<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
BLACKHAWK GAMING & DEVELOPMENT COMPANY, INC.
- - - --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
Samuel E. Wing
- - - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
- - - --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- - - --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
- - - --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- - - --------------------------------------------------------------------------------
(5) Total fee paid:
- - - --------------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
- - - --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- - - --------------------------------------------------------------------------------
(3) Filing Party:
- - - --------------------------------------------------------------------------------
(4) Date Filed:
- - - --------------------------------------------------------------------------------
<PAGE> 2
BLACK HAWK GAMING & DEVELOPMENT COMPANY, INC.
2060 BROADWAY, SUITE 400
BOULDER, COLORADO 80302
SEPTEMBER , 1996
PROXY STATEMENT
SEPTEMBER , 1996 SPECIAL MEETING OF SHAREHOLDERS
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors (sometimes hereinafter the "Board" or the
"Directors") of Black Hawk Gaming & Development Company, Inc. ("Black Hawk" or
the "Company") for use at a special meeting of shareholders of Black Hawk to be
held at the Boulderado Hotel, 2115 13th Street, Boulder, Colorado, on September
, 1996, at 10:00 a.m. local time, and at any postponement or adjournment
thereof.
This Proxy Statement and the enclosed proxy card are first being sent to
Black Hawk's shareholders on or about September , 1996.
MATTERS TO BE CONSIDERED.
The following matters will be acted on at the special meeting:
1. To amend the Company's Articles of Incorporation to increase the size of
its Board of Directors to not less than three nor more than nine
members;
2. To amend the Company's Articles of Incorporation to provide for
staggered terms for the Company's Board of Directors;
3. To elect and/or re-elect a total of eight persons to serve in accordance
with the staggered terms described herein;
4. To approve the issuance of certain additional shares of the Company's
Common Stock in accordance with the bylaws of the National Association
of Securities Dealers, Inc. ("NASD"); and
5. Transaction of such other business as may properly come before the
meeting.
VOTING SECURITIES AND VOTING RIGHTS.
Only shareholders of record on August 30, 1996, or their proxies, will be
entitled to vote at the special meeting of shareholders. On August 30, 1996,
Black Hawk had 2,968,067 shares of Common Stock outstanding.
A majority of the outstanding shares of Black Hawk Common Stock must be
represented at the special meeting in person or by proxy to constitute a quorum
for the transaction of business. Each share of Common Stock is entitled to one
vote on all matters. In the election of directors, each share of Common Stock is
entitled to one vote for a nominee for each director position since the Articles
of Incorporation of Black Hawk do not provide for cumulative voting in the
election of directors. A list of shareholders of Black Hawk will be available
for examination by shareholders of record at the special meeting.
VOTING PROCEDURE.
The shares represented by each properly executed proxy returned to Black
Hawk will be voted at the special meeting as indicated on the proxy. If no
instructions are given, the persons authorized by the proxy will vote in favor
of (i) the change in size of the Company's Board of Directors; (ii) the proposal
to amend the Company's Articles of Incorporation to provide for staggered terms
for members of its Board of Directors; (iii) the election to Board membership of
the nominees named in this Proxy Statement; and (iv) approval of
<PAGE> 3
shareholders to issue additional shares of the Company's Common Stock to comply
with bylaws of the NASD. Any person giving a proxy has the right to revoke it at
any time before it is exercised (1) by filing with the Secretary of Black Hawk a
duly signed revocation or proxy bearing a later date; or (2) by voting in person
at the special meeting.
The Board of Directors is not aware of any matters other than those set
forth above which may come before the special meeting. If any other matters are
properly presented to the meeting for action, unless contrary instructions are
given, the persons named in the enclosed form of proxy and acting thereunder
have the power to vote in accordance with their best judgment on such matters.
The proposals to change the size of the Company's Board of Directors and to
provide for staggered terms of its Board of Directors will require the
affirmative vote of a majority of the Company's issued and outstanding Common
Stock. Election of the nominees as Directors and approval of the plan to issue
additional shares of the Company's Common Stock to comply with bylaws of the
NASD will require the affirmative vote of a majority of the shares of Black Hawk
Common Stock represented at the special meeting.
If a proxy is marked with instructions to withhold authority to vote for
one or more director nominees or to abstain from voting on any matter, those
shares will be treated as represented at the special meeting and entitled to
vote in determining whether a quorum is present. In matters where approval is
required by a majority of shares outstanding or represented at the special
meeting, abstentions from voting on a matter will have the effect of a vote
against the matter.
SOLICITATION OF PROXIES.
The cost of solicitation of proxies will be borne by Black Hawk.
Solicitation of proxies may be made by officers, directors and employees of
Black Hawk in person, by telephone or by mail. In addition, brokers, banks and
other nominee holders will be reimbursed for expenses they incur in forwarding
proxy materials to and obtaining voting instructions from beneficial owners of
Black Hawk Common Stock.
PROPOSAL NO. 1
CHANGE IN SIZE OF COMPANY'S BOARD OF DIRECTORS
The Board of Directors intends to expand the activities of the Company
outside the City of Black Hawk and State of Colorado largely as the result of
the Jacobs Agreement described below. Therefore, it has unanimously adopted a
resolution to change the size of the Company's Board of Directors from not less
than three nor more than seven members to not less than three nor more than nine
members. The Board believes that its proposed activities warrant a slightly
larger Board and will allow the Company to attract valuable business advice and
direction from a larger group of Board members.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE FOR
THE PROPOSAL TO CHANGE THE SIZE OF THE COMPANY'S BOARD OF DIRECTORS TO NOT LESS
THAN THREE NOR MORE THAN NINE MEMBERS. THE AFFIRMATIVE VOTE OF A MAJORITY OF THE
COMPANY'S OUTSTANDING COMMON STOCK WILL BE REQUIRED TO EFFECT THIS CHANGE.
PROPOSAL NO. 2
STAGGERED TERMS FOR DIRECTORS
General. The Board of Directors has unanimously adopted a resolution to
submit to shareholders of the Company a proposal to amend the Articles of
Incorporation of the Company to provide that the Board consist of not fewer than
three and not more than nine directors, the exact number to be fixed from time
to time by affirmative vote of a majority of the entire Board and that the Board
be staggered or classified into three classes, as nearly equal in number as
possible, with each director, after a transitional period, serving for three
years, and with one class being elected each year. The proposal also provides
that Directors may be removed
2
<PAGE> 4
from office with cause only by the affirmative vote of a majority of the
Company's voting stock, and without cause only by the affirmative vote of 80% of
the Company's voting stock. The proposal provides further that any provision
which would alter, amend or repeal the Board classification provision, or is
inconsistent therewith, may be adopted only by the affirmative vote of 80% of
the Company's outstanding voting stock.
The proposal to stagger Board of Directors' terms will have significant
effects on the ability of shareholders of the Company to change the composition
of the Board of Directors. Accordingly, shareholders should read carefully the
following sections of this Proxy Statement, which describe this proposal and its
purpose and effects, and the full text of the proposed amendment to the
Company's Articles of Incorporation set forth in Exhibit A hereto.
The directors of the Company are currently elected to the Board each year
for a term of one year. The number of directors (three or more) to constitute
the Board is also determined annually. The proposal provides that the business
and affairs of the Company will be managed under the direction of a Board
consisting of not fewer than three nor more than nine directors, the exact
number to be fixed from time to time by resolution adopted by the affirmative
vote of a majority of the entire Board. The proposed amendment also provides
that the directors will be classified into three classes, as nearly equal in
number as possible.
At the special meeting, two directors will be elected and classified to
serve for terms expiring at the 1997 Annual Meeting of Shareholders, three
directors will be elected and classified to serve for terms expiring at the 1998
Annual Meeting of Shareholders and three directors will be elected and
classified for a term expiring at the 1999 Annual Meeting of Shareholders,
respectively, or, in all cases, until their respective successors are elected
and qualified. At each Annual Meeting of Shareholders, the successors to the
class of directors whose term expires at that meeting will be elected to a term
expiring at the Annual Meeting of Shareholders held in the third year following
the year of that election. See the Proposal entitled "Election of Directors" as
to the initial composition of each class of directors.
The classification of directors will have the effect of making it more
difficult to change the composition of the Company's Board of Directors. At
least two Annual Meetings of Shareholders instead of one, or a special meeting
of Shareholders called for the purpose of removal of at least a majority of the
directors for cause, will be required to effect a change in control of the
Board.
The Articles of Incorporation do not provide for cumulative voting in the
election of directors. Accordingly, absent the staggered Board proposal, the
entire Board could be changed by a majority vote of the shareholders at any
Annual Meeting. Classification of the Board will apply to every election of
directors, whether or not a change in control of the Company has occurred or the
holders of a majority of the voting stock desire to change the whole Board.
Removal of Directors and Filling of Vacancies on the Board. Under the
Colorado Business Corporation Act, unless the Articles of Incorporation or
bylaws provide otherwise, directors can be removed by the shareholders with or
without cause, and the vote required for removal is the same proportion of the
voting power of the shares sufficient to elect them. Currently, therefore, any
one or all of the Company's directors could be removed by the affirmative vote
of a majority of the shares of the Company's Common Stock voting at a meeting
called for that purpose.
The staggered Board proposal provides that a director will be removable by
the shareholders with cause only by the affirmative vote of a majority of the
then issued and outstanding voting stock, and, without cause, only by the
affirmative vote of the holders of 80% of such voting stock. Current ownership
is such that removal would be unlikely without concurrence of a substantial
majority of the Company's present officers and directors.
Increased Stockholder Vote for Alteration or Repeal of the Board
Classification. Under the Colorado Business Corporation Act, the affirmative
vote of the holders of a majority of the Company's voting stock present in
person or by proxy at a meeting of shareholders called for such purpose, is
required for adoption of an amendment to its Articles of Incorporation, unless
the Articles provide for a greater vote. The Board classification proposal
requires that 80% of the Company's outstanding voting stock be affirmatively
voted in favor of any provision which would alter, amend or repeal such
provision or which is inconsistent therewith.
3
<PAGE> 5
Purposes and Effects of the Board Classification. The Board of Directors
believes that a staggered or classified Board will facilitate continuity and
stability of leadership and policy by assuring that experienced personnel
familiar with the Company and its business will be on the Board at all times.
The proposal is also intended to prevent precipitous changes in the composition
of the Board and the manner of its selection and, thereby, to moderate those
changes in the Company's policies, business strategies and operations which the
Board does not deem to be in the best interests of the Company and its
shareholders.
Although the Company knows of no events which would be likely to result in
such a change, the Board has determined that the use of certain disruptive and
potentially unfair tactics in attempts to gain control of corporations make
adoption of the proposal a prudent measure for the protection of the Company's
shareholders. The proposal is designed to make it more time-consuming to change
majority control of the Board and, thus, to reduce the Company's vulnerability
to an unsolicited proposal to do so.
The Board has observed a trend over the last decade toward the accumulation
of substantial stock positions in public companies by third parties as a prelude
to proposing a change of control or a restructuring or sale of all or part of a
corporation or other similar extraordinary corporate action. Such actions are
often undertaken by the third party without advance notice to, or consultation
with, management. In many cases, the purchaser seeks representation on the
corporation's board of directors in order to increase the likelihood that its
proposal will be implemented by the corporation. If the corporation resists the
efforts of the purchaser to obtain representation on the corporation's board of
directors, the purchaser may commence a proxy contest to have its nominees
elected to the board of directors in place of certain directors or the entire
board of directors. In some cases, the purchaser may not truly be interested in
gaining control of the corporation, but uses the threat of a proxy fight or a
bid to gain control of the corporation as a means of obtaining for itself a
special benefit which might not be available to all of the corporation's
shareholders. The Company's Board believes that the imminent threat of removal
of the directors and management in such situations would severely curtail their
ability to negotiate effectively with such purchasers and adequately represent
the interests of the Company's shareholders. The proposal is intended to
encourage persons seeking to acquire control of the Company to initiate such an
acquisition through arm's-length negotiations with management and the Board, who
would then be in a position to negotiate a transaction which is fair to all of
the Company's shareholders.
The proposal will limit the ability of a stockholder to gain control of the
Board through electing directors at Annual Meetings, increasing the size of the
Board or removing directors. The classification provisions would apply to every
election of directors, whether or not a change in the Board would be beneficial
to the Company and its shareholders and whether or not a majority of the
shareholders believes that such a change would be desirable. A staggered or
classified Board also makes it more difficult for shareholders to change the
majority of directors even when the only reason for such change may be the
performance of the current directors. The proposal would not, however, delay a
change in control of the Company, if, after a successful tender offer for a
majority of the voting shares of the Company, the incumbent directors resigned
or reached an accommodation with the majority stockholder.
The requirement of an increased shareholder vote to alter, amend or repeal
the Board classification provision will give minority shareholders (including
the Company's current officers and directors as a group -- see "Director
Nominees and Other Principal Holders of the Company's Common Stock" below) a
veto power over any amendments or change and would prevent a majority
shareholder with less than 80% of the voting shares from avoiding the
requirements of the Board classification by amending or repealing it.
The proposal could have the effect of delaying an attempted business
combination. It may tend to discourage or make more difficult a proxy contest,
the assumption of control of the Company by a holder of a substantial block of
the Company's Common Stock or the removal of the incumbent directors.
In addition, the proposal may affect the ability of shareholders to change
the composition of the Board and to benefit from transactions which are opposed
by the incumbent directors. Moreover, since the proposal is designed to
discourage accumulations of large blocks of the Company's Common Stock by
purchasers whose objective is to assume control of the Board quickly, its
adoption could tend to reduce the temporary fluctuations in the market price of
the Company's Common Stock that could be caused by such accumula-
4
<PAGE> 6
tions. As a result, shareholders could be deprived of certain opportunities to
sell their shares at temporarily higher market prices.
ALTHOUGH CHANGES OF CONTROL OF THE BOARD OR CHANGES IN THE MANAGEMENT OF
THE COMPANY WITHOUT PRIOR CONSULTATION WITH INCUMBENT MANAGEMENT MAY NOT
NECESSARILY BE DETRIMENTAL, AND COULD BE BENEFICIAL TO THE COMPANY AND ITS
SHAREHOLDERS, THE BOARD HAS DETERMINED THAT THE BENEFITS OF PROTECTING ITS
ABILITY TO NEGOTIATE WITH THE PROPONENT OF AN UNSOLICITED BID TO CHANGE CONTROL
OF THE COMPANY OUTWEIGH THE DISADVANTAGES OF DISCOURAGING SUCH A PROPOSAL AND
THEREFORE UNANIMOUSLY RECOMMEND A VOTE FOR THE PROPOSAL.
PROPOSAL NO. 3
ELECTION OF DIRECTORS TO STAGGERED TERMS
General. At the Company's Annual Meeting held June 18, 1996, shareholders
elected six persons to serve as members of its Board of Directors until the next
Annual Meeting or until their successors are elected and qualified. As part of
the Jacobs Agreement discussed below, three members of the Company's Board
resigned, and three nominees of Jacobs were elected to the Board. It is proposed
that these six persons and two additional nominees now be elected by the
shareholders to the staggered terms described above. The proxies named on the
enclosed proxy intend to vote for the election of eight nominees named below.
Proxies cannot be voted for a greater number of directors than the number
nominated. Each nominee has indicated a willingness to serve; however, in the
event any of the nominees should become unable to serve as a director, the proxy
will be voted in accordance with the best judgment of the persons acting under
the proxy.
If the staggered Board set forth above in Proposal No. 2 is approved and
adopted by the shareholders, the members of the Board will be divided into three
classes as nearly equal in number as possible. Two Class I Directors, the
nominees for which are Messrs. and , will be elected for an
initial one year term expiring at the 1997 Annual Meeting of Shareholders. Three
Class II Directors, the nominees for which are Messrs. , and
, will be elected for an initial two year term expiring at the 1998
Annual Meeting of Shareholders. Three Class III Directors, the nominees for
which are Messrs. , and , will be elected for an
initial three year term expiring at the 1999 Annual Meeting of Shareholders.
Thereafter, except as described below, all members of the Board will be elected
for three year terms expiring at the third Annual Meeting of Shareholders after
their respective election. Accordingly, directors of one Class only will be
elected at each year's Annual Meeting of Shareholders after this Annual Meeting;
i.e., the Class whose prior term expires at each future year's Annual Meeting of
Shareholders.
If Proposal 1 above (which expands the size of the Board) is not approved,
only the six existing directors will be elected at the special meeting.
If Proposal 2 above (which contains a provision for a staggered Board) is
not approved and adopted by the shareholders, all directors will be elected at
this and future year's Annual Meetings of Shareholders for a one year term
expiring at the following year's Annual Meeting. In either case, if elected, all
nominees are expected to serve until the expiration of their respective terms
and until their successors are duly elected and qualified.
Currently, vacancies that occur during a term, and any newly created
directorships, may be filled by a majority of the remaining members of the Board
of Directors or by election at a meeting of shareholders. See the "Jacobs
Agreement" below in this regard.
5
<PAGE> 7
Information Concerning Nominees to the Board. The following table sets
forth information regarding each nominee. Each person assumed his duties on
August 29, 1996.
<TABLE>
<CAPTION>
NAME AGE POSITION(S) HELD
- - - --------------------------------- --- --------------------------------------------
<S> <C> <C>
Robert D. Greenlee 54 Co-Chairman of the Board and Treasurer
Jeffrey P. Jacobs 43 Co-Chairman of the Board and Chief Executive
Officer
Stephen R. Roark 48 President, Chief Financial Officer and a
Director
Frank B. Day 62 Vice President, Secretary and a Director
Mr. A. (Black Hawk) Nominee
Robert H. Hughes 55 Director
Martin S. Winick 46 Director
Patrick J. McKinley 41 Nominee
</TABLE>
ROBERT D. GREENLEE graduated from Iowa State University with a degree in
Radio & Television Broadcasting in 1963 and entered graduate school where he
obtained a Master's Degree in Journalism & Mass Communication in 1965. From 1975
through 1988 Mr. Greenlee was President of Centennial Wireless, Inc., which
operated two radio stations and successfully competed in the Denver-Boulder
radio market. The stations were sold to a national group owner of stations in
1988.
After selling the radio stations in 1988, Mr. Greenlee became and continues
at present as President of Centennial Investment & Management Company, Inc., a
private investment and consulting firm located in Boulder, Colorado. From
September, 1991, to August 29, 1996 Mr. Greenlee was Chairman and Chief
Executive Officer of the Company and from September 1991 to July 1995 he was
President of the Company. Mr. Greenlee is active in local government activities
and has served as an elected member of the Boulder City Council since August
1982. He is past Chairman of the six county Scientific and Cultural Facilities
District. Mr. Greenlee is also a director of Rock Bottom Restaurants, Inc., a
publicly traded company. Mr. Greenlee devotes approximately 75% of his time to
the business of the Company.
STEPHEN R. ROARK has been employed as chief financial officer of the
Company since August 1993. He was elected a director of the Company in August
1993 and President of the Company in July 1995. Prior to that time he was an
independent consultant in the Denver area rendering financial and accounting
assistance to companies in the public marketplace. Mr. Roark has 20 years
accounting experience having served as a partner with a large local accounting
firm and as a partner with a national accounting firm. Mr. Roark was with
Hanifen, Imhoff Securities Corporation and Prudential Securities, Inc. for three
years and is a member of the American Institute of Certified Public Accountants
and the Colorado Society of Certified Public Accountants. Mr. Roark obtained his
B.S.B.A. in Accounting from the University of Denver in 1973.
JEFFREY P. JACOBS, has been Co-Chairman of the Board and Chief Executive
Officer since August 29, 1996. Mr. Jacobs has been President of Jacobs
Entertainment, Inc., a privately held development company, since its formation.
Mr. Jacobs has also been President of Jacobs Investments, Inc., a privately held
company and its predecessor, for more than five years. Jacobs Entertainment,
Inc. developed a substantial portion of the Flats in downtown Cleveland, Ohio
and also developed Nautica, a large mixed use entertainment and residential
development in Cleveland, Ohio. Mr. Jacobs is active in a variety of other
private business ventures. Mr. Jacobs holds a B.A. degree in Marketing, an M.A.
degree in Urban Studies and an M.B.A. in Finance.
FRANK B. DAY, Chairman of the Board and Executive Director of Rock Bottom
Restaurants, Inc., a publicly traded company, has been employed since January
1980 as President of Concept Restaurants, Inc., and Managing General Partner of
the Hotel Boulderado in Boulder, Colorado since August 1982. Concept
Restaurants, Inc. owns or operates over twenty full service restaurants
(including the Old Chicago Pizza chain) in Colorado front range communities.
From 1959 to present, Mr. Day has owned and operated food service and
hospitality facilities in Illinois, Michigan, Wisconsin, and Colorado. He
attended Harvard University from 1950 to 1956 and received B.A. and M.B.A.
degrees. Mr. Day is also a real estate investor and is active in many civic and
nonprofit organizations, having served as a director of the Boulder Chamber of
6
<PAGE> 8
Commerce (September 1988 to September 1991) and Downtown Boulder, Inc. (from
June 1987 to June 1990). Mr. Day devotes approximately 10% of his time to the
business of the Company. Mr. Day has been an officer and director of the Company
since September 1991.
MR. A. [to come -- Black Hawk Nominee]
ROBERT H. HUGHES was a partner with Deloitte & Touche LLP, a large
international accounting firm, for more than five years until his retirement in
1991. In 1993, after two years of retirement, he became the Chief Financial
Officer of Jacobs Investments, Inc., an affiliate of Jacobs Entertainment, Inc.
Mr. Hughes received a B.A. degree in Accounting and is a Certified Public
Accountant.
MARTIN S. WINICK has been in the investment banking/brokerage business with
Cowen & Co. (1981-1990); Dean Witter Reynolds (1990-1992); Rodman & Renshaw
(1992-1995); and Mesirow Financial (1995 to present). Mr. Winick serves on the
Board of Directors of publicly traded Paul-Son Gaming Corp., a leading
manufacturer of table games and supplies.
PATRICK J. MCKINLEY has been a Vice President of Jacobs Investments, Inc.
for more than five years. See the resume of Mr. Jacobs above for information
regarding this company.
The Board of Directors has three committees consisting of Audit,
Compensation and Executive Committees. The members elected to serve on such
committees will be appointed shortly after the special meeting. Officers are
appointed by the directors and serve at the pleasure of the Board or until their
death, incapacity or resignation. Directors receive $1,000 and $500 per Board
and Audit and Compensation Committee meeting attended, respectively.
There are no family relationships between or among any directors or
executive officers and, except as set forth above in their respective resumes,
none serve as a director of any company required to file reports under the
Securities Exchange Act of 1934 or which is registered under the Investment
Company of 1940.
7
<PAGE> 9
EXECUTIVE COMPENSATION.
The following sets forth information concerning compensation paid, accrued
or granted to directors and executive officers of the Company during its last
three fiscal years:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
------------------------------------
ANNUAL COMPENSATION AWARDS
-------------------------------- ------------------------- PAYOUTS
OTHER RESTRICTED SECURITIES -------
ANNUAL STOCK UNDERLYING LTIP ALL OTHER
NAME OF YEAR SALARY BONUS COMPENSATION AWARD(S) OPTIONS/SARS PAYOUTS COMPENSATION
OFFICER/DIRECTOR (B) ($)(C) ($)(D) ($)(E) ($)(F) (#)(G)*** ($)(H) ($)(I)
- - - -------------------- ---- ------- ------ ------------ ---------- ------------ ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Robert D. Greenlee 1993 -- -- -- -- -- -- --
1994 75,000 -- -- -- 22,500 -- 6,500
1995 75,000 -- -- -- 50,000 -- 3,500
Stephen R. Roark 1993 29,167 -- -- -- 30,000 -- 63,764**
1994 100,000 -- -- -- 22,500 -- 6,500
1995 112,500 25,000 -- -- 50,000 -- 4,000
Frank B. Day 1993 -- -- -- -- -- -- --
1994 27,872 -- -- -- 22,500 -- 5,500
1995 -- -- -- -- 15,000 -- 4,000
William H. Evers 1993 75,000 57,500* -- $ 48,000 20,000**** -- --
(former officer
and 1994 150,000 71,500* -- $ 34,500 22,500**** -- 6,500
director) 1995 200,000 -- -- -- 15,000**** -- 4,000
Stanley Politano 1994 25,000 -- -- -- 30,000 -- --
1995 81,000 15,000 -- -- 15,000 -- 2,000
J. Patrick McDuff 1994 -- -- -- -- 5,000 -- 6,500
1995 -- -- -- -- 5,000 -- 4,500
Tom W. Lamm 1994 -- -- -- -- 5,000 -- 6,500
1995 -- -- -- -- 5,000 -- 3,500
</TABLE>
- - - ---------------
* Does not include an additional $57,500 and $71,500 in compensation
representing the portion paid by Gilpin Hotel Venture in 1993 and 1994,
respectively.
** Directors' fees paid for Board and Committee meetings attended.
*** Options granted under Black Hawk's 1994 Incentive Stock Option Plan cover
300,000 shares; options heretofore granted under Black Hawk's 1996
Incentive Stock Option Plan aggregate 45,000 shares.
**** Mr. Evers terminated his employment with the Company on April 15, 1996,
hence these options expired pursuant to their terms on July 15, 1996.
8
<PAGE> 10
Mr. Jacobs, recently elected Chief Executive Officer of the Company, will
receive compensation at the rate of $150,000 per year commencing August 29,
1996. Mr. Jacobs is also entitled to receive 2.5% of the Company's pre-tax net
income above $2,880,000 determined for each calendar year on or before March 31
of the succeeding year. Messrs. Roark and Politano have entered into year
employment agreements with the Company effective August 9, 1996 at annual rates
of compensation of $ and $ , respectively.
OPTION/SAR GRANTS IN FISCAL YEAR 1995
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
- - - --------------------------------------------------------------------------
PERCENT OF POTENTIAL
NUMBER OF TOTAL REALIZABLE VALUE AT ALTERNATIVE TO
SECURITIES OPTIONS/ ASSUMED ANNUAL (F) AND (G):
UNDERLYING SARS RATES OF STOCK GRANT DATE
OPTIONS/ GRANTED TO PRICE APPRECIATION VALUE
SARS EMPLOYEES EXERCISE ON FOR OPTION TERM ---------------
GRANTED IN FISCAL BASE PRICE EXPIRATION ------------------- GRANT DATE
NAME (#) YEAR ($/SH) DATE 5% ($) 10% ($) PRESENT VALUE $
(A) (B) (C) (D) (E) (F) (G) (H)
- - - --------------------------- --------- ---------- ----------- ---------- -------- -------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Robert D. Greenlee......... 35,484 32% $7.43 Aug. 2001 $ 42,000 $122,000 --
Stephen R. Roark........... 35,484 32% 6.75 Aug. 2006 151,000 382,000 --
Frank B. Day............... 10,645 10% 7.43 Aug. 2001 13,000 37,000 --
Stanley Politano........... 10,645 10% 6.75 Aug. 2006 45,000 115,000 --
J. Patrick McDuff.......... 3,548 3% 6.75 Aug. 2006 15,000 38,000 --
Tom W. Lamm................ 3,549 3% 6.75 Aug. 2006 15,000 38,000 --
</TABLE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
SHARES UNEXERCISED IN-THE-MONEY
ACQUIRED OPTIONS/SARS OPTIONS/SARS
ON VALUE AT FY-END (#) AT FY-END ($)
EXERCISE REALIZED EXERCISABLE/ EXERCISABLE/
NAME (#) ($) UNEXERCISABLE UNEXERCISABLE
(A) (B) (C) (D) (E)
- - - ----------------------------------------------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C>
Robert D. Greenlee............................. -- -- -- --
Stephen R. Roark............................... -- -- -- --
Frank B. Day................................... -- -- -- --
J. Patrick McDuff.............................. -- -- -- --
Tom W. Lamm.................................... -- -- -- --
</TABLE>
The foregoing tables do not include the following options granted on May
29, 1996 in contemplation of the "Jacobs Agreement" described below. Such
options vest after a three year period, assuming the continued association by
the holder with the Company, on the basis of 1/3 of the total during each of the
three succeeding years. Also on May 29, 1996, the exercise prices of the options
shown in the table above were reduced to then fair market value and now range
from $5.25 per share to $5.78 per share.
<TABLE>
<CAPTION>
NUMBER OF
SHARES EXERCISE EXPIRATION
NAME UNDER OPTION PRICE DATE
----------------------------------------------- ------------ -------- ------------
<S> <C> <C> <C>
Robert D. Greenlee............................. 40,000 $5.775 May 29, 2001
Frank B. Day................................... 20,000 5.775 May 29, 2001
Jeffrey P. Jacobs.............................. 60,000 5.775 May 29, 2001
Stephen R. Roark............................... 35,000 5.25 May 29, 2001
Stanley Politano............................... 15,000 5.25 May 29, 2001
</TABLE>
9
<PAGE> 11
DIRECTOR NOMINEES AND OTHER PRINCIPAL HOLDERS OF THE COMPANY'S COMMON STOCK.
On August 30, 1996, there were approximately 160 record holders of the
Company's Common Stock; the Company estimates that its shares are beneficially
owned by approximately 1,600 additional persons.
The following table sets forth, as of August 30, 1996, the number and
percentage of shares of the Company's Common Stock held of record by officers,
directors, individually and as a group and by holders of more than 5% of such
Common Stock:
<TABLE>
<CAPTION>
BENEFICIALLY OWNED
----------------------------
NAME SHARES OPTIONS(1) PERCENTAGE(4)
------------------------------------------------ ------- ---------- -------------
<S> <C> <C> <C>
Robert D. Greenlee.............................. 405,133 72,500
2076 Hardscrabble Drive
Boulder, Colorado 80301
Diversified Opportunities Group Ltd............. 474,000(2)(3)
1231 Main Avenue
Cleveland, Ohio 44113
Stephen R. Roark................................ -- 102,500
1730 South Ogden Street
Denver, Colorado 80210
Frank B. Day.................................... 403,089 37,500
1010 69th Street
Boulder, Colorado 80303
Mr. A [Black Hawk nominee]......................
Robert H. Hughes................................ -- --
Jacobs Investments, Inc.
1231 Main Avenue
Cleveland, Ohio 44113
Martin S. Winick................................ -- --
c/o Jacobs Entertainment Ltd.
1231 Main Avenue
Cleveland, Ohio 44113
Patrick J. McKinley............................. -- --
Jacobs Entertainment Ltd.
1231 Main Avenue
Cleveland, Ohio 44113
Officers and Directors as a group (eight
persons)......................................
</TABLE>
- - - ---------------
(1) Represents shares underlying presently exercisable options; these
individuals also hold other options which are not presently exercisable. See
"Executive Compensation" above.
(2) Mr. Jacobs may be deemed to be the beneficial owner of these shares which
are held by Diversified Opportunities Group Ltd. ("Diversified"), a limited
liability company managed by Jacobs Entertainment Ltd., which is controlled
and managed by Mr. Jacobs. Diversified is owned jointly by Jacobs
Entertainment Ltd. and a trust of which Mr. Jacobs is a beneficiary.
Diversified has acquired by assignment the rights of Jacobs Entertainment
Ltd. in the agreement between it and the Company as more fully described in
Proposal No. 4 below.
(3) If Proposal No. 4 is approved by shareholders, Mr. Jacobs, through
Diversified, will become the beneficial owner of an additional 288,000
shares of the Company's Common Stock. Moreover, subject to certain
conditions, both Jacobs (through Diversified) and other officers and
directors of the Company will acquire additional shares of the Company's
Common Stock. See "Significant Provisions of Jacobs Agreement" under
Proposal No. 4 below.
(4) All figures have been computed in accordance with Rule 13d-3 adopted under
the Securities Exchange Act of 1934.
10
<PAGE> 12
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS DURING FISCAL 1995.
The Gilpin Hotel Joint Venture paid a total of $538,000 during 1995 and
1994 to a construction company operated and partially owned by William H. Evers,
a former director of the Company, for the purpose of constructing the addition
of the Dolly's Casino with Gilpin Hotel Venture. The estimated profit realized
by Mr. Evers' construction company approximated $63,000.
During 1994, the Company signed a joint venture agreement with Jacobs to
develop a major hotel/casino/parking complex in Black Hawk, Colorado on
Millsites owned by the Company and Jacobs. After several modifications of the
original plan, occasioned largely by the various regulatory agencies involved,
the project has now evolved into a single phased 50 room hotel/casino, with
approximately 850 slot machines, 22 table games, 3 restaurants, 4 bars, three
floors of underground parking and an attendant two-story parking structure on
adjacent Millsite 30. Construction is anticipated to commence late summer or
early fall 1996, completion of financing is anticipated in early fall of 1996
and completion of the project is projected for late 1997. The Company and Jacobs
presently own equal interests in the joint venture, however, the Jacobs
Agreement described in Proposal No. 4 below provides that upon closing the
Company will own 75% and Jacobs 25% of the joint venture. See Proposal No. 4
below for additional details in this regard and particularly see "Significant
Provisions of Jacobs Agreement" below for information concerning certain
transactions which have occurred or are anticipated between certain officers and
directors and the Company.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE FOR THE ELECTION OF
THE EIGHT NOMINEES NAMED ABOVE. PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL
BE VOTED FOR THE NAMED NOMINEES UNLESS INSTRUCTIONS ARE GIVEN TO THE CONTRARY.
PROPOSAL NO. 4
APPROVAL OF ISSUANCE OF COMMON STOCK
Introduction. On May 29, 1996, the Company entered into a letter of intent
with Jacobs Entertainment Ltd. ("Jacobs") providing, among other things, for the
issuance of shares of the Company's Common Stock as described in detail below
under "Significant Provisions of Jacobs Agreement." A definitive agreement as
contemplated in the letter of intent was executed by the parties on August 12,
1996.
Neither approval of the Jacobs Agreement nor approval of the proposed
issuance of Common Stock by shareholders of the Company is required under
Colorado law; however the bylaws of the National Association of Securities
Dealers, Inc. ("NASD") require that shareholders of companies whose securities
trade in the NASDAQ National Market must receive shareholder approval in the
event a possible issuance of securities could result in the issuance of 20% or
more of the voting securities of such companies.
Therefore, to comply with its NASDAQ National Market listing agreement, the
Board of Directors is soliciting shareholder approval of the issuance of certain
shares of Common Stock as contemplated in the Jacobs Agreement. The Board of
Directors unanimously recommends a vote FOR approval of the proposed issuance.
Vote Required. The affirmative vote of a majority of the shares present in
person or by proxy at the special meeting will be required to approve the
proposed issuance of additional Common Stock in the Jacobs Agreement. A quorum
requires that a majority of the Company's Common Stock be present at the
meeting, hence approval of the issuance, at a minimum, will require the
affirmative vote of the number of shares equaling 25% of the Company's Common
Stock present at the special meeting plus one share (or a total of 742,069
shares voting for the proposal assuming only a quorum is present).
Messrs. Greenlee, Day and Jacobs (through Diversified) owned, in the
aggregate, 1,282,222 shares of the Company's Common Stock at August 30, 1996.
Pursuant to a Shareholders' Agreement dated August 29, 1996, Messrs. Greenlee
and Day agreed to vote their shares in support of the proposals described in
this Proxy Statement. Moreover, Mr. Jacobs has informed the Company that he will
cause Diversified to vote for the proposals set forth herein. The Shareholders'
Agreement also contains buy-sell agreements between and among Messrs. Greenlee,
Day and Jacobs and an irrevocable proxy granted to Jacobs by Messrs. Greenlee
and
11
<PAGE> 13
Day until December 31, 1998 in order to effectuate the proposals set forth in
this Proxy Statement. Hence, assuming only a quorum is present at the special
meeting, the votes of Messrs. Greenlee, Day and Jacobs will be sufficient to
approve the proposal. If for any reason shareholder approval is not obtained, no
shares beyond the initial purchase described immediately below will be issued to
Jacobs.
Significant Provisions of Jacobs Agreement. Under terms of the agreement,
Diversified, the assignee of Jacobs Entertainment Ltd. (both are collectively
referred to herein as "Jacobs") purchased 474,000 shares of the Company's Common
Stock for $5.25 per share -- a total investment of $2,488,500. These shares
represented an amount equal to 19% of the Company's Common Stock then
outstanding. Subject to shareholder approval of Proposal 4, Jacobs has agreed to
purchase an additional 288,000 shares at $5.25 per share payable on or before
March 15, 1997 (the "Initial Purchases"). All such investments will be made at
$5.25 per share and will be subject to an irrevocable stock purchase agreement.
In addition to the Initial Purchases described above, Jacobs has committed
to purchase, subject to approval of Proposal No. 4, an additional 571,428 shares
of Common Stock also at $5.25 per share (the "Additional Purchases"). The
Additional Purchases are payable ratably on or before September 30, 1996, March
1, 1997 and February 1, 1988 but such purchases are subject to the satisfaction
of certain conditions including the resolution, in Jacobs' sole but reasonable
discretion, of an investigation which is being conducted with respect to certain
activities of the Gilpin Hotel Casino ("Casino") of which the Company is the
manager. The Casino has been made aware that the Colorado Division of Gaming
("Division") is conducting an investigation into certain check cashing and bad
check collection practices of the Casino or certain of its personnel and agents
since the date of its opening. No proceedings have been initiated against the
Casino in any judicial or administrative forum as of this date, although
financial penalties and/or license suspension or revocation could result if
material charges, such as extending credit by the Casino, are established. The
Casino would vigorously contest any remedial actions brought by the Division but
the outcome of this matter is not presently determinable. In addition, the
agreement provides for existing officers and directors of the Company (i.e.,
Messrs. Greenlee, Day and Roark) to purchase up to 142,857 shares of Common
Stock (for aggregate consideration of $750,000) under terms and subject to the
same conditions governing the Jacobs purchase as described in this paragraph.
Jacobs and its affiliates have made application to the Colorado Gaming
Commission for certain gaming licenses. If such licenses are not granted, the
Company has agreed to redeem all Common Stock held by Jacobs at cost, plus
interest at the lowest rate permissible under the Internal Revenue Code of 1986,
within one year of such determination. Further, the Company has agreed to redeem
all Common Stock held by Jacobs if the Company or the Casino loses any gaming
license which is material to the operation of its business at Jacobs' cost of
such shares with interest at 10% also within one year of such event. This
obligation will be secured with certain assets of the Company.
The agreement also provides that upon issuance and payment by Jacobs for
all shares of the Company's Common Stock to be purchased by it, a total
investment of $7,000,000, the Company's eight person Board of Directors will be
expanded to nine members with the new member to be a nominee of Jacobs (as are
four of the eight existing Board members). If Proposal 1 is not approved, Jacobs
will appoint four of the seven Board members.
Jacobs is involved in several existing and potential gaming activities and
opportunities. In order to minimize conflicts of interest and allocate corporate
opportunities as between the Company and Jacobs, the agreement provided that a
master joint venture agreement ("MJV Agreement") executed as of August 29, 1996
would control such matters. The MJV Agreement has a term of 20 years (which may
be extended for an additional 20 years upon the parties' mutual consent).
Pursuant to the MJV Agreement, any gaming opportunity now, or in the future,
owned or controlled by Jacobs will be offered to a joint venture in which the
Company shall have right to own at least 51% therein; provided however that
Jacobs' present interest in Colonial Downs, a Virginia racing track and
associated satellite wagering facilities is to be excepted therefrom as is its
participation in certain other gaming activities. Likewise, any gaming
opportunity now, or in the future, owned or controlled by the Company will be
offered to a joint venture in which Jacobs shall have the right to obtain an
ownership interest of up to forty-nine percent (49%) therein. For purposes of
the MJV
12
<PAGE> 14
Agreement, a gaming opportunity shall mean any right to invest in or participate
in any venture, investment, enterprise, entity or other business opportunity
involved in or associated with, the legal gaming industry.
The MJV Agreement provides for a co-management fee payable to Jacobs and
calculated as a percentage of each individual venture's gaming revenues less
gaming taxes (the "fee"). The fee shall be 1% if Jacobs' ownership of a
particular venture is between 25 and 49%; the fee shall be 3/4 of 1% if Jacobs'
ownership is between 14 and 24%; and the fee shall be 1/2 of 1% if Jacobs'
ownership is between 1 and 14%.
The terms of such MJV Agreement were structured such that the financial
results of any particular joint venture will be consolidated with the financial
results of the Company in accordance with generally accepted accounting
principles. Moreover, the existing Company/Jacobs joint venture in Black Hawk,
Colorado has been amended to provide for a 75% participation by the Company and
25% by Jacobs (which was previously a 50%-50% joint venture) and will enable
such accounting consolidation.
Finally, the agreement between the Company and Jacobs provides for several
other matters, including customary representations and warranties, reciprocal
indemnification between the parties.
Reasons for Jacobs Agreement; Offering Price. The previous Board of
Directors of the Company unanimously approved the letter of intent and
definitive agreement, after significant arm's length negotiations which began in
early 1996. The letter of intent was publicly announced by the Company on May
30, 1996.
Although shareholders' approval of the Jacobs Agreement was not required by
either Colorado law, federal or state securities laws, rules or regulations, the
bylaws and listing requirements of the NASD require such approval. Moreover, as
discussed above, current officers and directors own or control approximately
1,282,222 shares entitling them to vote approximately 43% of the Company's
outstanding shares which they intend to vote for approval of the share issuances
included as part of the Jacobs Agreement. If such is not approved by
shareholders, which is not anticipated given the ownership of the Company's
Common Stock, the Jacobs Agreement will be rescinded, except for Jacobs' initial
purchase of approximately 19% of the Company's Common Stock.
Although approval by shareholders of Proposal No. 4 is anticipated given
the shareholdings of officers and directors of the Company, the Board of
Directors appreciates this opportunity to share with other shareholders its
reasons for the negotiated, arm's-length Jacobs Agreement:
(1) the Company's only operating gaming activity is its 50% interest
in the Gilpin Hotel Casino in Black Hawk, Colorado;
(2) large, experienced and well financed competitors in the Black
Hawk/Central City area have proliferated since the opening of the Gilpin
Hotel Casino on October 1, 1992;
(3) the Company's undeveloped, but significant, real estate ownership
position in Black Hawk will require funding in substantial amounts for
development and to meet on-going competitive challenges;
(4) after having explored numerous gaming and financing opportunities
and proposals during the last two years, the Company's previous Board of
Directors unanimously believed that the capital infusion provided by Jacobs
would provide the Company funds to continue its development of the $60
million proposed Casino on its existing undeveloped properties in Black
Hawk and acquire additional gaming opportunities in order to diversify
geographically. Jeffrey P. Jacobs, controlling person of Jacobs, is an
experienced developer/financier who has contributed to the successful
re-development of the revived downtown Cleveland, Ohio area;
(5) the MJV Agreement discussed above obligates Jacobs to present all
gaming opportunities now or in the future controlled by Jacobs to be
presented to the Company in which it may elect to acquire a minimum
participation of 51% therein. Jacobs is required to fund the remaining
balance; hence the Company has gained an on-going, financially capable,
experienced joint venture partner to accelerate growth beyond its present
resources;
(6) the Company has engaged, from time to time, reputable and
experienced investment banking firms to assist it in evaluating gaming
opportunities and alternatives available to the Company to finance
13
<PAGE> 15
proposals coming to its attention. Given the Company's lack of
diversification, the decreasing amount of its cash flow and net income, and
prospects of continuing to rely on a single operating entity, the Casino,
in a highly competitive environment, the Jacobs Agreement, in the opinion
of the Board of Directors, provides a unique and potentially substantial
opportunity to rapidly expand its gaming activities;
(7) the Company's earnings per share have declined from $1.40 per
share in 1993 to $.65 per share in 1995 and to $.29 per share for the six
months ended June 30, 1996. The results of operations reflect the
increasingly fierce competitive environment in the Black Hawk gaming
market;
(8) the purchase price of the Common Stock described above reflects
net proceeds to the Company. If the Company were able, of which there could
be little assurance, to undertake a second public offering of its Common
Stock, net proceeds would have yielded approximately 20% less because of
underwriting discounts and offering costs. Moreover, in such instance the
Company would have been denied the advantages of association with Jacobs as
set forth above; and
(9) the highest closing price of the Company's Common Stock for 1996,
through May 28, 1996, was $6.63 per share. During 1995 the price of the
Company's Common Stock ranged between a high of $11.75 in the first quarter
of 1995 to a low of $5.00 in the fourth quarter of 1995. As of March 31,
1996, the book value of the Company was approximately $6.63 per share.
However, the trading price of the Company's Common Stock has frequently
been less than book value. Largely as the result of the factors set forth
above, the purchase price of the shares issued and proposed to be issued to
Jacobs and to certain officers of the Company is $5.25 per share and was
determined to be the fair value of the shares by the Company's Board of
Directors after arm's-length bargaining.
ADDITIONAL INFORMATION
The Company furnishes to its shareholders annual reports containing
financial statements audited by an independent public accounting firm after the
end of each fiscal year. In addition, the Company furnishes to its shareholders
quarterly reports for the first three quarters of each fiscal year containing
unaudited financial and other information after the end of each fiscal quarter.
Copies of these materials may be obtained free of charge from the Company.
For further information with respect to the Company, reference is made to
periodic reports filed under the Securities Exchange Act of 1934, separate
copies of which may be obtained upon payment of the prescribed fees or examined
without charge at the office of the Securities and Exchange Commission, 450
Fifth Street, N.W., Washington, D.C. 20549.
By Order of the
Board of Directors
By /s/ FRANK B. DAY
------------------------------------
Frank B. Day, Secretary
Boulder, Colorado
September , 1996
14
<PAGE> 16
EXHIBIT A
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
BLACK HAWK GAMING & DEVELOPMENT COMPANY, INC.
Pursuant to the provisions of the Colorado Business Corporation Act
("CBCA"), the Corporation adopts the following Articles of Amendment to the
Articles of Incorporation:
FIRST: The name of the Corporation is Black Hawk Gaming & Development
Company, Inc.
SECOND: The following amendments to the Articles of Incorporation, as
amended, was adopted by the stockholders of the Corporation on September ,
1996, in the manner prescribed by the CBCA. The number of shares voted for the
amendment was sufficient for approval.
THIRD: The size of the Corporation's Board of Directors is hereby changed
to not less than three nor more than nine members.
FOURTH: Article Seventh of the Corporation's Articles of Incorporation is
deleted hereby and the following Article Seventh substituted therefor:
"SEVENTH: Staggered Board. The business and affairs of the Corporation
shall be managed under the direction of a Board of Directors consisting of
not fewer than three nor more than nine directors, the exact number to be
fixed from time to time by resolution adopted by the affirmative vote of a
majority of the entire Board of Directors. Whenever used in these Articles
of Incorporation, the phrase "entire Board of Directors" shall mean that
number of directors fixed by the most recent resolution adopted pursuant to
the preceding sentence prior to the date as of which a determination of the
number of directors then constituting the entire Board of Directors shall
be relevant for any purpose under these Articles of Incorporation. The
Directors shall be classified, with respect to the term for which they
severally hold office, into three classes, each class to be as nearly equal
in number as possible, the first class to hold office initially for a term
expiring at the annual meeting of the stockholders to be held in 1997, the
second class to hold office initially for a term expiring at the annual
meeting of stockholders to be held in 1998, and the third class to hold
office initially for a term expiring at the annual meeting of stockholders
to be held in 1999, with the members of each class to hold office until
their successors are elected and qualified. At each annual meeting of
stockholders of the Corporation, the successors to the class of directors
whose term expires at that meeting shall be elected to hold office for a
term expiring at the annual meeting of stockholders held in the third year
following the year of their election.
Any vacancy occurring in the Board of Directors and any newly created
directorship resulting from any increase in the number of directors shall
be filled solely by the affirmative vote of a majority of the remaining
directors then in office, even though less than a quorum of the Board of
Directors. No decrease in the number of directors constituting the Board of
Directors shall shorten the term of any incumbent director.
Any director may be removed from office with cause only by the
affirmative vote of the holders of a majority of the then issued and
outstanding voting stock of the Corporation and may be removed from office
without cause only by the affirmative vote of the holders of 80% of the
then issued and outstanding voting stock of the Corporation.
Notwithstanding the foregoing, whenever the holders of any one or more
classes or series of preferred stock or of any other class or series of
shares issued by the Corporation shall have the right, voting separately by
class or series, to elect directors under specified circumstances, the
election, term of office, filling of vacancies and other features of such
directorships shall be governed by the terms of these
A-1
<PAGE> 17
Articles of Incorporation applicable thereto, and such directors so elected
shall not be classified pursuant to this Article Seventh unless expressly
provided by such terms.
This Article Seventh may be altered, amended or repealed, and any
provision inconsistent herewith may be adopted, only the affirmative vote
of the holders of 80% of the voting power of the shares of the
Corporation's voting stock, in addition to any other vote required by the
CBCA or these Articles of Incorporation."
Dated: September , 1996 BLACK HAWK GAMING &
DEVELOPMENT COMPANY, INC.
By:
Stephen R. Roark, President
Attest:
Frank B. Day, Secretary
(CORPORATE SEAL)
STATE OF COLORADO
COUNTY OF BOULDER
The foregoing instrument was acknowledged before me this day of
, 1996, by Stephen R. Roark and Frank B. Day, President and
Secretary, respectively, of Black Hawk Gaming & Development Company, Inc., a
Colorado corporation, on behalf of the Corporation and verified by each person
on behalf of the Corporation, under penalties of perjury, that the foregoing
instrument is the Corporation's deed and act and that the facts stated therein
are true.
Witness my hand and official seal.
My commission expires:
- - - ------------------------------------
------------------------------------
Notary Public
(SEAL)
ss.
A-2
<PAGE> 18
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT (this "Agreement") is made and entered into as of
the 12th day of August, 1996, by and between BLACK HAWK GAMING & DEVELOPMENT
COMPANY, INC., a Colorado corporation ("Seller"), and JACOBS ENTERTAINMENT LTD.,
an Ohio limited liability company, or its nominee(s) as described in Section 29
("Purchaser").
RECITALS
Seller desires to sell to Purchaser certain Shares (as hereinafter
defined), and Purchaser desires to acquire the Shares from Seller. Seller and
Purchaser acknowledge that this Agreement is intended to memorialize their
understanding of their agreements contained in that certain letter of intent
dated as of May 29, 1996 by and between Seller and Purchaser.
AGREEMENTS
NOW, THEREFORE, in consideration of the foregoing Recitals and of the
warranties, representations, agreements and undertakings hereinafter set forth,
the parties hereto do hereby represent, warrant, covenant and agree as follows:
1. CERTAIN DEFINITIONS
For the purposes of this Agreement, the terms defined in this Section 1
shall have the meanings set out below. All capitalized terms not defined in this
Section 1 shall have the meanings ascribed to them in other parts of this
Agreement.
(a) "Closing Date" shall mean August 29, 1996, as of the close of
business, or such other date as to which the parties may agree in writing.
(b) "Closing" shall mean the closing on the Closing Date of the
purchase and sale transaction contemplated by this Agreement.
(c) "Annual Statement" shall mean Seller's Consolidated Balance Sheet
at December 31, 1995 and 1994 and the accompanying Consolidated Statements
of Income, Consolidated Statements of Cash Flows and Consolidated
Statements of Shareholders' Equity for Seller's three fiscal years then
ended, together with the schedules and notes related thereto, accompanied
by the applicable report of Deloitte & Touche L.L.P. ("Deloitte"),
Certified Public Accountants, as filed with the Securities and Exchange
Commission ("SEC").
(d) "Interim Statement" shall mean Seller's unaudited Consolidated
Balance Sheet at June 30, 1996 and the accompanying Consolidated Statements
of Income and Statements of Cash Flow for the 3-month period then ended,
together with the notes relating thereto, as filed with the SEC.
(e) "Gilpin Annual Statement" shall mean the Gilpin Hotel Venture's
(the "Gilpin") Balance Sheet at December 31, 1995 and 1994 and the
accompanying Statements of Income, Statements of Cash Flow and Statements
of Venturers' Investments and Advances for the Gilpin's three fiscal years,
then ended, together with the schedules and notes related thereto,
accompanied by the applicable report for Deloitte, as filed with the SEC.
(f) "Financial Statements" shall mean the Annual Statement and Interim
Statement and the Gilpin Annual Statement.
(g) "Material Adverse Effect" shall mean any event which would, in the
aggregate, have a material adverse effect upon the business, assets,
financial condition or results of operations of any of Seller on a
consolidated basis, the Gilpin or the Joint Venture (as hereinafter
defined).
(h) "NASD" shall mean the National Association of Securities Dealers,
Inc.
A-3
<PAGE> 19
(i) "NASD Approval" shall mean the approval of Seller's shareholders
as required by the rules and regulations of the NASD by virtue of its
Shares being traded on the National Market tier of the NASDAQ Stock Market
for Purchaser's acquisition of the Section 2(a) Shares and the Section 2(c)
Shares (both as hereinafter defined).
(j) "Purchaser Material Adverse Effect" shall mean any event which
would, in the aggregate, have a material adverse effect upon the business,
assets, financial condition or results of operations of Purchaser.
(k) "Shares" shall mean shares of Seller's common stock, $.001 par
value.
2. PURCHASE AND SALE; PRICE; SECURITY
Seller agrees to sell to Purchaser, and Purchaser agrees to purchase from
Seller, certain of the Shares for the purchase price and upon and subject to the
terms, provisions and conditions hereinafter set forth.
(a) Initial Sale and Purchase of Shares. Seller shall sell and
Purchaser shall purchase 762,000 Shares (the "Section 2(a) Shares") at a
price of $5.25 per Share for a total purchase price of $4,000,500. At
Closing, Seller shall sell and Purchaser shall acquire 474,000 of the
Section 2(a) Shares referred to above. Purchaser shall be obligated to
acquire the remaining 288,000 Section 2(a) Shares from Seller only upon
Seller having obtained the NASD Approval. Upon obtaining the NASD Approval,
provided Purchaser has provided the security set forth in Section 2(g),
Seller shall immediately issue and deliver to Purchaser the remaining
288,000 Section 2(a) Shares.
(b) Payment of Purchase Price for Initial Sale and Purchase. The
purchase price for the Section 2(a) Shares shall be paid as follows:
(i) $2,000,250 of said purchase price shall be paid to Seller by
wire transfer or by certified or bank check at the Closing.
(ii) Provided Seller obtains the NASD Approval, the balance of
$2,000,250 shall be paid on or before March 15, 1997. Purchaser's
obligation to pay this future installment shall be secured as set forth
in Section 2(g).
(c) Sale and Purchase of Additional Shares. Subject to the conditions
hereinafter set forth, Purchaser shall irrevocably purchase and Seller
shall irrevocably sell an additional 571,428 Shares (the "Section 2(c)
Shares"). The Purchaser shall be obligated to complete the purchase of the
Section 2(c) Shares only upon the satisfaction of the following conditions
(the "Section 2(c) conditions"): (i) Seller having obtained NASD Approval,
(ii) Purchaser having acquired or received all necessary and appropriate
regulatory, licensing and other approvals from the Colorado Division of
Gaming (the "Division"), the Colorado Limited Gaming Control Commission
(the "Commission") and the state and local liquor licensing authorities,
and (iii) the completion and termination in a manner satisfactory to
Purchaser, in its sole but reasonable discretion, of the Division's and the
Jefferson County Colorado District Attorney's office's investigation into
certain check cashing and bad check collection practices of the Gilpin
Hotel Casino (the "Casino") of which Seller is the general manager and a
joint venture participant and/or certain of its personnel and agents (the
"Casino Investigation"). Notwithstanding anything to the contrary contained
above, Purchaser shall by written notice to Seller, on or before December
31, 1998 (the "Outside Date"), (i) determine that the condition set forth
in Section 2(c)(iii) has been satisfied, (ii) determine that the condition
set forth in Section 2(c)(iii) has not been satisfied or (iii) waive such
condition. In the event Purchaser determines that any of the Section 2(c)
conditions have not been satisfied, Purchaser shall provide written notice
thereof to Seller on or before the Outside Date and thereupon (i)
Purchaser's obligation to acquire the Section 2(c) Shares shall be null and
void and (ii) Seller shall redeem the Section 2(a) Shares previously
purchased by Purchaser in accordance with Section 10, below. In the event
that the Section 2(c) conditions have been satisfied, Purchaser shall
provide written notice thereof to Seller on or before the Outside Date and
shall pay for the Section 2(c) Shares in accordance with Section 2(d)
below. Upon its receipt of written notice that the Section 2(c)
A-4
<PAGE> 20
conditions have been satisfied, the Seller shall immediately deliver to
Purchaser certificates for all the Section 2(c) Shares.
(d) Payment of Purchase Price for Section 2(c) Shares. Provided that
on or before September 30, 1996 the Section 2(c) conditions have been
satisfied, and Purchaser has received certificates for the Section 2(c)
Shares, Purchaser shall pay for the Section 2(c) Shares in three (3)
installments of $1,000,000 each, with such installments being paid by
Purchaser to Seller by wire transfer or by certified or bank check on or
before September 30, 1996, March 31, 1997 and February 1, 1998. In the
event the Section 2(c) conditions are satisfied after September 30, 1996,
Purchaser shall pay for the Section 2(c) Shares within five (5) business
days following Purchaser's delivery of the written notice described in
Section 2(c) to Seller; provided, however, if there are any installment
dates remaining as set forth above only such portion of the purchase price
that would have been paid prior to the delivery of the written notice shall
be due and payable at such time and the remainder shall be paid at the time
of the remaining installment dates. Purchaser's obligation to pay for the
Section 2(c) Shares shall be secured in the manner set forth in Section
2(g).
(e) Use of Proceeds. Seller shall use the proceeds to be received from
Purchaser's investment described in Section 2(a), above, solely to fund
Seller's equity participation in the Joint Venture (as defined in Section
4(a)). Further, Purchaser's prior written consent shall be required prior
to Seller's expenditure of, or commitment to expend, any amounts invested
by Purchaser pursuant to Section 2(c). Any amounts so invested shall be
held and maintained by Seller in a segregated account.
(f) Additional Purchases by Greenlee, Day and Roark. At Closing Robert
D. Greenlee ("Greenlee"), Frank B. Day ("Day") and Stephen R. Roark
("Roark") shall be obligated to purchase up to in the aggregate 142,857
Shares at a purchase price of $5.25 per Share; provided, however, that such
purchase also shall be subject to satisfaction of the Section 2(c)
conditions. The purchase price to be paid by such parties pursuant to this
Section 2(f) shall be paid to the Seller in installments at such time as
Purchaser is required to pay for the Section 2(c) Shares, and Seller shall
deliver the Shares acquired pursuant to this Section 2(f) at the time
Purchaser receives the Section 2(c) Shares.
(g) Security. Purchaser's obligation to pay the balance of $2,000,250
for the Section 2(a) Shares and to pay for the Section 2(c) Shares shall be
secured by an irrevocable letter of credit. The obligation of Greenlee, Day
and Roark to pay for their Shares being acquired pursuant to Section 2(f)
shall be secured by an irrevocable letter of credit. Notwithstanding the
foregoing, Purchaser's obligation to provide the letter of credit for the
Section 2(c) Shares and the obligation of Greenlee, Day and Roark to
provide their letter of credit shall be subject to the satisfaction of the
Section 2(c) conditions. Purchaser shall provide the $2,000,250 letter of
credit for the Section 2(a) Shares immediately following such time as
Seller obtains NASD Approval. If the Section 2(c) conditions are satisfied
on or before February 1, 1998, the appropriate letter of credit shall be
provided by Purchaser, Greenlee, Day and Roark at such time.
(h) Share Adjustments. Notwithstanding any contrary provision herein,
in the event that subsequent to the date hereof there shall be any change
in the issued and outstanding Shares by reason of a stock dividend, stock
split, combination of shares, recapitalization, merger, separation,
reorganization, liquidation, consolidation, split-up, combination or
exchange of Shares, or transaction or event having an effect similar to any
of the foregoing, the number of and price for Shares to be acquired
hereunder and the number of, and price for, Options (as hereinafter
defined) to be granted hereunder, shall be appropriately adjusted.
3. AGREEMENTS REGARDING SHARES OF CERTAIN KEY SHAREHOLDERS AND BOARD OF
DIRECTORS.
(a) At or prior to the Closing, Purchaser and/or Jeffrey P. Jacobs
("Jacobs"), Greenlee and Day shall have entered into a Shareholders' Agreement
(the "Shareholders' Agreement") with respect to the Shares owned or subscribed
to by each of them or their controlled entities. The Shareholders' Agreement
shall be in
A-5
<PAGE> 21
the form of Exhibit A attached hereto and shall provide, among other things, for
a pro rata right of first refusal among such parties.
(b) At or prior to Closing, Seller's Board of Directors (the "Board") shall
consist of eight persons, four of whom shall be nominees of Seller and four of
whom shall be nominees of Purchaser. In the event Seller's Board cannot be so
expanded prior to Closing, (i) until such time as shareholder approval can be
obtained the Board shall consist of six persons, three of whom shall be nominees
of Seller and three of whom shall be nominees of Purchaser and (ii) the
Shareholders' Agreement shall provide for Greenlee and Day to cause their Shares
to be voted for the purpose of calling or causing Seller to call a special
meeting of shareholders of Seller to occur on or before September 30, 1996 in
order to so expand the Board and to approve the proposals set forth in Section
3(c) below.
(c) The Shareholders' Agreement shall also contain provisions whereby
Greenlee and Day agree to vote or continue to vote at the special meeting or
otherwise, as the case may be, their Shares in favor of the following proposals:
(i) Approving Purchaser's acquisition of Shares pursuant to Sections
2(a) and 2(c) of this Agreement.
(ii) The Seller shall have adopted staggered terms for its Board in
accordance with Section 7-108-106 of the Colorado Business Corporation Act
and nominees of Seller and Purchaser shall be nominated in each of three
classes so created on terms agreeable to the parties. It is anticipated
that Class I of the Board will initially have a one year term and have two
directors (one nominee of each of Seller and Purchaser), Class II will
initially have a two year term and have three nominees (two nominees of
Seller and one of Purchaser) and Class III will initially have a three year
term and have three nominees (two nominees of Purchaser and one of Seller).
(iii) At such time as Purchaser shall have acquired the Section 2(c)
Shares, the Board shall be expanded to nine members and Purchaser shall be
entitled to nominate the additional Board member to Class I of the Board.
(iv) At or prior to Closing, Jacobs shall be elected as Chief
Executive Officer and Co-Chairman of the Board of Directors of Seller.
(v) If determined necessary by counsel to Seller and Purchaser, an
appropriate "poison pill" plan shall be submitted to Seller's shareholders
at the next regularly scheduled meeting of shareholders in order to protect
Seller and its shareholders from unwarranted and unwanted takeover attempts
by unrelated third parties.
Pursuant to the Shareholders' Agreement, Greenlee and Day shall appoint
Jacobs as their proxy to vote their shares in accordance with this Section 3(c).
(d) At or prior to Closing, Purchaser and Seller shall execute and deliver
a Registration Rights Agreement (the "Registration Agreement") in the form of
Exhibit B attached hereto. The Registration Agreement shall provide for the
registration of all Shares acquired by Purchaser hereunder, including any Shares
acquired pursuant to the Shareholders' Agreement.
4. AGREEMENTS REGARDING JOINT VENTURE AND MASTER JOINT VENTURE
(a) Purchaser shall assign to Seller 25% of that certain Joint Venture (the
"Joint Venture") which was previously formed by Seller and Purchaser pursuant to
a certain Joint Venture Agreement dated December 15, 1994, as amended (the
"Original Joint Venture Agreement"). Thereafter, Seller shall be a 75% Joint
Venture participant and Purchaser shall be a 25% Joint Venture participant. It
is further contemplated that approximately $16,000,000 will be required to fund
the Joint Venture and that Seller's $12,000,000 share will consist of $4,000,500
received from Purchaser's purchase of Shares contemplated in Section 2(a),
above, and approximately $3,500,000 of additional cash and approximately
$4,500,000 of land and development costs
A-6
<PAGE> 22
incurred or to be incurred. Purchaser's share shall consist of $2,500,000 of
cash to be contributed and land and development costs incurred or to be incurred
valued at $1,500,000.
(b) The Original Joint Venture Agreement shall be amended at or prior to
Closing on terms mutually agreeable to Seller and Purchaser. Such amendment
shall confirm that Purchaser or its nominee is entitled to a $600,000
development fee, $200,000 of which shall be paid prior to the completion of the
permanent financing of the Joint Venture and $400,000 of which shall be paid
with proceeds from the permanent financing of the Joint Venture.
(c) At or prior to Closing, Seller and Purchaser shall also have entered
into a twenty year Master Joint Venture Agreement (the "Master Joint Venture
Agreement") on terms mutually agreeable to Seller and Purchaser.
(d) To the extent Purchaser and/or its affiliates provide guarantees or
other forms of credit enhancement to reduce the cost of debt financing for the
Joint Venture, Purchaser shall receive such consideration as determined by the
Board of Seller.
5. REPRESENTATIONS AND WARRANTIES BY SELLER
As a material inducement to Purchaser to enter into this Agreement, Seller
represents, warrants to and, where applicable, covenants with Purchaser that as
of the date hereof and as of the Closing Date:
(a) Due Organization. Seller is a corporation duly organized, validly
existing and in good standing under the laws of the State of Colorado, and
each of Seller and the Gilpin has full corporate power and authority to own
its properties and to carry on its business as it is now being conducted,
is duly qualified to do business and is in good standing in all
jurisdictions in which it is required to be so qualified, except where the
failure to so qualify or be in good standing would not, in the aggregate,
have a Material Adverse Effect, and has received all necessary
authorizations, consents, licenses and approvals of the Division, the
Commission and other governmental authorities material to the ownership of
its properties and assets and to the conduct of its business.
(b) Power and Authority; No Conflicts. Seller has full power and
authority (corporate or otherwise) to enter into and carry out the terms of
this Agreement. The execution and delivery by Seller of this Agreement and
the other documents and instruments to be executed and delivered by Seller
pursuant hereto and thereto and the consummation of the transactions
contemplated hereby and thereby by Seller have been duly authorized by the
requisite vote of the Board of Seller. This Agreement has been duly and
validly executed by Seller, and constitutes, and when executed and
delivered, each other document and instrument to be executed and delivered
by Seller pursuant hereto will constitute, a valid and binding agreement of
Seller enforceable against it in accordance with their respective terms
subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or
affecting creditors' rights generally and except to the extent that the
enforceability of rights and remedies may be limited by general principles
of equity. The execution and delivery of this Agreement does not, and,
subject to any requisite governmental or other consents or approvals, the
consummation of the transactions contemplated hereby will not, (i) violate
any provision of the Articles of Incorporation, as amended, of Seller, or
the Bylaws of Seller, (ii) violate or conflict with any law, ordinance,
rule, regulation, order, judgment or decree to which Seller or the Gilpin
is subject or by which Seller or the Gilpin is bound, or (iii) except as
set forth on Schedule 5(b), violate or conflict with or constitute a
material default (or an event which, with notice or lapse of time, or both,
would constitute a default) under, or will result in the termination of, or
accelerate the performance required by, or result in the creation of any
lien, security interest, charge or encumbrance upon any of the properties
or assets under, any term or provision of any material contract,
commitment, understanding, arrangement, agreement or restriction of any
kind or character to which either Seller or the Gilpin is a party or by
which any of their respective assets or properties may be bound or
affected. Except for any required approval of Seller's shareholders, the
Division, the Commission and/or state and local liquor licensing
authorities, no consent, approval, authorization or action by any federal,
state, local or foreign governmental agency, instrumentality, commission,
authority, board or body (collectively, "Governmen-
A-7
<PAGE> 23
tal Agency" or "Governmental Authority") or any other third party is
required in connection with the execution and delivery by Seller of this
Agreement and the other documents and instruments to be executed and
delivered by Seller pursuant hereto or the consummation by Seller of the
transactions contemplated herein or therein.
(c) Capital Structure. The authorized capital stock of Seller as of
the date of this Agreement consists solely of Forty Million (40,000,000)
Shares, of which 2,494,067 are issued and outstanding, and Ten Million
(10,000,000) shares ("Preferred Shares") of a preferred class, $.001 par
value, of which none are issued and outstanding. Except as set forth on
Schedule 5(c), no Shares or Preferred Shares are held as treasury shares.
All of the outstanding shares of capital stock of Seller have been duly
authorized and validly issued and are fully paid and nonassessable and free
from preemptive rights. Schedule 5(c) sets forth a list of each stock
option, warrant or other right to acquire securities of Seller (an
"Option") outstanding on the date of this Agreement. There are no
outstanding options, warrants, convertible securities, subscriptions or
other rights or agreements providing for the issuance or delivery of any
additional shares of capital stock of Seller, except the Options.
(d) Valid Issuance of Shares. The Shares that are being purchased
hereunder, when issued, sold and delivered in accordance with the terms of
this Agreement, for the consideration expressed herein, will be duly and
validly issued, fully paid and nonassessable.
(e) Subsidiaries. Except as set forth on Schedule 5(e), Seller has no
subsidiaries, either wholly or partially owned and except for the Gilpin
and the Joint Venture, Seller has no interest as a partner or otherwise in
any partnership, joint venture or other business enterprise.
(f) SEC Documents. Seller has made available to Purchaser a true and
complete copy of each report, schedule, registration statement and
definitive proxy statement filed by Seller with the SEC since March 31,
1994 (as such documents have since the time of their filing been amended,
the "Seller SEC Documents") which are all of the documents (other than
preliminary material) that Seller was required to file with the SEC since
such date. As of their respective dates, the Seller SEC Documents complied
in all material respects with the requirements of the Securities Act of
1933 or the Securities Exchange Act of 1934, as the case may be, and the
rules and regulations of the SEC thereunder applicable to such Seller SEC
Documents, and none of the Seller SEC Documents contained any untrue
statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements therein, in light
of the circumstances under which they were made, not misleading. The
financial statements of Seller included in the Seller SEC Documents comply
as to form in all material respects with applicable accounting requirements
and with the published rules and regulations of the SEC with respect
thereto, have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis during the periods
involved (except as may be indicated in the notes thereto or, in the case
of the unaudited statements, as permitted by Form 10-Q of the SEC) and
fairly present (subject, in the case of the unaudited statements, to
normal, recurring audit adjustments) the consolidated financial position of
Seller as at the dates thereof and the consolidated results of its
operations and cash flows for the periods then ended. To the best of its
knowledge Seller is not now, nor has it ever been, the subject of any
inquiry or other investigation by the SEC ("SEC Investigation"), nor, to
the best knowledge of Seller, is any such SEC Investigation pending or
threatened.
(g) Title to Assets. Each of Seller, the Gilpin and the Joint Venture
has good, marketable and valid title in and to all of its assets, including
all real, personal and intangible property, and, except as set forth on
Schedule 5(g), each holds its assets free and clear of any mortgage,
conditional sale agreement, title retention agreement, security interest,
lease, pledge, hypothecation, lien or other encumbrance.
(h) Condition of Assets. All of the assets (whether owned or leased)
that are necessary for the conduct of the business of Seller, the Gilpin
and the Joint Venture are in normal operating condition, free from defects
other than such minor defects as do not materially interfere with the
continued use thereof in normal operations.
A-8
<PAGE> 24
(i) Insurance. Each of Seller, the Gilpin and the Joint Venture (a)
maintains insurance policies with licensed insurance carriers on such
assets, properties and businesses and against such risks as is customary
for companies engaged in its business, or (b) has reserved on the Financial
Statements sufficient funds to cover all losses known to it arising from
such risks. Schedule 5(i) sets forth a list and brief description
(specifying the insurer and describing each pending claim thereunder) of
all policies, binders or reserves of fire, liability, workers'
compensation, vehicular and other insurance or self-insurance held by or on
behalf of Seller, the Gilpin and the Joint Venture. All such policies are
in full force and effect and insure against risks and liabilities to an
extent and in a manner customary in the industry in which such parties
operate. Except for claims identified on Schedule 5(i), there are no
outstanding unpaid claims under any such policy, binder or reserve. Except
as set forth on Schedule 5(i), there will be no liability of Seller, the
Gilpin and the Joint Venture as of the Closing Date, under any such
insurance policy or ancillary agreement with respect thereto in the nature
of a retroactive rate adjustment, loss sharing arrangement or other actual
or contingent liability arising wholly or partially out of events occurring
prior to the Closing Date. None of the Seller, the Gilpin nor the Joint
Venture has received notice of cancellation or nonrenewal of any such
policy or binder. There is no inaccuracy in any application for such
policies or binders, or any failure to pay premiums due.
(j) Dividends and Distributions. From December 31, 1995 to the date
hereof, Seller has not declared or paid any dividends on any Shares or
Preferred Shares, nor has it made any other payments or distributions
thereon to its shareholders.
(k) Seller Data. Seller has made available to Purchaser its corporate
minutes, articles and regulations, books and records, all material
contracts, all loan documentation, all notes, all leases, evidence of all
bank accounts, an accurate and complete list of each insurance policy
currently providing coverage for the real and personal property owned,
operated or leased together with copies of such policies, information
regarding employee compensation and benefit plans, a list of all
outstanding workers compensation and unemployment claims, all licenses and
permits that Seller has with respect to its operations and with respect to
the operations of the Gilpin and the Joint Venture, and all outstanding
citations or complaints relating to environmental, health or safety laws or
regulations (collectively, the "Seller Data"). Seller acknowledges that
Purchaser has relied on the Seller Data in deciding to execute this
Agreement and consummate the transactions contemplated hereby.
(l) Undisclosed Liabilities. Except as set forth in Schedule 5(l),
none of the Seller, the Gilpin nor the Joint Venture has any liabilities or
obligations of any nature, secured or unsecured (absolute, accrued,
contingent or otherwise and whether due or to become due), except (i)
liabilities and obligations that are fully reflected, reserved against or
disclosed in the Financial Statements, and (ii) liabilities and obligations
incurred in the ordinary course of business consistent with past practice.
(m) Investigation or Litigation. Except for the Casino Investigation
and as set forth on Schedule 5(m), there is no investigation or review
pending or to the best knowledge of Seller threatened by any Governmental
Agency or other party or person with respect to Seller, the Gilpin or the
Joint Venture; nor has any Governmental Agency or other party or person
indicated in writing to Seller an intention to conduct any such
investigation or review; nor, to the knowledge of Seller, is there any
valid basis for any such investigation or review. Except as set forth on
Schedule 5(m), there is no claim, action, suit or proceeding pending before
or, to the best knowledge of Seller, threatened against or affecting
Seller, the Gilpin or the Joint Venture at law or in equity by, any
Governmental Agency or other party or person, nor is there, to the best
knowledge of Seller, any valid basis for any such claim, action, suit or
proceeding.
(n) Certain Agreements. Except as disclosed in the Seller SEC
Documents filed prior to the date of this Agreement or in Schedule 5(n) as
of the date of this Agreement, Seller is not a party to any oral or written
(i) consulting agreement not terminable on 60 days' or less notice, (ii)
agreement with any executive officer or other key employee of Seller, or
(iii) agreement or plan, including any stock option plan, stock
appreciation rights plan, any of the Plans (as defined in Section 5(o)),
restricted stock plan or stock purchase plan, any of the benefits of which
will be increased, or the vesting of the benefits of which will be
accelerated, by the occurrence of any of the transactions contemplated by
this Agreement or the
A-9
<PAGE> 25
value of any of the benefits of which will be calculated on the basis of
any of the transactions contemplated by this Agreement.
(o) Employee Benefits.
(i) Schedule 5(o) contains a true and complete list of each bonus,
deferred compensation, incentive compensation, stock purchase, stock
option, severance or termination pay, hospitalization or other medical,
life or other insurance, supplemental unemployment benefits,
profit-sharing, pension, retirement or other employee benefit plan,
program, practice, agreement or arrangement, including, without
limitation, each "employee benefit plan" as defined in section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), sponsored, maintained, contributed to or required to be
contributed to by Seller or any trade or business, whether or not
incorporated (an "ERISA Affiliate"), whose employees would, for the
purposes of applying certain provisions of the Internal Revenue code of
1986, as amended (the "Code"), be aggregated with the employees of
Seller under Section 414(b), (c), (m), (n) and/or (o) of the Code or
which would be deemed to be a member of a "controlled group" within the
meaning of Section 4001(a)(14) of ERISA of which Seller is also a
member, for the benefit of current or former employees or directors of
Seller and/or such ERISA Affiliate (the "Plans").
(ii) Each of the Plans has been operated and administered in all
material respects in accordance with applicable laws, including but not
limited to ERISA and the Code. No violation of Section 404 of ERISA has
occurred with respect to any Plan.
(iii) There are no pending, or to the best knowledge of Seller,
threatened or anticipated claims (other than routine claims for
benefits) by, on behalf of or against any of the Plans or any trusts
related thereto.
(p) Labor Matters. Seller has not entered into any collective
bargaining agreements or any other agreements with any labor organization
or any other person or group claiming to represent or bargain collectively
for any of Seller's, the Gilpin's or the Joint Venture's employees. Except
as set forth in Schedule 5(p), there are no unfair labor practice charges,
lawsuits, grievances or administrative charges pending or to the best
knowledge of Seller threatened, concerning or affecting Seller, the Gilpin
or the Joint Venture. Seller has received no written notice nor has there
been any proceeding or adjudication questioning whether or alleging or
determining that Seller, the Gilpin or the Joint Venture, is not in
compliance, in all material respects, with all federal, state and local
laws and regulations with respect to employment, employment practices and
terms and conditions of employment.
(q) Taxes. Except as set forth in Schedule 5(q), Seller has (i) timely
filed all tax returns, schedules, declarations, and tax-related documents
including, without limitation, all Forms 5500 pertaining to the Plans
(collectively, "Returns") required to be filed in any jurisdictions to
which it or the Gilpin is or has been subject, (ii) timely paid in full all
taxes, interest and penalties with respect thereto subject to audit by the
taxing authorities by such jurisdictions and timely made all deposits of
tax required by all applicable taxing jurisdictions, (iii) fully accrued on
its books an amount sufficient to pay all taxes not yet due but related to
operations through the date hereof and will have accrued all taxes not yet
due but which will become due through the Closing Date, (iv) made timely
payments of all taxes required to be deducted and withheld from the wages
paid to employees, and (v) otherwise satisfied, in all material respects,
all legal requirements applicable to it with respect to all aforementioned
obligations to taxing jurisdictions. All Returns filed by Seller accurately
reflect in all material respects their income, expenses, deductions,
credits and loss carryovers and the taxes due and are otherwise accurate
and complete in all material respects and have not been amended. Seller has
delivered to Purchaser true and complete copies of all federal and state
income and franchise tax returns for each of the taxable years ended
December 31, 1991 through December 31, 1995, inclusive. Except as set forth
on Schedule 5(q), Seller has no knowledge that an audit of any of the
federal income tax returns of Seller or the Gilpin is in progress and has
no reason to believe that any such audit is contemplated. For purposes of
this Section, "tax" and "taxes" (when not modified by other words such as
"income" or "franchise") shall include all income,
A-10
<PAGE> 26
gross receipts, franchise, excise, real and personal property, and other
taxes imposed by any federal, state, municipal, local, or other
governmental agency, including assessments in the nature of taxes.
(r) Absence of Certain Changes. Since December 31, 1995, none of
Seller, the Gilpin nor the Joint Venture has suffered any Material Adverse
Effect.
(s) Conduct of Business. Since the close of business on June 30, 1996,
except as set forth in Schedule 5(s), Seller has not, and prior to the
Closing Date will not have, without the prior written consent of Purchaser:
(i) Issued, sold, redeemed, reclassified or purchased any Shares
or Preferred Shares or other corporate securities, warrants or
debt instruments or, except as contemplated by Section 8(c),
granted any Options or other rights in connection therewith.
(ii) Incurred, paid or settled any obligations, commitments or
liabilities, absolute, accrued, contingent or otherwise,
except obligations, commitments or liabilities to perform
sales contracts, purchase orders or similar commitments, in
each case incurred, paid or settled in normal amounts and in
the regular and ordinary course of Seller's business.
(iii) Incurred any continuing contract or commitment or other
liability for the future purchase of materials, supplies or
equipment which is not in the regular and ordinary course of
the business, or any contracts or commitments for capital
expenditures in excess of Twenty-Five Thousand Dollars
($25,000) individually or One Hundred Thousand Dollars
($100,000) in the aggregate.
(iv) Conducted its business other than in the regular and ordinary
course thereof.
(v) Sold, assigned, transferred, encumbered or granted a security
interest in respect of any of its assets.
(vi) Entered into any pension, retirement, deferred compensation,
profit sharing, bonus, retainer, consulting, welfare or
incentive compensation plan or arrangement, or any contract,
or any fringe or other benefits or arrangements, of, with or
for any officer, director, employee or any other person; or
granted any increase in the compensation payable, or to become
payable, by Seller to any of its officers, directors,
employees or other persons (other than customary merit
increases of nonofficers), or in any bonus, insurance, pension
or other benefit plan made for or with any of them.
(vii) Terminated any material contract, agreement, license or other
instrument to which it is a party other than in the regular
and ordinary course of business.
(viii) Changed its Articles of Incorporation, Bylaws or any aspect of
its corporate structure.
(ix) Agreed to do any of the things or made any commitment to take
any of the types of action specified in (i) through (viii)
above.
(t) Legal Compliance. Each of the Seller, the Gilpin and the Joint
Venture has complied in all material respects with all applicable laws,
rules, regulations, and ordinances of any Governmental Agency (including
without limitation, all laws and regulations of the Division and the
Commission) having jurisdiction, any trademark, tradename or copyright
rules and regulations, and any zoning, occupational safety or environmental
protection laws or any laws relating to the employment of labor. None of
Seller, the Gilpin nor the Joint Venture is in violation of, or in default
under, any terms or provisions of any mortgage, indenture, security
agreement, lease, license, contract, agreement, instrument, order,
arbitration award, judgment, injunction or decree. Except with respect to
the Casino Investigation, Seller has not received any notice nor has there
been any proceeding or adjudication questioning whether or alleging or
determining that the business of Seller, the Gilpin or the Joint Venture is
or has been conducted in violation of any law, ordinance, regulation,
order, decree, judgment or injunction. Seller has not received any notice
nor has there been any proceeding or adjudication questioning whether or
alleging or
A-11
<PAGE> 27
determining that they have not obtained all permits, licenses and other
authorizations which relate to the assets or the business of Seller, the
Gilpin or the Joint Venture. Seller has not received any written notice nor
has there been any proceeding or adjudication questioning whether or
alleging or determining that any of such parties is not in compliance in
all material respects with all material terms and conditions of such
permits, licenses and authorizations.
(u) Environmental Protection.
(i) Each of Seller, the Gilpin and the Joint Venture is in
compliance with all Environmental Laws (as hereinafter defined)
applicable to the business of such parties. Seller has disclosed to
Purchaser all outside consultants' reports, internal memoranda, legal
documents and any other information, written or otherwise (including
without limitation, phase 1 and phase 2 reports) in Purchaser's
possession relating to its and their compliance with all Environmental
Laws.
(ii) "Environmental Laws" means all U.S. federal, state, local and
foreign laws and regulations relating to pollution or protection of
human health or the environment (including, without limitation, ambient
air, surface water, ground water, land surface or subsurface strata).
(v) Copyrights, Trademarks, Trade names, Etc. Schedule 5(v) contains
an accurate and complete list of all material copyrights, trademark
registrations, trademark applications, service marks, trade names and
assumed names used in Seller's, the Gilpin's or the Joint Venture's
business. Seller has not received written notice nor has there been any
proceeding or adjudication questioning whether or alleging or determining
that the use thereof by Seller the Gilpin or the Joint Venture infringes on
or conflicts with any existing patents, trademarks or copyrights or any
other rights of any person. Seller has nor received any written notice of
any material claim of a third party to the use of any such names.
(w) Contracts. Each contract and commitment (whether written or oral)
that individually involves potential future payments by or to Seller, the
Gilpin or the Joint Venture of $50,000 or more is disclosed on Schedule
5(w) (except as otherwise indicated therein) and copies of such written
contracts or commitments have been provided to Purchaser. Seller is not,
nor has it been during the past three years, a partner in any partnership
or a party to any joint venture.
(x) Full Disclosure. There is no fact known to Seller which has not
been disclosed to Purchaser in writing, that has caused, or would
reasonably be anticipated to result in, a Material Adverse Effect.
6. Representations and Warranties of Purchaser. As a material inducement to
Seller to enter into this Agreement, Purchaser represents, warrants to and,
where applicable, covenants with Seller that as of the date hereof and as of the
Closing Date:
(a) Due Organization. Purchaser is a limited liability company duly
organized, validly existing and in good standing under the laws of the
State of Ohio, has the requisite power and authority to own its properties
and to carry on its business as it is now being conducted.
(b) Power and Authority No Conflicts. Purchaser has the requisite
power and authority to enter into and carry out the terms of this
Agreement. The execution and delivery of this Agreement and the other
documents and instruments to be executed and delivered by Purchaser
pursuant hereto and the consummation of the transactions contemplated
hereby and thereby by Purchaser have been duly authorized by the Manager of
Purchaser. This Agreement has been duly and validly executed and delivered
by Purchaser and constitutes, and when executed and delivered, the other
documents and instruments to be executed and delivered by Purchaser will
constitute, valid and binding agreements of Purchaser, enforceable against
Purchaser in accordance with their respective terms subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar
laws of general applicability relating to or affecting creditors' rights
generally and except to the extent that the enforceability of rights and
remedies may be limited by general principles of equity. The execution and
delivery of this Agreement does not, and, subject to any requisite
governmental or other consents or approvals (including without limitation,
licensing approval of the Division and the Commission), the consummation of
the transactions contemplated hereby and thereby will not, (i) violate any
provision of the Articles of
A-12
<PAGE> 28
Organization or the Operating Agreement of Purchaser, (ii) violate or
conflict with any law, ordinance, rule, regulation, order, judgment or
decree to which Purchaser is subject or by which Purchaser is bound (other
than violations or conflicts which individually or in the aggregate would
not have a Purchaser Material Adverse Effect or which would not prevent or
delay the consummation of the transactions contemplated hereby), or (iii)
violate or conflict with or constitute a default (or an event which, with
notice or lapse of time, or both, would constitute a default) under, or
will result in the termination of, or accelerate the performance required
by, or result in the creation of any lien, security interest, charge or
encumbrance upon any of the properties or the assets under, any term or
provision of any contract, commitment, understanding, arrangement,
agreement or restriction of any kind or character to which Purchaser is a
party or by which Purchaser or any of its assets or properties may be bound
or affected (other than, in any such instance, violations, conflicts,
defaults, terminations, accelerations, liens, security interests, charges
or encumbrances which individually or in the aggregate would not have a
Purchaser Material Adverse Effect or which would not prevent or delay the
consummation of the transactions contemplated hereby). Except for approval
of Seller's shareholders, any required licensing approval of the Division,
the Commission and state and local liquor licensing authorities, no
consent, approval, authorization or action by any Governmental Agency or
any other third party is required in connection with the execution and
delivery by Purchaser of this Agreement and the other documents and
instruments to be executed and delivered by Purchaser pursuant hereto or
the consummation by Purchaser of the transactions contemplated herein or
therein.
(c) Investment Purpose. The Shares being acquired by Purchaser
pursuant to this Agreement are being acquired for Purchaser's own account
and not with the view to or for resale in connection with, any distribution
or public offering thereof within the meaning of the Securities Act of 1933
(the "1933 Act"). Purchaser understands that the Shares have not been
registered under the 1933 Act by reason of their contemplated issuance in a
transaction believed to be exempt from the registration and prospectus
delivery requirements of the 1933 Act pursuant to Section 4(2) thereof, and
in transactions believed to be exempt from the registration and/or
qualification provisions of the appropriate state securities laws.
Purchaser has such knowledge and experience in financial and business
matters that it is capable of independently evaluating the risks and merits
of purchasing or acquiring the Shares.
(d) Gaming Approval. To the best of Purchaser's knowledge, there are
no facts or circumstances which exist which would preclude Purchaser from
obtaining any necessary approval from the Division and the Commission
and/or the appropriate state and local liquor licensing authorities.
7. CLOSING.
The Closing hereunder shall take place at 10:00 a.m. on the Closing Date at
the offices of Jones & Keller, 1625 Broadway, Suite 1600, Denver, Colorado
80202.
8. UNDERTAKINGS.
(a) Prior to the date hereof, Purchaser and its agents and representatives
commenced and, from and after the date hereof, shall be permitted to continue
Purchaser's due diligence review of Seller, in anticipation of the Closing, and
shall have full access to all relevant information regarding Seller, its assets,
the business and the Shares to determine that all financial and other
information has been and will be provided to Purchaser is reasonably accurate.
Purchaser acknowledges that such information shall be and remain confidential
until the Closing. In the event the transactions contemplated by this Agreement
do not close, Purchaser shall return to the Seller all documents previously
furnished to Purchaser by the Seller. Purchaser and its agents and
representatives hereby agree that they will not divulge or use any confidential
or other proprietary information regarding Seller, except to the extent (i)
required by law, (ii) otherwise available from third parties, or (iii)
previously known to Purchaser from sources other than the Seller.
(b) Seller shall not divulge or use any confidential or proprietary
information regarding the Purchaser, except to the extent (i) required by law,
(ii) otherwise available from third parties, or (iii) previously known to Seller
from sources other than the Purchaser.
A-13
<PAGE> 29
(c) At or prior to Closing, Seller's 1996 Employees' Incentive Stock Option
Plan (the "1996 Plan") shall have been expanded in a manner satisfactory to
Seller and Purchaser to provide for additional grants of Options as follows:
Options for 180,000 Shares to Purchaser's employees (including Jacobs) as
determined by Purchaser and Options for 120,000 Shares to Seller's officers and
employees as determined by Seller's Board. The exercise price of such Options
shall be determined in accordance with Section 422 of the Code. Seller and
Purchaser intend, however, that such Options shall be deemed to have been
granted on May 29, 1996 at an exercise price of $5.25 per Share, provided the
same complies with Section 422 of the Code. At or prior to Closing, the parties
shall agree on a vesting schedule for the Options; provided, however, the
Options shall not vest during the three year period following the date of grant.
Options held by certain officers and employees of Seller as approved by
Purchaser shall be amended in order to change the exercise price of such Options
to $5.25 per Share, provided the same complies with Section 422 of the Code.
9. [INTENTIONALLY OMITTED]
10. GOVERNMENTAL REGULATION.
(a) The parties hereto acknowledge that the business of Seller and the
proposed business of the Joint Venture is subject to stringent government
regulation including supervision by the Division and the Commission.
(b) The parties also acknowledge that Purchaser and Jacobs are presently
seeking appropriate gaming licenses from the Division, and that no assurance can
be given that such licenses will be issued or when such licenses may be issued.
(c) If any license, registration, application or other form of required
governmental filing for the Casino, the Joint Venture or otherwise, is denied,
reserved, revoked or suspended for any reason, including, but not limited to the
participation of a person unacceptable or unsuitable to the Division and the
Commission or other Governmental Authority, the affected party hereto (either
Seller, Purchaser or Jacobs) shall take all measures necessary to remedy or
correct the deficiency. In the case where the Division, the Commission or other
Governmental Authority denies or reserves approval for gaming operations or
other business operations of a party hereto because of the participation of an
unacceptable or unsuitable person, that party shall forthwith expel such
person(s) and substitute a person(s) acceptable to the Division, the Commission
or other Governmental Authority, or otherwise take measures to remedy or correct
the deficiency.
(d) If either Purchaser or Jacobs, or his or its affiliates other than
Seller, is found not suitable or acceptable for licensing or for participation
in gaming by the Division and the Commission or by the state or local liquor
licensing authorities, then Seller shall, subject to any required approval of
the Division or the Commission, redeem the Shares previously purchased by
Purchaser at a price equal to the consideration paid for such Shares and payable
with interest at the lowest rate of interest under the Code under which no
interest would be imputed to the parties and payable over a period not to exceed
12 months and upon such other terms and conditions as may be required pursuant
to Colorado Gaming Rule 4.5.
(e) If Seller or the Casino loses any operator, retail gaming or other
gaming license granted by the Division or Commission which is material to the
continued operation of its business and such loss is not caused due to the fault
of Purchaser, Jacobs, or its or his affiliates other than Seller, then, subject
to any required approval of the Division or Commission, Purchaser shall have the
option to have the Shares previously purchased by it redeemed at a price equal
to the consideration paid for such shares and payable with interest at the rate
of 10% and payable over a period not to exceed 12 months and upon such other
terms and conditions as may be required pursuant to Colorado Gaming Rule 4.5.
Such payment shall be secured by a security interest in the 25% portion of the
Joint Venture assigned by Purchaser to Seller.
(f) At such time as Seller has paid Purchaser in full pursuant to Sections
10(d) or 10(e), Purchaser's nominees to Seller's Board of Directors shall resign
their positions on the Board.
A-14
<PAGE> 30
11. CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER
The obligations of Purchaser hereunder are subject to the following
conditions, any of which may be waived in writing by Purchaser:
(a) Representations and Warranties True at Closing. The
representations and warranties of Seller contained in this Agreement shall
be true and correct on the Closing Date with the same effect as if made on
and as of such date. All Schedules and all other information furnished to
Purchaser pursuant to this Agreement shall be updated by Seller as of the
Closing Date. The updating of said Schedules shall not, in any manner,
affect the representations and warranties of Seller nor relieve Seller from
any liability thereunder.
(b) Performance of Agreements and Conditions. Seller, Greenlee and Day
shall have performed and complied with all agreements and conditions
required by this Agreement to be performed and complied with by Seller,
Greenlee and Day as the case may be, prior to or at the Closing Date.
(c) President's Certificate. Seller shall have delivered to Purchaser
a certificate from its President, dated the Closing Date, certifying in
such detail as Purchaser may reasonably request to Seller's fulfillment of
the conditions specified in subsections (a) and (b) above and such other
evidence as to Seller's compliance with the provisions of this Agreement as
Purchaser reasonably may request.
(d) Due Diligence Completion. Purchaser shall have completed its due
diligence investigation contemplated by Section 8(a) and such investigation
shall not, in Purchaser's sole discretion, have disclosed any material
variances from information heretofore provided by Seller to Purchaser.
(e) Injunction. On the Closing Date there shall not be in effect any
injunction, writ, temporary restraining order or any other order of any
nature issued by a court or other governmental body or agency of competent
jurisdiction directing that the transaction provided for herein not be
consummated as herein provided, nor shall there be any litigation or
proceeding pending or threatened in respect of the transaction contemplated
hereby.
(f) Shareholders' Agreement. Greenlee, Day and Jacobs shall have
entered into the Shareholders' Agreement.
(g) Registration Agreement. Seller and Purchaser shall have entered
into the Registration Agreement.
(h) Original Joint Venture Agreement. Seller and Purchaser shall have
entered into the amendment to the Original Joint Venture Agreement.
(i) Master Joint Venture Agreement. Seller and Purchaser shall have
entered into the Master Joint Venture Agreement.
(j) Instruments of Transfer and Other Documents. Seller shall have
delivered to Purchaser instruments of transfer which vest in Purchaser good
and marketable title to the Shares as required herein, and shall have
delivered all other instruments, certificates and other documents required
to be delivered hereunder.
(k) Condition of Business and Properties. Between the date of this
Agreement and the Closing Date, each of Seller, the Gilpin and the Joint
Venture shall have continued to operate its business in its regular and
ordinary course. On and before the Closing Date, the business and property
of Seller, the Gilpin and/or the Joint Venture shall not have been
adversely affected in any material way as a result of fire, accident or
other casualty (whether or not covered by insurance) or any labor dispute
or act of God or the public enemy or as the result of any judicial,
administrative or governmental proceeding or other event or condition.
(l) Governmental Approval. Purchaser shall have obtained licensing
approval from the Division and the Commission, if required, and any other
necessary governmental or regulatory approval.
A-15
<PAGE> 31
(m) Board of Directors. Seller's Board of Directors shall have been
expanded in the manner contemplated by Section 3(b).
(n) Jacobs' Election. Jacobs shall have been elected as Chief
Executive Officer and Co-Chairman of the Board of Seller.
(o) INTENTIONALLY OMITTED.
(p) Expansion of 1996 Plan. The 1996 Plan shall have been expanded
pursuant to Section 8(c).
(q) Employment Agreements. Seller shall have entered into the
employment agreements in form satisfactory to Purchaser, in its sole
discretion, with Jacobs, Roark and Stanley Politano.
(r) Mission Statement. At or prior to Closing, Seller and Purchaser
shall have developed a mission statement for Seller as expanded by
Purchaser's involvement to address Seller's long term strategy with respect
to ongoing and potential gaming opportunities in Colorado, other areas of
the United States and in international markets.
(s) Opinion of Counsel. Purchaser shall have received a legal opinion
from Jones & Keller P.C., counsel for Seller, dated as of the Closing Date,
in the form of Exhibit C attached hereto.
(t) Delivery of Documents. Seller shall have delivered or caused to
have been delivered to Purchaser the documents contemplated by Section 15
not otherwise hereinabove specified.
Seller represents and warrants that it has not caused, and it covenants and
agrees that it shall not cause, any event that would prevent the satisfaction of
all of the conditions set forth in this Section 11. Seller covenants and agrees
to take all action reasonably required to satisfy such conditions.
12. CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER
The obligations of Seller hereunder are subject to the following
conditions, any of which may be waived in writing by Seller:
(a) Representations and Warranties True at Closing. The
representations and warranties of Purchaser contained in this Agreement
shall be true and correct on the Closing Date with the same effect as if
made on and as of such date.
(b) Performance of Agreements and Conditions. Purchaser shall have
performed and complied with all agreements and conditions required by this
Agreement to be performed or complied with by Purchaser prior to or at the
Closing Date.
(c) President's Certificate. Purchaser shall have delivered to Seller
the certificate of Purchaser's President, dated the Closing Date,
certifying in such detail as Seller reasonably may request to Purchaser's
fulfillment of the conditions specified in subsections (a) and (b) above
and such other evidence as to Purchaser's compliance with the provisions of
this Agreement as Seller reasonably may request.
(d) Opinion of Counsel. Purchaser shall have delivered to Seller an
opinion of Hahn Loeser & Parks, counsel for Purchaser, dated the Closing
Date, which opinion shall be mutually agreeable to Purchaser's counsel and
Seller's counsel.
(e) Injunction. On the Closing Date there shall not be in effect any
injunction, writ, temporary restraining order or any order of any nature
issued by a court or other governmental body or agency directing that the
transactions provided for herein not be consummated as herein provided, nor
shall there be any litigation or proceeding pending or threatened in
respect of the transactions contemplated hereby.
(f) Delivery of Documents. Purchaser shall have delivered to Seller
the documents contemplated by Section 15 not otherwise hereinabove
specified.
A-16
<PAGE> 32
Purchaser represents and warrants that it has not caused, and it covenants
and agrees that it shall not cause, any event that would prevent the
satisfaction of all of the conditions set forth in this Section 12. Purchaser
covenants and agrees to take all action reasonably required to satisfy such
conditions.
13. INDEMNIFICATION BY SELLER
Seller shall and hereby does indemnify and hold Purchaser harmless from and
against and in respect of any and all loss, damage and expense incurred by
Purchaser, resulting from, arising out of, attributable to, or in any manner
connected with:
(i) Any matter in respect of which Seller shall have made any
misrepresentation, breached any warranty made pursuant to this
Agreement or failed to fulfill any covenant or agreement on the
part of Seller contained in this Agreement or in any Exhibit,
Schedule or certificate or other document delivered, or to be
delivered, by Seller to Purchaser in connection with this
Agreement;
(ii) Any liability of Seller actual or contingent, current or deferred,
not disclosed in the Financial Statements, or any Exhibit or
Schedule furnished pursuant hereto; and
(iii) Any and all actions, suits, proceedings, demands, assessments or
judgments, costs and expense (including reasonable legal and
accounting fees and investigation costs) incident to the foregoing
and the enforcement thereof.
If any event shall occur or any circumstance arise which might give rise to
a claim in respect of any matter against which Seller has indemnified Purchaser
hereunder, Purchaser promptly shall give notice thereof to Seller. If the matter
as to which indemnification may be sought is a claim by a third party, such
notice shall be given within thirty (30) days after said claim shall have been
presented to the President of Purchaser; otherwise such notice shall be given
promptly after the President of Purchaser shall determine that the matter is one
as to which indemnification is sought. Unless the parties otherwise agree in
writing, Seller shall defend against all such third-party claims or otherwise
satisfy said claims, at its sole cost and expense, through counsel and
accountants designated by it and approved by Purchaser, which approval shall not
be withheld unreasonably. Purchaser shall have the right to participate with
Seller in the defense of any such matter and shall make available to Seller the
business records of Purchaser for said purpose. If Seller, after receipt of
notification from Purchaser of a third-party claim, fails to protest, defend or
settle any such third-party claim, demand, suit or proceeding promptly,
diligently and in good faith, Purchaser shall have the right at its discretion
to settle, defend or pay the same, in which event, Seller's indemnity shall
extend to and include the amount of said settlement or payment and/or the costs
and legal expenses of such defense.
14. INDEMNIFICATION BY PURCHASER
Purchaser shall and hereby does indemnify and hold Seller harmless from and
against and in respect of any and all loss, damage and expense incurred by
Seller, resulting from, arising out of, attributable to, or in any manner
connected with:
(a) Any matter in respect of which Purchaser shall have made any
misrepresentation, breached any warranty made pursuant to this
Agreement or failed to fulfill any covenant or agreement on the
part of Purchaser contained in this Agreement or in any Exhibit,
Schedule or certificate or other document delivered, or to be
delivered, by Purchaser to Seller in connection with this
Agreement; and
(b) Any and all actions, suits, proceedings, demands, assessments or
judgments, costs or expenses (including reasonable legal and
accounting fees and investigation costs) incident to the foregoing
and the enforcement thereof.
If any event shall occur or any circumstance arises which might give rise
to a claim in respect of any matter against which Purchaser has indemnified
Seller hereunder, Seller shall give notice thereof to Purchaser
A-17
<PAGE> 33
within thirty (30) days after said claim shall have been presented to it and,
unless the parties otherwise agree in writing, Purchaser shall defend against
said claim or otherwise satisfy said claim, at its sole cost and expense,
through counsel and accountants designated by Purchaser and approved by Seller,
which approval shall not be unreasonably withheld. Seller shall have the right
to participate with Purchaser in the defense of any such matter and shall make
available to Purchaser the business records of Seller for said purpose. If
Purchaser, after receipt of notification from Seller of a thirty-party claim,
fails to protest, defend or settle any such third-party claim, demand, suit or
proceeding promptly, diligently and in good faith, Seller shall have the right
in its discretion to settle, defend or pay the same, in which event, Purchaser's
indemnity shall extend to and include the amount of said settlement or payment
and/or the costs and legal expenses of such defense.
15. DOCUMENTS TO BE DELIVERED AT CLOSING
At the Closing on the Closing Date:
(a) Seller shall deliver or cause to be delivered to Purchaser the
following:
(i) Certificates representing the Section 2(a) Shares being issued
to Purchaser at Closing.
(ii) The Shareholders' Agreement referred to in Section 3(a);
(iii) The Registration Agreement referred to in Section 3(d);
(iv) The amendment to the Original Joint Venture Agreement and the
Master Joint Venture Agreement referred to in Section 4;
(v) Evidence that the 1996 Plan has been expanded pursuant to
Section 8(c);
(vi) The certificate referred to in Section 11(c),
(vii) A copy of the Seller's Articles of Incorporation and Bylaws
certified as of the Closing Date by the Secretary thereof;
(viii) The Employment Agreements referred to in Section 11(q);
(ix) The mission statement referred to in Section 11(r);
(x) The opinion of counsel referred to in Section 11(s);
(xi) Certified resolutions of Seller's Board of Directors
authorizing and approving this transaction; and
(xii) All other instruments not herein specifically provided for but
which are reasonably necessary or desirable to effectuate the
purpose of this Agreement.
(b) Purchaser and/or Jacobs shall deliver to Seller the following:
(i) The purchase price due at Closing pursuant to Section 2(b);
(ii) The Shareholders Agreement referred to in Section 3(c);
(iii) The Registration Agreement referred to in Section 3(d);
(iv) The amendment to the Original Joint Venture Agreement and the
Master Joint Venture Agreement referred to in Section 4;
(v) Certified resolutions of the Manager of Purchaser authorizing
this transaction;
(vi) The certificate referred to in Section 12(c);
(vii) The opinion of counsel referred to in Section 12(d); and
(viii) All other instruments not herein specifically provided for but
which are reasonably necessary or desirable to effectuate the
purpose of this Agreement.
A-18
<PAGE> 34
16. BROKERAGE
Each party represents and warrants to the other that no person or persons
assisted in or brought about the negotiation of this Agreement in the capacity
of broker, agent, finder or originator on behalf of it. Each party ("First
Party") agrees to indemnify and hold harmless the other from any claim asserted
against such other party for a brokerage or agent's or finder's or originator's
commission or compensation in respect of the transaction contemplated by this
Agreement by any person purporting to act on behalf of First Party.
17. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS
All representations, warranties and agreements made by Seller and Purchaser
pursuant hereto shall survive the closing of this transaction. None of the
representations, warranties and agreements shall be affected by any
investigation at any time made by or on behalf of Seller or Purchaser.
18. [INTENTIONALLY OMITTED]
19. REIMBURSEMENT OF EXPENSES OF PURCHASER
Upon the Closing, Seller shall reimburse Purchaser for and/or pay directly
on behalf of and in the name of Purchaser, all the fees and expenses of
Purchaser's attorneys' and accountants' fees incurred on or after May 29, 1996
in the negotiation and consummation of the transactions contemplated hereby.
20. BINDING AGREEMENT
All of the terms and provisions of this Agreement shall inure to the
benefit of, be enforceable by and be binding upon and enforceable against the
parties hereto and their respective heirs and personal representatives,
successors and assigns; provided, however, that except as specified in Section
29 hereof, none of the parties hereto may assign its rights or duties hereunder.
Nothing contained in this Agreement shall confer any rights or remedies upon any
other person, firm or corporation.
21. NOTICES
Any notice or other communication required or permitted hereunder shall be
expressed in writing and delivered in person or sent by certified or registered
mail, return receipt requested, or sent by overnight courier service such as
Federal Express and confirmed by certified or registered mail, return receipt
requested, or sent by facsimile (receipt confirmed) to the respective parties at
the following addresses, or at such other addresses as the parties shall
designate by written notice to the other:
PURCHASER: Jacobs Entertainment Ltd.
1231 Main Avenue
Cleveland, Ohio 44113
Attn: Jeffrey P. Jacobs
Fax No.: (216) 861-1315
Copy To: Hahn Loeser & Parks
3300 BP America Building
200 Public Square
Cleveland, Ohio 44114
Attn: Stephen P. Owendoff, Esq.
Fax No.: (216) 241-2824
SELLER: Black Hawk Gaming & Development Company, Inc.
3060 Broadway, Suite 400
Boulder, Colorado 80302
Attn: Stephen R. Roark, President
Fax No.: (303) 444-7968
A-19
<PAGE> 35
Copy To: Jones & Keller P.C.
1625 Broadway, Suite 1600
Denver, Colorado 80202
Attn: Samuel E. Wing, Esq.
Fax No.: (303) 573-0769
All notices shall be deemed received on the third business day after mailing or
the first business day after delivery to the overnight courier service or the
same business day if presently delivered or sent by facsimile.
22. SECTION HEADINGS
The section and subsection headings and any table of contents listing the
same contained in this Agreement are for reference purposes only and shall not
affect in any way the meaning or interpretation of this Agreement.
23. SCHEDULES AND EXHIBITS
All Schedules and Exhibits referred to in this Agreement are attached
hereto and are hereby incorporated herein and made a part hereof.
24. COUNTERPARTS
This Agreement may be executed in any one or more counterparts, all of
which taken together shall constitute one instrument.
25. COOPERATION
Each party shall cooperate and use its best efforts to consummate the
transaction contemplated herein. In addition, each party shall cooperate and
take such action and execute such other and further documents as reasonably may
be requested from time to time after the Closing Date by any other party to
carry out the terms and provisions and intent of this Agreement.
26. GENDER
Wherever the context of this Agreement so requires or permits, the
masculine herein shall include the feminine or the neuter, the singular shall
include the plural, and the term "person" shall also include "corporation" or
other business entity.
27. ENTIRE AGREEMENT
This Agreement contains the entire agreement between the parties hereto,
and it is understood and agreed that there are no other covenants,
representations or warranties other than those contained herein. This Agreement
may not be changed or modified except by a writing duly executed by the parties
hereto.
28. WAIVER OF PROVISIONS
The terms, covenants, representations, warranties and conditions of this
Agreement may be waived only by a written instrument executed by the party
waiving compliance. The failure of any party at any time or times to require
performance of any provision of this Agreement shall in no manner affect the
right at a later date to enforce the same. No waiver by any party of any
condition or the breach of any provision, term, covenant, representation or
warranty contained in this Agreement, whether by conduct or otherwise, in any
one or more instances shall be deemed to be or construed as a further or
continuing waiver of any such condition or of the breach of any other provision,
term, covenant, representation or warranty of this Agreement.
A-20
<PAGE> 36
29. ASSIGNMENT BY PURCHASER
Subject to any required approval of the Division, the Commission and the
state and local liquor licensing authorities, Purchaser may assign its rights
and obligations hereunder to corporations, limited liability companies,
partnerships, trusts or other entities which are under common control with or
controlled through equity ownership and/or voting control, by Purchaser or
Jacobs; it being acknowledged that any entity managed either by Purchaser or
Jacobs or any entity in which Jacobs is one of the trustees and/or one of the
beneficiaries, constitutes common control.
30. ARBITRATION
If any dispute shall arise between the parties pursuant to this Agreement,
such dispute shall be settled by arbitration pursuant to this Section 30. In
such event, either party hereto may serve upon the other party a written notice
demanding that the dispute be resolved pursuant to this Section 30. To the
extent that any provision herein is inconsistent with any rule of the AAA, this
Agreement shall prevail. The dispute or claim shall be heard in Chicago,
Illinois by one (1) neutral arbitrator, if the parties can agree on the
selection of said arbitrator, or if unable to agree, each party shall select (1)
arbitrator and the two arbitrators chosen shall select the third arbitrator. If
the dispute shall be heard by three (3) arbitrators, one (1) arbitrator will be
selected by the party initiating the arbitration at the time of the submission
to arbitration. Within seven (7) days after submission, the other party will
select an arbitrator. Within seven (7) days after the first two (2) arbitrators
are chosen, the third arbitrator will be selected. The third arbitrator selected
shall not have any relationship to either of the parties. The arbitrators shall
apply the internal law of the State of Colorado. Said arbitrator(s) shall be
sworn faithfully and fairly to determine the question at issue. The
arbitrator(s) shall afford to the parties a hearing and the right to submit
evidence, with the privilege of cross examination and the right to compel
testimony by applying for subpoena powers to appropriate judicial authority, on
the question at issue, and shall, with all possible speed, make his/their
determination in writing and shall give notice to the parties hereto of such
determination. The concurring determination of the arbitrator, if heard by one,
or of any two of said three arbitrator(s) shall be binding upon the parties
hereto, or, in case no two of the arbitrators shall render a concurring
determination, then the determination of the third arbitrator appointed shall be
binding upon the parties hereto. The decision of the arbitrators shall be final
and binding upon the parties hereto and shall be enforceable in any court having
jurisdiction. Any arbitration shall be conducted in accordance with the then
prevailing Commercial Rules of the American Arbitration Association, or the
successor party thereto from time to time in existence. The fees and expenses of
the arbitrator(s) shall be divided equally between the parties so involved. The
parties shall each bear their own expenses (including, but not limited to,
attorneys' and witnesses' fees and expenses) in any arbitration proceedings.
A-21
<PAGE> 37
31. GOVERNING LAW
This Agreement shall be governed by and construed under the laws of the
State of Colorado.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the date first above set forth.
SELLER:
BLACK HAWK GAMING &
DEVELOPMENT COMPANY, INC.
By:
------------------------------
Robert D. Greenlee, Chairman
PURCHASER:
JACOBS ENTERTAINMENT LTD.
By:
------------------------------
Jeffrey P. Jacobs, President
A-22
<PAGE> 38
EXHIBITS AND SCHEDULES
<TABLE>
<CAPTION>
EXHIBIT SECTION REFERENCE DESCRIPTION
- - - ---------------- ----------------- --------------------------------
<S> <C> <C>
Exhibit A 3(a) Shareholders' Agreement
Exhibit B 3(d) Registration Agreement
Exhibit C 11(s) Opinion of Seller's Counsel
</TABLE>
<TABLE>
<CAPTION>
SCHEDULE SECTION REFERENCE DESCRIPTION
- - - ---------------- ----------------- --------------------------------
<S> <C> <C>
5(b) 5(b) Conflicts
5(c) 5(c) Capital Structure
5(e) 5(e) Subsidiaries
5(g) 5(g) Liens
5(i) 5(i) Insurance and Claims
5(l) 5(l) Liabilities
5(m) 5(m) Investigation
5(n) 5(n) Certain Agreements
5(o) 5(o) Plans
5(p) 5(p) Labor Matters
5(q) 5(q) Taxes
5(s) 5(s) Conduct of Business
5(v) 5(v) Proprietary Rights
5(w) 5(w) Contracts
</TABLE>
A-23
<PAGE> 39
EXHIBIT A
BLACK HAWK GAMING & DEVELOPMENT COMPANY, INC.
SHAREHOLDERS AGREEMENT
THIS AGREEMENT is made as of , 1996, by and among BLACK HAWK
GAMING & DEVELOPMENT COMPANY, INC., a Colorado corporation (the "Company"),
JACOBS ENTERTAINMENT LTD., an Ohio limited liability company or its nominee as
described in Section 12 (the "Investor"), and ROBERT D. GREENLEE ("Greenlee")
and FRANK B. DAY ("Day"). The Investor, Greenlee and Day are sometimes
collectively referred to as the "Shareholders" and individually as a
"Shareholder."
RECITALS
A. Pursuant to a certain Purchase Agreement dated as of , 1996,
by and among Investor and the Company, Investor is acquiring certain Shares (as
defined in the Purchase Agreement) of the Company.
B. It is a condition to closing the transactions contemplated by the
Purchase Agreement that the parties enter into this Agreement for the purposes,
among others, of (i) establishing the composition of the Company's Board of
Directors (the "Board"), (ii) assuring continuity in the management and
ownership of the Company, and (iii) limiting the manner and terms by which the
Shareholders' Shares may be transferred.
C. Capitalized terms used herein are defined in Paragraph 7 hereof.
AGREEMENTS
NOW, THEREFORE, in consideration of the mutual covenants contained herein
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties to this Agreement hereby agree as follows:
1. Covenants With Respect To Voting.
(a) From and after the Closing (as defined in the Purchase Agreement) and
until the earlier of (i) the occurrence of the condition described in Section
1(a)(iii), below, or (ii) the determination by Investor on or before December
31, 1998 that the Section 2(c) conditions (as defined in the Purchase Agreement)
have not been satisfied, each of Greenlee and Day shall vote all of his
Shareholder Shares (as defined in paragraph 7 hereof) and any other voting
securities of the Company over which such Shareholder has voting control and
shall take all other necessary or desirable actions within his control (whether
in his capacity as a stockholder, director, member of a board committee or
officer of the Company or otherwise, and including, without limitation,
attendance at meetings in person or by proxy for purposes of obtaining a quorum
and execution of written consents in lieu of meetings), and the Company shall
take all reasonably necessary or desirable actions within its control
(including, without limitation, calling special board and shareholder meetings),
to approve the following actions:
(i) duly calling or causing the Company to call a special meeting of
shareholders of the Company to occur on or before September 30, 1996 to
approve the proposals referred to in clause (ii) below;
(ii) voting in favor of the following proposals:
(A) approving the Investor's acquisition of Shares pursuant to
Sections 2(a) and 2(c) of the Purchase Agreement;
(B) increasing the number of directors of the Company to eight and
electing (or, if already appointed by the Board, ratifying the
appointment of four directors (the "Investor Directors")); and
-1-
<PAGE> 40
(C) adopting staggered terms for the Company's Board in accordance
with Section 7-108-106 of the Colorado Business Corporation Act
and nominating directors to the three classes as follows: Class I
shall have two directors (one nominee of each of the Company and
the Investor, Class II shall have three nominees (two nominees of
the Company and one of the Investor) and Class III shall have
three nominees (two nominees of the Investor and one of the
Company);
(iii) at such time as the Investor shall have made payments sufficient
under Sections 2(a) and 2(c) of the Purchase Agreement to acquire 1,270,000
Shares, expanding the Board to nine members and electing an additional
member to Class I of the Board of directors as nominated by the Investor;
(iv) electing or ratifying the election of Jeffrey P. Jacobs as Chief
Executive Officer and as Co-Chairman of the Board of the Company;
(v) at the request of the Investor, electing at least one of the
Investor Directors to the board of directors of any of the Company's
Subsidiaries (a "Sub Board"); or
(vi) at the request of the Investor, at least one of the Investor
Directors shall be a member of the Compensation Committee and, at the
request of the Investor, at least one of the Investor Directors shall be a
member of any other committee of the board or a Sub Board, and any other
committees of the Board or a Sub Board shall be created only upon the
approval of six members of the Board.
(b) The removal from the Board or a Sub Board (with or without cause) of
any representative designated pursuant to this Paragraph 1 by the Investor shall
be at the Investor's written request, but only upon such written request and
under no other circumstances.
(c) In the event that any representative designated hereunder by the
Investor hereunder ceases to serve as a member of the Board or a Sub Board
during his term of office, the resulting vacancy on the Board or the Sub Board
shall be filled by a representative designated by the Investor as provided
hereunder.
(d) The Company shall pay the reasonable out-of-pocket expenses incurred by
each director in connection with attending the meetings of the Board, any Sub
Board and any committee thereof.
(e) If any party fails to designate a representative to fill a directorship
pursuant to the terms of this Paragraph 1, the election of an individual to such
directorship shall be accomplished in accordance with the Company's bylaws and
applicable law.
(f) Greenlee's and Day's obligation to vote their Shares as described in
this Paragraph 1 constitutes a voting agreement created under Section 7-107-302
of the Colorado Business Corporation Act.
2. IRREVOCABLE PROXY. IN ORDER TO SECURE EACH OF GREENLEE'S AND DAY'S
OBLIGATION TO VOTE HIS SHAREHOLDER SHARES AND OTHER VOTING SECURITIES OF THE
COMPANY IN ACCORDANCE WITH THE PROVISIONS OF PARAGRAPH 1 HEREOF, EACH OF
GREENLEE AND DAY HEREBY APPOINTS THE INVESTOR AS HIS TRUE AND LAWFUL PROXY AND
ATTORNEY-IN-FACT, WITH FULL POWER OF SUBSTITUTION, TO VOTE ALL OF HIS
SHAREHOLDER SHARES AND OTHER VOTING SECURITIES OF THE COMPANY FOR THE ELECTION
AND/OR REMOVAL OF DIRECTORS AND ALL SUCH OTHER MATTERS AS EXPRESSLY PROVIDED FOR
IN PARAGRAPH 1. THE INVESTOR MAY EXERCISE THE IRREVOCABLE PROXY GRANTED TO
HIM/IT HEREUNDER AT ANY TIME GREENLEE OR DAY FAILS TO COMPLY WITH THE PROVISIONS
OF THIS AGREEMENT. THE PROXIES AND POWERS GRANTED BY GREENLEE AND DAY PURSUANT
TO THIS PARAGRAPH 2 ARE COUPLED WITH AN INTEREST AND ARE GIVEN TO SECURE THE
PERFORMANCE OF THEIR RESPECTIVE OBLIGATIONS TO THE INVESTOR UNDER THIS
AGREEMENT. SUCH PROXIES AND POWERS SHALL BE IRREVOCABLE-FOR THE TERM SET FORTH
IN PARAGRAPH 1 OF THIS AGREEMENT AND SHALL SURVIVE THE DEATH,
-2-
<PAGE> 41
INCOMPETENCY, DISABILITY OR BANKRUPTCY OF GREENLEE OR DAY AND THE SUBSEQUENT
HOLDERS OF THEIR SHAREHOLDER SHARES.
3. Representations and Warranties of Greenlee and Day
Each of Greenlee and Day represents and warrants that (i) each is the
record owner of the number of Shareholder Shares set forth opposite his name on
Schedule A attached hereto, and (ii) such Shareholder has not granted and is not
a party to any proxy, voting trust or other agreement which is inconsistent
with, conflicts with or violates any provision of this Agreement. No holder of
Shareholder Shares shall grant any proxy or become party to any voting trust or
other agreement which is inconsistent with, conflicts with or violates any
provision of this Agreement.
4. Restrictions on Transfer of Shareholder Shares.
(a) Transfer of Shareholder Shares. No Shareholder shall sell, transfer,
assign, pledge or otherwise dispose of (whether with or without consideration
and whether voluntarily or involuntarily or by operation of law) any interest in
any Shareholder Shares (a "Transfer"), except pursuant to the provisions of this
Paragraph 4. Each Shareholder shall not consummate any Transfer until 30 days
after the later of the delivery to the Company and the other Shareholders of
such Shareholder's Offer Notice, unless the parties to the Transfer have been
finally determined pursuant to this Paragraph 4 prior to the expiration of such
30-day period (the "Election Period").
(b) First Offer Right. At least 30 days prior to making any Transfer of any
Shareholder Shares, the transferring Shareholder (the "Transferring
Shareholder") shall deliver a written notice (an "Offer Notice") to the Company
and the other Shareholders (the "Other Shareholders"). The Offer Notice shall
disclose in reasonable detail the proposed number of Shareholder Shares to be
transferred, the proposed terms and conditions of the Transfer and the identity
of the prospective transferee(s) (if known). Each Other Shareholder may elect to
purchase all (but not less than all) of his Pro Rata Share (as defined below) of
the Shareholder Shares specified in the Offer Notice at the price and on the
terms specified therein by delivering written notice of such election to the
Transferring Shareholder as soon as practical but in any event within 20 days
after delivery of the Offer Notice. Any Shareholder Shares not elected to be
purchased by the end of such 20-day period shall be reoffered for the ten-day
period prior to the expiration of the Election period by the Transferring
Shareholder on a pro rata basis to the Other Shareholders who have elected to
purchase their Pro Rata Share and, if there are any such Shareholder Shares
remaining after such allocation, the Company shall have the right to purchase
such remaining Shareholder Shares. If the Other Shareholders and/or the Company
have elected to purchase Shareholder Shares from the Transferring Shareholder,
the transfer of such shares shall be consummated as soon as practical after the
delivery of the election notice(s) to the Transferring Shareholder, but in any
event within 15 days after the expiration of the Election Period. To the extent
that the Company and the Other Shareholders have not elected to purchase all of
the Shareholder Shares being offered, the Transferring Shareholder may, within
90 days after the expiration of the Election Period, transfer such Shareholder
Shares to one or more third parties at a price no less than the price per share
specified in the Offer Notice and on other terms no more favorable to the
transferees thereof than offered to the Company and the Other Shareholders in
the Offer Notice. Any Shareholder Shares not transferred within such 90-day
period shall be reoffered to the Other Shareholders under this Paragraph 4 prior
to any subsequent Transfer. The purchase price specified in any Offer Notice
shall be payable solely in cash at the closing of the transaction or in
installments over time, and no Shareholder Shares may be pledged except on terms
and conditions satisfactory to the Investor. Each Shareholder's "Pro Rata Share"
shall be based upon such Shareholder's proportionate ownership of all
Shareholder Shares owned by Shareholders other than the Transferring
Shareholder.
5. Legend.
(a) Each certificate evidencing Shareholder Shares and each certificate
issued in exchange for or upon the transfer of any Shareholder Shares covered
hereby shall be stamped or otherwise imprinted with a legend in substantially
the following form:
-3-
<PAGE> 42
The transfer of the securities represented by this certificate is subject
to the conditions specified in the Shareholders Agreement, dated as of
, 1996 and as amended and modified from time to time, between
the issuer (the "Company") and certain stockholders, and the Company
reserves the right to refuse the transfer of such securities until such
conditions have been fulfilled with respect to such transfer.
The Company shall imprint such legend on certificates evidencing Shareholder
Shares outstanding as of the date hereof.
6. Transfer. Prior to transferring any Shareholder Shares to any Person,
the Transferring Shareholder shall cause the prospective transferee to be bound
by this Agreement and to execute and deliver to the Company and the Other
Shareholders a counterpart of this Agreement.
7. Definitions.
"Affiliate" of a Person means any other Person controlling, controlled by
or under common control with such first Person.
"Board" has the meaning set forth in the preamble.
"Closing" has the meaning set forth in the Purchase Agreement.
"Common Stock" means the Company's common shares, $.001 par value.
"Company" has the meaning set forth in the preamble.
"Investor" has the meaning set forth in the preamble.
"Investor Directors" has the meaning set forth in Paragraph 1(a).
"Person" means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
"Purchase Agreement" has the meaning set forth in the preamble.
"Shareholder Shares" means (i) any Common Stock purchased or otherwise
acquired by any Shareholder, and (ii) any Common Stock issued or issuable with
respect to the securities referred to in clause (i) above by way of stock
dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization.
"Shareholders" has the meaning set forth in the preamble.
"Sub Board" has the meaning set forth in Paragraph 1(a)(v).
"Subsidiary" means, with respect to any Person, any corporation limited
liability company, partnership, association or other business entity of which
(i) if a corporation, a majority of the total voting power of shares of stock
entitled (without regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by that Person or one or more of the other
Subsidiaries of that Person or a combination thereof, or (ii) if a limited
liability company, partnership, association or other business entity, a majority
of the limited liability company, partnership or other similar ownership
interest thereof is at the time owned or controlled, directly or indirectly, by
any Person or one or more Subsidiaries of that Person or a combination thereof.
For purposes hereof, a Person or Persons shall be deemed to have a majority
ownership interest in a limited liability company, partnership, association or
other business entity if such Person or Persons shall be allocated a majority of
limited liability company, partnership, association or other business entity
gains or losses or shall be or control the managing director or general partner
of such limited liability company, partnership, association or other business
entity.
"Transfer" has the meaning set forth in Paragraph 4.
-4-
<PAGE> 43
8. Transfers in Violation of Agreement. Any Transfer or attempted Transfer
of any Shareholder Shares in violation of any provision of this Agreement shall
be void, and the Company shall not record such Transfer on its books or treat
any purported transferee of such Shareholder Shares as the owner of such shares
for any purpose.
9. Amendment and Waiver. Except as otherwise provided herein, no
modification, amendment or waiver of any provision of this Agreement shall be
effective against the Company or the Shareholders unless such modification,
amendment or waiver is approved in writing by the parties hereto. The failure of
any party to enforce any of the provisions of this Agreement shall in no way be
construed as a waiver of such provisions and shall not affect the right of such
party thereafter to enforce each and every provision of this Agreement in
accordance with its terms.
10. Severability. Whenever possible, each provision of this Agreement shall
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
the validity, legality or enforceability of any other provision of this
Agreement in such jurisdiction or affect the validity, legality or
enforceability of any provision in any other jurisdiction, but this Agreement
shall be reformed, construed and enforced in such jurisdiction as if such
invalid, illegal or unenforceable provision had never been contained herein.
11. Entire Agreement. Except as otherwise expressly set forth herein, this
Agreement embodies the complete agreement and understanding among the parties
hereto with respect to the subject matter hereof and supersedes and preempts any
prior understandings, agreements or representations by or among the parties,
written or oral, which may have related to the subject matter hereof in any way.
12. Successors and Assigns. Except as otherwise provided herein, this
Agreement shall bind and inure to the benefit of and be enforceable by the
parties hereto and may not be assigned; the Investor may assign its rights and
obligations hereunder to a corporation, limited liability company, partnership,
trust or other entity which is under common control with, or controlled through
equity and/or voting control by the Investor or Jeffrey P. Jacobs; it being
acknowledged that any entity managed other by Investor and/or Jeffrey P. Jacobs
constitutes common control.
13. Counterparts. This Agreement may be executed in multiple counterparts,
each of which shall be an original and all of which taken together shall
constitute one and the same agreement.
14. Remedies. The Company and the Shareholders shall be entitled to enforce
their rights under this Agreement specifically, to recover damages by reason of
any breach of any provision of this Agreement and to exercise all other rights
existing in their favor. The parties hereto agree and acknowledge that money
damages would not be an adequate remedy for any breach of the provisions of this
Agreement and the Shareholders may in their discretion apply to any court of law
or equity of competent jurisdiction for specific performance and/or injunctive
relief (without posting a bond or other security) in order to enforce or prevent
any violation of the provisions of this Agreement.
15. Notices. All notices, demands or other communications to be given or
delivered under or by reason of the provisions of this Agreement shall be in
writing and shall be deemed to have been given when delivered personally to the
recipient, sent to the recipient by reputable overnight courier service (charges
prepaid) or mailed to the recipient by certified or registered mail, return
receipt requested and postage prepaid or sent by telecopier. Such notices,
demands and other communications shall be sent to the Company, the Investor,
Greenlee and Day at the addresses indicated below:
-5-
<PAGE> 44
Notices to the Investor:
Jacobs Entertainment Ltd.
1231 Main Avenue
Cleveland, OH 44113
Attention: Jeffrey P. Jacobs
Fax No.: (216) 861-6315
with a copy (which shall not constitute notice) to:
Hahn Loeser Parks
3300 BP America Building
200 Public Square
Cleveland, OH 44114-2301
Attention: Stephen P. Owendoff, Esq.
Fax No.: (216) 241-2824
Notices to the Company:
Black Hawk Gaming & Development Company, Inc.
2060 Broadway, Suite 400
Boulder, Colorado 80302
Attention: Stephen R. Roark, President
Fax No.: (303) 444-7968
with a copy (shall not constitute notice) to:
Jones & Keller P.C.
1625 Broadway, Suite 1600
Denver, Colorado 80202
Attention: Samuel E. Wing, Esq.
Fax No.: (303) 893-6506
Notices to Greenlee:
Robert D. Greenlee
c/o Black Hawk Gaming & Development Company, Inc.
2060 Broadway, Suite 400
Boulder, Colorado 80302
Fax No.: (303) 444-7968
-6-
<PAGE> 45
Notices to Day:
Frank B. Day
c/o Rock Bottom Restaurants, Inc.
1050 Walnut Street, Suite 402
Boulder, Colorado 80302
Fax No.: (303) 417-4199
16. GOVERNING LAW. ALL ISSUES AND QUESTIONS CONCERNING THE CONSTRUCTION,
VALIDITY, INTERPRETATION AND ENFORCEABILITY OF THIS AGREEMENT AND THE EXHIBITS
AND SCHEDULES HERETO SHALL BE GOVERNED BY THE LAWS OF THE STATE OF COLORADO,
WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW OR CONFLICT OF LAW RULES OR
PROVISIONS (WHETHER OF THE STATE OF COLORADO OR ANY OTHER JURISDICTION) THAT
WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE
OF COLORADO.
17. Business Days. If any time period for giving notice or taking action
hereunder expires on a day which is a Saturday, Sunday or legal holiday in the
State of Colorado, the time period shall automatically be extended to the
business day immediately following such Saturday, Sunday or legal holiday.
18. Descriptive Headings. The descriptive headings of this Agreement are
inserted for convenience only and do not constitute a part of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above written.
JACOBS ENTERTAINMENT LTD.
By
------------------------------------
Its
------------------------------------
BLACK HAWK GAMING & DEVELOPMENT
COMPANY, INC.
By
------------------------------------
Its
------------------------------------
------------------------------------
ROBERT D. GREENLEE
------------------------------------
FRANK B. DAY
-7-
<PAGE> 46
EXHIBIT B
BLACK HAWK GAMING & DEVELOPMENT COMPANY, INC.
REGISTRATION AGREEMENT
THIS AGREEMENT is made as of , 1996, by and among BLACK HAWK
GAMING & DEVELOPMENT COMPANY, INC., a Colorado corporation (the "Company"),
JACOBS ENTERTAINMENT LTD., an Ohio limited liability company or its nominee as
described in Paragraph 9(e) ("Purchaser"), ROBERT D. GREENLEE ("Greenlee") and
FRANK B. DAY ("Day").
Pursuant to a certain Purchase Agreement dated as of , 1996,
the parties hereto are acquiring unregistered shares of the Company's Common
Stock. In order to induce Purchaser to enter into the Purchase Agreement, the
Company has agreed to provide the registration rights set forth in this
Agreement. The execution and delivery of this Agreement is a condition to the
closing of the transactions described in the Purchase Agreement. Unless
otherwise provided in this Agreement, capitalized terms used herein shall have
the meanings set forth in paragraph 8 hereof.
The parties hereto agree as follows:
1. Demand Registrations.
(a) Requests for Registration. Until June 30, 1999, the holders of 15% of
the Registrable Securities may request registration under the Securities Act of
1933 (the "Securities Act") of all or any portion of their Registrable
Securities on Form S-1 or any similar long-form registration ("Long-Form
Registrations") or on Form S-2 or S-3 or any similar short-form registration
("Short-Form Registrations") if available. All registrations requested pursuant
to this Paragraph l(a) are referred to herein as "Demand Registrations". Each
request for a Demand Registration shall specify the approximate number of
Registrable Securities requested to be registered and the anticipated per share
price range for such offering. Within ten days after receipt of any such
request, the Company shall give written notice of such requested registration to
all other holders of Registrable Securities and shall include in such
registration all Registrable Securities with respect to which the Company has
received written requests for inclusion therein within 15 days after the receipt
of the Company's notice.
(b) Number of Demand Registrations. The holders of Registrable Securities
shall be entitled to request (i) one Demand Registration in which the Company
shall pay all Registration Expenses (the "Company-paid Registration") and (ii)
one Demand Registration in which the holders of Registrable Securities shall pay
their share of the Registration Expenses as set forth in paragraph 5 hereof;
provided, however, if Greenlee and Day request a Company-paid Registration in
which Purchaser does not participate, Purchaser shall be entitled to an
additional Company-paid Registration. A registration shall not count as one of
the permitted Demand Registrations until it has become effective, and no Demand
Registration shall count as one of the permitted Demand Registrations unless the
holders of Registrable Securities are able to register and sell at least 90% of
the Registrable Securities requested to be included in such registration;
provided that in any event the Company shall pay all Registration Expenses in
connection with any registration initiated as a Company-paid Demand Registration
whether or not it has become effective. The first Demand Registration shall be
the Company-paid Registration, and all Demand Registrations shall be
underwritten Long-Form Registrations unless the holders of a majority of the
Registrable Securities included in such registration otherwise agree or unless
the Company is permitted to use any applicable short form. The Company shall use
its reasonable best efforts to make Short-Form Registrations on Form S-3
available for the sale of Registrable Securities.
(c) Priority on Demand Registrations. The Company shall not include in any
Demand Registration any securities which are not Registrable Securities without
the prior written consent of the holders of a majority of the Registrable
Securities included in such registration. Any Persons other than holders of
Registrable Securities who participate in Demand Registrations which are not at
the Company's expense must pay their share of the Registration Expenses as
provided in Paragraph 5 hereof.
(d) Restrictions on Demand Registrations. The Company shall not be
obligated to effect any Demand Registration within 180 days after the effective
date of a previous Demand Registration.
-1-
<PAGE> 47
(e) Selection of Underwriters. The holders of a majority of the Registrable
Securities included in any Long-Form Registration shall have the right to select
the investment banker(s) and manager(s) to administer the offering with the
approval of the Company. Such approval shall not be unreasonably withheld.
(f) Other Registration Rights. Except as provided in this Agreement, the
Company has not granted and shall not grant to any Persons the right to request
the Company to register any equity securities of the Company, or any securities
convertible or exchangeable into or exercisable for such securities, without the
prior written consent of the holders of a majority of the Registrable
Securities; provided that the Company may grant rights to other Persons to
participate in Piggyback Registrations so long as such rights are subordinate to
the rights of the holders of Registrable Securities with respect to such
Piggyback Registrations.
2. Piggyback Registrations.
(a) Right to Piggyback. Whenever the Company proposes to register any of
its securities under the Securities Act (other than pursuant to a Demand
Registration) and the registration form to be used may be used for the
registration of Registrable Securities (a "Piggyback Registration"), the Company
shall give prompt written notice (in any event within three business days after
its receipt of notice of any exercise of demand registration rights other than
under this Agreement) to all holders of Registrable Securities of its intention
to effect such a registration and shall include in such registration all
Registrable Securities with respect to which the Company has received written
requests for inclusion therein within 20 days after the receipt of the Company's
notice.
(b) Piggyback Expenses. The Registration Expenses of the holders of
Registrable Securities shall be paid by the Company in all Piggyback
Registrations.
(c) Priority on Primary Registrations. If a Piggyback Registration is an
underwritten primary registration on behalf of the Company, and the managing
underwriters advise the Company in writing that in their opinion the number of
securities requested to be included in such registration exceeds the number
which can be sold in such offering without adversely affecting the marketability
of the offering, the Company shall include in such registration (i) first, the
securities the Company proposes to sell, (ii) second, the Registrable Securities
requested to be included in such registration, pro rata among the holders of
such Registrable Securities on the basis of the number of shares owned by each
such holder, and (iii) third, other securities requested to be included in such
registration.
(d) Selection of Underwriters. If any Piggyback Registration is an
underwritten offering, the selection of investment banker(s) and manager(s) for
the offering must be approved by the holders of a majority of the Registrable
Securities included in such Piggyback Registration. Such approval shall not be
unreasonably withheld.
(e) Other Registrations. If the Company has previously filed a registration
statement with respect to Registrable Securities pursuant to paragraph 1 or
pursuant to this Paragraph 2, and if such previous registration has not been
withdrawn or abandoned, the Company shall not file or cause to be effected any
other registration of any of its equity securities or securities convertible or
exchangeable into or exercisable for its equity securities under the Securities
Act (except on Form S-8 or any successor form), whether on its own behalf or at
the request of any holder or holders of such securities, until a period of at
least 180 days has elapsed from the effective date of such previous
registration.
3. Holdback Agreements.
(a) Each holder of Registrable Securities shall not effect any public sale
or distribution (including sales pursuant to Rule 144) of equity securities of
the Company, or any securities convertible into or exchangeable or exercisable
for such securities, during the seven days prior to and the 180-day period
beginning on the effective date of any underwritten Demand Registration or any
underwritten Piggyback Registration (except as part of such underwritten
registration), unless the underwriters managing the registered public offering
otherwise agree.
(b) The Company (i) shall not effect any public sale or distribution of its
equity securities, or any securities convertible into or exchangeable or
exercisable for such securities, during the seven days prior to and
-2-
<PAGE> 48
during the 180-day period beginning on the effective date of any underwritten
Demand Registration or any underwritten Piggyback Registration (except as part
of such underwritten registration or Pursuant to registrations on Form S-8 or
any successor form), unless the underwriters managing the registered public
offering otherwise agree, and (ii) shall cause each holder of at least 5% (on a
fully-diluted basis) of its Common Stock, or any securities convertible into or
exchangeable or exercisable for Common Stock, purchased from the Company at any
time after the date of this Agreement (other than in a registered public
offering) to agree not to effect any public sale or distribution (including
sales pursuant to Rule 144) of any such securities during such period (except as
part of such underwritten registration, if otherwise permitted), unless the
underwriters managing the registered public offering otherwise agree.
4. Registration Procedures. Whenever the holders of Registrable Securities
have requested that any Registrable Securities be registered pursuant to this
Agreement, the Company shall use its best efforts to effect the registration and
the sale of such Registrable Securities in accordance with the intended method
of disposition thereof, and pursuant thereto the Company shall as expeditiously
as possible:
(a) prepare and file with the Securities and Exchange Commission a
registration statement with respect to such Registrable Securities and use
its best efforts to cause such registration statement to become effective;
provided that before filing a registration statement or prospectus or any
amendments or supplements thereto, the Company shall furnish to the counsel
selected by Purchaser, Greenlee and Day of all such documents proposed to
be filed, which documents shall be subject to the review and comment of
such counsel;
(b) notify each holder of Registrable Securities of the effectiveness
of each registration statement filed hereunder and prepare and file with
the Securities and Exchange Commission such amendments and supplements to
such registration statement and the prospectus used in connection therewith
as may be necessary to keep such registration statement effective for a
period of not less than 180 days and comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by
such registration statement during such period in accordance with the
intended methods of disposition by the sellers thereof set forth in such
registration statement;
(c) furnish to each seller of Registrable Securities such number of
copies of such registration statement, each amendment and supplement
thereto, the prospectus included in such registration statement (including
each preliminary prospectus) and such other documents as such seller may
reasonably request in order to facilitate the disposition of the
Registrable Securities owned by such seller;
(d) use its best efforts to register or qualify such Registrable
Securities under such other securities or blue sky laws of such
jurisdictions as any seller reasonably requests and do any and all other
acts and things which may be reasonably necessary or advisable to enable
such seller to consummate the disposition in such jurisdictions of the
Registrable Securities owned by such seller; provided that the Company
shall not be required to (i) qualify generally to do business in any
jurisdiction where it would not otherwise be required to qualify but for
this subparagraph, (ii) subject itself to taxation in any such jurisdiction
or (iii) consent to general service of process in any such jurisdiction;
(e) notify each seller of such Registrable Securities, at any time
when a prospectus relating thereto is required to be delivered under the
Securities Act, of the happening of any event as a result of which the
prospectus included in such registration statement contains an untrue
statement of a material fact or omits any fact necessary to make the
statements therein not misleading, and, at the request of any such seller,
the Company shall prepare a supplement or amendment to such prospectus so
that, as thereafter delivered to the purchasers of such Registrable
Securities, such prospectus shall not contain an untrue statement of a
material fact or omit to state any fact necessary to make the statements
therein not misleading;
(f) cause all such Registrable Securities to be listed on each
securities exchange on which similar securities issued by the Company are
then listed and, if not so listed, to be listed on the NASD automated
quotation system and, if listed on the NASD automated quotation system, use
its best efforts to secure designation of all such Registrable Securities
covered by such registration statement as a NASDAQ
-3-
<PAGE> 49
"national market system security" within the meaning of Rule 11Aa2-1 of the
Securities and Exchange Commission or, failing that, to secure NASDAQ
authorization for such Registrable Securities and, without limiting the
generality of the foregoing, to arrange for at least two market makers to
register as such with respect to such Registrable Securities with the NASD;
(g) provide a transfer agent and registrar for all such Registrable
Securities not later than the effective date of such registration
statement;
(h) enter into such customary agreements (including underwriting
agreements in customary form) and take all such other actions as the
holders of a majority of the Registrable Securities being sold or the
underwriters, if any, reasonably request in order to expedite or facilitate
the disposition of such Registrable Securities (including effecting a stock
split or a combination of shares);
(i) make available for inspection by any seller of Registrable
Securities, any underwriter participating in any disposition pursuant to
such registration statement and any attorney, accountant or other agent
retained by any such seller or underwriter, all financial and other
records, pertinent corporate documents and properties of the Company, and
cause the Company's officers, directors, employees and independent
accountants to supply all information reasonably requested by any such
seller, underwriter, attorney, accountant or agent in connection with such
registration statement;
(j) otherwise use its best efforts to comply with all applicable rules
and regulations of the Securities and Exchange Commission, and make
available to its security holders, as soon as reasonably practicable, an
earnings statement covering the period of at least twelve months beginning
with the first day of the Company's first full calendar quarter after the
effective date of the registration statement, which earnings statement
shall satisfy the provisions of Section 11(a) of the Securities Act and
Rule 158 thereunder;
(k) permit any holder of Registrable Securities which holder, in its
sole and exclusive judgment, might be deemed to be an underwriter or a
controlling person of the Company, to participate in the preparation of
such registration or comparable statement and to require the insertion
therein of material, furnished to the Company in writing, which in the
reasonable judgment of such holder and its counsel should be included;
(l) in the event of the issuance of any stop order suspending the
effectiveness of a registration statement, or of any order suspending or
preventing the use of any related prospectus or suspending the
qualification of any common stock included in such registration statement
for sale in any jurisdiction, the Company shall use its best efforts
promptly to obtain the withdrawal of such order;
(m) use its best efforts to cause such Registrable Securities covered
by such registration statement to be registered with or approved by such
other governmental agencies or authorities as may be necessary to enable
the sellers thereof to consummate the disposition of such Registrable
Securities; and
(n) obtain a cold comfort letter from the Company's independent public
accountants in customary form and covering such matters of the type
customarily covered by cold comfort letters as the holders of a majority of
the Registrable Securities being sold reasonably request; provided that
such Registrable Securities constitute at least 10% of the securities
covered by such registration statement.
5. Registration Expenses.
(a) All expenses incident to the Company's performance of or compliance
with this Agreement, including without limitation all registration and filing
fees, fees and expenses of compliance with securities or blue sky laws, printing
expenses, messenger and delivery expenses, fees and disbursements of custodians,
and fees and disbursements of counsel for the Company and all independent
certified public accountants, underwriters (excluding discounts and commissions)
and other Persons retained by the Company (all such expenses being herein called
"Registration Expenses"), shall be borne as provided in this Agreement, except
that the Company shall, in any event, pay its internal expenses (including,
without limitation, all salaries and expenses of its officers and employees
performing legal or accounting duties), the expense of any annual audit or
quarterly review, the expense of any liability insurance and the expenses and
fees for listing the securities to
-4-
<PAGE> 50
be registered on each securities exchange on which similar securities issued by
the Company are then listed or on the NASD automated quotation system.
(b) In connection with the Company-paid Registration and each Piggyback
Registration, the Company shall reimburse the holders of Registrable Securities
included in such registration for the reasonable fees and disbursements of one
counsel chosen by each such participant included in such registration.
(c) To the extent Registration Expenses are not required to be paid by the
Company, each holder of securities included in any registration hereunder shall
pay those Registration Expenses allocable to the registration of such holder's
securities so included, and any Registration Expenses not so allocable shall be
borne by all sellers of securities included in such registration in proportion
to the aggregate selling price of the securities to be so registered.
6. Indemnification.
(a) The Company agrees to indemnify, to the extent permitted by law, each
holder of Registrable Securities, its officers and directors and each Person who
controls such holder (within the meaning of the Securities Act) against all
losses, claims, damages, liabilities and expenses caused by any untrue or
alleged untrue statement of material fact contained in any registration
statement, prospectus or preliminary prospectus or any amendment thereof or
supplement thereto or any omission or alleged omission of a material fact
required to be stated therein or necessary to make the statements therein not
misleading, except insofar as the same are caused by or contained in any
information furnished in writing to the Company by such holder expressly for use
therein or by such holder's failure to deliver a copy of the registration
statement or prospectus or any amendments or supplements thereto after the
Company has furnished such holder with a sufficient number of copies of the
same. In connection with an underwritten offering, the Company shall indemnify
such underwriters, their officers and directors and each Person who controls
such underwriters (within the meaning of the Securities Act) to the same extent
as provided above with respect to the indemnification of the holders of
Registrable Securities.
(b) In connection with any registration statement in which a holder of
Registrable Securities is participating, each such holder shall furnish to the
Company in writing such information and affidavits as the Company reasonably
requests for use in connection with any such registration statement or
prospectus and, the extent permitted by law, shall indemnify the Company, its
directors and officers and each Person who controls the Company (within the
meaning of the Securities Act) against any losses, claims, damages, liabilities
and expenses resulting from any untrue or alleged untrue statement of material
fact contained in the registration statement, prospectus or preliminary
prospectus or any amendment thereof or supplement thereto or any omission or
alleged omission of a material fact required to be stated therein or necessary
to make the statements therein not misleading, but only the extent that such
untrue statement or omission is contained in any information or affidavit so
furnished in writing by such holder; provided that the obligation of a Person to
indemnify shall be individual to each holder and shall be limited to the net
amount of proceeds received by such holder from the sale of Registrable
Securities pursuant to such registration statement.
(c) Any Person entitled to indemnification hereunder shall (i) give prompt
written notice to the indemnifying party of any claim with respect to which it
seeks indemnification (provided that the failure to give prompt notice shall not
impair any Person's right to indemnification hereunder to the extent such
failure has not prejudiced the indemnifying party) and (ii) unless in such
indemnified party's reasonable judgment a conflict of interest between such
indemnified and indemnifying parties may exist with respect to such claim,
permit such indemnifying party to assume the defense of such claim with counsel
reasonably satisfactory to the indemnified party. If such defense is assumed,
the indemnifying party shall not be subject to any liability for any settlement
made by the indemnified party without its consent (but such consent shall not be
unreasonably withheld). An indemnifying party who is not entitled to, or elects
not to, assume the defense of a claim shall not be obligated to pay the fees and
expenses of more than one counsel for all parties indemnified by such
indemnifying party with respect to such claim, unless in the reasonable judgment
of any indemnified party a conflict of interest may exist between such
indemnified party and any other of such indemnified parties with respect to such
claim.
-5-
<PAGE> 51
(d) The indemnification provided for under this Agreement shall remain in
full force and effect regardless of any investigation made by or on behalf of
the indemnified party or any officer, director or controlling person of such
indemnified party and shall survive the transfer of securities. The Company also
agrees to make such provisions, as are reasonably requested by any indemnified
party, for contribution to such party in the event the Company's indemnification
is unavailable for any reason.
7. Participation in Underwritten Registrations. No Person may participate
in any registration hereunder which is underwritten unless such Person (i)
agrees to sell such Person's securities on the basis provided in any
underwriting arrangements approved by the Person or Persons entitled hereunder
to approve such arrangements and (ii) completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents
required under the terms of such underwriting arrangements; provided that no
holder of Registrable Securities included in any underwritten registration shall
be required to make any representations or warranties to the Company or the
underwriters (other than representations and warranties regarding such holder
and such holder's intended method of distribution) or to undertake any
indemnification obligations to the Company or the underwriters with respect
thereto (other than the representations the holder or holders make with respect
to intended method of distribution).
8. Definitions.
(a) "Affiliates" of a Person means any other Person controlling, controlled
by or under common control with such first Person.
(b) "Common Stock" means, collectively, the Company's common shares, $.001
par value, and any capital stock of any class of the Company hereafter
authorized which is not limited to a fixed sum or percentage of par or stated
value in respect to the rights of the holders thereof to participate in
dividends or in the distribution of assets upon any liquidation, dissolution or
winding up of the Company.
(c) "Registrable Securities" means any Common Stock issued or issuable to
Purchaser, Greenlee or Day.
9. Miscellaneous.
(a) No Inconsistent Agreements. The Company shall not hereafter enter into
any agreement with respect to its securities which is inconsistent with or
violates the rights granted to the holders of Registrable Securities in this
Agreement.
(b) Adjustments Affecting Registrable Securities. The Company shall not
take any action, or permit any change to occur, with respect to its securities
which would adversely affect the ability of the holders of Registrable
Securities to include such Registrable Securities in a registration undertaken
pursuant to this Agreement or which would adversely affect the marketability of
such Registrable Securities in any such registration (including, without
limitation, effecting a stock split or a combination of shares).
(c) Remedies. Any person having rights under any Provision of this
Agreement shall be entitled to enforce such rights specifically to recover
damages caused by reason of any breach of any provision of this Agreement and to
exercise all other rights granted by law. The parties hereto agree and
acknowledge that money damages may not be an adequate remedy for any breach of
the provisions of this Agreement and that any party may in its sole discretion
apply to any court of law or equity of competent jurisdiction (without posting
any bond or other security) for specific performance and for other injunctive
relief in order to enforce or prevent violation of the provisions of this
Agreement.
(d) Amendments and Waivers. Except as otherwise provided herein, the
provisions of this Agreement may be amended or waived only upon the prior
written consent of the Company and holders of a majority of the Registrable
Securities.
(e) Successors and Assigns. All covenants and agreements in this Agreement
by or on behalf of any of the parties hereto shall bind and inure to the benefit
of the parties hereto and may not be assigned; provided, however, Purchaser may
assign its rights and obligations hereunder to a corporation, limited lability
company, partnership, trust or other entity which is under common control with,
or controlled through equity and/or
-6-
<PAGE> 52
voting control by Purchaser or Jeffrey P. Jacobs; it being acknowledged that any
entity managed either by Purchaser and/or Jeffrey P. Jacobs constitutes common
control.
(f) Severability. Whenever possible, each provision of this Agreement shall
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be prohibited by or invalid
under applicable law, such provision shall be ineffective only to the extent of
such prohibition or invalidity, without invalidating the remainder of this
Agreement.
(g) Counterparts. This Agreement may be executed simultaneously in two or
more counterparts, any one of which need not contain the signatures of more than
one party, but all such counterparts taken together shall constitute one and the
same Agreement.
(h) Descriptive Headings. The descriptive headings of this Agreement are
inserted for convenience only and do not constitute a part of this Agreement.
(i) Governing Law. All issues and questions concerning the construction,
validity, interpretation and enforcement of this Agreement and the exhibits and
schedules hereto will be governed by the laws of the State of Colorado, without
giving effect to any choice of law or conflict of law rules or provisions
(whether of the State of Colorado, or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other than the State of
Colorado.
(j) Notices. All notices, demands or other communications to be given or
delivered under or by reason of the provisions of this Agreement shall be in
writing and shall be deemed to have been given when delivered personally to the
recipient, sent to the recipient by reputable overnight courier service (charges
prepaid) or mailed to the recipient by certified or registered mail, return
receipt requested and postage prepaid or sent by telecopier. Such notices,
demands and other communications shall be sent to the Company, Purchaser,
Greenlee and Day at the addresses indicated below:
Notices to the Purchaser:
Jacobs Entertainment Ltd.
1231 Main Avenue
Cleveland, OH 44113
Attention: Jeffrey P. Jacobs
Fax No.: (216) 861-6315
with a copy (which shall not constitute notice) to:
Hahn Loeser Parks
3300 BP America Building
200 Public Square
Cleveland, OH 44114-2301
Attention: Stephen P. Owendoff, Esq.
Fax No.: (216) 241-2824
Notices to the Company:
Black Hawk Gaming & Development Company, Inc.
2060 Broadway, Suite 400
Boulder, Colorado 80302
Attention: Stephen R. Roark, President
Fax No.: (303) 444-7968
-7-
<PAGE> 53
with a copy (shall not constitute notice) to:
Jones & Keller P.C.
1625 Broadway, Suite 1600
Denver, Colorado 80202
Attention: Samuel E. Wing, Esq.
Fax No.: (303) 893-6506
Notices to Greenlee:
Robert D. Greenlee
c/o Black Hawk Gaming & Development Company, Inc.
2060 Broadway, Suite 400
Boulder, Colorado 80302
Fax No.: (303) 444-7968
Notices to Day:
Frank B. Day
c/o Rock Bottom Restaurants, Inc.
1050 Walnut Street, Suite 402
Boulder, Colorado 80302
Fax No.: (303) 417-4199
or to such other address or to the attention of such other person as the
recipient party has specified by prior written notice to the sending party.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
JACOBS ENTERTAINMENT LTD.
By
------------------------------------
Its
------------------------------------
BLACK HAWK GAMING &
DEVELOPMENT COMPANY, INC.
By
------------------------------------
Its
------------------------------------
------------------------------------
ROBERT D. GREENLEE
------------------------------------
FRANK B. DAY
-8-
<PAGE> 54
EXHIBIT C
LEGAL OPINION PROVISIONS
1. Seller is duly organized, validly existing and in good standing under the
laws of the State of Colorado. Each of Seller, the Gilpin and the Joint
Venture has all necessary power and authority, and holds all licenses,
permits and other approvals required by the Division, the Commission and
the state and local liquor licensing authorities of the State of Colorado
and other approvals as may be required under Colorado law to conduct its
business as it is now conducted. Seller is qualified to conduct business as
a foreign corporation in all jurisdictions where its failure to be
qualified would have a material adverse effect on the business of Seller.
2. Seller has the requisite corporate power and authority to enter into the
Purchase Agreement, the Shareholders' Agreement and the Registration Rights
Agreement and the Escrow Agreement (collectively, with all other documents
and agreements referred to therein to be signed and delivered by the
Seller, the "Transaction Documents"); the officers executing and delivering
the Transaction Documents on behalf of Seller are duly authorized to do so
and to execute and deliver the other related writings which are referred to
and required by the Transaction Documents or the corporate resolutions of
Seller authorizing the Transaction Documents. Neither Seller's execution
and delivery of the Transaction Documents or said related writings, nor the
performance and observance of the provisions of the Transaction Documents
or said related writings will violate any applicable law, or any existing
provision of Seller's Articles of Incorporation, as amended, or Bylaws, or
any other provisions of any law, governmental rule, regulation, judgment,
decree or order binding on Seller, or constitute a default under any
contract or other obligation now existing to which Seller is a party or by
which it may be bound. The Transaction Documents constitute legal, valid
and binding obligations of Seller, enforceable in accordance with their
respective terms.
3. Purchaser shall be entitled to vote the 474,000 Section 2(a) Shares at the
special shareholders' meeting to approve Purchaser's acquisition of the
additional Section 2(a) Shares and the Section 2(c) Shares and such vote
will not violate any NASD requirement for purposes of obtaining NASD
Approval. Pursuant to the Escrow Agreement, Purchaser shall be entitled to
direct the voting of the Section 2(a) Shares.
4. The authorized capital stock of Seller consists of Forty Million
(40,000,000) Shares and Ten Million (10,000,000) Preferred Shares. As of
, 1996, Shares and Preferred Shares were issued and
outstanding. All of such Shares and Preferred Shares are duly authorized,
validly issued, fully paid and non assessable. None of the issued and
outstanding Shares or Preferred Shares have been issued in violation of any
preemptive rights or other restrictions contained in Seller's Articles of
Incorporation or Bylaws. No authorized but unissued Shares or Preferred
Shares are subject to any preemptive rights or restrictions.
5. The certificates representing the Shares issued at Closing to Purchaser
have been duly authorized, executed and delivered by Seller and such Shares
have been validly issued and are outstanding, fully paid and non-
assessable. The remaining Shares issuable pursuant to the Purchase
Agreement have been duly authorized and reserved for issuance by Seller and
will upon such issuance and payment therefor in accordance with the terms
of the Purchase Agreement be validly issued, fully paid and nonassessable.
Except as set forth on Schedule 5(c) to the Purchase Agreement, there are
no options, warrants, conversion privileges or other right to acquire
securities of Seller.
6. To our knowledge, no consent, approval, order or other authorization of any
Governmental Authority is or was required in connection with the execution
and delivery of the Purchase Agreement or the other Transaction Documents,
or the consummation of any of the transactions contemplated thereby, with
the exception of the consent of the shareholders of Seller.
7. To our knowledge, except with respect to the Casino Investigation, there is
no lawsuit or legal, administrative or regulatory proceeding or
investigation pending against Seller, the Gilpin or the Joint Venture or
threatened against such parties which could, if adversely determined,
reasonably be expected to have a material adverse effect on the business or
financial condition of Seller, the Gilpin or the Joint Venture or which
challenges the legality of the Purchase Agreement or any action to be taken
in connection therewith.
-1-
<PAGE> 55
ALL SCHEDULES TO THE AGREEMENT HAVE BEEN DELETED
AND MAY BE OBTAINED FROM THE COMPANY
<PAGE> 56
PROXY PROXY
BLACK HAWK GAMING & DEVELOPMENT COMPANY, INC.
2060 Broadway, Suite 400
Boulder, Colorado 80302
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned shareholder of Black Hawk Gaming & Development
Company, Inc. acknowledges receipt of the notice of a Special Meeting of
Shareholders, to be held _______________, September _____, 1996, at 10:00 a.m.,
at the Boulderado Hotel, 2115 13th Street, Boulder, Colorado and hereby
appoints Robert D. Greenlee or Jeffrey P. Jacobs, or either of them, each with
the power of substitution, as Attorneys and Proxies to vote all the shares of
the undersigned at the Special Meeting and at all adjournments thereof, hereby
ratifying and confirming all that the Attorneys and Proxies may do or cause to
be done by virtue hereof. The above-named Attorneys and Proxies are instructed
to vote all of the undersigned's shares as follows:
1. To change the size of the Company's Board of Directors.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. To amend the Company's Articles of Incorporation to provide
for staggered terms for the Company's Board of Directors.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. To elect and/or re-elect a total of eight persons to serve
staggered terms.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Robert D. Greenlee Stephen R. Roark Patrick J. McKinley
Jeffrey P. Jacobs Robert H. Hughes Mr. A
Frank B. Day Martin W. Winick
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL
NOMINEE, STRIKE A LINE THROUGH THAT NOMINEE'S NAME.)
4. To approve a proposal for the issuance of shares of the
Company's Common Stock.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. Transaction of such other business as may properly come before
the meeting.
<PAGE> 57
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR PROPOSALS 1, 2, 3 AND 4.
DATED:___________________ 1996
---------------------------------------
SIGNATURE
---------------------------------------
SIGNATURE IF HELD JOINTLY
Please sign your name exactly as it
appears below. When shares are held by
joint tenants, both should sign. When
signing as attorney, executor,
administrator, trustee or guardian,
please give full title as such. If a
corporation, please sign in full
corporate name by President or other
authorized officer. If a partnership,
please sign in partnership name by
authorized person.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY. NOTE: SECURITIES
DEALERS PLEASE STATE THE NUMBER OF SHARES VOTED BY THIS PROXY:
- - - -------------------------------
