyer....................................................7
Section 2.07. Allocation of Purchase Price...........................................7
Section 2.08. Further Assurances.....................................................7
Article III REPRESENTATIONS AND WARRANTIES BY GOLDCOAST AND THE SHAREHOLDERS................8
Section 3.01. Due Incorporation......................................................8
Section 3.02. No Subsidiaries........................................................8
Section 3.03. Due Authorization......................................................8
Section 3.04. Consents and Approvals; Authority Relative to this Agreement...........8
Section 3.05. Title to Partnership Interests.........................................8
Section 3.06. Financial Statements; Undisclosed Liabilities; Other Documents.........9
Section 3.07. Management of Bayfront and Princesa....................................9
Section 3.08. Contracts..............................................................9
Section 3.09. Litigation............................................................10
Section 3.10. Accuracy of Statements................................................10
Article IV REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS..............................11
Section 4.01. Shareholders' Power and Authority.....................................11
Section 4.02. Ownership of Goldcoast................................................11
Section 4.03. Effect of Agreement on the Shareholders...............................11
Section 4.04. Agreements Among Shareholders.........................................11
Article V REPRESENTATIONS AND WARRANTIES OF BUYER..........................................11
Section 5.01. Due Incorporation.....................................................11
Section 5.02. Due Authorization.....................................................12
Section 5.03. Consents and Approvals; Authority Relative to This Agreement..........12
Section 5.04. Litigation............................................................13
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
Section 5.05. Accuracy of Statements................................................12
Article VI TAX REPRESENTATIONS AND COVENANTS...............................................12
Section 6.01. Tax Representations...................................................12
Article VII additional AGREEMENTS OF THE PARTIES...........................................13
Section 7.01. Public Announcements..................................................13
Section 7.02. Confidentiality.......................................................13
Section 7.03. Personal Guarantees...................................................13
Article VIII INDEMNIFICATION...............................................................13
Section 8.01. Survival..............................................................13
Section 8.02. Indemnification Obligations...........................................14
Section 8.03. Method of Asserting Claims, Etc.......................................14
Section 8.04. Arbitration...........................................................16
Section 8.05. Payment...............................................................17
Section 8.06. Equitable Relief......................................................18
Article IX MISCELLANEOUS...................................................................18
Section 9.01. Expenses..............................................................18
Section 9.02. Amendment.............................................................18
Section 9.03. Notices...............................................................18
Section 9.04. Waivers...............................................................20
Section 9.05. Counterparts..........................................................20
Section 9.06. Interpretation........................................................20
Section 9.07. Applicable Law........................................................20
Section 9.08. Assignment............................................................20
Section 9.09. No Third-Party Beneficiaries..........................................20
Section 9.10. Severability..........................................................20
Section 9.11. Remedies Cumulative...................................................21
Section 9.12. Entire Understanding..................................................21
Exhibit A: Escrow Agreement..........................................................A-1
Exhibit B: Form of Assignment of Partnership Interests...............................B-1
Exhibit C: Form of Goldcoast's Officers Certificate..................................C-1
Exhibit D: Form of Mutual Release....................................................D-1
Exhibit E: Form of Buyer's Officers Certificate......................................E-1
</TABLE>
ii
<PAGE> 4
PARTNERSHIP INTEREST PURCHASE AGREEMENT
This PARTNERSHIP INTEREST PURCHASE AGREEMENT (this "Agreement") is dated as
of March 31, 2000, among Concorde Cruises, Inc., a South Dakota corporation
("Buyer"), Goldcoast Entertainment Cruises, Inc., a Florida corporation
("Goldcoast"), and Michael A. Hlavsa, a shareholder of Goldcoast, and David
Grossman, a shareholder of Goldcoast (each referred to herein individually as a
"Shareholder" and collectively as the "Shareholders"). The Buyer, Goldcoast and
the Shareholders are each sometimes referred to herein individually as a "Party"
and collectively as the "Parties."
P R E A M B L E:
WHEREAS, pursuant to a joint venture agreement dated August 27, 1997, as
amended, Goldcoast owns 20% of the outstanding partnership interest in Bayfront
Ventures, a Florida general partnership ("Bayfront"), and Buyer, a wholly owned
subsidiary of Concorde Gaming Corporation ("Concorde"), owns 80% of the
outstanding partnership interest in Bayfront;
WHEREAS, pursuant to a joint venture agreement dated October 1, 1998, as
amended, Goldcoast owns 20% of the outstanding partnership interest in Princesa
Partners, a Florida general partnership ("Princesa"), and Conami, Inc., a wholly
owned subsidiary of Concorde, owns 80% of the outstanding partnership interest
in Princesa;
WHEREAS, the Shareholders own all of the issued and outstanding shares of
common stock of Goldcoast; and
WHEREAS, Goldcoast wishes to sell its partnership interests in Bayfront and
Princesa (collectively, the "Partnership Interests") to Buyer and Buyer desires
to purchase such Partnership Interests from Goldcoast.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants, agreements and warranties contained herein, and for other good and
valuable consideration, the Parties agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. DEFINITIONS.
(a) The following terms shall have the following meanings for the
purposes of this Agreement:
"Affiliate" means, with respect to any specified Person, (i) any other
Person which, directly or indirectly, owns or controls, is under common
ownership or control with, or is owned or controlled by, such specified Person,
(ii) any other Person that is a director, officer or partner or is, directly or
indirectly, the beneficial owner of 10% or more of any class of equity
securities
1
<PAGE> 5
of the specified Person or a Person described in clause (i) of this paragraph,
(iii) another Person of which the specified Person is a director, officer or
partner or is, directly or indirectly, the beneficial owner of 10% or more of
any class of equity securities, or (iv) any relative or spouse of the specified
Person or any of the foregoing Persons.
"Business Day" means any day of the year other than (i) any Saturday or
Sunday or (ii) any other day on which commercial banks located in New York, New
York, are generally closed for business.
"Code" means the United States Internal Revenue Code of 1986, as amended,
and the regulations promulgated thereunder.
"Company" means individually either Bayfront or Princesa, and collectively
Bayfront and Princesa are herein referred to as "Companies."
"Confidential Information" means any information relating to the
properties, prospects, products, services or operations of the Companies or any
direct or indirect Affiliate thereof that is not generally known, is proprietary
to the Companies or such Affiliate and is made known to such Person or learned
or acquired by such Person while such Person was a general partner, officer,
director, employee or independent contractor of the Companies, including,
without limitation, submission and proposal procedures of the Companies,
customer or contact lists, information concerning trade secrets of the
Companies, or any of its Affiliates and any improvements relating to the
products of the Companies in accounting, marketing, selling, leasing, financing
and other business methods and techniques. However, Confidential Information
shall not include (i) at the time of disclosure to any Person such information
that was in the public domain or later entered the public domain other than as a
result of a breach of an obligation herein; or (ii) subsequent to disclosure to
any Person, such Person received such information from a third party under no
obligation to maintain such information in confidence, and the third party came
into possession of such information other than as a result of a breach of an
obligation herein.
"Contract" means any contract, lease, commitment, understanding, sales
order, purchase order, agreement, indenture, mortgage, note, bond, right,
warrant, instrument, plan, permit or license, whether written or oral, that is
intended or purports to be binding and enforceable.
"Escrow Agent" means the escrow agent designated in the Escrow Agreement.
"Escrow Agreement" means the escrow agreement to be entered into by and
among Buyer, Goldcoast and the Escrow Agent in the form attached hereto as
Exhibit A.
"Financial Statements" means collectively, for each Company the (i) balance
sheets dated as of September 30, 1999 and 1998 and February 29, 2000, (ii)
related statements of income, changes in shareholders equity, and cash flows for
the fiscal years ended September 30, 1999 and 1998 and five months ended
February 29, 2000, and (iii) related notes and schedules, if any.
"Governmental Authority" means the government of the United States or any
foreign country or any state or political subdivision thereof and any entity,
body or authority exercising
2
<PAGE> 6
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"Holdback Escrow" means an account established by the Escrow Agent in
accordance with Section 2.03 and the Escrow Agreement.
"Indemnified Person" means the Person or Persons entitled to, or claiming a
right to, indemnification.
"Indemnifying Person" means the Person or Persons claimed by the
Indemnified Person to be obligated to provide indemnification.
"Indemnity Escrow" means an account established by the Escrow Agent in
accordance with Section 2.03 and the Escrow Agreement.
"Joint Venture Agreements" means (a) the agreement dated August 27, 1997,
as amended, between Goldcoast and Buyer for Bayfront, and (b) the agreement
dated October 1, 1998, as amended, between Goldcoast and Conami, Inc. for
Princesa.
"Knowledge" of a particular fact or other matter means:
(a) such Person is actually aware of such fact or other matter; or
(b) such Person should have discovered or become aware of such fact or
other matter in the course of conducting a reasonable investigation concerning
such fact or other matter.
A Person other than an individual shall be deemed to have "Knowledge" of a
particular fact or matter only if a director, officer or key employee of such
Person has, had or should have had Knowledge of such fact or matter.
"Law" means any law, statute, regulation, ordinance, rule, order, decree,
judgment, consent decree, settlement agreement or governmental requirement
enacted, promulgated, entered into, agreed or imposed by any Governmental
Authority.
"Legislative Session Expiration Date" means the last day on which the
governor of Florida may approve a bill passed by the Florida legislature during
the 2000 regular session of the Florida legislature.
"Lien" means any security agreement, financing statement filed with any
Governmental Authority, conditional sale or other title retention agreement, any
lease, consignment or bailment given for purposes of security, any lien,
mortgage, indenture, pledge, option, encumbrance, adverse interest, constructive
trust or other trust, claim, attachment, exception to or defect in title or
other ownership interest (including but not limited to reservations, rights of
entry, possibilities of reverter, encroachments, easement, rights-of-way,
restrictive covenants, and licenses) of any kind, which otherwise constitutes an
interest in or claim against property, whether arising pursuant to any Law,
Contract, or otherwise.
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"Loss" or "Losses" means any and all liabilities, losses, costs, claims,
damages (including consequential damages), penalties and expenses (including
reasonable attorneys' fees and expenses and costs of investigation and
litigation). In the event any of the foregoing are indemnifiable hereunder, the
terms "Loss" and "Losses" shall include any and all reasonable attorneys' fees
and expenses and costs of investigation and litigation incurred by the
Indemnified Person in enforcing such indemnity. No Loss shall be reduced by
reason of tax benefits allegedly enjoyed as a result of such Loss by any
Indemnified Person.
"Material Adverse Effect" means any material adverse change in, or material
adverse effect on, the business, assets, prospects, results of operations, value
or financial or other condition of Goldcoast, or any event or circumstance that
would likely prevent, hinder or materially delay the consummation of any of the
transactions contemplated by this Agreement and the Related Agreements.
"Person" means any individual, corporation, proprietorship, firm,
partnership, limited partnership, limited liability company, trust, association
or other entity, including a government or government department, agency or
instrumentality.
"Related Agreement" means any Contract that is or is to be entered into at
the Closing or otherwise pursuant to this Agreement.
"Subsidiaries" means any Person 50.1% or more of the voting power of which
is controlled by another Person.
"Tax" or "Taxes" means (a) any net income, alternative or add-on minimum
tax, gross income, gross receipts, sales, use, ad valorem, value added,
transfer, franchise, profits, license, withholding, payroll, employment, excise,
severance, stamp, occupation, premium, property, environmental or windfall
profit tax, custom, duty or other tax, governmental fee or other like assessment
or charge of any kind whatsoever, together with any interest, penalty,
addition-to-tax or additional amount imposed by any governmental authority
(domestic or foreign) responsible for the imposition of any such tax (a "Taxing
Authority"), (b) any liability of the Companies for the payment of any amount of
the type described in clause (a) above as a result of being a member of an
affiliated, consolidated, combined or unitary group, and (c) any liability of
the Companies for the payment of any amount as a result of being party to any
Tax Sharing Agreement or with respect to the payment of any amounts of the type
described in clauses (a) or (b) above as a result of any express or implied
obligation to indemnify any other Person.
"Tax Sharing Agreement" means any existing Tax sharing agreements or
arrangements (whether or not written) binding Goldcoast and any other agreement
or arrangement (including any arrangement required or permitted by law) that (a)
requires Goldcoast to make any Tax payment to or for the account of any other
person, (b) affords any other person to utilize any tax attributes of Goldcoast
to reduce such other person's Taxes, (c) affords Goldcoast to utilize any tax
attributes of any other person to reduce any Taxes of Goldcoast, (d) requires or
permits the transfer or assignment of income, revenues, receipts, or gains, or
(e) requires or permits Goldcoast to determine its Tax liability by taking into
account or by reference to the Tax liability, income, revenues, receipts or
gains of any other person.
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"Treasury Regulations" means the U.S. income tax regulations, including
temporary regulations, promulgated under the Code, as of the date hereof.
(b) Each of the following terms is defined in the section set forth
opposite such term below:
<TABLE>
<S> <C>
Agreement...........................Introductory Paragraph
Balance Sheet Date.........................Section 3.06(b)
Bayfront..........................................Preamble
Buyer...............................Introductory Paragraph
Claim Notice............................Section 8.03(a)(i)
Closing.......................................Section 2.04
Closing Date..................................Section 2.04
Company Contracts.............................Section 3.08
Concorde..........................................Preamble
Escrow Amount.................................Section 2.03
Final Determination........................Section 8.03(d)
GAAP..........................................Section 3.06
Goldcoast...........................Introductory Paragraph
Holdback Amount............................Section 2.03(b)
Indemnification Obligation.................Section 8.02(a)
Indemnity Amount...........................Section 2.03(a)
Notice Period..........................Section 8.03(a)(ii)
Partnership Interest..............................Preamble
Party.............................................Preamble
Personal Guarantees...........................Section 7.03
Princesa..........................................Preamble
Purchase Price................................Section 2.02
Shareholder.........................Introductory Paragraph
</TABLE>
ARTICLE II
SALE AND PURCHASE OF PARTNERSHIP INTERESTS
Section 2.01. SALE AND PURCHASE. Subject to the terms and conditions set
forth in this Agreement, Goldcoast hereby agrees to sell, assign, transfer and
deliver to Buyer all right, title and interest in and to (i) its Partnership
Interest in Bayfront and (ii) its Partnership Interest in Princesa, free and
clear of all Liens, and Buyer hereby agrees to purchase such Partnership
Interests.
Section 2.02. PURCHASE PRICE. The purchase price for the Partnership
Interests (the "Purchase Price") of $1,500,000, less the Escrow Amount, shall be
paid to Goldcoast in immediately available funds by wire transfer to a bank
account designated by Goldcoast at least two days prior to the Closing Date or,
if not so designated, then by certified or official bank check payable in
immediately available funds to the order of Goldcoast in such amount.
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Section 2.03. ESCROW. Subject to the terms and conditions set forth herein
and in the Escrow Agreement, Buyer shall withhold an aggregate of 30% from the
Purchase Price otherwise payable to Goldcoast (the "Escrow Amount") and deposit
the Escrow Amount into the Indemnity Escrow and the Holdback Escrow, as follows:
(a) 5% of the Purchase Price ("Indemnity Amount") shall be deposited
into the Indemnity Escrow, for a period of twelve months, as partial
security for the Indemnification Obligations as set forth in Article VIII;
and
(b) 25% of the Purchase Price ("Holdback Amount") shall be deposited
into the Holdback Escrow, until the Legislative Session Expiration Date, to
be distributed to Buyer in the event that during such time period any rule,
law, regulation or statute is adopted or enacted by a federal, state, local
or other governmental or quasi-governmental entity, or any decision or
proceeding by a court or other tribunal that (i) prohibits or has a
material adverse affect on the business of the Companies as such business
is currently conducted as of the date hereof, or (ii) permits Class III
gaming on Indian reservations.
Section 2.04. CLOSING. The closing of the transactions contemplated herein
(the "Closing") shall take place concurrently with the execution of this
Agreement at the offices of Morrison & Foerster LLP, at 370 Seventeenth Street,
Suite 5200, Denver, Colorado 80202, unless another place or time is agreed to in
writing by Buyer and Goldcoast. The date upon which the Closing actually occurs
is referred to in this Agreement as the "Closing Date." The Closing, and all
transactions to occur at the Closing, shall be deemed to have taken place at,
and shall be effective as of, the close of business on the Closing Date.
Section 2.05. DELIVERIES BY THE SHAREHOLDERS AND GOLDCOAST. On or prior to
the Closing, the Shareholders and Goldcoast, as applicable, shall deliver to
Buyer the following:
(a) a copy of this Agreement, duly and validly executed by each
Shareholder and an authorized officer of Goldcoast;
(b) a copy of the Escrow Agreement, duly and validly executed by an
authorized officer of Goldcoast;
(c) a copy of the Assignment of Partnership Interests assigning the
Partnership Interests owned by Goldcoast in the form attached hereto as
Exhibit B;
(d) a certificate, dated as of the Closing Date, executed on behalf of
Goldcoast by Goldcoast's Secretary and Chief Executive Officer in the form
attached hereto as Exhibit C;
(e) evidence, in form satisfactory to Buyer, that all consents
required by Section 3.04, if any, have been obtained;
(f) a copy of the mutual release, whereby Goldcoast, Concorde and
Bayfront agree to release each other from amounts payable to each other as
set forth therein, duly and validly executed by an authorized officer of
Goldcoast, in the form attached hereto as Exhibit D (the "Release"); and
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(g) a copy of the consulting agreement between Buyer and Michael A.
Hlavsa, duly and validly executed by Mr. Hlavsa.
Section 2.06. DELIVERIES BY BUYER. On or prior to Closing, the Buyer shall
deliver or cause to be delivered to Goldcoast, the Shareholders or the Escrow
Agent, as the case may be, the following:
(a) a copy of this Agreement, duly and validly executed by an
authorized officer of Buyer;
(b) a certificate, dated as of the Closing Date, executed on behalf of
Buyer, by Buyer's Chairman of the Board and Chief Executive Officer in the
form attached hereto as Exhibit E;
(c) a copy of the Escrow Agreement, duly and validly executed by an
authorized officer of Buyer;
(d) the Purchase Price;
(e) a copy of the Release duly and validly executed by an authorized
officer of Concorde; and
(f) a copy of the Consulting Agreement duly and validly executed by an
authorized officer of Buyer and delivered to Mr. Hlavsa.
Section 2.07. ALLOCATION OF PURCHASE PRICE. The Parties agree that the
Purchase Price shall be allocated 100% to the Partnership Interests and that
such allocation will be used by the Parties in reporting the transactions
contemplated hereby for federal, state, county and local tax purposes.
Section 2.08. FURTHER ASSURANCES. At any time and from time to time after
the Closing Date, at the request of Buyer and without further consideration,
Goldcoast or its officers will execute and deliver such other instruments of
sale, transfer, conveyance, assignment and confirmation as may be reasonably
requested in order to more effectively transfer, convey and assign to the
applicable Buyer and to confirm such Buyer's title to the Partnership Interests.
Subject to the terms and conditions hereof, each Party hereto shall use its
reasonable best efforts to take all action required of it to fulfill its
obligations under the terms of this Agreement and to facilitate the consummation
of the transactions contemplated hereby.
ARTICLE III
REPRESENTATIONS AND WARRANTIES BY GOLDCOAST AND THE SHAREHOLDERS
Goldcoast and the Shareholders, jointly and severally, represent and
warrant to Buyer as of the date of this Agreement, as follows:
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Section 3.01. DUE INCORPORATION. Goldcoast is duly organized, validly
existing and in good standing under the laws of the state of its organization,
with all requisite power and authority to own, lease and operate its properties
and to carry on its business as they are now being owned, leased, operated and
conducted.
Section 3.02. NO SUBSIDIARIES. Goldcoast has no direct or indirect
Subsidiaries, either wholly or partially owned, and Goldcoast does not hold any
direct or indirect economic, voting or management interest in any Person or
directly or indirectly own any security issued by any Person.
Section 3.03. DUE AUTHORIZATION. Goldcoast has full power and authority to
enter into this Agreement and the other Related Agreements to which it is a
party and to consummate the transactions contemplated hereby and thereby. This
Agreement and the Related Agreements to which it is a party, have been duly
authorized and approved by all necessary corporate action on the part of
Goldcoast. Goldcoast has duly and validly executed and delivered this Agreement
and the other Related Agreements to which it is a party. This Agreement and each
Related Agreement to which Goldcoast is a party constitutes the legal, valid and
binding obligation of Goldcoast enforceable in accordance with their respective
terms, except as such enforceability may be limited by applicable bankruptcy,
insolvency, moratorium, reorganization or similar laws in effect that affect the
enforcement of creditors' rights generally and by equitable limitations on the
availability of specific remedies.
Section 3.04. CONSENTS AND APPROVALS; AUTHORITY RELATIVE TO THIS AGREEMENT.
(a) Except as set forth on Schedule 3.04(a), no consent, authorization
or approval of, filing or registration with, or cooperation from, any
Governmental Authority or any other Person not a party to this Agreement is
necessary in connection with the execution, delivery and performance by
Goldcoast of this Agreement, the Related Agreements to which Goldcoast is a
party or the consummation of the transactions contemplated hereby or
thereby.
(b) The execution, delivery and performance by Goldcoast of this
Agreement and the Related Agreements to which Goldcoast is a party does not
and will not, and the consummation of the transactions contemplated hereby
and thereby does not and will not, (i) violate any Law; (ii) violate or
conflict with, result in a breach or termination of, constitute a default
or give any third party any additional right (including any right of
termination or acceleration or right of acceleration) under, permit
cancellation of, result in the creation of any Lien upon any of the assets
or properties of Goldcoast under, or result in or constitute a circumstance
which, with or without notice or lapse of time or both, would constitute
any of the foregoing under, any Contract to which Goldcoast is a party or
by which Goldcoast or any of its assets or properties are bound; (iii)
permit the acceleration of the maturity of any indebtedness of Goldcoast or
indebtedness secured by its assets or properties; or (iv) violate or
conflict with any provision of the articles of incorporation and bylaws of
Goldcoast.
Section 3.05. TITLE TO PARTNERSHIP INTERESTS. Except as set forth on
Schedule 3.05, Goldcoast (i) owns all right, title and interest to the
Partnership Interests in the Companies, free
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and clear of any Lien, restriction on sale or transfer (other than restrictions
imposed by applicable securities laws), preemptive right, limitations on voting
rights or option or requirement to make any capital contributions that have not
previously been made and (ii) has the authority to dispose of such Partnership
Interests to Buyer pursuant to this Agreement.
Section 3.06. FINANCIAL STATEMENTS; UNDISCLOSED LIABILITIES; OTHER
DOCUMENTS.
(a) To Goldcoast's Knowledge, the Financial Statements of the
Companies have been prepared in accordance with generally accepted
accounting principles consistently applied ("GAAP"), subject to any
qualifications set forth in the applicable notes and schedules, present
fairly the financial condition of each Company as of such dates and the
results of operations of each Company for such periods, include all
adjustments that are necessary for a fair presentation of the information
shown, are correct and complete in all material respects, and are
consistent with the books and records of each Company (which books and
records are true and complete in all material respects). The Financial
Statements of the Companies reflect reserves appropriate and adequate for
all known liabilities and reasonably anticipated losses as required by GAAP
(including appropriate and adequate reserves for inventory, bad debt and
accrued liabilities). Goldcoast has disclosed to Buyer all material facts
relating to the preparation of the Financial Statements.
(b) Except as set forth on Schedule 3.06 or in the balance sheet dated
as of February 29, 2000 (the "Balance Sheet Date") for each Company, to
Goldcoast's Knowledge, the Companies have no liabilities, debts, claims or
obligations, whether accrued, absolute, contingent or otherwise, whether
due or to become due, other than trade payables and accrued expenses
incurred in the ordinary course of business since the Balance Sheet Date.
Except as set forth on Schedule 3.06, the Companies have no liabilities not
directly related to, and that did not arise directly out of, the business
of the Companies.
Section 3.07. MANAGEMENT OF BAYFRONT AND PRINCESA. (a) Except as set forth
on Schedule 3.07, Goldcoast, in its capacity as a general partner and/or manager
of the Companies, has conducted the business of the Companies in the ordinary
course consistent with past practices and in accordance with the terms of the
Joint Venture Agreements, and to Goldcoast's Knowledge, since the date of the
Financial Statements, there has not been any Material Adverse Effect and there
is no condition or development or contingency of any kind existing that could
reasonably be expected to result in a Material Adverse Effect on the Companies.
Section 3.08. CONTRACTS.
(a) Each of the Contracts to which either of the Companies is a party
were entered into in accordance with the terms and provisions of the Joint
Venture Agreement (the "Company Contracts").
(b) Except as set forth on Schedule 3.08(b), each Company Contract is
valid and in full force and effect, and is enforceable by each applicable
Company in
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accordance with its material terms, except as enforceability may be limited
by bankruptcy and other similar laws and general principles of equity.
(c) Except as set forth on Schedule 3.08(c), neither the Companies
nor, to the Knowledge of Goldcoast and the Shareholders, any party to a
Company Contract is in default under any Company Contract. To the Knowledge
of Goldcoast and the Shareholders, no event has occurred, and no
circumstance or condition exists, that likely would (with or without notice
or lapse of time) (A) result in a violation or breach of any of the
provisions of any Company Contract, (B) give any Person the right to
declare a default or exercise any remedy or hinder any Company Contract,
(C) give any Person the right to accelerate the maturity or performance of
any Company Contract, or (D) give any Person the right to cancel, terminate
or modify any Company Contract.
(d) Except as set forth on Schedule 3.08(d), the Company has not
received from any party to any Company Contract notification of a claim to
the effect that either Company has failed to perform a material obligation
thereunder. In addition, to the Knowledge of Goldcoast and the
Shareholders, there is no plan, intention or indication of any contracting
party to any Company Contract to cause the termination, cancellation or
modification of such Contract or to reduce or otherwise change its activity
thereunder so as to adversely affect the benefits derived or expected to be
derived therefrom by the Companies.
(e) The Company Contracts collectively constitute all of the Contracts
necessary to enable the Companies to conduct their respective business in
the manner in which such business is currently being conducted. Goldcoast
has made available to Buyer a copy of each Company Contract.
Section 3.09. LITIGATION. Except as set forth on Schedule 3.09, there are
no claims, actions, suits, arbitrations, grievances, proceedings or
investigations pending or, to the Knowledge of Goldcoast or any Shareholder,
threatened against the Companies, Goldcoast or any Shareholder, at law, in
equity or before any Governmental Authority involving the Companies, the
Partnership Interests or the transactions contemplated by this Agreement and any
Related Agreements.
Section 3.10. ACCURACY OF STATEMENTS. Neither this Agreement nor any
schedule, statement, list, document, certificate or other information furnished
or to be furnished by or on behalf of Goldcoast or the Shareholders to Buyer or
any representative or Affiliate of Buyer in connection with this Agreement, the
Related Agreements or any of the transactions contemplated hereby or thereby
contains or will contain any untrue statement of a material fact or omits or
will omit to state a material fact necessary to make the statements contained
herein or therein, in light of the circumstances in which they are made, not
misleading.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS
Each Shareholder, severally, represents and warrants to Buyer, as of the
date of this Agreement, as follows:
Section 4.01. SHAREHOLDERS' POWER AND AUTHORITY. The Shareholders have
legal capacity to execute, deliver and perform this Agreement and the other
Related Agreements to which the Shareholders are a party. This Agreement and
each of the Related Agreements to which the Shareholders are a party have been
duly executed and delivered by each Shareholder, constitutes a legal, valid and
binding obligation of such Shareholders, enforceable against each Shareholder in
accordance with its terms, except as enforcement thereof may be limited by
liquidation, conservatorship, bankruptcy, insolvency, reorganization, moratorium
or similar laws affecting the enforcement of creditors' rights generally from
time to time in effect and except that equitable remedies are subject to
judicial discretion.
Section 4.02. OWNERSHIP OF GOLDCOAST. The Shareholders, collectively, own
100% of the issued and outstanding capital stock of Goldcoast.
Section 4.03. EFFECT OF AGREEMENT ON THE SHAREHOLDERS. Neither the
execution and delivery of this Agreement nor the Related Agreements to which the
Shareholders are a party nor the consummation of the transactions contemplated
hereby or thereby will: (i) result in the acceleration, breach or termination
of, or the creation in any party of the right to accelerate, terminate, modify,
cancel or require any notice under, any Contract or other obligation or
liability to which the Shareholders are a party or is bound or to which the
Shareholders' assets are subject, (ii) conflict with or violate any Law
applicable to the Shareholders by which any of their properties or assets are
bound or affected, or (iii) result in the creation of any Lien upon the
Partnership Interests or any assets, tangible or intangible, of the
Shareholders.
Section 4.04. AGREEMENTS AMONG SHAREHOLDERS. There are no agreements,
written or oral, between Goldcoast and any Shareholder relating to the
acquisition (including without limitation rights of first refusal or pre-emptive
rights), disposition or otherwise of the Partnership Interests.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
Each Buyer represents and warrants to Goldcoast and the Shareholders, as of
the date of this Agreement, as follows:
Section 5.01. DUE INCORPORATION. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of its state of
organization, with all requisite power and authority to own, lease and operate
its properties and to carry on its business as they are now being owned, leased,
operated and conducted.
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Section 5.02. DUE AUTHORIZATION. Buyer has full power and authority to
enter into this Agreement and the Related Agreements to which Buyer is a party
and to consummate the transactions contemplated hereby and thereby. This
Agreement and the Related Agreements to which it is a party, have been duly
authorized and approved by all necessary corporate action on the part of Buyer.
Buyer has duly and validly executed and delivered this Agreement and the other
Related Agreements to which it is a party. This Agreement and each Related
Agreement to which Buyer is a party constitutes the legal, valid and binding
obligation of Buyer enforceable in accordance with their respective terms,
except as such enforceability may be limited by applicable bankruptcy,
insolvency, moratorium, reorganization or similar laws in effect which affect
the enforcement of creditors' rights generally and by equitable limitations on
the availability of specific remedies.
Section 5.03. CONSENTS AND APPROVALS; AUTHORITY RELATIVE TO THIS AGREEMENT.
(a) Except as set forth on Schedule 5.03, no consent, authorization or
approval of, filing or registration with, or cooperation from, any
Governmental Authority or any other Person not a party to this Agreement is
necessary in connection with the execution, delivery and performance by
Buyer of this Agreement and the Related Agreements to which Buyer is a
party and the consummation of the transactions contemplated hereby and
thereby.
(b) The execution, delivery and performance by Buyer of this Agreement
and the Related Agreements to which Buyer is a party do not and will not,
and the consummation of the transactions contemplated hereby and thereby
does not and will not, (i) violate any Law, or (ii) violate or conflict
with any provision of the articles of incorporation, bylaws or similar
organizational instruments of Buyer.
Section 5.04. LITIGATION. Except as set forth on Schedule 5.04, there are
no claims, actions, suits, arbitrations, grievances, proceedings or
investigations pending or, to the Knowledge of Buyer, threatened against Buyer,
at law, in equity or before any Governmental Authority involving Buyer or the
transactions contemplated by this Agreement and any Related Agreements.
Section 5.05. ACCURACY OF STATEMENTS. Neither this Agreement nor any
schedule, statement, list, document, certificate or other information furnished
or to be furnished by or on behalf of Buyer to Goldcoast or the Shareholders or
any representative or Affiliate of Goldcoast or the Shareholders in connection
with this Agreement, the Related Agreements or any of the transactions
contemplated hereby or thereby contains or will contain any untrue statement of
a material fact or omits or will omit to state a material fact necessary to make
the statements contained herein or therein, in light of the circumstances in
which they are made, not misleading.
ARTICLE VI
TAX REPRESENTATIONS AND COVENANTS
Section 6.01. TAX REPRESENTATIONS. Goldcoast and each Shareholder, jointly
and severally, represents and warrants to Buyer as of the date hereof, that to
the Knowledge of
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Goldcoast and the Shareholders, all materials and information provided by
Goldcoast regarding returns required to be filed by or on behalf of the
Companies on or before the Closing Date have been (or will be) provided on a
timely basis and such materials are (or will be) true, complete and correct.
ARTICLE VII
ADDITIONAL AGREEMENTS OF THE PARTIES
Section 7.01. PUBLIC ANNOUNCEMENTS. Each of the Parties acknowledges the
importance of appropriate disclosures in positioning the relationship between
the two companies to the distribution channel, the press, customers and others.
Goldcoast and the Shareholders agree to make no press releases or other public
announcements regarding this Agreement without Buyer's prior written consent.
Section 7.02. CONFIDENTIALITY. Goldcoast and the Shareholders will treat
and hold as such all Confidential Information, refrain from using any of the
Confidential Information except in connection with this Agreement, and deliver
promptly to Buyer or destroy, at the request and option of Buyer, all tangible
embodiments (and all copies) of the Confidential Information that are in its or
his possession. In the event that Goldcoast or any Shareholder is requested or
required (by oral question or request for information or documents in any legal
proceeding, interrogatory, subpoena, civil investigative demand, or similar
process) to disclose any Confidential Information, that Party will promptly
notify the Buyer of the request or requirement so that the Buyer may seek an
appropriate protective order or waive compliance with the provisions of this
Section 7.02. If, in the absence of a protective order or the receipt of a
waiver hereunder, Goldcoast or the Shareholders are, on the advice of counsel,
compelled to disclose any Confidential Information to any tribunal or else stand
liable for contempt, that Party may disclose the Confidential Information to the
tribunal; provided, however, that the disclosing Party shall use best efforts to
obtain, at the request of the Buyer, an order or other assurance that
confidential treatment will be accorded to such portion of the Confidential
Information required to be disclosed as the Buyer shall designate.
Section 7.03. PERSONAL GUARANTEES. Buyer will use its reasonable efforts to
assist the Shareholders in releasing the personal guarantees of each Shareholder
for contracts or obligations arising from or relating to the business of the
Companies. In the event that the Buyer cannot secure the release of the Personal
Guarantees, Buyer shall indemnify and hold harmless each Shareholder from any
and all damage, loss, liability and expense (including without limitation
reasonable expenses of investigation and reasonable attorneys' fees and expenses
in connection with any action, suit or proceeding) incurred or suffered by
either Shareholder arising out of the Personal Guarantees.
ARTICLE VIII
INDEMNIFICATION
Section 8.01. SURVIVAL. The covenants, agreements, representations and
warranties of the Parties contained in this Agreement or in any certificate or
other writing delivered pursuant
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hereto or in connection herewith shall survive the Closing (i) until the first
anniversary of the Closing Date, except in the case of fraud, in which case such
representations and warranties shall survive indefinitely, and (ii) the
representations and warranties contained in Section 3.05 and the covenants
contained in Section 7.02 shall survive indefinitely. Notwithstanding the
preceding sentence, any covenant, agreement, representation or warranty in
respect of which indemnity may be sought under this Agreement shall survive the
time at which it would otherwise terminate pursuant to the preceding sentence,
if notice of the inaccuracy or breach thereof giving rise to such right of
indemnity shall have been given to the Party against whom such indemnity may be
sought prior to such time.
Section 8.02. INDEMNIFICATION OBLIGATIONS.
(a) Indemnification by Goldcoast and the Shareholders. Goldcoast and
the Shareholders shall indemnify, defend and hold harmless Buyer and its
Affiliates (the "Indemnification Obligation") from, against and in respect
of any and all Losses resulting from, relating to or arising out of:
(i) any misrepresentation, inaccuracy in or breach of
representations or warranties contained in this Agreement or any
Related Agreements;
(ii) any failure to perform, satisfy or observe or the
non-fulfillment of any agreement or covenant on the part of Goldcoast
or the Shareholders contained in this Agreement or any Related
Agreements; and
(iii) any claim, action, suit, arbitration, grievance, proceeding
or investigation brought by third party involving Goldcoast as a
general partner of either of the Companies for any period of time on
or prior to closing;
provided, however, the maximum indemnification obligation of Goldcoast and the
Shareholders to Buyer shall not exceed an aggregate of $300,000; provided,
further that nothing contained in this Section 8.02(a) shall be deemed to limit
or restrict in any manner (whether by time, amount, procedure or otherwise) any
remedy at law or in equity to which Buyer may be entitled as a result of actual
fraud by the Shareholders or Goldcoast.
(b) Indemnification by Buyer. Buyer shall indemnify, defend and hold
harmless Goldcoast from, against and in respect of any and all Losses
resulting from, relating to or arising out of:
(i) any misrepresentation, inaccuracy in or breach of
representations and warranties contained in this Agreement or any
Related Agreement; and
(ii) any failure to perform, satisfy, or observe or the
non-fulfillment of any agreement or covenant on the part of Buyer
contained in this Agreement or any Related Agreement.
Section 8.03. METHOD OF ASSERTING CLAIMS, ETC. All claims for
indemnification under this Article VIII shall be asserted and resolved as
follows:
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(a) In the event that any claim or demand for which an Indemnifying
Person would be liable to an Indemnified Person hereunder is asserted
against or sought to be collected by a third party, the Indemnified Person
shall:
(i) promptly notify the Indemnifying Person of such claim or
demand, specifying the nature of such claim or demand and the amount
or the estimated amount thereof to the extent then feasible (which
estimate shall not be conclusive of the final amount of such claim or
demand) (the "Claim Notice"); provided, however, that the failure of
an Indemnified Person to give notice as provided herein shall not
relieve an Indemnifying Person of its obligations under this Article
VIII, except to the extent the Indemnifying Person is prejudiced
thereby;
(ii) an Indemnifying Person shall have 15 calendar days from
their receipt of the Claim Notice (the "Notice Period") to notify the
Indemnified Person (x) whether or not the Indemnifying Person disputes
its liability to the Indemnified Person hereunder with respect to such
claim or demand, and (y) if they do not dispute such liability,
whether or not they desire, at their sole cost and expense, to defend
the Indemnified Person against such claim or demand; provided,
however, that the Indemnified Person is hereby authorized prior to and
during the Notice Period to file any motion, answer or other pleading
which it shall deem necessary or appropriate to protect its interests;
(iii) in the event that the Indemnifying Person notifies the
Indemnified Person within the Notice Period that the Indemnifying
Person does not dispute such liability and desires to defend against
such claim or demand, then except as hereinafter provided, the
Indemnifying Person shall have the right to defend by appropriate
proceedings, which proceedings shall be promptly settled or prosecuted
to a final conclusion in such a manner as to avoid any risk of the
Indemnified Person becoming subject to liability for any other matter;
(iv) if the Indemnified Person desires to participate in, but not
control, any such defense or settlement it may do so at its sole cost
and expense; provided, however, that the Indemnifying Person shall pay
such expense if representation of the Indemnified Person by the
counsel retained by the Indemnifying Person would be inappropriate due
to actual or potential differing interests between the Indemnified
Person and any other party represented by such counsel in such
proceeding;
(v) if, in the reasonable opinion of the Indemnified Person, any
such claim or demand involves an issue or matter which could have a
Material Adverse Effect on the business, operations, assets,
properties or prospects of the Indemnified Person, or Affiliate of the
Indemnified Person, the Indemnified Person shall have the right to
control the defense or settlement of any such claim or demand, and its
reasonable costs and expenses thereof shall be included as part of the
Indemnification Obligations of the Indemnified Person hereunder and,
with respect to subsections (iv) and (v) the Indemnifying Person shall
make available
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to the Indemnified Person any documents and materials in his or her
possession or control that may be necessary or useful to such defense;
and/or
(vi) if the Indemnifying Person disputes the Indemnifying
Person's liability with respect to such claim or demand or elects not
to defend against such claim or demand, whether by not giving timely
notice as provided above or otherwise, then the amount of any such
claim or demand, or, if the same be contested by the Indemnifying
Person or by the Indemnified Person (but the Indemnified Person shall
not have any obligation to contest any such claim or demand), then
that portion thereof as to which such defense is unsuccessful, shall
be conclusively deemed to be a liability of the Indemnifying Person
hereunder (subject, if the Indemnifying Person has timely disputed
liability, to a determination that the disputed liability is covered
by these indemnification provisions).
(b) In the event the Indemnified Person should have a claim against
the Indemnifying Person hereunder which does not involve a claim or demand
being asserted against or sought to be collected from it by a third party,
the Indemnified Person shall promptly send a Claim Notice with respect to
such claim to the Indemnifying Person. If the Indemnifying Person does not
notify the Indemnified Person within the Notice Period that they dispute
such claim, the amount of such claim shall be conclusively deemed a
liability of the Indemnifying Person hereunder.
(c) Nothing herein shall be deemed to prevent any Indemnified Person
from making a claim hereunder for potential or contingent claims or demands
provided the Claim Notice sets forth the specific basis for any such
potential or contingent claim or demand and the estimated amount thereof to
the extent then feasible and the Indemnified Person has reasonable grounds
to believe that such a claim or demand will be made.
(d) As used herein, a "Final Determination" of a disputed claim shall
mean (i) as to third party claims, a judgment of any court determining the
validity of a disputed claim, if no appeal is pending from such judgment or
if the time to appeal therefrom has elapsed; (ii) as between Goldcoast, any
Shareholder and/or the Buyer an award of any arbitration determining the
validity of such disputed claim; (iii) a written agreement as to the
termination of the dispute with respect to such claim signed by all of the
Parties thereto or their attorneys; (iv) a written acknowledgement of the
Indemnifying Person that he or it no longer disputes the validity of such
claim; or (v) such other evidence of final determination of a disputed
claim as shall be acceptable to the Parties.
Section 8.04. ARBITRATION. All disputes under this Article VIII and all
other controversies or claims arising out of or relating to this Agreement, or
the breach thereof, not subject to a third party claim, shall be settled by
arbitration in accordance with the Commercial Arbitration Rules of the American
Arbitration Association in Denver, Colorado if Goldcoast or the Shareholders
request such arbitration or in Miami, Florida if Buyer requests such
arbitration. One arbitrator shall be selected by the Indemnifying Persons or
Parties, one arbitrator shall be selected by the Indemnified Person, and the
third arbitrator shall be chosen by the first two arbitrators chosen. The cost
and expense of arbitration shall be shared equally by the Parties to
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the arbitration, regardless of which Party or Parties prevail. The arbitration
shall be conducted in accordance with the following time schedule unless
otherwise mutually agreed to in writing by the Parties: (i) Parties to the
arbitration proceeding shall each appoint their respective arbitrator within 15
Business Days after the end of the Notice Period; (ii) within five Business Days
thereafter, such arbitrators shall appoint the third arbitrator; (iii) within 10
Business Days after the appointment of the third arbitrator, Parties to the
arbitration proceeding shall provide all documents, records and supporting
information reasonably necessary to resolve the dispute; and (iv) within 15
Business Days after the date the above records are due, the arbitrators shall
render their decision. The decision or award of the arbitrators shall be final
and binding upon the Parties hereto to the same extent and to the same degree as
if the matter had been adjudicated by a court of competent jurisdiction and
shall be enforceable under the Federal Arbitration Act.
Section 8.05. PAYMENT.
(a) As partial security for the Indemnification Obligations of the
Shareholders to Buyer set forth in Section 8.02(a), the Indemnity Amount
shall be deposited into the Indemnity Escrow in accordance with Section
2.03 hereof and the terms of the Escrow Agreement. In the event that any
amounts are due and owing to Buyer under the indemnification provisions of
this Article VIII, Buyer shall be entitled to offset such amounts against
the Indemnity Amount pursuant to the terms and provisions of the Escrow
Agreement. If the Indemnity Amount is insufficient, the Buyer may, in its
sole discretion, seek payment for such amount directly from Goldcoast or
the Shareholders, as the case may be.
(b) Except as set forth in Section 8.05(a), in the event that any
Party is required to make any payment under this Article VIII, such Party
shall promptly pay the Indemnified Person the amount so determined. If
there should be a dispute as to the amount or manner of determination of
any indemnity obligation owed under this Article VIII, the Party from which
indemnification is due shall nevertheless pay when due such portion, if
any, of the obligation as shall not be subject to dispute. The difference,
if any, between the amount of the obligation ultimately determined as
properly payable under this Article VIII and the portion, if any,
theretofore paid shall bear interest as provided in Section 8.05(d). Upon
the payment in full of any claim, either by setoff or otherwise, the Party
or Person making payment shall be subrogated to the rights of the
Indemnified Person against any Person with respect to the subject matter of
such claim.
(c) The foregoing indemnification provisions are in addition to, and
not in derogation of, any statutory or common law remedy any Party may have
for breach of representation, warranty, or covenant.
(d) If all or part of any Indemnification Obligation under this
Agreement is not paid when due, then the Indemnifying Person or parties
shall pay the Indemnified Person or parties interest on the unpaid amount
of the obligation for each day from the date the amount became due until
payment in full, payable on demand, at the "prime rate" set forth in The
Wall Street Journal on the date the payment was due.
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Section 8.06. EQUITABLE RELIEF. In the event of a breach or threatened
breach by any Shareholder of Section 7.02 hereof, each Shareholder hereby
consents and agrees that Buyer shall be entitled to an injunction or similar
equitable relief restraining the breaching party from committing or continuing
any such breach or threatened breach or granting specific performance of any act
required to be performed by such Shareholders under any such provision, without
the necessity of showing any actual damage or that money damages would not
afford an adequate remedy and without the necessity of posting any bond or other
security. Nothing herein shall be construed as prohibiting Buyer, Goldcoast or
the Shareholders from pursuing any other remedies at law or in equity which it
may have.
ARTICLE IX
MISCELLANEOUS
Section 9.01. EXPENSES. Goldcoast shall pay all expenses of the
Shareholders and Goldcoast (including attorneys' fees and expenses) and Buyer
shall pay all expenses of Buyer (including attorneys' fees and expenses), in
each case incurred in connection with this Agreement and the transactions
contemplated hereby. Goldcoast shall pay all sales, use, stamp, transfer,
service, recording, real estate and like taxes or fees, if any, imposed by any
Governmental Authority in connection with the transfer and assignment of the
Partnership Interests.
Section 9.02. AMENDMENT. This Agreement may be amended, modified or
supplemented but only in writing signed by the Parties.
Section 9.03. NOTICES. Any notice, request, instruction or other document
to be given hereunder by a Party hereto shall be in writing and shall be deemed
to have been given, (a) when received if given in person or by courier or a
courier service, (b) on the date of transmission if sent by facsimile or other
wire transmission, or (c) four Business Days after being deposited in the U.S.
or Canadian mail, certified or registered mail, postage prepaid:
(a) If to David Grossman, addressed as follows:
1429 Capri Lane, #5113
Weston, Florida 33326
Attention: David Grossman
Telephone No.: (954)385-1003
Facsimile No.: (954)385-1004
with a copy to:
Haley, Sinagra & Perez, P.A.
100 South Biscayne Blvd., Suite 800
Miami, Florida 33131
Attention: Al Perez, Esq.
Telephone No.: (305)374-1300
Facsimile No.: (305)358-8305
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(b) If to Michael Hlavsa, addressed as follows:
Michael Hlavsa
2221 SW 131 Terrace
Davie, Florida 33325
Telephone No.: (954) 476-4300
with a copy to:
Cohen, Berke, Bernstein, Brodie & Kondell, P.A.
2601 South Bayshore Drive, 19th Floor
Miami, Florida 33133
Attention: Richard Bernstein, Esq.
Telephone No.: (305)854-5900
Facsimile No.: (305)857-0857
(c) If to Goldcoast, addressed as follows:
Goldcoast Entertainment Cruises, Inc.
100 S. Biscayne Blvd., Suite 850
Miami, Florida 33132
Attention: Michael Hlavsa
Telephone No.: (305)379-4422
Facsimile No.: (305)379-5522
(d) If to Buyer, addressed as follows:
Concorde Cruises, Inc.
c/o Concorde Gaming Corporation
3290 Lien Street
Rapid City, South Dakota 57702
Attention: Jerry L. Baum, President
Telephone No.: (605)341-7738
Facsimile No.: (605)342-0247
with a copy to:
Morrison & Foerster LLP
5200 Republic Plaza
370 17th Street
Denver, Colorado 80202
Attention: Warren L Troupe, Esq.
Telephone No.: (303)592-1500
Facsimile No.: (303)592-1510
or to such other individual or address as a Party hereto may designate for
itself by notice given as herein provided.
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Section 9.04. WAIVERS. The failure of a Party hereto at any time or times
to require performance of any provision hereof shall in no manner affect its
right at a later time to enforce the same. No waiver by a Party of any condition
or of any breach of any term, covenant, representation or warranty contained in
this Agreement shall be effective unless in writing, and no waiver in any one or
more instances shall be deemed to be a further or continuing waiver of any such
condition or breach in other instances or a waiver of any other condition or
breach of any other term, covenant, representation or warranty.
Section 9.05. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, and by different Parties hereto in separate counterparts, each of
which when so executed shall be deemed an original, but all of which together
shall constitute one and the same instrument. Signatures on the Agreement may be
communicated by facsimile transmission and shall be binding upon the Party
transmitting the same by facsimile transmission.
Section 9.06. INTERPRETATION. The headings preceding the text of Articles
and Sections included in this Agreement and the headings to Schedules attached
to this Agreement are for convenience only and shall not be deemed part of this
Agreement or be given any effect in interpreting this Agreement. The use of the
masculine, feminine or neuter gender herein shall not limit any provision of
this Agreement. The use of the terms "including" or "include" shall in all cases
herein mean "including, without limitation" or "include, without limitation,"
respectively. References to Articles, Sections, Subsections or Schedules shall
refer to those portions of this Agreement. Consummation of the transactions
contemplated herein shall not be deemed a waiver of a breach of or inaccuracy in
any representation, warranty or covenant or of any Party's rights and remedies
with regard thereto. No specific representation, warranty or covenant contained
herein shall limit the generality or applicability of a more general
representation, warranty or covenant contained herein. A breach of or inaccuracy
in any representation, warranty or covenant shall not be affected by the fact
that any more general or less general representation, warranty or covenant was
not also breached or inaccurate.
Section 9.07. APPLICABLE LAW. This Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the State of
Florida without giving effect to the principles of conflicts of law thereof.
Section 9.08. ASSIGNMENT. This Agreement shall be binding upon and inure to
the benefit of the Parties hereto and their respective estates, heirs, legal
representatives, successors and assigns; provided, however, that no assignment
of any rights or obligations shall be made by any Party hereto without the
written consent of each other Party hereto, except that Buyer may assign its
rights hereunder, but not its obligations, without such consent to any Affiliate
of Buyer.
Section 9.09. NO THIRD-PARTY BENEFICIARIES. This Agreement is solely for
the benefit of the Parties hereto and, to the extent provided herein, their
respective estates, heirs, successors, Affiliates, directors, officers,
employees, agents and representatives, and no provision of this Agreement shall
be deemed to confer upon other third parties any remedy, claim, liability,
reimbursement, cause of action or other right.
Section 9.10. SEVERABILITY. If any provision of this Agreement shall be
held invalid, illegal or unenforceable, the validity, legality or enforceability
of the other provisions hereof
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<PAGE> 24
shall not be affected thereby, and there shall be deemed substituted for the
provision at issue a valid, legal and enforceable provision as similar as
possible to the provision at issue.
Section 9.11. REMEDIES CUMULATIVE. Unless otherwise specified, the remedies
provided in this Agreement shall be cumulative and shall not preclude the
assertion or exercise of any other rights or remedies available by law, in
equity or otherwise.
Section 9.12. ENTIRE UNDERSTANDING. This Agreement, together with all
Exhibits and Schedules referenced herein, and the Related Agreements set forth
the entire agreement and understanding of the Parties hereto and supersede any
and all prior agreements, arrangements and understandings among the Parties.
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<PAGE> 25
IN WITNESS WHEREOF, the Parties hereto have executed and delivered or
caused this Agreement to be executed and delivered by their authorized
representatives as of the date first above written.
BUYER:
CONCORDE CRUISES, INC.
By: /s/ JERRY L. BAUM
----------------------------------------
Name: Jerry L. Baum
Title: President
GOLDCOAST:
GOLDCOAST ENTERTAINMENT CRUISES,
INC.
By: /s/ MICHAEL A. HLAVSA
----------------------------------------
Name: Michael A. Hlavsa
Title: President
SHAREHOLDERS:
/s/ MICHAEL A. HLAVSA
-------------------------------------------
Michael A. Hlavsa
/s/ DAVID GROSSMAN
-------------------------------------------
David Grossman
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EXHIBIT A
ESCROW AGREEMENT
A-1
<PAGE> 27
EXHIBIT B
FORM OF ASSIGNMENT OF PARTNERSHIP INTERESTS
B-1
<PAGE> 28
EXHIBIT C
FORM OF GOLDCOAST'S OFFICERS CERTIFICATE
C-1
<PAGE> 29
EXHIBIT D
FORM OF MUTUAL RELEASE
D-1
<PAGE> 30
EXHIBIT E
FORM OF BUYER'S OFFICERS CERTIFICATE
E-1
<PAGE> 1
EXHIBIT 10.2
ESCROW AGREEMENT
This Escrow Agreement (this "Escrow Agreement") dated March 31, 2000
("Effective Date") is entered into by and among Concorde Cruises, Inc., a South
Dakota corporation ("Buyer"), Goldcoast Entertainment Cruises, Inc., a Florida
corporation ("Goldcoast"), and National City Bank of Evansville, as escrow agent
(the "Escrow Agent").
RECITALS
A. Buyer, Goldcoast and Michael A. Hlavsa and David Grossman (collectively,
the "Shareholders") have entered into that certain Partnership Interest Purchase
Agreement dated March 31, 2000 (the "Purchase Agreement") attached hereto as
Exhibit A, whereby Buyer shall purchase Goldcoast's interest in Bayfront
Ventures, a Florida general partnership, and Princesa Partners, a Florida
general partnership (collectively, the "Partnerships").
B. The Purchase Agreement provides for Goldcoast and the Shareholders to
indemnify Buyer for certain expenses and liabilities in accordance with the
terms and provisions contained in Article VIII of the Purchase Agreement.
C. The Purchase Agreement requires that Buyer deposit with the Escrow Agent
the sum of $75,000 in cash (the "Indemnity Amount"), which shall be a fund
against which claims for indemnification against Goldcoast and the Shareholders
shall first be made.
D. The Purchase Agreement also requires Buyer to deposit the sum of
$375,000 in cash (the "Holdback Amount" and together with the Indemnity Amount,
the "Escrow Amounts"), which amount shall be payable to Buyer in the event that
prior to the Legislative Session Expiration Date any rule, law, regulation or
statute is adopted or enacted by a federal, state, local or other governmental
or quasi-governmental entity, or any decision or proceeding by a court or other
tribunal is given, that (i) prohibits or has a material adverse affect on the
business of the Companies as such business is currently conducted as of the date
of the Purchase Agreement, or (ii) permits Class III gaming on Indian
reservations (the "Holdback Distribution Event").
D. Capitalized terms used but not otherwise defined herein shall have the
meanings assigned to them in the Purchase Agreement.
NOW, THEREFORE, in consideration of the premises set forth above and other
good and valuable consideration, the receipt of which is hereby acknowledged,
the parties hereto agree as follows:
ARTICLE I
APPOINTMENT OF ESCROW AGENT
Section 1.01. APPOINTMENT OF ESCROW AGENT.
(a) The Escrow Agent is hereby appointed escrow agent in accordance
with the instructions set forth in this Escrow Agreement and National City
Bank of Evansville hereby agrees to act as the Escrow Agent under this
Escrow Agreement. The Escrow
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Agent shall have no duty to enforce any provision hereof requiring
performance by any other party hereunder.
(b) The Escrow Agent hereby acknowledges receipt of an escrow deposit
as follows: (i) $75,000 for the Indemnity Amount; and (ii) $375,000 for the
Holdback Amount.
(c) The Escrow Agent shall not have any interest in the Escrow
Amounts, but shall serve as escrow holder only and have only possession
thereof. The Escrow Agent expressly waives any right to set off and
appropriate any amounts under the Escrow Amounts.
(d) The Escrow Agent shall establish two separate escrow accounts. One
account shall be for the Indemnity Amount (the "Indemnity Escrow") and the
second account shall be for the Holdback Amount (the "Holdback Escrow").
ARTICLE II
TAX
Section 2.01. TAX WITHHOLDING AND REPORTING.
(a) General. Any payments of income from the Escrow Amounts shall be
subject to any withholding required with respect to Taxes. For federal,
state and local income tax purposes, all interest earned on the Escrow
Amounts shall be reportable to Goldcoast. The Escrow Agent shall file
annually all information returns with the Internal Revenue Service and
other governmental authorities documenting such interest income. As
required by law, the parties hereto will provide Escrow Agent with
appropriate Internal Revenue Service Forms W-9 for tax identification
number certification, or non-resident alien, certifications.
(b) Tax Treatment of Payments. Any indemnification payments or
payments made in connection with a Holdback Distribution Event, whether
from the Indemnity Escrow or Holdback Escrow, shall be treated as
adjustments to the purchase price for all purposes.
ARTICLE III
ESCROW PROCEDURE
Section 3.01. CLAIM CERTIFICATES. Buyer, from time to time on or prior to
the first anniversary of the date of this Agreement (the "Termination Date"),
may make a claim for indemnification pursuant to Article VIII of the Purchase
Agreement, on behalf of itself or another indemnitee, for up to all of the
Indemnity Amount (a "Claim") by delivering to the Escrow Agent a certificate (a
"Claim Certificate") signed by an authorized officer of Buyer in substantially
the form of Exhibit B attached hereto; provided, however, that none of the
Indemnity Amount shall be distributed to Buyer by the Escrow Agent unless a
Final Determination has been made with respect to the Claim. If a Final
Determination has not been
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<PAGE> 3
made with respect to the Claim, the Claim Certificate shall include the
following additional information:
(a) a statement that Buyer or its Affiliates ("Buyer Indemnitee") is
entitled to be indemnified under Article VIII of the Purchase Agreement;
(b) the reasons therefore, set forth in reasonable detail;
(c) the amount of the Claim by Buyer Indemnitee, provided that where
the amount of the Claim is not a liquidated sum, the amount of the Claim
shall be the amount reasonably estimated by Buyer Indemnitee in good faith;
and
(d) a statement that Buyer Indemnitee has delivered a copy of such
Claim Certificate to Goldcoast and its legal counsel and the date on which
such copy was delivered.
Whenever a Claim Certificate is delivered to the Escrow Agent, the Escrow
Agent shall thereupon promptly deliver a copy to Goldcoast and its legal
counsel.
Section 3.02. DISPUTED CLAIMS. For any Claim in which a Final Determination
has not been made, Goldcoast may dispute such Claim in whole or in part (a
"Disputed Claim"), by delivering to the Escrow Agent a written notice (an
"Objection Notice") within fifteen (15) calendar days of receipt of the Claim
Certificate from Buyer (such date referred to herein as the "Last Notice Date")
stating:
(a) that Goldcoast disputes or objects to such Claim;
(b) the reasons for such objection or dispute, to the extent then
known;
(c) that Goldcoast has delivered a copy of the Objection Notice to
Buyer and its legal counsel and the date on which such copy was delivered;
and
(d) the portion of the Claim set forth in the Claim Certificate, if
any, to which there is no dispute or objection, including the dollar amount
of such portion of the Claim (an "Undisputed Claim").
Whenever there shall be delivered to the Escrow Agent an Objection Notice,
the Escrow Agent shall thereupon promptly deliver a copy to Buyer and its legal
counsel.
Section 3.03. PAYMENT OF CLAIMS.
(a) For Claims for which a Final Determination has been made and
submitted to the Escrow Agent, the Escrow Agent shall, within two (2)
business days after the date it receives the Claim Certificate, pay to
Buyer from the Indemnity Escrow an amount equal to the amount of the Claim
specified in the Final Determination.
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<PAGE> 4
(b) Claims for which a Final Determination has not been made shall be
paid as follows:
(i) If the Escrow Agent does not receive an Objection Notice by
the Last Notice Date, the Escrow Agent shall, within two business days
after such date, pay to Buyer from the Indemnity Escrow an amount
equal to the amount of the Claim specified in the Claim Certificate.
(ii) If the Escrow Agent receives from Goldcoast an Objection
Notice which consents or agrees to part of a Claim, the Escrow Agent
shall, within two (2) business days after the date it receives the
Objection Notice, pay to Buyer from the Indemnity Escrow an amount
equal to the aggregate amount of such Undisputed Claim as specified in
the Objection Notice from Goldcoast.
(c) If the Indemnity Amount is not sufficient to pay in full any
amounts payable to Buyer under the preceding Sections 3.03(a) or 3.03(b),
the Escrow Agent shall pay to Buyer such amount from the Indemnity Escrow
as is available and the Escrow Agent's obligations under this Escrow
Agreement shall terminate.
Section 3.04. DISTRIBUTION OF INDEMNITY ESCROW. Except as provided in
Section 3.03 hereof, the Escrow Agent shall not make any distribution of the
Indemnity Escrow with respect to any Claim made by Buyer hereunder until:
(a) it receives the written consent or agreement from Goldcoast with
respect to such distribution; or
(b) there is a Final Determination with respect to a Disputed Claim.
Section 3.05. TERMINATION OF INDEMNITY ESCROW. Unless earlier terminated
pursuant to Section 3.03(c):
(a) on the Termination Date, all of the Indemnity Amount (including
any interest earned thereon) held by the Escrow Agent pursuant to the terms
of this Escrow Agreement, less an amount equal to one hundred percent
(100%) of the amount of any Disputed Claims as set forth herein, shall be
paid by Escrow Agent to Goldcoast; and
(b) upon settlement of all Disputed Claims outstanding as of the
Termination Date, the Escrow Agent's obligations under this Escrow
Agreement shall terminate, and all remaining Indemnity Amounts (including
any interest earned thereon) held by the Escrow Agent shall be paid by the
Escrow Agent to Goldcoast in accordance with such settlement, written
notice of which shall be delivered to the Escrow Agent.
ARTICLE IV
HOLDBACK ESCROW
Section 4.01. HOLDBACK ESCROW. If a Holdback Distribution Event occurs
prior to Legislative Session Expiration Date, Buyer shall deliver to the Escrow
Agent a certificate ("Officer's Certificate") signed by an authorized officer of
Buyer in substantially the form of
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<PAGE> 5
Exhibit C attached hereto; provided, however, that none of the Holdback Amount
shall be distributed to Buyer by the Escrow Agent unless Goldcoast fails to
object to the Officer's Certificate in the requisite time period or until the
dispute over the matters set forth in such Officer's Certificate are resolved as
set forth in Section 4.03 hereof.
Whenever an Officer's Certificate is delivered to the Escrow Agent, the
Escrow Agent shall thereupon promptly deliver a copy to Goldcoast and its
counsel.
Section 4.02. DISPUTED CLAIMS. Goldcoast may dispute such Officer's
Certificate by delivering to the Escrow Agent a written notice (a "Holdback
Objection Notice") within fifteen (15) calendar days of receipt of the Officer's
Certificate from Buyer stating:
(a) that Goldcoast disputes or objects to such Officer's Certificate;
(b) the reasons for such objection or dispute; and
(c) that Goldcoast has delivered a copy of the Holdback Objection
Notice to Buyer and its legal counsel and the date on which such copy was
delivered.
Whenever there shall be delivered to the Escrow Agent a Holdback Objection
Notice, the Escrow Agent shall thereupon promptly deliver a copy to Buyer and
its legal counsel.
Section 4.03. DISTRIBUTION OF HOLDBACK ESCROW.
(a) Escrow Agent shall take the following actions with respect to the
Holdback Escrow:
(i) If the Escrow Agent does not receive a Holdback Objection
Notice within fifteen (15) calendar days after the date that it
receives an Officer's Certificate from Buyer, the Escrow Agent shall,
within two (2) business days after such fifteen (15) day period, pay
to Buyer the aggregate amount in the Holdback Escrow.
(ii) If the Escrow Agent receives from Goldcoast a Holdback
Objection Notice, the Escrow Agent shall, within two (2) business days
after the date it receives the Holdback Objection Notice, notify Buyer
that Goldcoast has sent a Holdback Objection Notice to such Officer's
Certificate.
(iii) Upon Buyer's receipt of the Holdback Objection Notice,
Buyer and Goldcoast shall use their best efforts to resolve such
dispute and, in the event they are unable to do so, such dispute shall
be subject to arbitration as set forth in Section 6.07 of this Escrow
Agreement.
Section 4.04. TERMINATION OF HOLDBACK ESCROW. If the Holdback Distribution
Event does not occur on or prior to the Legislative Session Expiration Date,
which date is expected to occur in May 2000, then within two (2) business days
after its receipt of written notice executed by Goldcoast and Buyer stating that
the Holdback Distribution Event did not occur, Escrow
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<PAGE> 6
Agent shall pay to Goldcoast the aggregate amount contained in the Holdback
Escrow (including any interest earned thereon).
ARTICLE V
ESCROW AMOUNTS
Section 5.01. ADMINISTRATION OF ESCROW AMOUNTS.
(a) Escrow Agent shall invest the Escrow Amounts in the Federal
Treasury Obligations Money Market Fund or, if specifically directed in
writing by Goldcoast, in Investments. Neither the Escrow Agent, Buyer nor
Goldcoast shall be liable or responsible for any loss resulting from any
investment or reinvestment made pursuant to this Section 5.01 and Buyer
acknowledges that its right to any amounts contained in the Indemnity
Escrow or Holdback Escrow shall be limited to the current balance of such
accounts.
As used herein "Investments" means:
(i) direct obligations of, or obligations fully guaranteed by,
the United States of America or any agency thereof with any residual
amount being invested in the Federal Treasury Obligations Money Market
Fund; and
(ii) certificates of deposit whether negotiable or nonnegotiable,
issued by any bank, trust company or national banking association,
including the Escrow Agent, provided that such certificates of deposit
shall (A) be issued by a bank, trust company or national banking
association having a capital stock and surplus of more than
$500,000,000, (B) be fully insured by the Federal Deposit Insurance
Corporation or (C) be fully and continuously secured by direct
obligations of, or obligations unconditionally guaranteed by, the
United States of America, which (1) shall have a market value
(exclusive of accrued interest) at all times at least equal to the
principal amount of such certificates of deposit, (2) shall be lodged
with the Escrow Agent (or any correspondent bank or trust company
designated by the Escrow Agent), as custodian, by the bank, trust
company or national banking association issuing such certificate of
deposit; and
(iii) the bank, trust company or national banking association
issuing each certificate of deposit required to be so secured shall
furnish the Escrow Agent with an undertaking satisfactory to it that
the aggregate market value of such obligations securing each such
certificate of deposit will at all times be an amount equal to the
principal amount of each such certificate of deposit (and the Escrow
Agent shall be entitled to rely on each such undertaking).
(b) Maturities or unexpired terms of maturities of instruments in
which the Indemnity Amount is invested shall not exceed ninety (90) days
and in which the Holdback Amount is invested shall not exceed thirty (30)
days. The Escrow Agent is authorized to sell any such Investments as may be
required to make any payment under this Escrow Agreement, and the Escrow
Agent shall not be liable for any loss due to early
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<PAGE> 7
redemption. In the event that no such written instructions are given by
Goldcoast as to any uninvested portion of the Escrow Amounts, such portion
shall be invested by the Escrow Agent in United States treasury bills for a
thirty (30) day period; provided, however that if such period is not
available, such portion shall be invested for the closest period of shorter
duration.
(c) Not less than ten (10) nor more than fifteen (15) business days
prior to the termination of the Escrow Agent's obligations under this
Escrow Agreement, the Escrow Agent shall deliver to Buyer and Goldcoast a
report outlining (i) the total amount of the Escrow Amounts as of such date
and the total amount of interest earned on the Escrow Amounts prior thereto
and not distributed pursuant to the terms of this Escrow Agreement, and
(ii) copies of or a description of all Claim Certificates pursuant to which
payments from the Indemnity Escrow have been made and a description of all
other payments made from the Indemnity Escrow during the preceding eleven
(11) month period and all pending Claim Certificates as of such date.
(d) At the prior written request of either Buyer or Goldcoast at any
time, the Escrow Agent shall deliver to Buyer and Goldcoast such
information as shall be reasonably requested with respect to the Escrow
Amounts and any interest earned thereon or payments made therefrom.
ARTICLE VI
OTHER
Section 6.01. NOTICES. All notices (including Objection Notices),
certificates (including Claim Certificates), payments and distributions required
or permitted to be given or delivered hereunder shall be in writing (including
facsimile transmissions) and shall be deemed to have been given if delivered
personally or by commercial messenger or courier service, or mailed by
registered or certified mail (return receipt requested) or sent via facsimile
(with acknowledgment of complete transmission) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
If to Buyer: Concorde Cruises, Inc.
c/o Concorde Gaming Corporation
3290 Lien Street
Rapid City, SD 57702
Attention: Jerry Baum
Telephone: (605)341-7738
Fax: (605)341-0247
with a copy to: Morrison & Foerster LLP
5200 Republic Plaza
370 17th Street
Denver, Colorado 80202
Attention: Warren L. Troupe, Esq.
Telephone: (303)592-1500
Fax: (303)592-1510
7
<PAGE> 8
If to Goldcoast: Goldcoast Entertainment Cruises, Inc.
100 S. Biscayne Blvd., Suite 850
Miami, Florida 33132
Attention: Michael A. Hlavsa
Telephone: (305)379-4422
Fax: (305)379-5522
If to Escrow Agent: National City Bank of Evansville
Box 868
227 Main Street
Evansville, Indiana 47708
Attn: Stuart Harrington
Telephone: (812)464-9608
Fax: (812)464-9691
Notice so given shall be deemed given and received (i) if by mail on the
fourth calendar day after posting; (ii) by facsimile or personal delivery on the
date of actual transmission or personal delivery, as the case may be; and (iii)
if by overnight courier, on the next business day following the day such notice
is delivered to the courier service.
Section 6.02. RELIANCE. Escrow Agent may act upon any instrument or other
writing believed by it in good faith to be genuine and to be signed or presented
by the proper person or persons and shall not be liable in connection with the
performance by it of its duties pursuant to the provisions hereof, except for
its own willful misconduct or gross negligence. Buyer and Goldcoast shall each
jointly and severally indemnify and save harmless the Escrow Agent for one half
of all losses, costs, and expenses which may be incurred by it without gross
negligence or willful misconduct on the part of the Escrow Agent, arising out of
or in connection with its entering into this Escrow Agreement and carrying out
its duties hereunder. Such indemnification provisions shall survive the
termination of this Escrow Agreement or the removal or resignation of the Escrow
Agent.
Section 6.03. FEES AND EXPENSES. The Escrow Agent shall be entitled to
compensation equal to Two Thousand Dollars ($2,000) for all of its services,
which compensation shall be paid one-half by Buyer and one-half by Goldcoast by
wire transfer of immediately available funds to an account designated by Escrow
Agent. The fee agreed upon for the services rendered hereunder is intended as
full compensation for the Escrow Agent's services as contemplated by this Escrow
Agreement.
Section 6.04. LIABILITY OF THE ESCROW AGENT.
(a) The Escrow Agent shall hold, invest and disburse the Escrow
Amounts and any interest accrued thereon only in accordance with (a) this
Escrow Agreement or (b) written instructions accompanied by a certificate
signed by Buyer and Goldcoast confirming that such written instructions are
being given in conformity with this Escrow Agreement. The Escrow Agent
shall not be bound in any way by, or be deemed to have knowledge of, the
Purchase Agreement or any other agreement between or among the
8
<PAGE> 9
parties hereto, other than this Escrow Agreement and the provisions of the
Purchase Agreement specifically referenced herein. The Escrow Agent shall
have no duties other than those expressly imposed on it herein and shall
not be liable with respect to any action taken by it, or any failure on its
part to act, except to the extent that such actions constitute gross
negligence or willful misconduct.
(b) The Escrow Agent makes no representations and has no
responsibility as to the validity, genuineness or sufficiency of any of the
documents or instruments delivered to it hereunder. Subject to Section
6.04(a) hereof, the Escrow Agent (i) shall be entitled to rely upon any
order, judgment, certification, demand, notice, instrument or other writing
delivered to it hereunder without being required to determine the
authenticity or the correctness of any fact stated therein or the propriety
or validity of the service thereof, and (ii) may act in reliance upon any
instrument or signature reasonably believed by it to be genuine and may
assume that any person purporting to give notice, receipt or advice or make
any statement or execute any document in connection with the provisions
hereof has been duly authorized to do so. The Escrow Agent may act in
reliance upon the written advice of counsel satisfactory to it in reference
to any matter in connection with this Escrow Agreement and shall not incur
any liability for any action taken in good faith in accordance with such
written advice.
(c) In the event the Escrow Agent should at any time be confronted
with inconsistent or conflicting claims or demands by the parties hereto,
such dispute shall be adjudicated in accordance with the arbitration
provisions set forth in Section 6.07.
Section 6.05. RESIGNATION; REMOVAL.
(a) The Escrow Agent may resign upon thirty (30) days advance written
notice to the parties. If a successor escrow agent is not appointed by the
mutual agreement of Buyer and Goldcoast within the thirty (30) day period
following such notice, the Escrow Agent may tender into the registry or
custody of any court of competent jurisdiction any part or all of the
Escrow Amounts.
(b) The Escrow Agent shall be entitled to its compensation earned
prior its resignation hereunder.
(c) Buyer and Goldcoast may, at any time, substitute a new escrow
agent by giving thirty (30) days notice thereof to the existing Escrow
Agent and paying all fees and expenses of such Escrow Agent incurred to the
date of the substitution. Upon the effective date of the substitution of a
successor escrow agent, the Escrow Agent shall deposit all of the Escrow
Amounts with such successor.
Section 6.06. GOVERNING LAW. This Escrow Agreement shall be governed by and
construed in accordance with the laws of the State of Colorado, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof. Each of the parties hereto irrevocably consents to the exclusive
jurisdiction and venue of any court within the City and County of Denver, State
of Colorado, in connection with any matter based upon or arising out of this
Escrow Agreement or the matters contemplated herein, which matters are not
subject
9
<PAGE> 10
to arbitration under Section 6.07, and agrees that process may be served upon
them in any manner authorized by the laws of the State of Colorado for such
persons and waives and covenants not to assert or plead any objection which they
might otherwise have to such jurisdiction, venue and such process.
Section 6.07. ARBITRATION. All disputes, controversies or claims arising
out of or relating to this Escrow Agreement (including filing a Claim or
delivering a Claim Certificate or Officer's Certificate pursuant to Sections
3.01 and 4.01, respectively, and any objections by Goldcoast thereto), or the
breach hereof, shall be settled by arbitration in accordance with the Commercial
Arbitration Rules of the American Arbitration Association in Miami, Florida with
respect to claims brought by the Buyer and Denver, Colorado with respect to
claims brought by Goldcoast and, notwithstanding the preceding, any claim
involving the Escrow Agent. One arbitrator shall be selected by the indemnifying
party or parties (or in the case of a dispute involving the Escrow Agent, the
Escrow Agent), one arbitrator shall be selected by the indemnified party (or in
the case of a dispute involving the Escrow Agent, the other party to such
dispute), and the third arbitrator shall be chosen by the first two arbitrators
chosen. The cost and expense of arbitration shall be shared equally by the
parties to the arbitration, regardless of which party or parties prevail, except
with respect to attorney's fees which shall be subject to the provisions
contained in Section 6.11. The arbitration shall be conducted in accordance with
the following time schedule unless otherwise mutually agreed to in writing by
the parties: (i) parties to the arbitration proceeding shall each appoint their
respective arbitrator within fifteen (15) business days after notice of the
claim is received from the party initiating the arbitration; (ii) within five
(5) business days thereafter, such arbitrators shall appoint the third
arbitrator; (iii) within ten (10) business days after appointment of the third
arbitrator, the parties to the arbitration proceeding shall provide all
documents, records and supporting documentation reasonably necessary to resolve
the dispute; and (iv) within fifteen (15) business days after the date the above
records are due, the arbitrators shall render their decision The decision or
award of the arbitrators shall be final and binding upon the parties hereto to
the same extent and to the same degree as if the matter had been adjudicated by
a court of competent jurisdiction and shall be enforceable under the Federal
Arbitration Act.
Section 6.08. AMENDMENTS. This Escrow Agreement may be amended or modified,
and any of the terms, covenants, representations, warranties, or conditions
hereof may be waived, only by a written instrument executed by all the parties
hereto, or in the case of a waiver, by the party waiving compliance. Any waiver
by any party of any condition, or of the breach of any provision, term,
covenant, representation, or warranty contained in this Escrow Agreement in any
one or more instances, shall not be deemed to be nor construed as a further or
continuing waiver of any such conditions, or of the breach of any other
provision, term, covenant, representation, or warranty of this Escrow Agreement.
Section 6.09. SECTION HEADINGS. The section headings in this Escrow
Agreement are for reference purposes only and shall not affect the meaning or
interpretation of this Escrow Agreement.
Section 6.10. SEVERABILITY. In the event that any part of this Escrow
Agreement is declared by any court or other judicial or administrative body to
be null, void, or unenforceable,
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<PAGE> 11
said provision shall survive to the extent it is not so declared, and all of the
other provisions of this Escrow Agreement shall remain in full force and affect.
Section 6.11. ATTORNEY'S FEES. In the event of a dispute under this Escrow
Agreement, the reasonable attorneys' fees and costs of the prevailing party in
such dispute, shall be paid by the opposing party in such dispute.
Section 6.12. COUNTERPARTS; THIRD PARTY BENEFICIARIES. This Escrow
Agreement may be signed in any number of counterparts, each of which shall be an
original, with the same effect as if the signatures thereto and hereto were upon
the same instrument. Signatures on this Escrow Agreement may be communicated by
facsimile transmission and shall be binding upon the parties transmitting the
same by facsimile transmission. Counterparts with original signatures shall be
provided within seven days of the applicable facsimile transmission, provided,
however, that the failure to provide the original counterpart shall have no
effect on the validity or the binding nature of the Escrow Agreement. If
executed in counterparts, the Escrow Agreement shall be effective as if
simultaneously executed. No provision of this Escrow Agreement is intended to
confer upon any Person other than the parties hereto any rights or remedies
hereunder.
Section 6.13. ESCROW AGENT REPORTS. Pursuant to the regulations of the
Office of the Comptroller of the Currency 12 C.F.R. 12.5(1), Buyer and Goldcoast
have the right to receive, at no additional cost and within five (5) business
days of the transaction, a written notification disclosing certain information
relating to securities purchase and sale transactions in the Escrow Amounts. The
Escrow Agent has the option of furnishing to Buyer and Goldcoast either (1) a
copy of the broker-dealer confirmation relating to the transaction or (2) a
written notification disclosing: the Escrow Agent's name, the account name, the
Escrow Agent's capacity in the transaction, the date of execution (and, upon
Buyer's and Goldcoast's written request, the time of execution) of the
transaction, the identity, price and number of shares involved, the remuneration
to the broker-dealer and his identity, the total remuneration to be received by
the Escrow Agent, and, if no broker-dealer was involved, the identify of the
person from whom the security was purchased or to whom it was sold.
In lieu of the foregoing time and form of notification, Buyer and Goldcoast
agree that the Escrow Agent's periodic statements, transmitted pursuant to the
terms of this Escrow Agreement, will suffice.
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<PAGE> 12
IN WITNESS WHEREOF, Buyer, Goldcoast and the Escrow Agent have caused this
Escrow Agreement to be signed the day and year first above written.
BUYER
CONCORDE CRUISES, INC.
By:/s/ JERRY L. BAUM
---------------------------------------
Name: Jerry L. Baum
Title: President
SELLER
GOLDCOAST ENTERTAINMENT CRUISES,
INC.
By: /s/ MICHAEL A. HLAVSA
---------------------------------------
Name: Michael A. Hlavsa
Title: President
ESCROW AGENT
NATIONAL CITY BANK OF EVANSVILLE
By: /s/ SHANE ROBERSON
---------------------------------------
Name: Shane Roberson
-------------------------------------
Title: Trust Administrator
------------------------------------
12
<PAGE> 13
EXHIBIT A
PARTNERSHIP INTEREST PURCHASE AGREEMENT
A-1
<PAGE> 14
EXHIBIT B
FORM OF CLAIM CERTIFICATE
This Claim Certificate Notice is delivered pursuant to Section 3.01 of that
certain Escrow Agreement dated as of March 31, 2000 (the "Escrow Agreement"), by
and among Concorde Cruises, Inc., a South Dakota corporation ("Buyer"),
Goldcoast Entertainment Cruises, Inc., a Florida corporation ("Goldcoast"), and
National City Bank of Evansville, as escrow agent (the "Escrow Agent").
Capitalized terms used herein without definition shall have the meanings set
forth in the Escrow Agreement.
The undersigned hereby instructs Escrow Agent to pay to the undersigned,
within two (2) business days after Escrow Agent's receipt of this Claim
Certificate, at the address set forth below, $______ from the Indemnity Escrow
established and maintained pursuant to the Escrow Agreement. In connection with
such distribution, the undersigned hereby certifies as follows:
1. Buyer is entitled to submit this Claim Certificate to Escrow Agent
pursuant to Article III of the Escrow Agreement.
2. The reasons Buyer is entitled to be indemnified are as follows:
3. There has been a Final Determination with respect to the Claim with
evidence of such Final Determination submitted herewith.
4. Buyer has delivered a copy of this Claim Certificate to Goldcoast and
its legal counsel on _______________________.
Dated:
-------------
Concorde Cruises, Inc.,
a South Dakota corporation
By:
--------------------------------------
Name:
------------------------------------
Its:
-------------------------------------
Address for Payment:
3290 Lien Street
Rapid City, SD 57702
B-1
<PAGE> 15
EXHIBIT C
OFFICER'S CERTIFICATE
This Officer's Certificate is delivered pursuant to Section 4.01 of that
certain Escrow Agreement dated as of March 31, 2000 (the "Escrow Agreement"), by
and among Concorde Cruises, Inc., a South Dakota corporation ("Buyer"),
Goldcoast Entertainment Cruises, Inc., a Florida corporation ("Goldcoast"), and
National City Bank of Evansville, as escrow agent (the "Escrow Agent").
Capitalized terms used herein without definition shall have the meanings set
forth in the Escrow Agreement.
The undersigned hereby instructs Escrow Agent to pay to the undersigned,
upon the expiration of a fifteen (15) calendar day period from the date this
Officer's Certificate is received by Goldcoast, at the address set forth below,
the entire amount from the Holdback Escrow established and maintained pursuant
to the Escrow Agreement. In connection with such distribution, the undersigned
hereby certifies as follows:
1. Buyer is entitled to submit this Officer's Certificate to Escrow Agent
pursuant to Article IV of the Escrow Agreement.
2. The Holdback Distribution Event has occurred.
3. Buyer has delivered a copy of this Officer's Certificate to Goldcoast
and its legal counsel on ___________________.
Dated:
-------------
Concorde Cruises, Inc.,
a South Dakota corporation
By:
--------------------------------------
Name:
------------------------------------
Its:
-------------------------------------
Address for Payment:
3290 Lien Street
Rapid City, SD 57702
C-1
<PAGE> 1
EXHIBIT 10.3
ASSIGNMENT OF PARTNERSHIP INTEREST
This Assignment of Partnership Interest (this "Assignment") is made,
entered into and effective as of this 31st day of March, 2000, by and between
Concorde Cruises, Inc., a South Dakota corporation (the "Assignee"), and
Goldcoast Entertainment Cruises, Inc., a Florida corporation (the "Assignor").
P R E A M B L E:
WHEREAS, Assignor owns 20% of the outstanding partnership interest in
Bayfront Ventures, a Florida general partnership, and 20% of the outstanding
partnership interest in Princesa Partners, a Florida general partnership
(collectively, the "Partnership Interests"); and
WHEREAS, Assignor and Assignee have, among other parties, entered into a
Partnership Interest Purchase Agreement dated March 31, 2000 (the "Purchase
Agreement") providing for the sale by Assignor and the purchase by Assignee of
the Partnership Interests; and
WHEREAS, in order to effectuate the sale and purchase of the Partnership
Interests, Assignor is executing and delivering this Assignment in favor of
Assignee.
NOW, THEREFORE, in consideration of the mutual covenants, agreements and
representations contained herein, the parties hereto hereby agree as follows:
1. Conveyance of Partnership Interests. Pursuant to the terms of the
Purchase Agreement and in consideration for the payment by the Assignee to the
Assignor of the consideration specified therein, Assignor hereby grants,
conveys, assigns, transfers, bargains and delivers unto Assignee and its
successors and assigns, forever, all of its rights, title and interest in and to
the Partnership Interests.
2. Assignee's Acknowledgment. Assignee hereby acknowledges receipt of the
Partnership Interests.
3. Counterparts. This Assignment may be executed in any number of
counterparts, and each counterpart hereof shall be deemed to be an original
instrument, but all such counterparts shall constitute but one assignment.
4. Governing Law. This Assignment shall be governed by and construed in
accordance with the laws of the State of Florida, excluding any conflicts-of-law
rule or principle which might refer same to another jurisdiction.
5. Successors and Assigns. This Assignment shall bind Assignor and its
successors and assigns and inure to the benefit of Assignee and its successors
and assigns.
6. Descriptive Headings. The descriptive headings of the several paragraphs
of this Assignment are for convenience only and shall not be deemed to affect
the meaning of construction of any of the provisions hereof.
B-1
<PAGE> 2
7. Capitalized Terms. Capitalized terms used but not otherwise defined in
this Assignment shall have the same meaning ascribed to such terms in the
Purchase Agreement.
CONCORDE CRUISES, INC., as Assignee
By: /s/ JERRY L. BAUM
-----------------------------------
Name: Jerry L. Baum
Title: President
GOLDCOAST ENTERTAINMENT CRUISES,
INC., as Assignor
By: /s/ MICHAEL A. HLAVSA
-----------------------------------
Name: Michael A. Hlavsa
Title: President
B-2
<PAGE> 1
EXHIBIT 10.4
MUTUAL RELEASE
This MUTUAL RELEASE (the "Release"), is entered into as of March 31, 2000
by and among Goldcoast Entertainment Cruises, Inc., a Florida corporation having
its mailing address at 100 South Biscayne Blvd., Suite 850, Miami, Florida 33131
("Goldcoast"), Concorde Gaming Corporation, a Colorado corporation, having its
principal place of business at 3290 Lien Street, Rapid City, South Dakota 57702
("Concorde"), Concorde Cruises, Inc., a South Dakota corporation and wholly
owned subsidiary of Concorde, having its principal place of business at 3290
Lien Street, Rapid City, South Dakota 57702 ("Concorde Cruises") and Bayfront
Ventures, a Florida general partnership having its principal place of business
at 100 South Biscayne Blvd., Suite 850, Miami, Florida 33131 ("Bayfront
Ventures"). Goldcoast, Concorde and Bayfront Ventures are each sometimes
referred to herein individually as a "Party" and collectively as the "Parties."
WHEREAS, Goldcoast owes (i) $75,208 to Concorde Cruises under that certain
promissory note dated November 9, 1998 in the original principal amount of
$95,000 (the "Concorde Note"), and (ii) $3,959 to Bayfront Ventures under an
obligation to pay Bayfront Ventures the original principle amount of $5,000 (the
"Bayfront Amount"); and
WHEREAS, Concorde and/or Bayfront Ventures has advanced Goldcoast funds
(the "Advances") under the terms of a certain join venture agreement dated
August 27, 1997 (the "Joint Venture Agreement") by and between Goldcoast and
Concorde Cruises; and
WHEREAS, under the Second Amendment to the Joint Venture Agreement dated
November 2, 1998, Goldcoast has agreed to pay Bayfront Ventures $150,000, which
amount may only be waived in the event that Concorde Cruises annualized rate of
return on its capital contribution to Bayfront Ventures is 33.3% or greater over
the Project's first three years of operations (the "Bayfront Advances"); and
WHEREAS, Concorde and/or Concorde Cruises owes to Goldcoast $83,493 (the
"Goldcoast Amount" and together with the Concorde Note, the Advances, the
Bayfront Amount and the Bayfront Advances, the "Indebtedness"); and
WHEREAS, for and in consideration of the execution and delivery of that
certain Partnership Interest Purchase Agreement dated March 31, 2000, by and
among, Goldcoast, Concorde Cruises, Michael A. Hlavsa and David Grossman (the
"Purchase Agreement"), the Parties desire to release each other from the
Indebtedness.
NOW, THEREFORE, in consideration of the foregoing premises and for other
good and valuable consideration the receipt and sufficiency of which is hereby
acknowledged, the Parties agree as follows:
<PAGE> 2
1. Bayfront Ventures, Concorde and Concorde Cruises each hereby release
Goldcoast and its subsidiaries, directors, officers, agents, affiliates,
attorneys, employees, successors and assigns (collectively, the "Releasee") from
any and all actions, causes of actions, damages, judgments, liability,
obligations and claims whatsoever in law or in equity, whether known or unknown,
of every nature and kind whatsoever, against the Releasee, which Bayfront
Ventures, Concorde or Concorde Cruises, ever had, now has or hereafter can,
shall, or may have, arising out of or in connection with the Bayfront Amount,
the Bayfront Advances, the Concorde Note and the Advances.
2. Goldcoast hereby releases Concorde, Bayfront Ventures and Concorde
Cruises and each of their subsidiaries, directors, officers, agents, affiliates,
attorneys, employees, successors and assigns (collectively, the "Concorde
Releasee") from any and all actions, causes of actions, damages, judgments,
liability, obligations and claims whatsoever in law or in equity, whether known
or unknown, of every nature and kind whatsoever, against the Concorde Releasee,
which Goldcoast ever had, now has or hereafter can, shall, or may have, arising
out of or in connection with the Goldcoast Amount.
This Mutual Release shall be binding on all Parties, their predecessors,
successors, subsidiaries, parents and assigns.
<PAGE> 3
IN WITNESS WHEREOF, the Parties hereto have executed and delivered or
caused Release to be executed and delivered by their authorized representatives
as of the date first written above.
GOLDCOAST ENTERTAINMENT CRUISES, INC.
By: /s/ MICHAEL A. HLAVSA
----------------------------------
Michael A. Hlavsa, President
BAYFRONT VENTURES
By: CONCORDE CRUISES, INC., as general partner
By: /s/ JERRY L. BAUM
---------------------------------
Jerry L. Baum, President
By: GOLDCOAST ENTERTAINMENT CRUISES, INC.,
as general partner
By: /s/ MICHAEL A. HLAVSA
---------------------------------
Michael A. Hlavsa, President
CONCORDE GAMING CORPORATION
By: /s/ JERRY L. BAUM
----------------------------------
Jerry L. Baum, President and CEO
CONCORDE CRUISES, INC.
By: /s/ JERRY L. BAUM
----------------------------------
Jerry L. Baum, President
<PAGE> 1
EXHIBIT 10.5
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT (the "Agreement"), is made and entered into as of
March 31, 2000 (the "Effective Date"), by and between Concorde Cruises, Inc., a
South Dakota corporation (the "Company"), and Michael A. Hlavsa (the
"Consultant"). The Company and Consultant are also referred to collectively as
the "Parties" and individually as a "Party".
W I T N E S S E T H:
WHEREAS, the Company desires to hire the Consultant to perform certain
management duties for Bayfront Ventures, a Florida general partnership and/or
Princesa Partners, a Florida general partnership, and the Consultant desires to
accept such opportunity offered by the Company.
NOW, THEREFORE, in consideration for the mutual obligations contained
herein, the Company and the Consultant, each intending to be legally bound
hereby, mutually covenant and agree as follows:
1. ENGAGEMENT.
(a) Contracting. The Company hereby contracts with the Consultant and
the Consultant hereby accepts such contract, in the capacity to act in
accordance with the terms and conditions hereinafter set forth.
(b) Term. The term of engagement under this Agreement shall commence
on the Effective Date, and shall terminate on the first to occur: (i)
the liquidation and winding up of the Company, (ii) two years from the
Effective Date, or (iii) the effective date of written notice of
termination as set forth in Section 9.1 hereof (the "Term").
(c) Location of Services. Upon the Effective Date, and through the
Term, the Consultant's services will be performed at such places that
are appropriate and mutually agreed upon by the Consultant and the
Company.
2. INDEPENDENT CONTRACTOR. The Consultant shall not be an employee of the
Company and shall not be entitled to participate in any employee benefit plans
or other benefits or conditions of employment available to employees of the
Company. Nothing contained in this Agreement shall be deemed or construed as
creating a joint venture, partnership, agency, employment or fiduciary
relationship between the parties. The Consultant shall have no authority to act
as an agent of the Company, except on authority specifically so delegated, and
he shall not represent to the contrary to any person. The Consultant shall only
consult on, render advice with respect to and perform such tasks as the
Consultant determines in good faith are necessary to achieve the results
specified by the Company.
1
<PAGE> 2
3. SERVICES. During the Term the Consultant shall be available upon
reasonable notice from time to time to provide management consulting services to
the Company. As requested, Consultant agrees to render advice with respect to
senior management matters related to the Company's business, administration and
policies. In addition, Consultant's services may include, without limitation,
the preparation and quarterly revision of a comprehensive marketing plan
including statistical and performance measurements, periodic identification and
follow-up on tasks assigned to each department head, and preparation and
submittal of department head performance appraisals for approval.
4. EXTENT OF SERVICES. During the Term, the Consultant shall devote
substantially his entire time during reasonable business hours and use his best
efforts to provide consulting services in accordance with the terms of this
Agreement, and keep the Company advised of the progress of the work. The
Consultant shall permit any authorized representative of the Company to inspect
from time to time such results of said consulting services as are susceptible to
inspection.
5. COMMUNICATION. The Consultant will report to the President of the
Company, or such person as the President of the Company may from time to time
designate, on all matters relating to this Agreement and the Consultant's
performance of his duties hereunder.
6. AGREEMENTS. The Consultant shall not be authorized or empowered to enter
into any agreements with any party on behalf of the Company. The Company has the
absolute right to refuse any offers, work or material brought to it by
Consultant without incurring any liability to such third party or to the
Consultant.
7. COMPENSATION.
(a) Annual Compensation. As compensation for the above stated
services, the Company shall pay Consultant a fee of $125,000 per year
(the "Annual Fee") payable in advance on the first business day of each
month in substantially equal installments.
(b) Bonus Payment. For each Contract Year (as defined below) during
the Term, Consultant shall be eligible to receive a bonus (the "Bonus")
based upon the combined earnings before interest, depreciation, taxes
and amortization ("EBITDA") of Bayfront Ventures, a Florida general
partnership, and Princesa Partners, a Florida general partnership
(collectively, the "Partnerships") calculated as follows:
(i) Consultant shall be entitled to a Bonus equal to 3% of the
EBITDA of the Partnerships for a Contract Year; provided, however,
that no Bonus will be payable if the EBITDA of the Partnerships for a
Contract Year is less than $3,375,000; and
(ii) Consultant shall be entitled to an additional Bonus equal to
2% of the EBITDA of the Partnerships for a Contract Year that is in
excess of $4,100,000.
2
<PAGE> 3
A Contract Year means the twelve month period beginning April 1 and
ending March 31. The Bonus shall be due and payable on or before June 30
for the preceding Contract Year. Any Bonus payable to Consultant for a
portion of a Contract Year shall be prorated in accordance with the
following formula: the Bonus otherwise payable multiplied by the
fraction, the numerator of which is equal to the number of days during
the recently completed Contract Year this Agreement was in effect and
the denominator of which is equal to 365. In calculating the EBITDA of
the Partnerships for a partial Contract Year, the Bonus calculation
shall be based on the Company's calculation of pro forma EBITDA for the
full Contract Year.
(c) Expenses. The Company shall promptly pay or reimburse the
Consultant for all reasonable expenses incurred by him in connection
with the performance of his duties and responsibilities hereunder;
provided such expenses are incurred in compliance with the Company's
travel and expense reimbursement policies, as amended from time to time.
Expenses in excess of $500 must be preapproved by the Company. All
requests for reimbursed expenses shall be accompanied by such documents
or other evidence as are reasonably required to support the deduction of
such expenses in accordance with the rules established from time to time
by the Company.
(d) Taxes. The Consultant shall provide the Company with his Social
Security Number or Employer Identification Number, as applicable, so
that the Company is able to file the appropriate reporting forms with
the Internal Revenue Service. The Company shall annually provide the
Consultant with copies of forms so filed. It is understood that all
compensation paid to the Consultant hereunder in respect of services
rendered during the Term shall constitute revenues to the Consultant. To
the extent consistent with applicable law (and unless otherwise required
by applicable law as determined by the Company in its absolute
discretion or a taxing authority), the Company will not withhold any
amounts therefrom as federal income tax withholding from wages or as
employee contributions under the Federal Insurance Contributions Act or
any other state or federal laws. The Consultant shall be solely
responsible for the withholding and/or payment of any federal, state or
local income or payroll taxes.
THE CONSULTANT IS NOT ENTITLED TO WORKERS' COMPENSATION BENEFITS. THE
CONSULTANT IS OBLIGATED TO PAY FEDERAL AND STATE INCOME TAX ON ANY MONIES EARNED
PURSUANT TO THE CONTRACT RELATIONSHIP AND THE CONSULTANT SHALL INDEMNIFY AND
HOLD THE COMPANY HARMLESS FROM ANY AND ALL TAXES, INTEREST AND PENALTIES OWED BY
HIM AS A RESULT OF THE CONSULTANT'S FAILURE TO TIMELY PAY ANY SUCH TAXES.
3
<PAGE> 4
8. INDEMNIFICATION.
(a) Indemnification by Consultant. Consultant shall defend,
indemnify, and hold the Company harmless from and against all claims
asserted by a third party (or parties) and related damages, losses and
expenses, including reasonable attorneys' fees, arising out of or
resulting from the services performed or neglected to be performed by
Consultant; provided that any such claim, damage, loss, or expense is
caused by the gross negligence or willful misconduct of Consultant and
is not caused by the gross negligence or willful misconduct of the
Company.
(b) Indemnification by Company. Company shall defend, indemnify, and
hold Consultant harmless from and against all claims asserted by a third
party (or parties) and related damages, losses and expenses, including
reasonable attorneys' fees, arising out of or resulting from the
services performed or neglected to be performed by the Company; provided
that any such claim, damage, loss, or expense is caused by the gross
negligence or willful misconduct of the Company and is not caused by the
gross negligence or willful misconduct of Consultant.
9.1. TERMINATION.
(a) Cause. The Company may terminate this Agreement at any time for
Cause. For purposes of this Agreement, "Cause" means (i) Consultant
engaging in an act of theft, embezzlement, misappropriation of funds or
property, or fraud against, or with respect to the business of, the
Company or its affiliates; (ii) Consultant commits a breach of any
material term or condition of this Agreement; (iii) Consultant is
convicted of, or pleads guilty or nolo contendere to, a felony or a
crime involving moral turpitude; (iv) as a result of Consultant's gross
negligence or willful misconduct, Consultant commits any act that
causes, or knowingly fails to take reasonable and appropriate action to
prevent, any material injury to the financial condition or business
reputation of the Company or its affiliates; (v) the material failure or
inability of Consultant to provide the services set forth in Section 3
or to follow the lawful direction of the Company in performing the
services set forth in Section 3, which failure is not remedied within
fifteen (15) days after receipt of notice thereof; (vi) death; and (vii)
Consultant's commission of any act, other than an act performed at the
direction of the Company, that would cause any license or permit of the
Company or its affiliates to be revoked, suspended or not renewed after
proper application.
(b) Without Cause. Either Party may terminate this Agreement for any
reason upon thirty (30) days prior written notice to the other Party.
(c) Date of Termination. For purposes of this Agreement, the term
"Date of Termination" shall mean the date that the Company gives written
notice to Consultant that it intends to terminate this Agreement
pursuant to the terms
4
<PAGE> 5
hereof or the date, if any, specified by the Corporation in such written
notice as the effective date of termination.
9.2. OBLIGATIONS UPON TERMINATION.
(a) Upon the termination by the Company for Cause or upon
Consultant's voluntary termination of this Agreement, the Corporation's
obligations to Consultant shall terminate, other than the obligation to
pay to Consultant any earned but unpaid portion of the Annual Fee and
unpaid expenses through the day preceding the Date of Termination. No
Bonus will be payable to Consultant.
(b) If the Company terminates Consultant other than pursuant to
Section 9.1(a) hereof, the Corporation shall pay the unpaid portion of
the Annual Fee through the remainder of the Term. In addition,
Consultant shall be entitled to the Bonus, if any, only for the Contract
Year in which he was terminated, which Bonus shall be calculated through
the Date of Termination in the manner set forth in, and in accordance
with, Section 7(b) of this Agreement. Any amount payable under this
Section 9.2(b) shall be payable in a lump sum within ninety (90) days of
the Date of Termination.
10. PROPRIETARY INFORMATION. Through the second anniversary of the date
this Agreement terminates or expires, the Consultant shall keep in strictest
confidence and trust all Proprietary Information and shall not use for his
personal benefit, or disclose, communicate or divulge to, or use for the direct
or indirect benefit of any person, firm, association or company other than the
Company, any Proprietary Information. Consultant agrees that all Proprietary
Information shall be the sole property of the Company and its assigns, and the
Company and its assigns shall be the sole owner of all licenses and other rights
in connection with such Proprietary Information. "Proprietary Information" means
information relating to the properties, prospects, products, services, customers
or operations of the Company or any direct or indirect affiliate thereof that is
not generally known, is proprietary to the Company or such affiliate and is made
known to the Consultant or learned or acquired by the Consultant during its
relationship with the Company, including, without limitation, information
concerning trade secrets of the Company, or any of the Company's affiliates and
any improvements relating to the products of the Company in accounting,
marketing, selling, leasing, financing and other business methods and
techniques. However, Proprietary Information shall not include: (i) at the time
of disclosure to the Consultant such information that was in the public domain
or later entered the public domain other than as a result of a breach of an
obligation herein. All materials or articles of information of any kind
furnished to the Consultant by the Company or developed by the Consultant in the
course of its engagement hereunder are and shall remain the sole property of the
Company; and if the Company requests the return of such information at any time
during, upon or after the termination of the Consultant's engagement hereunder,
the Consultant shall immediately deliver the same to the Company.
11. EQUITABLE RELIEF. The Consultant acknowledges that, in view of the nature
of the business in which the Company is engaged, the restrictions contained in
Section 10 (the "Restrictions") are reasonable and necessary in order to protect
the legitimate interests of the
5
<PAGE> 6
Company, and that any violation thereof would result in irreparable injuries to
the Company, and the Consultant therefore further acknowledges that, if the
Consultant violates, or threatens to violate, any of the Restrictions, the
Company shall be entitled to obtain from any court of competent jurisdiction,
without the posting of any bond or other security, preliminary and permanent
injunctive relief as well as damages and an equitable accounting of all
earnings, profits and other benefits arising from such violation, which rights
shall be cumulative and in addition to any other rights or remedies in law or
equity to which the Company may be entitled.
12. NOTICES. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
delivered by hand or mailed within the continental United States by first-class
certified mail, return receipt requested, postage prepaid, addressed as follows:
(a) if to the Company, to: (b) if to the Consultant, to:
Concorde Cruises, Inc. Michael A. Hlavsa
c/o Concorde Gaming Corporation 2221 SW 131 Terrace
3290 Lien Street Davie, FL 33325
Rapid City, SD 57702 Telephone: (954) 476-4300
Attention: Jerry L. Baum, President
Telephone: (605) 341-7738
Facsimile: (605) 342-0247
Notice so given shall be deemed given and received (i) if by mail, on the fourth
calendar day after posting; (ii) if by cable, telegram, telecopier or personal
delivery on the date of actual transmission or (as the case may be) personal or
other delivery; and (iii) if by overnight courier, on the next business day
following the day such notice is delivered to the courier service.
13. EXCLUSION OF PROPERTY OF OTHERS. Consultant will not bring to the
Company or use in the performance of its consulting duties any documents or
materials of a former employer or client that are not generally available to the
public or that have not been legally transferred to the Company or Consultant.
14. NO ASSIGNMENT. This Agreement and all rights hereunder are personal to
Consultant and may not be assigned by Consultant. Company may assign this
Agreement to and all rights hereunder shall inure to the benefit of any person,
firm or corporation succeeding to all or substantially all of the business or
assets of the Company whether by purchase, merger or consolidation.
15. AMENDMENTS, WAIVERS. This Agreement may not be modified, amended, or
terminated except by an instrument in writing, signed by Consultant and by a
duly authorized representative of the Company. No failure to exercise and no
delay in exercising any right, remedy, or power under this Agreement shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right, remedy, or power under this Agreement preclude any other or
6
<PAGE> 7
further exercise thereof, or the exercise of any other right, remedy, or power
provided herein or by law or in equity.
16. RULES OF CONSTRUCTION. The Parties hereto agree that they have been
represented by counsel during the negotiation and execution of this Agreement
and, therefore, waive the application of any law, regulation, holding or rule of
construction providing that ambiguities in an agreement or other document will
be construed against the Party drafting such agreement or document.
17. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the substantive laws of the State of Florida.
18. ARBITRATION OF ALL DISPUTES. The Company and Consultant mutually agree
that any controversy or claim arising out of or relating to this Agreement or
the breach thereof (including the arbitrability of any controversy or claim),
shall be settled by arbitration in Denver, Colorado, if Consultant requests such
arbitration, or in Miami, Florida, if Company requests such arbitration. Except
for claims relating to the Restrictions, which may be resolved at the Company's
option through judicial proceedings or arbitration, arbitration shall be the
exclusive forum to resolve all disputes between the Consultant and the Company.
The arbitration shall be conducted in accordance with the rules of the American
Arbitration Association. The arbitration shall be presided over by one
arbitrator who shall be selected in accordance with the commercial arbitration
rules of the American Arbitration Association. The cost of any arbitration
proceeding hereunder shall be borne equally by the Company and the Consultant,
subject to the arbitrator awarding such costs otherwise. The award of the
arbitrator shall be binding upon the parties. Except where expressly authorized
by statute, a party shall only be entitled to be awarded damages for actual
losses suffered by the injured party plus reasonable costs (including reasonable
attorney's fees). Judgment upon the award rendered by the arbitrator may be
entered in any court having jurisdiction thereof.
19. SEVERABILITY. If any provision of this Agreement shall be adjudged by
any court of competent jurisdiction to be invalid or unenforceable for any
reason, such judgment shall not affect, impair or invalidate the remainder of
this Agreement.
20. ENTIRE AGREEMENT. This Agreement embodies the entire agreement of the
parties hereof, and supersedes all other oral or written agreements or
understandings between them regarding the subject matter hereof.
21. EXECUTION IN COUNTERPARTS. This Agreement may be executed by the
parties hereto in two or more counterparts, each of which shall be deemed to be
an original, but all such counterparts shall constitute one and the same
instrument, and all signatures need not appear on any one counterpart.
Signatures on this Agreement may be communicated by facsimile transmission and
shall be binding upon the parties transmitting the same by facsimile
transmission.
7
<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the Effective Date.
COMPANY
Concorde Cruises, Inc.
By: /s/ JERRY L. BAUM
-------------------------------------
Name: Jerry L. Baum
Title: President
CONSULTANT
Michael A. Hlavsa
/s/ MICHAEL A. HLAVSA
----------------------------------------
8
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