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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO.______ )*
BOARDWALK CASINO, INC.
- --------------------------------------------------------------------------------
(Name of Issuer)
COMMON STOCK, $.001 PAR VALUE
- --------------------------------------------------------------------------------
(Title of Class of Securities)
096612 10 6
- --------------------------------------------------------------------------------
(CUSIP Number)
JEFFREY P. JACOBS, President of Jacobs Entertainment Ltd., the manager of
Diversified Opportunities Group Ltd., 1231 Main Avenue, Cleveland, Ohio 44113
(216/861-4080)
- --------------------------------------------------------------------------------
(Name, Address and Telephone Number of Person Authorized to Receive Notices
and Communications)
September 25, 1996
------------------------------------
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box / /.
Check the following box if a fee is being paid with the statement / /. (A
fee is not required only if the filing person: (1) has a previous statement on
file reporting beneficial ownership of more than five percent of the class of
securities described in Item 1; and (2) has filed no amendment subsequent
thereto reporting beneficial ownership of five percent or less of such class.)
(See Rule 13d-7.)
NOTE: Six copies of this statement, including all exhibits, should be filed
with the Commission. See Rule 13d-1(a) for other parties to whom copies are to
be sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required in the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities
Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that
section of the Act but shall be subject to all other provisions of the Act
(however, see the Notes).
<PAGE> 2
SCHEDULE 13D
<TABLE>
CUSIP NO. 096612 10 6 PAGE 2 OF PAGES
<S> <C>
- -----------------------------------------------------------------------------------------------------------
| 1 | NAME OF REPORTING PERSON |
| | S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON |
| | |
| | DIVERSIFIED OPPORTUNITIES GROUP LTD. 34-1828344 |
|-----|---------------------------------------------------------------------------------------------------|
| 2 | CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ] |
| | ---- |
| | (b) [ X ] |
| | ---- |
|-----|---------------------------------------------------------------------------------------------------|
| 3 | SEC USE ONLY |
| | |
|-----|---------------------------------------------------------------------------------------------------|
| 4 | SOURCE OF FUNDS* |
| | |
| | 00 |
| | |
| | |
|-----|---------------------------------------------------------------------------------------------------|
| 5 | CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT |
| | TO ITEMS 2(d) OR 2(e) [ ] |
| | ---- |
| | |
| | |
|-----|---------------------------------------------------------------------------------------------------|
| 6 | CITIZENSHIP OR PLACE OF ORGANIZATION |
| | |
| | OHIO |
|-------------------------------|-------|-----------------------------------------------------------------|
| NUMBER OF | 7 | SOLE VOTING POWER |
| | | |
| SHARES | | 753,840 |
| |-------|-----------------------------------------------------------------|
| BENEFICIALLY | 8 | SHARED VOTING POWER |
| | | |
| OWNED BY | | 0 |
| |-------|-----------------------------------------------------------------|
| EACH | 9 | SOLE DISPOSITIVE POWER |
| | | |
| REPORTING | | 753,840 |
| | | |
| PERSON |-------|-----------------------------------------------------------------|
| | 10 | SHARED DISPOSITIVE POWER |
| WITH | | |
| | | 0 |
|-------------------------------|-------|-----------------------------------------------------------------|
| 11 | AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON |
| | |
| | 753,840 |
|-----|---------------------------------------------------------------------------------------------------|
| 12 | CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN |
| | SHARES* [ ] |
| | ---- |
|-----|---------------------------------------------------------------------------------------------------|
| 13 | PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) |
| | |
| | 10.5% |
|-----|---------------------------------------------------------------------------------------------------|
| 14 | TYPE OF REPORTING PERSON* |
| | |
| | OO |
- -----------------------------------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION
</TABLE>
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This Schedule 13D is being filed in connection with a
transaction (the "Transaction") entered into by and among Diversified
Opportunities Group Ltd., an Ohio limited liability company ("Diversified"),
Boardwalk Casino, Inc., a Nevada corporation ("Boardwalk"), and Norbert W.
Jansen, individually and as trustee under an agreement dated July 14, 1993
("Jansen"). Pursuant to the terms of a Purchase Agreement dated as of September
24, 1996 (the "Purchase Agreement") among Diversified, Boardwalk and Jansen, the
first phase of the Transaction was consummated on September 25, 1996.
In the first phase of the Transaction, Boardwalk sold to
Diversified 571,429 shares of Boardwalk's shares of common stock, $.001 par
value (the "Shares") and issued to Diversified a convertible subordinated note
(the "Note") in the principal amount of $5,000,000. In the first phase, Jansen
also sold to Diversified 182,411 Shares pursuant to the terms of an Option and
Proxy Agreement (the "Option Agreement").
ITEM 1. SECURITY AND ISSUER.
This Schedule 13D relates to the common stock, $.001 par
value, of Boardwalk Casino, Inc., a Nevada corporation. The address of the
principal executive office of Boardwalk is 3750 Las Vegas Boulevard South, Las
Vegas, Nevada 89109.
ITEM 2. IDENTITY AND BACKGROUND.
This Schedule 13D is being filed by Diversified Opportunities
Group Ltd., an Ohio limited liability company. The principal business of
Diversified is developing and acquiring investments in the gaming industry and
managing, supervising, selling or otherwise disposing of such investments and
engaging in activities incidental or ancillary thereto. The address of
Diversified's principal business and office is 1231 Main Avenue, Cleveland, Ohio
44113.
There are two members of Diversified, (i) Gary L. Bryenton and
Jeffrey P. Jacobs, as trustees under the Opportunities Trust Agreement dated
February 1, 1996 (the "Trust") and (ii) Jacobs Entertainment Ltd., an Ohio
limited liability company ("Entertainment"). Entertainment is the Manager of
Diversified. Jeffrey P. Jacobs ("Jacobs") and Jacobs Entertainment Inc. (a
corporation in which Jacobs owns 100% of the outstanding capital stock) are the
members of Entertainment and Jacobs is the manager of Entertainment. Both the
Trust and Entertainment were formed primarily to hold their interest in
Diversified. The address of the Trust's principal business and office is c/o
Baker & Hostetler, Gary L. Bryenton, 3200 National City Center, Cleveland, Ohio
44114, and the address of Entertainment's principal business and office is 1231
Main Avenue, Cleveland, Ohio 44113.
During the last five years, none of Diversified, the Trust,
Entertainment or Jacobs has been convicted in any criminal proceeding (excluding
traffic violations or similar misdemeanors) or have been a party to a civil
proceeding of a judicial or administrative
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body of competent jurisdiction and as a result of such proceeding was or is
subject to a judgment, decree or final order enjoining future violations of, or
prohibiting or mandating activities subject to, federal or state securities laws
or finding any violation with respect to such laws.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
The acquisition of common stock was financed as follows:
Diversified financed 50% of the total purchase price of the
common stock ($2,638,440) with the proceeds of a loan from Richard E. Jacobs,
father of Jacobs and grantor and a potential beneficiary of the Trust, an entity
which is described above. The loan was made as an advance pursuant to the terms
of the Credit Agreement and Revolving Note dated as of July 31, 1996, attached
as Exhibits A and B, respectively.
Diversified financed the remaining 50% of the total purchase
price of the common stock ($2,638,440) with the proceeds of a capital
contribution from the Trust, a member of Diversified.
The acquisition of the $5,000,000 convertible note was
financed with the proceeds of a loan from Richard E. Jacobs, father of Jacobs
and grantor and a potential beneficiary of the Trust, an entity which is
described above. The loan was made as an advance pursuant to the terms of the
Credit Agreement and Revolving Note dated as of July 31, 1996, attached as
Exhibits A and B, respectively. Diversified's obligations to Richard E. Jacobs
are being guaranteed by Jacobs pursuant to a Guaranty dated as of July 31, 1996,
attached as Exhibit C.
ITEM 4. PURPOSE OF TRANSACTION.
The purpose of the Transaction was to acquire a substantial
investment in Boardwalk on the terms and subject to the conditions referred to
below. As of September 24, 1996, Boardwalk, Diversified and Jansen executed the
Purchase Agreement and the Option Agreement and Boardwalk issued the Note to
Diversified. On the same date, Boardwalk and Diversified also executed a
Registration Agreement (the "Registration Agreement"). Copies of the Purchase
Agreement, the Note, the Option Agreement and the Registration Agreement are
attached hereto as Exhibits D, E, F and G, respectively, and incorporated by
reference herein in their entirety.
The following is a summary of certain terms of the Purchase
Agreement, the Note, the Option Agreement and the Registration Agreement
(collectively, "the Transaction Documents"). This summary of the Transaction
Documents is qualified in its entirety by reference to the Transaction
Documents, copies of which are attached hereto.
4
<PAGE> 5
The first phase of the Transaction closed on September 25,
1996. At such time, Boardwalk sold to Diversified 571,429 Shares. Pursuant to
the Option Agreement, Jansen sold to Diversified 182,411 Shares. In addition,
Boardwalk issued the Note to Diversified.
Diversified has the right, at its option, to convert the Note
into Shares at any time following its receipt of all necessary licensing
approvals from the Nevada State Gaming Control Board (the "Gaming Board"), the
Nevada Gaming Commission (the "Commission") and local licensing authorities. The
Note is convertible into a number of Shares determined by dividing the then
unpaid principal balance of the Note by $7.50.
Diversified has submitted a ruling letter to the Gaming Board
seeking a ruling that the second phase of the Transaction will not result in a
change in control of Boardwalk pursuant to the regulations of the Gaming Board
and the Commission. Subject to the receipt of a favorable ruling letter from the
Gaming Board, phase two of the Transaction will be consummated. In phase two,
Diversified will purchase up to an additional 317,589 Shares from Jansen
pursuant to the Option Agreement, and Boardwalk's Board of Directors (the
"Board") will be expanded to six directors, with Jacobs being appointed as the
sixth director. In the event that the Gaming Board places any restrictions on
the consummation of phase two, phase two of the Transaction will be limited by
such restrictions.
The final phase of the Transaction provides Diversified the
option to acquire an additional 1,000,000 Shares from Jansen pursuant to the
Option Agreement. The exercise of this option is subject to Diversified
obtaining all necessary licensing approvals from the Gaming Board, the
Commission and the Nevada local licensing authorities. At such time as
Diversified acquires a total of 1,000,000 Shares from Jansen pursuant to the
Option Agreement, Boardwalk's Board will be expanded to seven directors with the
additional director being designated by Diversified.
The Option Agreement further provides for first refusal and
first offer rights for Diversified on Shares to be sold by Jansen, his estate
and family. The Option Agreement requires that Jansen vote all of his Shares and
any other securities of Boardwalk over which he has control and that he take all
necessary or desirable actions within his control so that: (i) the Board is
established at six directors; (ii) Jacobs is elected to the Board as one of the
six directors; and (iii) once Diversified acquires 1,000,000 or more Shares from
Jansen pursuant to the Option Agreement, the Board is expanded to seven
directors with the additional director to be designated by Diversified.
Diversified is also granted an irrevocable proxy to vote Jansen's Shares if
Jansen fails to comply with the terms of the Option Agreement relating to the
Board, or any restrictive covenants imposed on Boardwalk pursuant to the Note.
The Registration Agreement gives Diversified certain rights
with respect to registering for sale under the Securities Act of 1933, as
amended (the "Act"), and applicable state laws the Shares that it may acquire
pursuant to the Transaction. The Registration Agreement gives Diversified the
right, through September 24, 2001, to demand that
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<PAGE> 6
Boardwalk effect up to three registrations (two of which are paid by Boardwalk
and one of which is paid by Diversified) of such Shares subject to the
conditions set forth in the Registration Agreement. In addition, Diversified has
the right to have such Shares included in certain registrations under the Act
that Boardwalk may effect other than pursuant to such demand, subject to the
conditions set forth in the Registration Agreement.
Other than as provided in the Transaction Documents which are
summarized above, none of Diversified, the Trust, Entertainment or Jacobs has
any plans or proposals for actions with respect to Boardwalk that would require
disclosure under this Item 4.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
(a) Prior to the sale of the 571,429 Shares to Diversified,
Boardwalk indicated to Diversified that the number of Shares outstanding as of
September 25, 1996 was 6,608,000. As of September 25, 1996, Diversified had
beneficial ownership of 753,840 Shares. Therefore, Diversified has acquired
10.5% of the outstanding common stock of Boardwalk.
(b) Diversified has the sole power to vote and dispose of all
753,840 Shares. Because Jacobs is the sole Manager of Entertainment, the Manager
of Diversified, Jacobs may be deemed to have sole power to vote or to direct the
voting of the Shares and have shared power with the Trust to dispose or to
direct the disposition of the Shares.
(c) Not Applicable.
(d) Not Applicable.
(e) Not Applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS
WITH RESPECT TO SECURITIES OF THE ISSUER.
The descriptions of the Transaction Documents set forth in
Item 4 above and the text of the Transaction Documents attached as Exhibits
hereto are incorporated herein by reference in their entirety. None of
Diversified, the Trust, Entertainment or Jacobs is a party to any other
contract, arrangement, understanding or relationship (legal or otherwise) with
respect to any securities of Boardwalk that would have to be described pursuant
to this Item 6.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
A. Credit Agreement dated as of July 31, 1996 by and
between Diversified and Richard E. Jacobs.
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B. Revolving Note dated as of July 31, 1996 executed by
Diversified in favor of Richard E. Jacobs.
C. Guaranty dated as of July 31, 1996 executed by Jacobs in
favor of Richard E. Jacobs.
D. Purchase Agreement dated as of September 24, 1996, by and
among Diversified, Boardwalk and Jansen.
E. Convertible Subordinated Note dated September 24, 1996,
executed by Boardwalk in favor of Diversified.
F. Option and Proxy Agreement dated as of September 24, 1996,
by and among Diversified, Boardwalk and Jansen.
G. Registration Agreement dated as of September 24, 1996, by
and between Boardwalk and Diversified.
7
<PAGE> 8
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
October 3, 1996
------------------------------------------
(Date)
/s/ Diversified Opportunities Group LTD.
------------------------------------------
(Signature)
By: Jacobs Entertainment Ltd., its manager
/s/ Jeffrey P. Jacobs, President
------------------------------------------
(Name and Title)
8
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EXHIBIT INDEX
Exhibit Description Page No.
- ------- ----------- --------
A Credit Agreement dated as of July 31, 1996 by
and between Diversified and Richard E. Jacobs.
B Revolving Note dated as of July 31, 1996
executed by Diversified in favor of Richard E.
Jacobs.
C Guaranty dated as of July 31, 1996 executed
by Jacobs in favor of Richard E. Jacobs.
D Purchase Agreement dated as of September 24, 1996, by
and among Diversified, Boardwalk and Jansen.
E Convertible Subordinated Note dated September 24,
1996, executed by Boardwalk in favor of Diversified.
F Option and Proxy Agreement dated as of September 24,
1996, by and among Diversified, Boardwalk and Jansen.
G Registration Agreement dated as of September 24,
1996, by and between Boardwalk and Diversified.
<PAGE> 1
EXHIBIT A
CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated as of July 31, 1996, is by and
between Diversified Opportunities Group Ltd., an Ohio limited liability company
(the "Borrower"), and RICHARD E. JACOBS, an individual (the "Lender").
Capitalized terms used herein are defined in Section 7.1 hereof.
ARTICLE I
---------
REVOLVING CREDIT
Section 1.1 REVOLVING CREDIT. Lender hereby establishes for
Borrower the following revolving credit (the "Revolving Credit") pursuant to
which on the terms and subject to the conditions and provisions hereof
(including, without limitation, the provisions of Section 6.15) Lender agrees to
make loans (each a "Revolving Loan" and, collectively, the "Revolving Loans") to
Borrower on a revolving basis at any time and from time to time from the date
hereof to the Termination Date.
(a) AMOUNT. The amount of the Revolving Credit is thirty
million dollars ($30,000,000), but that amount shall be automatically reduced
from time to time when the revolving credit amount available to Lender under the
First Bank Credit Agreement is reduced as provided in Section 2.14 of the First
Bank Credit Agreement.
(b) TERM. The Revolving Credit shall remain in effect until
the Termination Date, during which period Borrower may, subject to Section 6.15
hereof and the other terms and conditions of this Agreement, borrow, repay, and
reborrow in accordance with the terms hereof, provided, that no Revolving Loan
will be made in any amount which, after giving effect thereto, would cause the
aggregate amount of all Revolving Loans then outstanding to exceed the Revolving
Commitment Amount.
(c) REVOLVING COMMITMENT FEE. Borrower shall pay to Lender
fees in an amount equal to $75,000 per annum for the period from the date of
execution of this Agreement to the first day of the Term-Out Period (as defined
in the First Bank Credit Agreement). Such fees are payable annually in advance
on the date hereof and on each anniversary of the date hereof occurring prior to
the first day of the Term-Out Period. Borrower shall also pay to Lender fees in
an amount equal to .25% of the unpaid principal amount of all Revolving Loans as
of the first day of the Term-Out Period and as of the first and second
anniversaries thereof, payable in advance on each such date.
(d) PROCEDURE FOR REVOLVING LOANS. Whenever Borrower desires
to obtain a Revolving Loan, Borrower shall give Lender an appropriate notice to
be in form and detail satisfactory to Lender (a "Credit Request"). The Credit
Request shall be given to Lender not later than 10:00 a.m. (Cleveland, Ohio
time) on the
<PAGE> 2
sixth Business Day prior to the requested Revolving Loan Date, and shall either
be made in writing or orally and, if orally, immediately confirmed in writing.
Each Revolving Loan shall be in a minimum amount of $100,000 or, if more, an
integral multiple thereof. Unless the Lender determines that any applicable
condition specified in Article III has not been satisfied, the Lender will make
available to Borrower in immediately available funds not later than 5:00 p.m.
(Cleveland, Ohio time) on the requested Revolving Loan Date the amount of the
Revolving Loan.
(e) TERMS AND CONDITIONS.
(i) Each Revolving Loan shall be in the principal amount
requested by Borrower, provided, that in no event shall the aggregate principal
balance of all Revolving Loans at any one time outstanding exceed the amount of
the Revolving Commitment Amount.
(ii) Within two Business Days following its receipt of a
Credit Request, the Lender shall establish and set forth on a schedule (each, a
"Revolving Loan Schedule") the stated maturity date, the interest rate and the
repayment terms applicable to the requested Revolving Loan and shall
communicate, either orally or in writing, the same to Borrower. Upon its receipt
of such information, Borrower shall thereafter have twenty-fours hours to revoke
its Credit Request. If Borrower fails to notify Lender, in writing, of its
decision to revoke its Credit Request, Borrower shall be deemed to have affirmed
its Credit Request on the terms set forth on the applicable Revolving Loan
Schedule.
(f) REVOLVING NOTE. Upon execution of this Agreement, Borrower
shall execute and deliver to Lender a Revolving Note in the form and substance
of Exhibit A attached to this Agreement. Lender shall from time to time attach
as an allonge to the Revolving Note each Revolving Loan Schedule. Each such
Revolving Loan Schedule shall be prima facie evidence of the date and amount of
the Revolving Loan so indicated. The Lender shall enter in its ledgers and
records the amount of each Revolving Loan and the payments made thereon,
provided, however that the failure by the Lender to make any such entry or any
error in making such entry shall not limit or otherwise affect the obligation of
the Borrower hereunder and on the Revolving Note, and, in all events, the
principal amounts owing by the Borrower in respect of the Revolving Note shall
be the aggregate amount of all Revolving Loans made by the Lender less all
payments of principal thereof made by the Borrower. Upon a request of Borrower,
the Lender shall provide to the Borrower a copy of a schedule on which is set
forth the Lender's record of such Revolving Loans and payments.
(g) PREPAYMENTS. Each Revolving Loan Schedule shall set forth
the rights, if any, of Borrower to prepay, whether in
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whole or in part and whether without premium or penalty, a particular Revolving
Loan.
(h) INCREASED COST. If Lender makes any payment contemplated
by Section 2.22, 2.24 or 2.25 of the First Bank Credit Agreement, Borrower shall
reimburse Lender its pro rata share of such amount or amounts on the basis of
the total principal amount outstanding under this Credit Agreement and the total
principal amount outstanding under the First Bank Credit Agreement.
ARTICLE II
----------
REPRESENTATIONS AND WARRANTIES
To induce the Lender to enter into this Agreement and to make
Revolving Loans hereunder, the Borrower represents and warrants to the Lender:
Section 2.1 ORGANIZATION, EXISTENCE, ETC.. The Borrower is a
limited liability company duly organized, validly existing and in full force and
effect under the laws of the State of Ohio, and has all power and authority
necessary to execute, deliver and perform the Borrower Loan Documents; Gary L.
Bryenton and Jeffrey P. Jacobs as Trustees under The Opportunities Trust Trust
Agreement dated February 1, 1996, and Jacobs Entertainment Ltd. are the sole
members of Borrower; and the Borrower Loan Documents have been duly executed and
delivered by and on behalf of the Borrower by a duly authorized representative
of Borrower so as to constitute the Borrower Loan Documents the valid and
binding obligations of the Borrower, enforceable against Borrower in accordance
with their respective terms.
Section 2.2 NO CONFLICT; NO DEFAULT. The execution, delivery
and performance by the Borrower of the Borrower Loan Documents will not (a)
violate any provision of any law, statute, rule or regulation or any order,
writ, judgment, injunction, decree, determination or award of any court,
governmental agency or arbitrator presently in effect having applicability to
Borrower, (b) violate any provision of the articles or organization or the
operating agreement of Borrower, or (c) result in a breach of or constitute a
default under any material indenture, loan or credit agreement or any other
material agreement, lease or instrument to which Borrower is a party or by which
Borrower or any of Borrower's properties may be bound or result in the creation
of any lien thereunder. Borrower is not in default under or in violation of any
such law, statute, rule or regulation, order, writ, judgment, injunction,
decree, determination or award or any such indenture, loan or credit agreement
or other agreement, lease or instrument in any case in which the consequences of
such default or violation would have a
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material adverse effect on the business, operations, properties, assets or
condition (financial or otherwise) of Borrower.
Section 2.3 GOVERNMENT CONSENT. No order, consent, approval,
license, authorization or validation of, or filing, recording or registration
with, or exemption by, any governmental or public body or authority is required
on the part of Borrower to authorize, or is required in connection with the
execution, delivery and performance of, or the legality, validity, binding
effect or enforceability of, the Borrower Loan Documents, which has not been
secured, except for any necessary filing or recordation of or with respect to
the Borrower Loan Documents.
ARTICLE III
-----------
CONDITIONS PRECEDENT
Section 3.1 CONDITIONS PRECEDENT TO ALL REVOLVING LOANS. The
obligation of the Lender to make any Revolving Loans hereunder shall be subject
to the fulfillment of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties contained in Article II shall be true and correct on and as of the
date hereof and on the date of each Revolving Loan with the same force and
effect as if made on such date.
(b) NO DEFAULT. No Event of Default (as defined in Section 5.1
hereof) shall have occurred and be continuing on the date hereof and on the date
of each Revolving Loan no Default or Event of Default will exist after giving
effect to the Revolving Loan made on such date.
(c) DELIVERIES. The Lender shall have received the Revolving
Note duly executed by the Borrower dated the date hereof and shall have received
such other documents (including, without limitation, financial statements,
certificates regarding factual matters and legal opinions) as Lender may
reasonably request.
(d) COMPLIANCE. The Borrower shall have performed and complied
in all material respects with all agreements, terms and conditions contained in
this Agreement to be performed or complied with at or prior to the time of the
Revolving Loan Date.
(e) OTHER MATTERS. All instruments and agreements in
connection with the transactions contemplated by this Agreement shall be
satisfactory in scope, form and substance to the Lender and its counsel, and the
Lender shall have received all information and copies of all documents as the
Lender or its counsel may have requested in connection therewith, such
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<PAGE> 5
documents where appropriate to be certified by proper authorities.
(f) FEES AND EXPENSES. The Lender shall have received all fees
and other amounts due and payable by the Borrower on or prior to the date of
such Revolving Loan, including the reasonable fees and expenses of counsel to
the Lender.
(g) NOTICES AND REQUESTS. The Lender shall have received the
Borrower's request for such Revolving Loan as required under Section 1.1(d).
ARTICLE IV
----------
COVENANTS
Until any obligation of the Lender hereunder to make the
Revolving Loans shall have expired or been terminated and the Revolving Note and
all of the other Obligations have been paid in full, unless the Lender shall
otherwise consent in writing:
Section 4.1 DELIVERIES. From time to time, Borrower shall
deliver to Lender such information regarding the business, operation and
financial condition of Borrower as Lender may reasonably request.
Section 4.2 BOOKS AND RECORDS. Borrower will keep adequate and
proper records and books of account in which full and correct entries will be
made of its dealings, business and affairs.
Section 4.3 COMPLIANCE. Borrower will comply in all material
respects with all laws, rules, regulations, orders, writs, judgments,
injunctions, decrees or awards to which it may be subject; provided, however,
that failure so to comply shall not be a breach of this covenant if such failure
does not have, or is not reasonably expected to have, a materially adverse
effect on the properties, business, prospects or condition (financial or
otherwise) of Borrower and Borrower is acting in good faith and with reasonable
dispatch to cure such noncompliance.
Section 4.4 MAINTENANCE OF EXISTENCE. Borrower shall at all
times during the term of this Agreement maintain its existence as a limited
liability company in full force and effect under the laws of the State of Ohio.
No member of Borrower may withdraw as a member of Borrower and no member of
Borrower shall sell, transfer, encumber, convey or assign all or any portion of
its interest in Borrower.
Section 4.5 FURTHER ASSURANCES. Borrower shall
promptly correct any defect or error that may be discovered in
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<PAGE> 6
any Borrower Loan Document or in the execution, acknowledgment or recordation
thereof. Promptly upon request by Lender, Borrower also shall do, execute,
acknowledge and deliver any and all certificates, assurances and other
instruments as Lender may reasonably require from time to time in order: (a) to
carry out more effectively the purposes of the Borrower Loan Documents; and (b)
to better assure, convey, grant, assign, transfer, preserve, protect and confirm
unto Lender the rights granted now or hereafter intended to be granted to Lender
under any Borrower Loan Document or under any other instrument executed in
connection with any Borrower Loan Document.
ARTICLE V
---------
EVENTS OF DEFAULT AND REMEDIES
Section 5.1 EVENTS OF DEFAULT. The occurrence of any one or
more of the following events shall constitute an event of default (each, an
"Event of Default"):
(a) The Borrower shall fail to make (i) when due, whether by
acceleration or otherwise, any payment of principal of or interest on the
Revolving Note or (ii) within five (5) calendar days after same becomes due, any
other Obligation required to be made to the Lender pursuant to this Agreement.
(b) Any representation or warranty made by Borrower in this
Agreement or any other Borrower Loan Document or by any Borrower in any
certificate, statement, report, or document herewith or hereafter furnished to
the Lender pursuant to this Agreement or any other Borrower Loan Document shall
prove to have been false or misleading in any material respect on the date as of
which the facts set forth are stated or certified.
(c) Borrower shall fail to comply with any other agreement,
covenant, condition, provision or term contained in this Agreement (other than
those hereinabove set forth in this Section 5.1) and such failure to comply
shall continue for thirty (30) calendar days after whichever of the following
dates is the earliest: (i) the date Borrower gives notice of such failure to the
Lender or (ii) the date the Lender gives notice of such failure to Borrower.
(d) Borrower shall become insolvent or shall generally not pay
its debts as they mature or shall apply for, shall consent to, or shall
acquiesce in the appointment of a custodian, trustee or receiver of Borrower or
for a substantial part of the property thereof or, in the absence of such
application, consent or acquiescence, a custodian, trustee or receiver shall be
appointed for Borrower or for a substantial part of the property thereof and
shall not be discharged within 90 days, or Borrower shall make an assignment for
the benefit of creditors.
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<PAGE> 7
(e) Any bankruptcy, reorganization, debt arrangement or other
proceedings under any bankruptcy or insolvency law shall be instituted by or
against Borrower, and, if instituted against Borrower, shall have been consented
to or acquiesced in by Borrower, or shall remain undismissed for 90 days, or any
order for relief shall have been entered against Borrower.
Section 5.2 REMEDIES. If (a) any Event of Default described in
Sections 5.1(d) or (e) shall occur with respect to Borrower, the Revolving
Commitment shall automatically terminate and the Revolving Note and all other
Obligations shall automatically become immediately due and payable; or (b) any
other Event of Default shall occur and be continuing, then the Lender may (i)
declare the Revolving Commitment terminated, whereupon the Revolving Commitment
shall terminate, and (ii) declare the outstanding unpaid principal balance of
the Revolving Note, the accrued and unpaid interest thereon and all other
Obligations to be forthwith due and payable, whereupon the Revolving Note, all
accrued and unpaid interest thereon and all such Obligations shall immediately
become due and payable, in each case without presentment, demand, protest or
other notice of any kind, all of which are hereby expressly waived, anything in
this Agreement or in the Revolving Note to the contrary notwithstanding. Upon
the occurrence of any of the events described in clauses (a) or (b) of the
preceding sentence, the Lender may exercise all rights and remedies under any of
the Borrower Loan Documents, and enforce all rights and remedies under any
applicable law.
ARTICLE VI
----------
MISCELLANEOUS
Section 6.1 MODIFICATIONS. Notwithstanding any provisions to
the contrary herein, any term or condition of this Agreement may be amended with
the written consent of the Borrower; provided that no amendment, modification or
waiver of any provision of this Agreement or consent to any departure by
Borrower therefrom shall in any event be effective unless the same shall be in
writing and signed by the Lender, and then such amendment, modification, waiver
or consent shall be effective only in the specific instance and for the purpose
for which given.
Section 6.2 EXPENSES. Whether or not the transactions
contemplated hereby are consummated, the Borrower agrees to reimburse the Lender
upon demand for all reasonable out-of-pocket expenses paid or incurred by the
Lender (including fees and expenses of counsel to the Lender) in connection with
the negotiation, preparation, approval, review, execution, delivery,
administration, amendment, modification and interpretation of this Agreement and
the other Borrower Loan Documents. The
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<PAGE> 8
Borrower shall also reimburse the Lender upon demand for all reasonable
out-of-pocket expenses (including expenses of legal counsel) paid or incurred by
the Lender in connection with the collection and enforcement of this Agreement
and any other Borrower Loan Document following a default hereunder by Borrower.
The Borrower shall also reimburse the Lender upon demand for all fees, costs and
expenses, of whatever nature, paid or incurred by Lender under the First Bank
Credit Agreement. The obligations of the Borrower under this Section shall
survive any termination of this Agreement.
Section 6.3 WAIVERS, ETC. No failure on the part of the Lender
or the holder of the Revolving Note to exercise and no delay in exercising any
power or right hereunder or under any other Borrower Loan Document shall operate
as a waiver thereof; nor shall any single or partial exercise of any power or
right preclude any other or further exercise thereof or the exercise of any
other power or right. The remedies herein and in the other Borrower Loan
Documents provided are cumulative and not exclusive of any remedies provided by
law.
Section 6.4 NOTICES. Except when telephonic notice is
expressly authorized by this Agreement, any notice or other communication to any
party in connection with this Agreement shall be in writing and shall be sent by
manual delivery, telegram, telex, facsimile transmission, overnight courier or
United States mail (postage prepaid), registered or certified, return receipt
requested, addressed to such party at the address specified to the other party
hereto in writing, in accordance with this Section 6.4 (and, in the case of any
such notice or other communication by telegram, telex or facsimile transmission,
a "hard" copy of same shall also be sent by manual delivery, overnight courier
or United States mail (postage prepaid), registered or certified, return receipt
requested). All periods of notice shall be measured from the date of delivery
thereof if manually delivered, from the date of sending thereof if sent by
telegram, telex or facsimile transmission, from the first Business Day after the
date of sending if sent by overnight courier, or from four days after the date
of mailing if mailed.
Section 6.5 TAXES. The Borrower agrees to pay, and save the
Lender harmless from all liability for, any stamp or other taxes which may be
payable with respect to the execution or delivery of this Agreement or the
issuance of the Revolving Note, which obligation of the Borrower shall survive
the termination of this Agreement.
Section 6.6 SUCCESSORS AND ASSIGNS; DISPOSITION OF LOANS;
TRANSFEREES. This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective heirs, legal representatives, successors
and assigns, except that Borrower may not assign its rights or delegate its
obligations
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<PAGE> 9
hereunder or under any other Borrower Loan Document without the prior written
consent of the Lender.
Section 6.7 GOVERNING LAW AND CONSTRUCTION. THE VALIDITY,
CONSTRUCTION AND ENFORCEABILITY OF THIS AGREEMENT AND THE REVOLVING NOTE SHALL
BE GOVERNED BY THE INTERNAL LAWS OF THE STATE OF OHIO, WITHOUT GIVING EFFECT TO
CONFLICT OF LAWS PRINCIPALS THEREOF. Whenever possible, each provision of this
Agreement and the other Borrower Loan Documents and any other statement,
instrument or transaction contemplated hereby or thereby or relating hereto or
thereto shall be interpreted in such manner as to be effective and valid under
such applicable law, but, if any provision of this Agreement, the other Borrower
Loan Documents or any other statement, instrument or transaction contemplated
hereby or thereby or relating hereto or thereto shall be held to be prohibited
or invalid under such applicable law, such provision shall be ineffective only
to the extent of such prohibition or invalidity, without invalidating the
remainder of such provision or the remaining provisions of this Agreement, the
other Borrower Loan Documents or any other statement, instrument or transaction
contemplated hereby or thereby or relating hereto or thereto.
Section 6.8 CONSENT TO JURISDICTION. AT THE OPTION OF THE
LENDER, THIS AGREEMENT AND THE OTHER BORROWER LOAN DOCUMENTS MAY BE ENFORCED IN
ANY FEDERAL COURT OR OHIO STATE COURT SITTING IN CLEVELAND, CUYAHOGA COUNTY,
OHIO; AND BORROWER CONSENTS TO THE JURISDICTION AND VENUE OF ANY SUCH COURT AND
WAIVES ANY ARGUMENT THAT VENUE IN SUCH FORUMS IS NOT CONVENIENT. IN THE EVENT
BORROWER COMMENCES ANY ACTION IN ANOTHER JURISDICTION OR VENUE UNDER ANY TORT OR
CONTRACT THEORY ARISING DIRECTLY OR INDIRECTLY FROM THE RELATIONSHIP CREATED BY
THIS AGREEMENT, THEN LENDER AT ITS OPTION SHALL BE ENTITLED TO HAVE THE CASE
TRANSFERRED TO ONE OF THE JURISDICTIONS AND VENUES ABOVE-DESCRIBED, OR IF SUCH
TRANSFER CANNOT BE ACCOMPLISHED UNDER APPLICABLE LAW, TO HAVE SUCH CASE
DISMISSED WITHOUT PREJUDICE.
Section 6.9 WAIVER OF JURY TRIAL. BORROWER AND LENDER
IRREVOCABLY WAIVE ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER BORROWER LOAN DOCUMENT
OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
Section 6.10 SURVIVAL OF AGREEMENT. All representations,
warranties, covenants and agreement made by Borrower herein or in the other
Borrower Loan Documents and in the certificates or other instruments prepared or
delivered in connection with or pursuant to this Agreement or any other Borrower
Loan Document shall be deemed to have been relied upon by the Lender and shall
survive the making of the Revolving Loan by the Lender and the execution and
delivery to Lender by Borrower of the Revolving Note, regardless of any
investigation made by or on behalf of the Lender, and shall continue in full
-9-
<PAGE> 10
force and effect as long as any Obligation is outstanding and unpaid and so long
as the Revolving Commitment has not been terminated; provided, however, that the
obligations of the Borrower under Sections 6.2, 6.5 and 6.11 shall survive
payment in full of the Obligations and the termination of the Revolving
Commitment.
Section 6.11 INDEMNIFICATION. The Borrower hereby agrees to
defend, protect, indemnify and hold harmless the Lender and the employees and
agents of the Lender (each of the foregoing being an "Indemnitee" and all of the
foregoing being collectively the "Indemnitees") from and against any and all
claims, actions, damages, liabilities, judgments, costs and expenses (including
all reasonable fees and disbursements of counsel which may be incurred in the
investigation or defense of any matter) imposed upon, incurred by or asserted
against any Indemnitee, whether direct, indirect or consequential and whether
based on any federal, state, local or foreign laws or regulations (including
securities laws, environmental laws, commercial laws and regulations), under
common law or on equitable cause, or on contract or otherwise:
(a) by reason of, relating to or in connection with the
execution, delivery, performance or enforcement of any Borrower Loan
Document, any commitments relating thereto, or any transaction
contemplated by any Borrower Loan Document; or
(b) by reason of, relating to or in connection with any credit
extended or used under the Borrower Loan Documents or any act done or
omitted by any Person, or the exercise of any rights or remedies
thereunder;
provided, however, that Borrower shall not be liable to any Indemnitee for any
portion of such claims, damages, liabilities and expenses resulting from such
Indemnitee's gross negligence or willful misconduct. In the event this indemnity
is unenforceable as a matter of law as to a particular matter or consequence
referred to herein, it shall be enforceable to the full extent permitted by law
as to any other matter or consequence referred to in this Agreement.
This indemnification applies, without limitation, to any act,
omission, event or circumstance existing or occurring on or prior to the later
of the Termination Date or the date of payment in full of the Obligations,
including specifically Obligations arising under clause (b) of this Section. The
indemnification provisions set forth above shall be in addition to any liability
the Borrower may otherwise have under this Agreement or any other Borrower Loan
Document. Without prejudice to the survival of any other obligation of the
Borrower hereunder the indemnities and obligations of the Borrower contained in
this Section shall survive for a period of five (5) years following
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<PAGE> 11
the payment in full of the Obligations, except that any claim by any Indemnitee
which has been asserted and as to which the Borrower has been notified prior to
the expiration of such five-year period shall survive until such claim is
settled or adjudicated or otherwise disposed of.
Section 6.12 CAPTIONS. The captions or headings herein are for
convenience only and in no way define, limit or describe the scope or intent of
any provision of this Agreement.
Section 6.13 ENTIRE AGREEMENT. This Agreement and the other
Borrower Loan Documents embody the entire agreement and understanding between
the Borrower and the Lender with respect to the subject matter hereof and
thereof. This Agreement supersedes all prior agreements and understandings
relating to the subject matter hereof. Nothing contained in this Agreement or in
any other Borrower Loan Document, expressed or implied, is intended to confer
upon any Persons other than the parties hereto any rights, remedies, obligations
or liabilities hereunder or thereunder.
Section 6.14 COUNTERPARTS. This Agreement may be executed in
any number of counterparts, all of which taken together shall constitute one and
the same instrument, and any of the parties hereto may execute this Agreement by
signing any such counterpart.
Section 6.15 BORROWER ACKNOWLEDGMENT. Borrower acknowledges
that Lender is subject to the terms, conditions and limitations of the First
Bank Credit Agreement. Borrower agrees that to the extent that any of such
provisions adversely affect Lender's ability (i) to perform hereunder
(including, without limitation, by increasing the cost to Lender of making
Revolving Loans) or (ii) to make Revolving Loans hereunder, Lender shall be
released from such performance (including, without limitation, its obligation to
make Revolving Loans) without incurring liability to Borrower hereunder.
Further, upon the termination of the First Bank Credit Agreement or the ability
of Lender to obtain loans thereunder, for any reason whatsoever, the obligation
of Lender to make Revolving Loans hereunder shall terminate.
Section 6.16 PERSONAL LIABILITY. Notwithstanding anything
herein contained to the contrary, Lender agrees to look solely to the trust
estate of any trust which is or becomes a Borrower hereunder for redress in the
event of any action or claims against such trust arising under this Agreement,
regardless of whether such Borrower has any personal liability hereunder, and no
trustee, co-trustee or successor trustee shall have any personal liability under
this Agreement. No member of Borrower shall be personally liable for the
repayment of any costs or expenses under this Agreement or for principal or
interest under the Revolving Note.
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<PAGE> 12
ARTICLE VII
-----------
DEFINITIONS
Section 7.1 DEFINED TERMS. As used in this Agreement the
following terms shall have the following respective meanings (and such meanings
shall be equally applicable to both the singular and plural form of the terms
defined, as the context may require):
"BORROWER LOAN DOCUMENTS": This Agreement, the Revolving Note and any
other agreement or instrument executed in connection with the transactions
contemplated by this Agreement.
"BUSINESS DAY": Any day (other than a Saturday, Sunday or legal
holiday in the State of Minnesota) on which national banks are not authorized or
required to close for business in Minneapolis, Minnesota.
"FIRST BANK CREDIT AGREEMENT" The Credit Agreement, dated July 31,
1996, among Richard E. Jacobs, Richard E. Jacobs, as Grantor and Trustee of the
Richard E. Jacobs Revocable Living Trust under Agreement dated April 23, 1987,
as amended by Modifications to said Trust dated February 16, 1988, January 23,
1992, June 29, 1992 and Restatement of Trust dated August 1, 1994, Jacobs Realty
Investors Limited Partnership and First Bank National Association.
"OBLIGATIONS": The Borrower's obligations in respect of the due and
punctual payment of principal of and interest on the Revolving Note when and as
due, whether by acceleration or otherwise and all fees, expenses, indemnities,
reimbursements and other obligations of the Borrower under this Agreement or any
other Borrower Loan Document, in all cases whether now existing or hereafter
arising or incurred.
"PERSON": Any natural person, corporation, partnership, limited
partnership, limited liability company, joint venture, firm, association, trust,
unincorporated organization, government or governmental agency or political
subdivision or any other entity, whether acting in an individual, fiduciary or
other capacity.
"REVOLVING COMMITMENT": As defined in Section 1.1.
"REVOLVING COMMITMENT AMOUNT": Initially $30,000,000 but as the same
may be reduced from time to time pursuant to Section 1.1(a).
"REVOLVING COMMITMENT ENDING DATE": July 31, 1999, or, if Richard E.
Jacobs dies prior to July 31, 1999, the date of his death.
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<PAGE> 13
"REVOLVING LOAN": As defined in Section 1.1.
"REVOLVING LOAN DATE": The date of the making of any Revolving Loan
hereunder.
"REVOLVING LOAN SCHEDULE": As defined in Section 1.1(e)(ii).
"REVOLVING NOTE" A promissory note of the Borrower in the form of
Exhibit A hereto.
"TERMINATION DATE": The earliest of (a) the Revolving Commitment Ending
Date, (b) the date on which the Revolving Commitment is terminated pursuant to
Section 5.2 hereof, (c) the date on which the Revolving Commitment Amount is
reduced to zero pursuant to Section 1.1(a) hereof or (d) the date on which the
First Bank Credit Agreement is terminated or the date the lender thereunder is
no longer obligated to make revolving loans thereunder.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the date first above written.
LENDER:
/s/ RICHARD E. JACOBS
---------------------
Richard E. Jacobs
BORROWER:
DIVERSIFIED OPPORTUNITIES GROUP, LTD.
By: Jacobs Entertainment Ltd.
By /s/ JEFFREY P. JACOBS
-------------------------
Title: President
And By: The Opportunities Trust
By /s/ JEFFREY P. JACOBS
-------------------------
Jeffrey P. Jacobs, Trustee
And By /s/ GARY L. BRYENTON
-------------------------
Gary L. Bryenton, Trustee
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<PAGE> 14
EXHIBIT A
REVOLVING NOTE
$30,000,000
July 31, 1996
Cleveland, Ohio
FOR VALUE RECEIVED, the undersigned, Diversified Opportunities
Group Ltd., an Ohio limited liability company (the "Borrower"), promises to pay
to the order of RICHARD E. JACOBS, an individual (the "Lender"), at 25425 Center
Ridge Road, Cleveland, Ohio 44145, in lawful money of the United States of
America in immediately available funds, the principal amount of THIRTY MILLION
AND NO/100 DOLLARS ($30,000,000) or, if less, the aggregate principal amount of
all advances (each, an "Advance" and, collectively, the "Advances") made
hereunder at the times set forth in the Credit Agreement, of even date herewith,
by and between Richard E. Jacobs and Borrower (the "Credit Agreement"), and to
pay interest (computed on the basis of actual days elapsed and a year of 360
days) in like funds on the unpaid principal amount hereof from time to time
outstanding at the rates and times set forth in the Credit Agreement, provided
that in any event the entire unpaid principal balance hereof, together with all
accrued and unpaid interest hereon, if not sooner paid, shall be due and payable
in full on the Maturity Date (as defined in the Credit Agreement).
This note is the Revolving Note referred to in the Credit
Agreement. This note is subject to certain permissive prepayments upon the terms
provided in the Credit Agreement.
Lender shall enter in his records the amount of each Advance
made and the payments made thereon, and Lender is authorized by Borrower to
enter on a schedule attached to this Revolving Note a record of such Advances
and payments; provided, however that the failure by Lender to make any such
entry or any error in making such entry shall not limit or otherwise affect the
obligation of the Borrower hereunder, and, in all events, the principal amounts
owning by Borrower in respect of this Revolving Note shall be the aggregate
amount of all Advances made by Lender less all payments of principal thereof
made by the Borrower. Upon request of Borrower, Lender shall provide Borrower a
copy of a schedule on which is set forth Lender's record of such Advances and
payments.
Upon the occurrence of any one or more or the following events
the Lender's obligations to make Advances under the Credit Agreement shall
automatically terminate and this Revolving Note shall automatically become
immediately due and payable without any further action on the part of Lender:
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<PAGE> 15
(a) Borrower shall become insolvent or shall generally not pay
Borrower's debts as they mature or shall apply for, shall consent to, or shall
acquiesce in the appointment of a custodian, trustee or receiver for Borrower or
for a substantial part of Borrower's property or, in the absence of such
application, consent or acquiescence, a custodian, trustee or receiver shall be
appointed for Borrower or for a substantial part of Borrower's property and
shall not be discharged within 90 days, or Borrower shall make an assignment for
the benefit of creditors; or
(b) Any bankruptcy, reorganization, debt arrangement or other
proceedings under any bankruptcy or insolvency law shall be instituted by or
against Borrower, and, if instituted against Borrower, shall have been consented
to or acquiesced in by Borrower, or shall remain undismissed for 90 days, or an
order for relief shall have been entered against Borrower.
Borrower shall pay all costs and expenses, including
reasonable attorneys' fees, incurred by Lender in connection with the
enforcement of Lender's rights hereunder or under the Credit Agreement or in
connection with the collection of this Revolving Note or any Advances made
hereunder.
The undersigned waives presentment, notice of nonpayment,
protest, notice of protest, notice of default and notice of dishonor.
THE VALIDITY, CONSTRUCTION AND ENFORCEABILITY OF THIS NOTE
SHALL BE GOVERNED BY THE INTERNAL LAWS OF THE STATE OF OHIO WITHOUT GIVING
EFFECT TO THE CONFLICT OF LAWS PRINCIPLES THEREOF.
BORROWER:
DIVERSIFIED OPPORTUNITIES GROUP, LTD.
By: Jacobs Entertainment Ltd.
By____________________________
Title:________________________
And By: The Opportunities Trust
By____________________________
Jeffrey P. Jacobs, Trustee
And By________________________
Gary L. Bryenton, Trustee
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<PAGE> 1
EXHIBIT B
REVOLVING NOTE
$30,000,000
July 31, 1996
Cleveland, Ohio
FOR VALUE RECEIVED, the undersigned, Diversified Opportunities
Group Ltd., an Ohio limited liability company (the "Borrower"), promises to pay
to the order of RICHARD E. JACOBS, an individual (the "Lender"), at 25425 Center
Ridge Road, Cleveland, Ohio 44145, in lawful money of the United States of
America in immediately available funds, the principal amount of THIRTY MILLION
AND NO/100 DOLLARS ($30,000,000) or, if less, the aggregate principal amount of
all advances (each, an "Advance" and, collectively, the "Advances") made
hereunder at the times set forth in the Credit Agreement, of even date herewith,
by and between Richard E. Jacobs and Borrower (the "Credit Agreement"), and to
pay interest (computed on the basis of actual days elapsed and a year of 360
days) in like funds on the unpaid principal amount hereof from time to time
outstanding at the rates and times set forth in the Credit Agreement, provided
that in any event the entire unpaid principal balance hereof, together with all
accrued and unpaid interest hereon, if not sooner paid, shall be due and payable
in full on the Maturity Date (as defined in the Credit Agreement).
This note is the Revolving Note referred to in the Credit
Agreement. This note is subject to certain permissive prepayments upon the terms
provided in the Credit Agreement.
Lender shall enter in his records the amount of each Advance
made and the payments made thereon, and Lender is authorized by Borrower to
enter on a schedule attached to this Revolving Note a record of such Advances
and payments; provided, however that the failure by Lender to make any such
entry or any error in making such entry shall not limit or otherwise affect the
obligation of the Borrower hereunder, and, in all events, the principal amounts
owning by Borrower in respect of this Revolving Note shall be the aggregate
amount of all Advances made by Lender less all payments of principal thereof
made by the Borrower. Upon request of Borrower, Lender shall provide Borrower a
copy of a schedule on which is set forth Lender's record of such Advances and
payments.
Upon the occurrence of any one or more or the following events
the Lender's obligations to make Advances under the Credit Agreement shall
automatically terminate and this Revolving Note shall automatically become
immediately due and payable without any further action on the part of Lender:
(a) Borrower shall become insolvent or shall generally not pay
Borrower's debts as they mature or shall apply for, shall consent to, or shall
acquiesce in the appointment of a custodian, trustee or receiver for Borrower or
for a substantial part of
<PAGE> 2
Borrower's property or, in the absence of such application, consent or
acquiescence, a custodian, trustee or receiver shall be appointed for Borrower
or for a substantial part of Borrower's property and shall not be discharged
within 90 days, or Borrower shall make an assignment for the benefit of
creditors; or
(b) Any bankruptcy, reorganization, debt arrangement or other
proceedings under any bankruptcy or insolvency law shall be instituted by or
against Borrower, and, if instituted against Borrower, shall have been consented
to or acquiesced in by Borrower, or shall remain undismissed for 90 days, or an
order for relief shall have been entered against Borrower.
Borrower shall pay all costs and expenses, including
reasonable attorneys' fees, incurred by Lender in connection with the
enforcement of Lender's rights hereunder or under the Credit Agreement or in
connection with the collection of this Revolving Note or any Advances made
hereunder.
The undersigned waives presentment, notice of nonpayment,
protest, notice of protest, notice of default and notice of dishonor.
No member of Borrower shall be personally liable for the
repayment of principal, interest, costs or expenses under this note.
THE VALIDITY, CONSTRUCTION AND ENFORCEABILITY OF THIS NOTE
SHALL BE GOVERNED BY THE INTERNAL LAWS OF THE STATE OF OHIO WITHOUT GIVING
EFFECT TO THE CONFLICT OF LAWS PRINCIPLES THEREOF.
BORROWER:
DIVERSIFIED OPPORTUNITIES GROUP, LTD.
By: Jacobs Entertainment Ltd.
By /s/ Jeffrey P. Jacobs
------------------------
Title: President
And By: The Opportunities Trust
By /s/ Jeffrey P. Jacobs
-------------------------
Jeffrey P. Jacobs, Trustee
And By /s/ Gary L. Bryenton
------------------------
Gary L. Bryenton, Trustee
<PAGE> 1
EXHIBIT C
GUARANTY
--------
GUARANTY, dated as of July 31, 1996, made by Jeffrey P.
Jacobs, an individual (the "Guarantor"), in favor of Richard E. Jacobs, an
individual (the "Lender").
W I T N E S S E T H :
WHEREAS, the Lender has entered into a Credit Agreement, of
even date herewith (as amended or supplemented from time to time, the "Credit
Agreement", the terms defined therein and not otherwise defined herein being
used herein as therein defined), with Diversified Opportunities Group Ltd., a
limited liability company organized and existing under the laws of the State of
Ohio (the "Borrower"), pursuant to which the Lender has agreed to lend to the
Borrower up to $30,000,000 on a revolving credit basis on the terms and
conditions contained in the Credit Agreement (the "Loan");
WHEREAS, the Guarantor owns a 99% membership interest in
Jacobs Entertainment Ltd., an Ohio limited liability company;
WHEREAS, Jacobs Entertainment Ltd. owns a 50% membership
interest in Borrower; and
WHEREAS, it is a condition precedent to the making of the Loan
by the Lender that the Guarantor shall have executed and delivered this
Guaranty.
NOW, THEREFORE, in consideration of the premises and in order
to induce the Bank to make the Loan in accordance with the Credit Agreement, the
Guarantor hereby agrees as follows:
1. GUARANTY. The Guarantor hereby unconditionally and
absolutely (i) guarantees the full and prompt payment, when due, of the
principal and interest and other sums payable from time to time, and the
performance, when due, of Borrower's Obligations (as defined below), including,
without limitation, the duties, obligations and undertakings of the Borrower now
or hereafter existing pursuant to the Borrower Loan Documents (as defined in the
Credit Agreement) (all of the foregoing, collectively the "Obligations"), and
(ii) agrees to pay any and all expenses incurred by the Lender in enforcing any
rights under this Guaranty. The Obligations, together with the obligations of
the Guarantor set forth in clause (ii) of the foregoing sentence, are sometimes
collectively referred to herein as the "Guaranteed Obligations."
2. GUARANTY ABSOLUTE. The Guarantor guarantees that the
Obligations will be paid or performed, as the case may be, strictly in
accordance with the terms of the Credit Agreement and the other applicable
Borrower Loan Documents, regardless of any
<PAGE> 2
law, regulation or order now or hereafter in effect in any jurisdiction
affecting any of such terms or the rights of the Lender with respect thereto.
The liability of the Guarantor under this Guaranty shall be absolute,
unconditional and irrevocable irrespective of:
(a) Any illegality, irregularity, invalidity or
unenforceability of the Credit Agreement or the other Borrower Loan Documents or
any other agreement or instrument relating to Borrower's Obligations or any
legal or equitable defenses or rights available to the Borrower under or with
respect thereto, or by any modification, release, or other alteration of any of
the Obligations or of any other security therefor, or by any agreements or
arrangements whatever with the Borrower or anyone else;
(b) Any change in the time, manner or place of payment of, or
in any other term of, all or any of the Obligations, or any other amendment or
waiver of or any consent to departure from the Credit Agreement or any other
Borrower Loan Document, with or without notice to the Guarantor (including,
without limitation, the granting to the Borrower of any indulgences or extension
of time for any payment or payments or for performance of any Obligation, the
acceptance of partial performance, payment or payments by the Borrower, the
exchange, release or replacement of any security or collateral, and the
agreement to any modifications or amendments thereof);
(c) Any release or amendment or waiver of or consent to
departure from any other guaranty for all or any of the Obligations; or
(d) Any other circumstance which might otherwise constitute a
defense (other than payment) available to, or a discharge of, the Borrower in
respect of the Obligations or the Guarantor in respect of this Guaranty.
3. SUBROGATION.
-----------
(a) The Guarantor shall be subrogated to all rights of the
Lender against the Borrower in respect of any amounts paid by the Guarantor
pursuant to the provisions of this Guaranty. Notwithstanding the foregoing, the
Guarantor agrees that it will never have, and hereby waives and disclaims, any
claim or right against the Borrower by way of subrogation or otherwise in
respect of any payment that the Guarantor may be required to make hereunder, to
the extent that such claim or right would cause the Guarantor to be a "creditor"
of the Borrower for purposes of Title 11 of the United States Code, as now or
hereafter amended, or any other Federal or state bankruptcy, insolvency,
receivership or similar law, during the period of one year prior to filing of a
petition thereunder by or against the Borrower.
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<PAGE> 3
(b) Notwithstanding the foregoing, the Guarantor shall not
exercise any rights which it may acquire by way of subrogation under this
Guaranty, by any payment made hereunder or otherwise, until all the Obligations
shall have been paid in full and Borrower shall have no further obligation under
the Credit Agreement to make Revolving Loans (as defined in the Credit
Agreement). If any amount shall be paid to the Guarantor on account of such
subrogation rights at any time when all the Obligations shall not have been paid
in full and the Lender's obligation to make Revolving Loans under the Credit
Agreement shall not have terminated, such amount shall be held in trust for the
benefit of the Lender and shall forthwith be paid to the Lender to be credited
and applied against the Obligations in accordance with the terms of the Credit
Agreement or the other Borrower Loan Documents, as the case may be. If (i) the
Guarantor shall make payment to the Lender of all or any part of the Obligations
and (ii) all the Obligations shall be paid in full and the Lender's obligation
to make Revolving Loans under the Credit Agreement shall have terminated, the
Lender will, at the request of Guarantor, execute and deliver to the Guarantor
appropriate documents, without recourse and without representation or warranty,
necessary to evidence the transfer by subrogation to the Guarantor of an
interest in the Obligations resulting from such payment by the Guarantor.
4. ACCELERATION OF LIABILITIES. If the Borrower or the
Guarantor should at any time become insolvent or if a petition in bankruptcy or
any insolvency or reorganization proceeding shall be filed or commenced by,
against or in respect of the Borrower or the Guarantor, any and all liabilities
and obligations of the Guarantor shall not be released, mitigated or otherwise
affected thereby, and shall, at the option of the Lender, forthwith become due
and payable without notice.
5. CONTINUING GUARANTY; TRANSFER OF NOTES. This Guaranty is a
continuing guaranty and shall (i) remain in full force and effect until payment
in full of the Guaranteed Obligations and all other amounts payable to the
Lender under this Guaranty, (ii) be binding upon the Guarantor and its
successors, transferees and assigns, and (iii) inure to the benefit of and be
enforceable by the Lender and successors, transferees and assigns. Without
limiting the generality of the foregoing clause (iii), the Lender may assign or
otherwise transfer the Revolving Note (as defined in the Credit Agreement) or
any participation therein separately or together with any security, to any other
person or entity, and such other person or entity shall thereupon become vested
with all the rights in respect thereof granted to the Lender herein or
otherwise.
6. REPRESENTATIONS AND WARRANTIES. In addition to and
independent of any other obligation or liability under this
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<PAGE> 4
Guaranty, the Guarantor hereby represents and warrants to the Lender as follows:
(a) No consent, approval or authorization of, or registration
or declaration with, any governmental authority of the United States or the
State of Ohio is required in connection with the execution, delivery and
performance by the Guarantor of this Guaranty;
(b) The Guarantor owns a 99% membership interest in Jacobs
Entertainment Ltd. and such membership interest is validly issued, fully paid
and nonassessable;
(c) The execution and delivery of and performance under this
Guaranty by the Guarantor and the consummation of the transactions contemplated
thereby: (a) do not and will not breach or contravene or result in a default
under (i) any material written agreement or instrument to which the Guarantor is
a party or by which he or any of his assets are bound, or (ii) any judgment,
decree, or order of any court or of any federal, state, or other regulatory
authority or other governmental body having jurisdiction over the Guarantor, any
law, rule, regulation of the United States or the State of Ohio applicable to
him or his properties; and (b) do not and will not result in or cause the
creation of any lien, security interest or other charge or encumbrance upon or
with respect to any of his properties or accelerate the maturity of any
indebtedness of the Guarantor under any document referred to in clause (a)(i)
above;
(d) This Guaranty constitutes the legal, valid and binding
obligation of the Guarantor, enforceable against the Guarantor in accordance
with its terms;
(e) Guarantor is not, and by the execution and delivery of
this Guaranty will not be, (i) in default under any indenture, contract or
agreement to which he is a party or by which he is bound or for which a waiver
or consent has not been obtained, (ii) in default with respect to any order,
writ, injunction or decree of any court, or (iii) in default under any order or
license of any federal or state governmental department, which default or
violation in any of the aforesaid cases materially and adversely affects his
business or property;
(f) Any and all balance sheets, net worth statements and other
financial data with respect to the Guarantor which have heretofore been given to
Lender by or on behalf of the Guarantor fairly and accurately present the
financial condition of the Guarantor as of the respective dates thereof, and,
since the respective dates thereof, there has been no materially adverse change
in the financial condition of the Guarantor; and
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<PAGE> 5
(g) There are no facts or circumstances of any kind or nature
whatsoever of which the Guarantor is aware which could in any way impair or
prevent the Borrower from performing Borrower's Obligations or the Guarantor
from performing his obligations under this Guaranty.
7. INDEMNIFICATION. The Guarantor hereby indemnifies the
Lender and agrees to defend and hold harmless the Lender from and against (a)
any loss, cost, damage or expense occurring by reason of the inaccuracy of any
representation or warranty contained herein or the breach or nonfulfillment of
any of the Guarantor's obligations contained herein and (b) the loss,
mitigation, subordination or other consequences adverse to the Lender by reason
of any payment or other performance of the Guaranteed Obligations or this
Guaranty being challenged as a preference or suffering any other subjugation
under any bankruptcy or other law, whether state or federal, affecting debtors,
creditors and/or the relationship between and among them.
8. NO ADVANCES OR ENFORCEMENT. The Guarantor shall make no
loan or advance to the Borrower nor take any steps to enforce any obligation of
the Borrower to the Guarantor so long as this Guaranty remains in effect.
Nothing in the foregoing sentence, however, is intended or shall be deemed to
preclude a contribution to capital, equity investment or other infusion of
at-risk funds in the Borrower which is not a loan or other priority repayment
obligation of the Borrower.
9. NO RESORT TO OTHER REMEDIES. The Lender shall have no
obligation to resort to any other party or to any other security or collateral
held by the Lender and shall not have any obligation to exhaust any remedies the
Lender might have against the Borrower before calling upon the Guarantor for
performance hereunder, and the Guarantor hereby waives any right he may have to
require the Lender to proceed against the Borrower or to require the Lender to
pursue any other remedy or enforce any other right.
10. NOTICES. All demands, notices and other communications
provided for hereunder shall be addressed as follows: if to the Guarantor,
addressed to him at 1231 Main Avenue, Cleveland, Ohio 44113; if to the Lender,
addressed to him at 25425 Center Ridge Road, Cleveland, Ohio 44145; or as to
each party at such other address as shall be designated by such party in a
written notice to each other party complying as to delivery with the terms of
this Section. All such demands, notices and other communications shall be
addressed as aforesaid, mailed, delivered or otherwise sent as set forth in the
Credit Agreement and shall be deemed effective as of the times prescribed
therefor as set forth in the Credit Agreement.
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<PAGE> 6
11. CERTAIN WAIVERS. The Guarantor hereby waives promptness,
diligence, demand, presentment and protest of any instrument, and notice
thereof, notice of acceptance, default and any other notice with respect to any
of the Obligations and this Guaranty and any requirement that the Lender
protect, secure, perfect or insure any security interest or lien or any property
subject thereto or exhaust any right or take any action against the Borrower or
any other person or entity.
12. EFFECTIVENESS; REINSTATEMENT. This Guaranty shall continue
to be effective or be reinstated, as the case may be, if at any time any whole
or partial payment or performance of any Guaranteed Obligation is or is sought
to be rescinded or must otherwise be restored or returned by the Lender upon the
insolvency, bankruptcy, dissolution, liquidation or reorganization of the
Borrower or upon or as a result of the appointment of a receiver, intervenor or
conservator of, or trustee or similar officer for, the Borrower, all as though
such payments and performance had not been made. Without limiting the generality
of the foregoing, this Guaranty shall remain in full force and effect until
thirteen calendar months have elapsed since the full payment and performance of
all Guaranteed Obligations and, in such case, thereafter if and so long as there
is pending at the end of such thirteen month period against the Borrower or
against the Guarantor a proceeding under any federal or state bankruptcy or
insolvency law. Notwithstanding anything to the contrary contained herein, if
following any payment of the Obligations to the Lender it is determined by a
final decision of a court of competent jurisdiction that such payment shall be
avoided by a trustee in bankruptcy (including any debtor-in-possession) as a
preference under 11 U.S.C. Section 547 and such payment is repaid by the Lender
to such trustee in bankruptcy, then and to the extent of such repayment, the
Guaranteed Obligations with respect to such payment shall be reinstated and this
Guaranty shall remain in full force and effect.
13. SERVICE OF PROCESS; WAIVER OF IMMUNITIES.
(a) The Guarantor irrevocably consents to the service of any
and all process in any action or proceeding arising out of or relating to this
Guaranty by the mailing of copies of such process to the Guarantor at his
address as specified in Section 10. The Guarantor agrees that a final judgment
in any such action or proceeding shall be conclusive and may be enforced in
other jurisdictions by suit on the judgment or in any other manner provided by
law.
(b) Nothing in this section shall affect the right of the
Lender to serve legal process in any other manner permitted by law or affect the
right of the Lender to bring any action or proceeding against the Guarantor or
his properties in the courts of any other jurisdictions.
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<PAGE> 7
14. FINANCIAL STATEMENTS. Upon the request of Lender, the
Guarantor shall provide to the Lender, within 90 days following the end of each
calendar year while this Guaranty is in effect, a net worth statement of the
Guarantor in the form required by the Lender.
15. EVENT OF DEFAULT. The occurrence of any of the following
events shall constitute an Event of Default under this Agreement:
(a) An Event of Default (as defined in the Credit Agreement)
shall have occurred under the Credit Agreement;
(b) Any representation or warranty made by Guarantor in this
Guaranty shall prove to have been incorrect in any material respect when made;
(c) Guarantor shall fail to perform or observe any term,
covenant or agreement contained in this Guaranty on Guarantor's part to be
performed or observed, and such failure shall remain unremedied for 30 days
after written notice thereof shall have been given to Guarantor; or
(d) This Guaranty shall, at any time after its execution and
delivery and for any reason, cease to be in full force and effect or shall be
declared to be null and void, or the validity or enforceability thereof shall be
contested by Guarantor.
Upon the occurrence of an Event of Default hereunder, the
Lender may exercise any and all rights and remedies the Lender may have
hereunder or at law or in equity, including, without limitation, calling upon
the Guarantor for performance hereunder.
16. MISCELLANEOUS.
(a) In case one or more of the provisions contained in this
Guaranty shall for any reason be held to be invalid, illegal or unenforceable in
any respect, such invalidity, illegality or unenforceability shall not affect
any other provisions of this Guaranty, but this Guaranty shall be construed as
if such invalid, illegal or unenforceable provision or provisions had not been
contained herein.
(b) This Guaranty may be assigned by the Lender, in whole or
in part, and shall be construed liberally in favor of the Lender and its
successors and assigns.
(c) No amendment or waiver of any provisions of this Guaranty
nor consent to any departure therefrom by the Guarantor shall in any event be
effective unless the same shall be in
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<PAGE> 8
writing and signed by the Lender, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given.
(d) No failure or delay on the part of the Lender in
exercising any right, power or remedy hereunder shall operate as a waiver
thereof; nor shall any single or partial exercise of any such right, power or
remedy preclude any other or further exercise thereof or the exercise of any
other right, power or remedy. The remedies herein provided are cumulative and
not exclusive of any remedies provided by law.
(e) This Guaranty, all acts and transactions hereunder, and
the rights and obligations of the parties hereto shall be governed, construed
and interpreted according to the laws of the State of Ohio, shall be binding
upon the successors, heirs, legal representatives and assigns of the Guarantor
and shall inure to the benefit of the Lender and its successors and assigns and
any subsequent holder of the Revolving Note.
17. WAIVER OF JURY TRIAL. THE GUARANTOR HEREBY, AND THE LENDER
BY ITS ACCEPTANCE HEREOF, WAIVES THE RIGHT OF A JURY TRIAL IN EACH AND EVERY
ACTION ON THIS GUARANTY OR ANY OF THE OTHER LOAN DOCUMENTS, IT BEING
ACKNOWLEDGED AND AGREED THAT ANY ISSUES OF FACT IN ANY SUCH ACTION ARE MORE
APPROPRIATELY DETERMINED BY THE COURTS.
18. CONSENT TO JURISDICTION AND VENUE. THE GUARANTOR HEREBY
CONSENTS AND SUBJECTS HIMSELF TO THE JURISDICTION OF COURTS OF THE STATE OF OHIO
AND FEDERAL COURTS LOCATED IN OHIO, WITHOUT LIMITING THE GENERALITY OF THE
FOREGOING, TO THE VENUE OF SUCH COURTS IN CUYAHOGA COUNTY, OHIO.
IN WITNESS WHEREOF, the Guarantor has executed this Guaranty
at Cuyahoga County, Ohio as of July 31, 1996.
/s/ Jeffrey P. Jacobs
---------------------
Jeffrey P. Jacobs
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<PAGE> 1
EXHIBIT D
PURCHASE AGREEMENT
------------------
THIS PURCHASE AGREEMENT is made and entered into as of the 24 day
of September, 1996, by and among BOARDWALK CASINO, INC., a Nevada corporation
("Seller"), NORBERT W. JANSEN, individually and as trustee under an agreement
dated July 14, 1993 ("Jansen"), and DIVERSIFIED OPPORTUNITIES GROUP LTD., an
Ohio limited liability company, or its nominee as described in Section 27
("Purchaser").
RECITALS
--------
Seller desires to sell to Purchaser certain Shares (as hereinafter
defined) and issue to Purchaser a convertible subordinated note in the principal
amount of $5,000,000 (the "Note"), and Purchaser desires to acquire the Shares
and the Note from Seller.
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 September 25, 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.
<PAGE> 2
(c) "Annual Statement" shall mean Seller's Balance Sheet at
September 30, 1995 and the accompanying Statements of Income (Loss), Statements
of Cash Flows and Statements of Shareholders' Equity for Seller's two fiscal
years then ended, together with the schedules and notes related thereto,
accompanied by the applicable report of Coopers & Lybrand L.L.P., Certified
Public Accountants, as filed with the Securities and Exchange Commission
("SEC").
(d) "Interim Statement" shall mean Seller's unaudited Balance
Sheet at June 30, 1996 and the accompanying Statements of Operations and
Statements of Cash Flow for the 9-month period then ended, together with the
notes relating thereto, as filed with the SEC.
(e) "Financial Statements" shall mean the Annual Statement and
Interim Statement.
(f) "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 Seller on a consolidated
basis.
(g) "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.
(h) "Shares" shall mean shares of Seller's Common Stock, $.001
par value.
2. PURCHASE AND SALE; PRICE
------------------------
Seller agrees to issue and sell to Purchaser, as the case may
be, and Purchaser agrees to purchase from Seller, the Note and certain of the
Shares for the purchase price and upon and subject to the terms, provisions and
conditions hereinafter set forth.
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<PAGE> 3
(a) ISSUANCE OF NOTE. Seller shall issue and Purchaser shall
purchase the Note. The Note shall be in substantially the form and substance of
Exhibit A attached hereto and incorporated herein by reference. The Note shall
contain, among other things, interest at a variable rate per annum equal to
Purchaser's costs of funds (estimated at LIBOR + 2.25%) (the "Charged Rate").
Each change in the Charged Rate shall result immediately, without notice or
demand of any kind, in a corresponding change in the interest rate under the
Note, effective with respect to the periods on or after the date of such change.
Interest due on the Note shall be payable on a quarterly basis. The principal of
the Note shall be due and payable on the second anniversary of the Closing Date
and shall, commencing on the receipt from the Nevada Gaming Commission (the
"Commission") and the Nevada State Gaming Control Board (the "Gaming Board") and
the authorities of Clark County, Nevada (the Commission, the Gaming Board and
the Clark County Authorities are collectively referred to as the "Nevada Gaming
Authorities") of all requisite licensing, findings of suitability or other
approval required in accordance with Nevada law ("Licensing Approval"), be
convertible into Shares at a conversion price of $7.50 per share. The Note shall
be secured by a second priority lien on the Collateral, as such term is defined
in that certain Indenture dated as of April 7, 1995 between Seller and Shawmut
Bank, N.A., Trustee for $40,000,000 16.5% First Mortgage Notes Due March 31,
2005 (the "Indenture"). This second priority lien shall be evidenced by a Deed
of Trust and Security Agreement in substantially the form and substance of
Exhibit B attached hereto and incorporated herein by reference.
(b) PURCHASE OF SHARES. Seller shall sell and Purchaser shall
purchase 571,429 Shares at a price of $7.00 per Share for a total purchase price
of $4,000,000.
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<PAGE> 4
(c) ACQUISITION OF AND OPTION FOR JANSEN SHARES. Pursuant to
an Option and Proxy Agreement to be entered into between Purchaser and Jansen
(the "Option Agreement"), Purchaser shall have the obligation to acquire certain
Shares owned by Jansen and the right to acquire certain Shares owned by Jansen.
The Option Agreement shall be in substantially the form and substance of Exhibit
C attached hereto and incorporated herein by reference.
(d) PAYMENT OF PURCHASE PRICE. The purchase price of
$5,000,000 for the Note and $4,000,000 for the Shares pursuant to Sections 2(a)
and 2(b) above, shall be paid by Purchaser to Seller by wire transfer or by
certified or bank check at the Closing.
3. AGREEMENTS REGARDING REGISTRATION OF SHARES AND
-----------------------------------------------
BOARD REPRESENTATION.
---------------------
(a) At or prior to the Closing, Purchaser and Seller shall
execute and deliver a Registration Agreement (the "Registration Agreement") in
substantially the form and substance of Exhibit D attached hereto and
incorporated herein by reference. The Registration Agreement shall provide for
the registration of all Shares acquired by Purchaser as contemplated hereunder,
including those acquired by conversion of the Note or pursuant to the Option
Agreement.
(b) Within seven (7) days following the earlier to occur of
(i) receipt of a favorable ruling letter from the Gaming Board, satisfactory to
Purchaser and Seller, each in the exercise of its reasonable business judgment,
with respect to the transactions contemplated by this Agreement, or (ii)
Purchaser having obtained Licensing Approval, Seller's Board of Directors (the
"Board") shall be expanded to six persons, one of whom shall be Jeffrey P.
Jacobs ("Jacobs"). Subject to Purchaser having obtained Licensing Approval, at
such time as Purchaser shall have acquired a total of 1,000,000 or more Shares
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<PAGE> 5
from Jansen pursuant to the Option Agreement, the Board shall be expanded to
seven members and Purchaser shall be entitled to nominate the additional Board
member.
4. REPRESENTATIONS AND WARRANTIES BY SELLER AND JANSEN.
----------------------------------------------------
As a material inducement to Purchaser to enter into this
Agreement, Seller and Jansen, jointly and severally, represent, warrant to and,
where applicable, covenant with Purchaser that as of the date hereof and as of
the Closing Date (it being acknowledged, however, that the representations and
warranties being made by Jansen are being made to the best of his actual
knowledge):
(a) DUE ORGANIZATION. Seller is a corporation duly organized,
validly existing and in good standing under the laws of the State of Nevada, 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, result in a Material Adverse Effect. Seller has received
all necessary authorizations, consents, licenses and approvals of the Nevada
Gaming Authorities, 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
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<PAGE> 6
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 is subject or by which
Seller is bound, or (iii) 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 Seller
is a party or by which any of its assets or properties may be bound or affected.
Except for required approvals of the Nevada Gaming Authorities, no consent,
approval, authorization or action by any other federal, state, local or foreign
governmental agency, instrumentality, commission, authority, board or body
(collectively, "Governmental Agency") 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.
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<PAGE> 7
(c) CAPITAL STRUCTURE. The authorized capital stock of Seller
as of September 11, 1996 consists solely of Fifteen Million (15,000,000) Shares,
of which 6,608,000 are issued and outstanding, and Fifteen Million (15,000,000)
shares ("Preferred Shares") of a preferred class, $.001 par value, none of which
Preferred Shares are issued and outstanding. 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 4(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 and the Option Agreement, for the consideration
expressed herein and therein, will be duly and validly issued, fully paid and
nonassessable. The Shares issuable upon conversion of the Note have been duly
and validly reserved for issuance, and when issued upon conversion, will be duly
and validly issued, fully paid and nonassessable.
(e) SUBSIDIARIES. Seller has no subsidiaries, either wholly or
partially owned.
(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
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<PAGE> 8
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, as
amended (the "1933 Act"), or the Securities Exchange Act of 1934, as amended, 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-QSB 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. Seller has good, marketable and valid
title in and to all of its assets, including all real, personal and intangible
property, and, except for the lien created by the Indenture and as set forth on
Schedule 4(g), holds its assets free and clear of any mortgage, conditional sale
agreement, title retention agreement, security interest, lease, pledge,
hypothecation, lien or other encumbrance.
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<PAGE> 9
(h) CONDITION OF ASSETS. All of the assets (whether owned or
leased) that are necessary for the conduct of the business of Seller 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.
(i) INSURANCE. Seller (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 4(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. 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 Seller operates. Except for claims identified on Schedule
4(i), there are no outstanding unpaid claims under any such policy, binder or
reserve. Except as set forth on Schedule 4(i), there will be no liability of
Seller, 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. Seller has
received no 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.
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(k) SELLER DATA. Seller has made available to Purchaser its
corporate minutes, articles and bylaws, books and records, all material
contracts, summaries of all loans and 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 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. Seller has no liabilities or
obligations of any nature, secured or unsecured (absolute, accrued, contingent
or otherwise and whether due or to become due), which would result in a Material
Adverse Effect, 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 as set forth on
Schedule 4(m), there is no investigation or review pending or to the best
knowledge of Seller threatened by the Nevada Gaming Authorities or any other
Governmental Agency or other party or person with respect to Seller; nor have
the Nevada Gaming Authorities or any other 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
4(m), there is no claim, action,
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suit or proceeding pending before or, to the best knowledge of Seller,
threatened against or affecting Seller at law or in equity by, the Nevada Gaming
Authorities or any other 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 4(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 4(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 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 4(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
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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"). Seller has delivered or made available to
Purchaser true and complete copies of all documents, as they may have been
amended to the date hereof, embodying or relating to 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 employees. 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. Seller has received no written
notice nor has there been any proceeding or adjudication questioning whether or
alleging or determining that Seller 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. Seller has (i) timely filed all tax returns,
schedules, declarations, and tax-related documents including, without
limitation, all Forms 5500 pertaining to the
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Plans (collectively, "Returns") required to be filed in any jurisdictions to
which it 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 September 30, 1993 through September 30, 1995, inclusive. Seller has no
knowledge that an audit of any of the federal income tax returns of Seller 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, 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,
Seller has not suffered any Material Adverse Effect.
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(s) CONDUCT OF BUSINESS. Except as shown on Schedule 4(s),
since the close of business on June 30, 1996, 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 granted any Options or other
rights in connection therewith, except in
connection with the exercise of warrants
outstanding as of June 30, 1996.
(ii) Incurred, paid or settled any obligations,
commitments or liabilities, absolute, accrued,
contingent or otherwise, which would result in
a Material Adverse Effect, 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.
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<PAGE> 15
(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. Seller 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 Nevada Gaming Authorities) 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.
Seller is not 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
(other than violations or defaults which individually or in the aggregate would
not result in a Material Adverse Effect). Seller has not received any written
notice nor has there been any proceeding or adjudication questioning whether or
alleging or determining that the business of Seller is or has been conducted in
violation of any law, ordinance, regulation, order, decree, judgment or
injunction. Except as disclosed on Schedule 4(t), Seller has not received any
written notice nor has there been any proceeding or adjudication questioning
whether or alleging or determining that it has not obtained all permits,
licenses and other authorizations which relate to the assets or the business of
Seller. Seller has not received any written notice nor has there been any
proceeding or adjudication questioning whether
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<PAGE> 16
or alleging or determining that it is not in compliance in all material respects
with all material terms and conditions of such permits, licenses and
authorizations.
(u) ENVIRONMENTAL PROTECTION.
(i) Seller is in compliance with all Environmental
Laws (as hereinafter defined) applicable to the business of Seller. 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 Seller'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 4(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 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 infringes on or conflicts with any
existing patents, trademarks or copyrights or any other rights of any person.
Seller has not received any written notice of any material claim of a third
party to the use of any such names.
(w) CONTRACTS. Except for employment arrangements disclosed on
Schedule 4(n), each contract and commitment (whether written or oral) that
individually involves potential future payments by or to Seller of $50,000 or
more is disclosed on Schedule 4(w) (except as otherwise indicated therein) and
copies of such written contracts or commitments
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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.
5. 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 all necessary action 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
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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 Nevada Gaming
Authorities), the consummation of the transactions contemplated hereby and
thereby will not, (i) violate any provision of the Articles of Organization or
the Operating Agreement of Purchaser, or (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). Except for any required Licensing Approval of the Nevada
Gaming 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 and the Note being acquired
by Purchaser pursuant to this Agreement and the Option 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 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
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<PAGE> 19
merits of purchasing or acquiring the Shares. Purchaser is an accredited
investor as defined in Regulation D promulgated under the 1933 Act. Purchaser
has not been formed solely for the purpose of consummating the transactions
contemplated hereby.
6. CLOSING
The Closing hereunder shall take place at 10:00 a.m. on the
Closing Date at the offices of Hahn Loeser & Parks, 3300 BP America Building,
200 Public Square, Cleveland, Ohio 44114.
7. 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 that 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 and Jansen 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 or Jansen from sources other than the
Purchaser.
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<PAGE> 20
8. INTENTIONALLY OMITTED.
9. 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 and Jansen 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.
(b) PERFORMANCE OF AGREEMENTS AND CONDITIONS. Seller and
Jansen shall have performed and complied with all agreements and conditions
required by this Agreement to be performed and complied with by Seller and
Jansen, as the case may be, prior to or at the Closing Date.
(c) SECRETARY'S CERTIFICATE. Seller shall have delivered to
Purchaser a certificate from its Secretary, dated the Closing Date, certifying
in such detail as Purchaser may reasonably request to Seller's and Jansen's
fulfillment of the conditions specified in subsections (a) and (b) above and
such other evidence as to Seller's and Jansen's compliance with the provisions
of this Agreement as Purchaser reasonably may request.
(d) Intentionally Omitted.
(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 transactions provided for herein not be
consummated as herein provided, nor shall there be
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any litigation or proceeding pending or threatened in respect of the
transactions contemplated hereby.
(f) OPTION AGREEMENT. Jansen and Purchaser shall have entered
into the Option Agreement.
(g) REGISTRATION AGREEMENT. Seller and Purchaser shall have
entered into the Registration Agreement.
(h) LEASE. Seller and Jansen shall have entered into a lease
for adjacent real property (the "Lease") in substantially the form and substance
of Exhibit E attached hereto and incorporated herein by reference.
(i) 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.
(j) CONDITION OF BUSINESS AND PROPERTIES. Between the date of
this Agreement and the Closing Date, Seller shall have continued to operate its
business in its regular and ordinary course, and shall not have suffered a
Material Adverse Effect.
(k) GOVERNMENTAL APPROVAL. Nothing in this Agreement shall be
construed to permit Purchaser to acquire control of Seller (as such term is
defined in Nevada Gaming Regulation 16.010(1)) without first obtaining Licensing
Approval.
(l) Intentionally Omitted.
(m) OPINION OF COUNSEL. Purchaser shall have received a legal
opinion from Jones, Jones, Close & Brown, Chartered, counsel for Seller and
Jansen, dated as of the Closing Date, in form and substance reasonably
satisfactory to Purchaser's counsel.
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(n) DELIVERY OF DOCUMENTS. Seller and Jansen shall have delivered to
Purchaser the documents contemplated by Section 13 (a) not otherwise hereinabove
specified.
Seller and Jansen represent and warrant that they have not caused, and they
covenant and agree that they shall not cause, any event that would prevent the
satisfaction of all of the conditions set forth in this Section 9. Seller and
Jansen covenant and agree to take all action reasonably required to satisfy such
conditions.
10. CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER AND
JANSEN
The obligations of Seller and Jansen hereunder are subject to the
following conditions, any of which may be waived in writing by Seller and
Jansen:
(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
and Jansen the certificate of Purchaser's Manager or President, dated the
Closing Date, certifying in such detail as Seller and Jansen 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 and Jansen reasonably may request.
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<PAGE> 23
(d) OPINION OF COUNSEL. Purchaser shall have delivered to Seller and
Jansen an opinion of Hahn Loeser & Parks, counsel for Purchaser, dated as of the
Closing Date, in form and substance reasonably satisfactory to Seller's and
Jansen'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 13(b) not otherwise hereinabove specified.
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 10. Purchaser
covenants and agrees to take all action reasonably required to satisfy such
conditions.
11. INDEMNIFICATION BY SELLER AND JANSEN
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
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(iii) Any and all actions, suits, proceedings, demands, assessments or
judgments, costs and expenses (including reasonable legal and
accounting fees and investigation costs) incident to the
foregoing and the enforcement thereof.
Jansen 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 any matter in respect of which Jansen 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 Jansen contained in
this Agreement or in any certificate or other document delivered, or to be
delivered, by Jansen to Purchaser in connection with this Agreement and for any
and all actions, suits, proceedings, demands, assessments, or judgments, costs
and expenses (including reasonable legal and accounting fees and investigation
costs) incident to the foregoing and the enforcement thereof.
The indemnification obligations of Seller and Jansen pursuant to this
Section 11 are several and not joint and several.
If any event shall occur or any circumstance arise which might give rise to
a claim in respect of any matter against which Seller and/or Jansen have
indemnified Purchaser hereunder, Purchaser promptly shall give notice thereof to
Seller and/or Jansen 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 Purchaser; otherwise such notice
shall be given promptly after Purchaser shall determine that the matter is one
as to which indemnification is sought. Unless the parties otherwise agree in
writing, Seller and/or Jansen shall defend against all such third-party claims
or otherwise satisfy said claims, at their sole cost and expense, through
counsel and accountants
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designated by them and approved by Purchaser, which approval shall not be
withheld unreasonably. Purchaser shall have the right to participate with Seller
and/or Jansen in the defense of any such matter and shall fully cooperate with
and make available to Seller and/or Jansen the business records of Purchaser for
said purpose. If Seller and/or Jansen, after receipt of notification from
Purchaser of a third-party claim, fail 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 and/or Jansen's indemnity shall extend to and
include the amount of said settlement or payment and/or the costs and legal
expenses of such defense.
12. 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 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
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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 fully
cooperate with and 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.
13. DOCUMENTS TO BE DELIVERED AT CLOSING
At the Closing on the Closing Date:
(a) Seller and/or Jansen shall deliver to Purchaser the following:
(i) The Note referred to in Section 2(a);
(ii) Certificates representing the Shares being purchased under
Section 2(b) and the Option Agreement, if any;
(iii) The Deed of Trust and Security Agreement referred to in
Section 2(a);
(iv) The Option Agreement referred to in Section 2(c);
(v) The Registration Agreement referred to in Section 3(a);
(vi) The Lease referred to in Section 9(h);
(vii) The certificate referred to in Section 9(c);
(viii) A copy of the Seller's Articles of Incorporation and Bylaws
certified as of the Closing Date by the Secretary thereof;
(ix) The opinion of counsel referred to in Section 9(m);
(x) Certified resolutions of Seller's Board authorizing and
approving this transaction; and
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<PAGE> 27
(xi) All other instruments not herein specifically provided
for but which are reasonably necessary or desirable to
effectuate the purpose of this Agreement.
(b) DELIVERIES BY PURCHASER. Purchaser shall deliver to Seller
and/or Jansen, as appropriate, the following:
(i) The purchase price due at Closing pursuant to Section 2;
(ii) The Option Agreement referred to in Section 2(c);
(iii) The Registration Agreement referred to in Section 3(a);
(iv) Certified resolutions of the Manager of Purchaser
authorizing this transaction;
(v) The certificate referred to in Section 10(c);
(vi) The opinion of counsel referred to in Section 10(d); and
(vii) All other instruments not herein specifically provided for
but which are reasonably necessary or desirable to
effectuate the purpose of this Agreement.
14. BROKERAGE
Each party represents and warrants to the other that except for
Brenner Securities, Inc., ("Broker") whose compensation shall be the sole
responsibility of Seller, 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 (other
than Broker as hereinabove provided) purporting to act on behalf of First Party.
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<PAGE> 28
15. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS
All representations, warranties and agreements made by Seller,
Jansen or Purchaser pursuant hereto shall survive for a period of three (3)
years from and after 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 any of Seller, Jansen or
Purchaser.
16. REGULATORY CONCERNS
(a) Purchaser acknowledges and understands that notwithstanding
anything to the contrary contained herein if the Commission at any time
determines that Purchaser is unsuitable to hold Shares or other securities of
Seller, then until such Shares or other securities are owned by persons other
than Purchaser, (i) Seller shall not be required or permitted to pay any
dividend or interest with regard to such Shares or other securities, (ii) the
holder of such Shares or other securities shall not be entitled to vote on any
matter as a holder of such Shares or other securities, and such Shares or other
securities shall not for any purposes be included in the Shares or other
securities of the Company entitled to vote, and (iii) Seller shall not pay any
remuneration in any form to the holder of such Shares or other securities.
(b) The parties acknowledge that Purchaser and its affiliates
will be seeking appropriate Licensing Approval from the Nevada Gaining
Authorities, and that no assurance can be given that such Licensing Approval
will be issued or when such Licensing Approval may be issued. The Purchaser
agrees to file for such Licensing Approval as soon as practicable and to pursue
their issuance with reasonable diligence. If Purchaser or its affiliates are (i)
found unsuitable, (ii) denied such Licensing Approval or (iii) do not obtain
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<PAGE> 29
such Licensing Approval on or before the third anniversary of the Closing Date,
then, subject to the requirements of the Nevada Gaming Authorities, Seller, upon
Purchaser's request, shall on such third anniversary or such earlier time that
there is a finding of unsuitability or a denial of such Licensing Approval (i)
pay off the indebtedness owing to Purchaser under the Note and/or (ii) redeem
the Shares previously purchased by Purchaser from Seller at a price equal to the
consideration paid for such Shares by Purchaser. The principal balance of the
Note, together with interest owing thereon through the date of the event
triggering the payment, shall be paid off within six (6) months following the
date of the event triggering payment or such shorter period as may be required
by the Nevada Gaming Authorities. The purchase price for the redemption of
Shares pursuant to this Section 16(b) shall be paid without interest and shall
be paid in twenty-four (24) equal, consecutive monthly installments or such
shorter period as may be required by the Nevada Gaming Authorities. The
installments shall commence on the first day of the calendar month following the
month in which the event triggering payment occurred. Further, in the event that
the Gaming Board, pursuant to the ruling letter request described in Section
3(b), requires the transactions contemplated by this Agreement to be unwound,
then, subject to the requirements of the Gaining Board, the Note shall be paid
off and the Shares shall be redeemed by Seller in accordance with the procedure
described above, except that in such event the purchase price for the Shares
shall be paid within a six (6) month period or such shorter period as may be
required by the Nevada Gaming Authorities.
17. 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 in the negotiation and
consummation of the transactions
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<PAGE> 30
contemplated hereby; provided, however, that (i) such fees and expenses shall
not include any fees and expenses incurred by Purchaser and its affiliates in
connection with obtaining appropriate gaming licenses in Nevada and (ii) such
fees and expenses shall not exceed $100,000.
18. 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
27 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.
19. 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: Diversified Opportunities Group Ltd.
c/o Jacobs Entertainment Ltd.
1231 Main Avenue
Cleveland, Ohio 44113
Attn: Jeffrey P. Jacobs
Fax No.: (216) 861-6315
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<PAGE> 31
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 AND
JANSEN Boardwalk Casino, Inc.
3750 Las Vegas Boulevard South
Las Vegas, Nevada 89109
Attn: Louis J. Sposato
Fax No.: (702) 739-7918
Copy To: Jones, Jones, Close & Brown, Chartered
3773 Howard Hughes Parkway
Third Floor South
Las Vegas, Nevada 89109
Attn: Gary R. Goodheart, Esq.
Fax No.: (702) 737-7705
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 personally delivered or sent by facsimile.
20. 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.
21. 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.
22. COUNTERPARTS
This Agreement may be executed in any one or more counterparts, all
of which taken together shall constitute one instrument.
-31-
<PAGE> 32
23. 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.
24. 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.
25. 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.
26. 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
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<PAGE> 33
continuing waiver of any such condition or of the breach of any other provision,
term, covenant, representation or warranty of this Agreement.
27. ASSIGNMENT BY PURCHASER.
Subject to any required approval of the Nevada Gaming Authorities,
Purchaser may assign its rights and obligations hereunder, in whole or in part,
to one or more 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 in which Jacobs beneficially owns 15% or more of
the voting equity securities and is Chairman of the Board and/or Chief Executive
Officer constitutes common control.
28. ARBITRATION.
If any dispute shall arise among the parties with respect to this
Agreement or any of the transactions contemplated hereby, such dispute shall be
settled by arbitration pursuant to this Section 28. 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 28. 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 Nevada. Said
arbitrator(s) shall be sworn
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<PAGE> 34
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 fees and expenses of the prevailing
party's attorneys in any arbitration proceedings shall be borne by the
non-prevailing party.
29. GOVERNING LAW
This Agreement shall be governed by and construed under the laws of
the State of Nevada.
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<PAGE> 35
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the date first above set forth.
SELLER:
BOARDWALK CASINO, INC.
By: /s/ Louis Sposato
------------------------------------------
Title: Secretary/Treasurer
/s/ Norbert W. Jansen
----------------------------------------------
Norbert W. Jansen, individually and as trustee
under an agreement dated July 14, 1993
PURCHASER:
DIVERSIFIED OPPORTUNITIES GROUP
LTD.
By: Jacobs Entertainment Ltd.,
its Manager
By: /s/ Jeffery P. Jacobs
------------------------------
Jeffery P. Jacobs,
President
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<PAGE> 36
LIST OF EXHIBITS AND SCHEDULES
<TABLE>
<CAPTION>
CONTRACT
EXHIBIT REFERENCE DESCRIPTION
- ------- --------- -----------
<S> <C> <C>
A 2(a) Note A
B 2(a) Deed of trust and Security Agreement
C 2(c) Option Agreement
D 3(a) Registration Agreement
E 9(h) Lease
</TABLE>
<TABLE>
<CAPTION>
CONTRACT
SCHEDULE REFERENCE DESCRIPTION
- -------- --------- -----------
<S> <C> <C>
4(c) 4(c) Options
4(g) 4(g) Liens
4(i) 4(i) Insurance and Claims
4(m) 4(m) Investigations and Litigation
4(n) 4(n) Certain Agreement
4(s) 4(s) Conduct of Business
4(t) 4(t) Legal Compliance
4(o) 4(o) Benefit Plans
4(v) 4(v) Intellectual Property
4(w) 4(w) Contracts
</TABLE>
<PAGE> 1
EXHIBIT E
CONVERTIBLE SUBORDINATED NOTE
$5,000,000.00 Las Vegas, Nevada
September 24, 1996
FOR VALUE RECEIVED, the adequacy of which is hereby acknowledged,
Boardwalk Casino, Inc., a Nevada corporation with its principal office located
at 3750 Las Vegas Blvd. South, Las Vegas, Nevada 89109 (the "Maker"), hereby
promises to pay to the order of Diversified Opportunities Group Ltd. (the
"Holder") with its principal office located at 1231 Main Avenue, Cleveland, Ohio
44113, the principal sum of Five Million Dollars ($5,000,000.00), together with
interest thereon from the date hereof until payment in full at the Charged Rate
(as defined below). This Convertible Subordinated Note (the "Note") is issued
pursuant to that certain Purchase Agreement dated September 24, 1996 (the
"Purchase Agreement") among the Maker, the Holder and Norbert W. Jansen,
individually and as trustee under an agreement dated July 14, 1993 ("Jansen").
1. PAYMENT OF PRINCIPAL
All principal outstanding hereunder shall be due in one payment, in
full, on September 23, 1998. Principal of and interest on this Note are payable
in lawful money of the United States of America at the Holder's address stated
above, or at such other place as the Holder shall designate to the Maker in
writing.
2. INTEREST
a. For purposes of this Note, the following terms shall have the
meanings given them in this subsection a.:
i. "Adjusted Eurodollar Rate": For each calendar month until this
Note is paid in full, the rate (rounded upward, if necessary,
to the next one
<PAGE> 2
hundredth of one percent) determined by dividing the Eurodollar Rate
for such Interest Period by 1.00 minus the Eurodollar Reserve
Percentage;
ii. "Eurodollar Business Day": A day (other than a Saturday, Sunday
or legal holiday) on which banks are open for business in New
York City and on which there is trading by and between banks in
United States dollar deposits in the interbank Eurodollar
market.
iii."Eurodollar Rate": For each calendar month, the interest rate
per annum (rounded upward, if necessary, to the next
one-sixteenth of one percent) at which United States dollar
deposits are offered to First Bank National Association (the
"Bank") in the interbank Eurodollar market two Eurodollar
Business Days prior to the first day of such calendar month for
delivery in immediately available funds on the first day of such
month and in an amount approximately equal to the outstanding
principal amount of the Note and for a thirty (30) day maturity;
provided, that in lieu of determining the rate in the foregoing
manner, the Holder may substitute the per annum Eurodollar rate
(LIBOR) for United States dollars displayed on the Telerate
Systems, Inc. screen, page 3750 (or other applicable page), on
the first day of such calendar month.
iv. "Eurodollar Reserve Percentage": As of any day, that percentage
(expressed as a decimal) which is in effect on such day, as
prescribed by the Federal Reserve Board for determining the
maximum reserve
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<PAGE> 3
requirement (including any basic, supplemental or emergency
reserves) for a member bank of the Federal Reserve System, with
deposits comparable in amount to those held by the Bank, in
respect of "Eurocurrency Liabilities" as such term is defined in
Regulation D of the Federal Reserve Board. The rate of interest
applicable to the outstanding principal balance of the Note
shall be adjusted automatically on and as of the effective date
of any change in the Eurodollar Reserve Percentage.
b. This Note shall bear interest on the unpaid principal amount at
a variable rate per annum equal to the sum of (1) the Adjusted
Eurodollar Rate, plus (2) two percent (2.00%) (the "Charged
Rate"). The Charged Rate shall be adjusted monthly on the first
day of each calendar month and each change in the Charged Rate
shall result immediately, without notice or demand of any kind,
in a corresponding change in the interest rate under the Note.
Interest shall be payable on the last day of each calendar
quarter, and, in the event of a permitted prepayment, on the
date of such prepayment. The Holder shall provide the Maker with
notice of the Charged Rate periodically in order to permit the
Maker to make timely payments hereunder.
c. Any amount not paid when due under this Note, whether at the
date scheduled for payment or earlier upon acceleration, shall
bear interest until paid in full at a rate per annum equal to
the Charged Rate plus four percent (4.00%) (the "Default Rate").
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<PAGE> 4
3. FACILITY FEE
Maker shall pay to Holder an annual facility fee (the "Facility Fee")
in the amount of Twelve Thousand Five Hundred Dollars ($12,500). The Facility
Fee shall be due and payable to Holder on the date hereof and on the same day of
each subsequent year until this Note is paid in full.
4. USE OF PROCEEDS
The principal sum of Five Million Dollars ($5,000,000) shall be used by
the Maker solely for working capital purposes.
5. SECURITY
This Note is be secured by a Deed of Trust and Security Agreement of
even date herewith on certain real and personal property owned by the Maker
located in Clark County, Las Vegas, Nevada (the "Deed of Trust").
6. PREPAYMENT Except as may be required by Section 16(b) of the Purchase
Agreement or as otherwise may be required by the Nevada Gaming Authorities (as
defined in the Purchase Agreement), the Maker may not prepay this Note without
the prior written consent of the Holder.
7. COVENANTS. So long as any indebtedness under this Note remains
outstanding, Maker shall not, without the prior written consent of the Holder:
a. directly or indirectly declare or pay any dividends or make any
distributions upon any of its common stock or other equity securities; PROVIDED
that the Maker may pay dividends or make distributions on its common stock or
its other equity securities during any fiscal year so long as the same are
permitted pursuant to that certain Indenture dated as of
-4-
<PAGE> 5
April 7, 1995 between the Maker and Shawmut Bank, N.A., Trustee for $40,000,000
16.5% First Mortgage Notes Due March 31, 2005 (the "Indenture");
b. directly or indirectly redeem, purchase or otherwise acquire any of
the Maker's common stock or other equity securities (including, without
limitation, options and other rights to acquire such common stock or other
equity securities), or directly or indirectly redeem, purchase or make any
payments with respect to any stock appreciation rights, phantom stock plans or
similar rights or plans; PROVIDED that the Maker may redeem, purchase or
otherwise acquire outstanding common stock or other equity securities so long as
the same are permitted pursuant to the Indenture;
c. merge or consolidate with any person or permit any subsidiary to
merge or consolidate with any person (other than a wholly-owned subsidiary);
PROVIDED that a subsidiary may merge with another person so long as after such
merger the Maker owns at least 80% of the (i) capital stock of the surviving
corporation possessing the right to vote for the election of directors and (ii)
number of shares of the common stock of the surviving corporation then
outstanding;
d. sell, lease or otherwise dispose of, or permit any subsidiary to
sell, lease or otherwise dispose of, more than 50% of the consolidated assets of
the Maker and its subsidiaries (computed on the basis of book value, determined
in accordance with generally accepted accounting principles consistently
applied, or fair market value);
e. issue or sell any shares of the capital stock, or rights to acquire
shares of the capital stock, of any subsidiary to any person (other than the
Holder or a permitted assignee of the Holder) if immediately after such issuance
or sale the Maker owns less than 80% of
-5-
<PAGE> 6
the (i) capital stock possessing the right to vote for the election of directors
and (ii) the number of shares of the common stock of any subsidiary then
outstanding;
f. liquidate, dissolve or effect a recapitalization or reorganization
in any form of transaction (including, without limitation, any reorganization
into a limited liability company or into partnership or other non-corporate
form); or
g. create, incur, assume or suffer to exist, or permit any subsidiary
to create, incur, assume or suffer to exist, additional indebtedness, unless the
same is permitted pursuant to the Indenture.
Further, in the event the Maker proposes to authorize, issue or enter
into any agreement providing for the issuance (contingent or otherwise) of
equity securities, including without limitation, common stock, preferred stock,
warrants or otherwise, or any notes or debt securities containing equity
features, including, without limitation, any notes or debt securities
convertible into or exchangeable for common stock, preferred stock, or other
equity securities, the Maker shall provide thirty (30) days prior written notice
to the Holder that it plans to effect such a transaction. In such event, the
Holder shall have the right to require the Maker to pay off the remaining
indebtedness owed to the Holder under this Note as a condition to completing
such a transaction; such pay off to occur contemporaneously with the closing of
such a transaction. The Holder shall exercise such right by delivering written
notice to the Maker within twenty (20) days after the Holder's receipt of the
notice described above.
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<PAGE> 7
8. CONVERSION
a. Prior to payment in full of the principal balance of this Note, the
Holder of this Note has the right, at the Holder's option, at any time and from
time to time following the receipt from the Nevada Gaming Authorities (as
defined in the Purchase Agreement) of Licensing Approval (as defined in the
Purchase Agreement), to convert all or any portion of the then unpaid principal
balance of this Note in accordance with the provisions of subparagraph c. of
this Section 8, into shares of Common Stock of Maker, $.001 par value per share
(the "Common Stock"). The number of shares of Common Stock into which this Note
may be converted ("Conversion Shares") shall be determined by dividing the then
unpaid principal balance of this Note by $7.50 (the "Conversion Price").
b. Any Conversion Shares shall have the registration rights set forth
in the Registration Agreement between the Maker and the Holder dated of even
date herewith.
c. Before the Holder shall be entitled to convert this Note into
Conversion Shares, it shall give written notice by mail, postage prepaid, to the
Maker at its principal corporate office, of the election to convert the same.
Such notice shall state therein the date on which such conversion will occur.
The Maker at its own expense shall, as soon as practicable thereafter, issue and
deliver at such office to the Holder of this Note a certificate or certificates
for the number of Conversion Shares to which the Holder of this Note shall be
entitled. At the time such certificates are issued, accrued interest on the
amount of principal so converted shall be paid by the Maker to the Holder. Such
conversion shall be deemed to have been made immediately prior to the close of
business on the date of conversion specified in such written notice, and the
Holder of this Note shall be treated for all purposes as the record holder of
such Conversion Shares. To the extent
-7-
<PAGE> 8
that the entire unpaid principal balance of this Note is not being converted
into Common Stock, the Holder of this Note shall credit the Note on its books to
the extent of the principal being converted by the Holder into Common Stock.
d. No fractional share of Common Stock shall be issued upon conversion
of this Note. In lieu of the Maker issuing any fractional share to the Holder
upon the conversion of this Note, the Maker shall pay, in cash, to the Holder
the amount of outstanding principal that is applicable to such fractional share.
9. CONVERSION PRICE ADJUSTMENTS.
a. In the event the Maker should at any time or from time to time after
the date of issuance hereof fix a record date for the effectuation of a split or
subdivision of the outstanding shares of Common Stock or the determination of
holders of Common Stock entitled to receive a dividend or other distribution
payable in additional shares of Common Stock or other securities or rights
convertible into, or entitling the holder thereof to receive directly or
indirectly, additional shares of Common Stock (hereinafter referred to as
"Common Stock Equivalents") without payment of any consideration by such holder
for the additional shares of Common Stock or the Common Stock Equivalents
(including the additional shares of Common Stock issuable upon conversion or
exercise thereof), then, as of such record date (or the date of such dividend
distribution, split or subdivision if no record date is fixed), the Conversion
Price of this Note shall be appropriately decreased so that the number of
Conversion Shares issuable upon conversion of this Note shall be increased in
proportion to such increase of outstanding shares.
b. If the number of shares of Common Stock outstanding at any time
after the date hereof is decreased by a combination of the outstanding shares of
Common Stock,
-8-
<PAGE> 9
then, following the record date of such combination, the Conversion Price for
this Note shall be appropriately increased so that the number of Conversion
Shares issuable on conversion hereof shall be decreased in proportion to such
decrease in outstanding shares.
c. In the event of (i) any taking by the Maker of a record of the
holders of any class of securities of the Maker for the purpose of determining
the holders thereof who are entitled to receive any dividend (other than a cash
dividend) or other distribution, or any right to subscribe for, purchase or
otherwise acquire any shares of stock of any class or any other securities or
property, or to receive any other right, or (ii) any capital reorganization of
the Maker, any reclassification or recapitalization of the capital stock of the
Maker or any transfer of all or substantially all of the assets of the Maker to
any other person or any consolidation or merger involving the Maker, or (iii)
any voluntary or involuntary dissolution, liquidation or winding up of the
Maker, the Maker will mail to the Holder of this Note a notice specifying (A)
the date on which any such record is to be taken for the purpose of such
dividend, distribution or right, and the amount and character of such dividend,
distribution or right, (B) the date on which any such reorganization,
reclassification, transfer, consolidation, merger, dissolution, liquidation or
winding up is expected to become effective and the record date for determining
stockholders entitled to vote thereon and (C) the new Conversion Price after
giving effect to the adjustment event, which new Conversion Price shall
represent an appropriate increase or decrease in the Conversion Price to
preserve the proportionate amount of Conversion Shares. Such notice shall be
mailed at least twenty (20) days prior to the date described in clause (A) or
(B) above.
-9-
<PAGE> 10
d. The Maker shall at all times reserve and keep available out of its
authorized but unissued shares of Common Stock solely for the purpose of
effecting the conversion of the Note into such number of Conversion Shares as
shall from time to time be sufficient to effect the conversion of the Note; and
if at any time the number of authorized but unissued shares of Common Stock
shall not be sufficient to effect the conversion of the entire outstanding
principal amount of this Note, in addition to such other remedies as shall be
available to the Holder of this Note, the Maker will use its best efforts to
take such corporate action as may, in the opinion of its counsel, be necessary
to increase its authorized but unissued shares of Common Sock to such number of
shares as shall be sufficient for such purposes.
10. EVENTS OF DEFAULT
"Event of Default," whenever used herein, means any one or more of the
following defaults shall have occurred and be continuing (whatever the reason
for such Event of Default and whether it shall be voluntary or involuntary or be
effected by operation of law pursuant to any judgment, decree or order of any
court or any order, rule or regulation of any administrative or governmental
body):
i. Default in the payment of any installment of interest, the
Facility Fee, the principal of this Note or any other amount payable
hereunder when such payment becomes due and payable, whether at
maturity, by acceleration or otherwise, and such default shall continue
unremedied for a period of fifteen (15) days;
ii. Default in the performance or breach of any other
agreement, covenant or warranty of the Maker contained in this Note,
and such default or breach shall continue unremedied for a period of
thirty (30) days after the date on which written
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<PAGE> 11
notice of such default or breach, requiring the Maker to remedy the
same, shall have been given to the Maker by the Holder, or such longer
period provided that the default is of a nature that cannot be remedied
within 30 days and the Maker has within the thirty (30) day period
instituted curative action and diligently and continuously pursues such
action to completion;
iii. The entry of a decree or order by a court having
jurisdiction adjudging the Maker a bankrupt or insolvent, or approving
as properly filed a petition seeking reorganization, arrangement,
adjustment or composition of or in respect of the Maker under federal
bankruptcy law or any similar federal or state law for the relief of
debtors ("Bankruptcy Law"), or appointing a receiver, liquidator,
assignee, trustee, conservator, sequestrator or assignee in bankruptcy
or insolvency of the Maker or of any substantial part of its property,
or ordering the winding up or liquidation of its affairs, and such
decree or order shall have continued undischarged and unstayed for a
period of thirty (30) days;
iv. The Maker shall commence a voluntary case or shall consent
to the entry of an order for relief in any involuntary case under
Bankruptcy Law, or shall consent to the appointment of or taking
possession by a receiver, liquidator, custodian, sequestrator, trustee
or assignee of any substantial part of its property, or shall make an
assignment for the benefit of creditors, or shall fail generally to pay
its debts as they become due;
v. There shall have occurred any circumstance or event which,
upon the lapse of time, the giving of notice, or both, would constitute
an event of default
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<PAGE> 12
under any other indebtedness of the Maker with a principal balance in
excess of $1,000,000, except if the same is cured or waived within any
applicable grace period;
vi. The Maker shall have failed to give written notice within
five (5) days after the occurrence of the event or circumstances
described in clause (v), above; and
vii. Breach or default by the Maker of any representation,
warranty, agreement or covenant pursuant to the Purchase Agreement or
any other agreement between the Holder and Maker or Jansen, including,
without limitation, the Deed of Trust and such breach or default gives
rise to an indemnification obligation of the Maker or Jansen pursuant
to the Purchase Agreement and such parties fail to comply with such
indemnification obligations.
11. REMEDIES
If an Event of Default occurs and is continuing (unless waived in
writing by the Holder), then, and in each and every case, unless the entire
principal of this Note already shall have become due and payable, the Holder
may, by a notice in writing to the Maker, declare the principal of and the
accrued interest on this Note to be immediately due and payable. The principal
of and accrued interest on this Note shall become and shall be immediately due
and payable upon such declaration.
12. MISCELLANEOUS
a. The Maker hereby waives presentment, notice of dishonor, protest and
diligence in bringing suit against the Maker. Acceptance by the Holder of any
payment which is less than the full amount then due and owing hereunder shall
not constitute a waiver of the Holder's right to receive payment in full at such
time or at any prior or subsequent time. The Maker consents that the time of
payment may be extended an
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<PAGE> 13
unlimited number of times before or after maturity without notice to the Maker,
and that the Maker shall not be discharged by reason of any such extension or
extensions of time. No delay or omission on the part of the Holder in exercising
any right hereunder shall operate as a waiver of such right or any other right
under this Note. A waiver on any one occasion shall not be construed as a bar to
or waiver of any such right or remedy on any future occasion.
b. Notwithstanding the foregoing, if at any time implementation of any
provision hereof shall cause the interest contracted for or charged herein and
collectible hereunder to exceed the applicable lawful maximum rate, then the
interest shall be limited to such lawful maximum.
c. The Maker shall be liable for any and all costs and expenses of
collection, including, without limitation, reasonable attorneys' fees, arising
by virtue of an Event of Default.
d. This Note shall be subject to and construed in accordance with the
laws of the State of Nevada. If any provision herein shall be unenforceable,
such unenforceable provision shall not render the remaining provisions hereof
unenforceable or invalid.
e. This Note shall be binding upon the Maker and the Maker may not
assign its obligations hereunder without the prior written consent of the
Holder. The Holder may assign its rights hereunder, in whole or in part, to one
or more 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, the Holder or Jeffrey P. Jacobs; it being
acknowledged that any entity in which Jeffrey P. Jacobs beneficially owns
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<PAGE> 14
15% or more of the voting equity securities and is Chairman of the Board and/or
Chief Executive Officer constitutes common control.
BOARDWALK CASINO, INC.
By: /s/ Louis Sposato
-----------------------------
Title: Secretary/Treasurer
--------------------------
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<PAGE> 1
EXHIBIT F
OPTION AND PROXY AGREEMENT
--------------------------
THIS AGREEMENT is made as of September 24, 1996, by and among
Boardwalk Casino, Inc., a Nevada corporation (the "Company"), Norbert W. Jansen,
individually and as trustee under an agreement dated July 14, 1993 ("Jansen"),
and Diversified Opportunities Group Ltd., an Ohio limited liability company, or
its nominee as described in Section 14 ("Investor").
RECITALS
--------
A. Pursuant to a certain Purchase Agreement dated as of even date
herewith (the "Purchase Agreement"), by and among Investor, Jansen and the
Company, Investor is acquiring certain Shares and a Note (as defined in the
Purchase Agreement) of the Company.
B. It is a condition to closing the transactions contemplated by the
Purchase Agreement that Jansen and the Investor enter into this Agreement for
the purposes, among others, of (i) providing the Investor an option to acquire
and a right of first refusal with respect to certain of the Shares of the
Company owned by Jansen, (ii) establishing the composition of the Company's
Board of Directors (the "Board"), (iii) assuring continuity in the management
and ownership of the Company, and (iv) providing certain covenants for the
benefit of Investor.
C. Capitalized terms used but not otherwise defined herein are defined
in Paragraph 9 hereof.
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. ACQUISITION OF AND OPTION FOR JANSEN SHARES.
Subject to the conditions to Closing (as described in the Purchase
Agreement), Investor shall acquire the Shares contemplated by subparagraph (a),
below, and shall be granted an option (the "Option") to acquire from Jansen
additional Shares, as described below:
(a) At Closing Investor shall acquire from Jansen 182,411 Shares
at a purchase price of $7.00 per Share (the "Strike Price").
The parties acknowledge that Investor is filing with the
Gaming Board (as defined in the Purchase Agreement) a
request for a ruling letter with respect to the transactions
contemplated by the Purchase Agreement. Within 7 days
following the receipt of a favorable ruling letter from the
Gaming Board satisfactory to Purchaser and Seller, each in
the exercise of its reasonable business judgment, Investor
shall acquire
<PAGE> 2
from Jansen 317,589 Shares (the "Differential Shares") at
the Strike Price. If, however, the Gaming Board determines
that Investor may not acquire the Differential Shares
without first having obtained Licensing Approval (as defined
in the Purchase Agreement), Investor shall thereafter have
the right but not the obligation to acquire the Differential
Shares on the terms described in subparagraph (b) below.
(b) If applicable, Investor shall have the right but not the
obligation to acquire from Jansen and Jansen shall have the
obligation to sell to Investor the Differential Shares. The
exercise price for the Differential Shares shall be
determined by taking the difference of (i) $7.75 less (ii)
the Strike Price. Such difference shall be multiplied by a
fraction, the numerator of which shall be the number of full
months (excluding partial months) elapsed from the Closing
until such time as the Investor obtains Licensing Approval
and the denominator of which shall be 18. The product
obtained therefrom shall be added to the Strike Price in
order to determine the Exercise Price. For purposes of
illustration if the Closing occurs on September 17, 1996,
the Strike Price was $7 and Investor obtains Licensing
Approval on September 20, 1997, the exercise price for the
Differential Shares would be $7.50 (e.g. $7.75 - $7.00 =
$.75 x 12/18 = $.50 + $7 = $7.50). Investor shall have the
right to exercise the Option for the Differential Shares as
described in this subparagraph (b) by giving written notice
to Jansen during the 30 day period following Investor's
receipt of Licensing Approval; provided, however if Investor
does not obtain Licensing Approval on or before the 18 month
anniversary of the Closing, such Option for the Differential
Shares as described in this subparagraph (b) shall be null
and void. Thereafter, Investor shall have the right but not
the obligation to acquire the Differential Shares on the
terms described in subparagraph (d) below.
(c) Investor shall have the right but not the obligation to
acquire from Jansen and Jansen shall have the obligation to
sell to Investor up to 1,000,000 Shares at an exercise price
of $7.75 per Share. This right may be exercised by Investor
commencing on receipt of Licensing Approval and continuing
until the 18 month anniversary of the Closing by giving
written notice to Jansen.
(d) Investor shall have the right but not the obligation to
acquire from Jansen and Jansen shall have the obligation to
sell to Investor up to an amount equal to the sum of the
Differential Shares plus 1,000,000 Shares (less any Shares
acquired by Investor pursuant to subparagraph (c) above) at
an exercise price of $8.25 per Share. This right may be
exercised by Investor at any time following the expiration
of the Option period described in subparagraph (c) and
continuing until the third anniversary date of the Closing
by giving written notice to Jansen.
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<PAGE> 3
The exercise of any such Option shall be conditioned upon appropriate Licensing
Approval or other regulatory approval being obtained from the Nevada Gaming
Authorities. The Option shall continue to apply to any Shares owned by Jansen's
estate or family which are acquired from Jansen. The closing of any purchase and
sale of any such Shares pursuant to Paragraphs 1(b), (c) or (d) shall be
consummated as soon as practical after the delivery of the Investor's written
election notice to Jansen, but in any event within 15 business days after the
delivery of such notice. At the closing of the purchase and sale of the
Differential Shares pursuant to Paragraph 1(a), Jansen shall deliver a
certificate affirming the representations and warranties made by Jansen pursuant
to the Purchase Agreement. The purchase price of any Shares acquired pursuant to
this Paragraph 1 shall be payable by Investor in cash by wire transfer or
certified or bank check at the time of transfer and Jansen shall deliver to
Investor certificates representing such Shares in proper form for transfer.
2. FIRST REFUSAL RIGHTS.
(a) TRANSFER OF SHARES. None of Jansen, Jansen's family or his
estate (collectively, the "Selling Party") 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 Shares
or any securities containing options or rights to acquire any Shares (a
"Transfer"), except pursuant to the provisions of this Paragraph 2. A Selling
Party shall not consummate any Transfer until 14 calendar days after the later
of the delivery to the Investor of such Selling Party's Offer Notice (as defined
below) (the "Election Period"); provided, however, the Election Period shall be
reduced to 7 calendar days if the proposed Transfer involves an interest in less
than 50,000 Shares. The restrictions set forth in this Paragraph 2 shall not
apply with respect to (i) any Shares owned by Jansen's family members on the
date hereof or (ii) any Transfer of Shares from Jansen's estate to his family
members pursuant to the terms of his will or trust agreement; provided that the
restrictions contained in this Paragraph 2 shall continue to be applicable to
the Shares after any such Transfer and provided further that the transferees of
such Shares shall have agreed in writing to be bound by the provisions of this
Agreement affecting the Shares so transferred.
(b) FIRST OFFER RIGHT. At least 7 or 14 calendar days prior to
making any Transfer, of any Shares or securities, as applicable, the Selling
Party shall deliver a written notice (an "Offer Notice") to the Company and the
Investor. The Offer Notice shall disclose in reasonable detail the proposed
number of Shares or securities to be transferred, the proposed terms and
conditions of the Transfer and the identity of the prospective transferee(s) (if
known). The Investor may elect to purchase a portion of such Shares or
securities, at the price to be paid to the Selling Party and on the terms
proposed in the Offer Notice, equal to the greater of (i) 35% of the number of
Shares offered for sale by the Selling Party or (ii) an amount determined by
multiplying (x) the number of Shares or securities offered for sale by the
Selling Party by (y) the Investor's then percentage ownership of Shares of the
Company, by delivering written notice of such election to the Selling Party as
soon as practical but in any event during the Election Period. In determining
the Investor's percentage ownership, it shall be assumed that the Investor has
purchased
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<PAGE> 4
500,000 Shares under Paragraphs 1(a), (b) and/or (d), has exercised the Option
for 1,000,000 Shares under Paragraphs 1(c) and/or (d) and has converted the Note
for 666,667 Shares. If the Investor has elected to purchase Shares and
securities from the Selling Party, the transfer of such Shares shall be
consummated as soon as practical after the delivery of the election notice(s) to
the Selling Party, but in any event within 15 days after the expiration of the
Election Period. At the time of transfer, the Selling Party shall deliver to the
Investor certificates representing such Shares in proper form for the transfer
and the Investor shall deliver the purchase price in accordance with the terms
set forth in the Offer Notice, including any notes for a Selling Party financed
purchase.
(c) SHARES NOT ACQUIRED BY THE INVESTOR. To the extent of the
Shares not purchased by the Investor, the Selling Party shall, within 90 days
after the expiration of the Election Period, complete the transfer of such
Shares either in the public market or to the proposed transferee set forth in
the Offer Notice 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 Investor, and furnish proof of such transfer to the
Investor. Any Shares not transferred within such 90-day period shall be
reoffered to the Investor under this Paragraph 2 prior to any subsequent
Transfer. The Shares so transferred by the Selling Party pursuant to the Offer
Notice shall no longer be subject to the restrictions contained herein and the
legend referred to in Paragraph 7 may be removed at the time of such transfer.
3. BOARD OF DIRECTORS.
(a) From and after the time that the Board is to be expanded
to six persons pursuant to Section 3(b) of the Purchase Agreement, Jansen shall
vote all of his Shares and any other voting securities of the Company over which
Jansen 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), so that:
(i) the authorized number of directors on the Board shall be
established at six directors;
(ii) Jeffrey P. Jacobs shall be elected to the Board;
(iii) at such time as the Investor has acquired 1,000,000 or more
Shares from Jansen pursuant to this Agreement, the Board shall be
expanded to seven directors and the additional director shall be
designated by the Investor (such additional director together with
Jeffrey P. Jacobs are sometimes referred to collectively as the
"Investor Directors"); and
(iv) in the event that either of the Investor Directors are
removed (with or without cause) or cease to, or cannot, serve as a
member of the Board for
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<PAGE> 5
his elected term of office, the resulting vacancy on the Board shall be
filled by a representative designated by the Investor.
(b) The Company shall pay the reasonable out-of-pocket
expenses incurred by each Investor Director in connection with attending the
meetings of the Board and any committee thereof.
(c) If the Investor fails to designate a representative to
fill a directorship pursuant to the terms of this Paragraph 3 within 30 days
after written notice, the election of an individual to such directorship shall
be accomplished in accordance with the Company's Bylaws and applicable law.
4. CERTAIN COVENANTS OF JANSEN.
From and after the Closing, Jansen shall, subject to his
fiduciary duties as a director of the Company, vote all of his Shares and any
other voting securities of the Company over which Jansen 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 such meetings in person or by proxy for purposes of obtaining a
quorum and execution of written consents in lieu of meetings), so that the
Company shall not, without the prior written consent of the Investor, take any
of the actions described in Section 7 of the Note.
5. IRREVOCABLE PROXY. In order to secure Jansen's obligation to
vote his Shares and other voting securities of the Company in accordance with
the provisions of Paragraphs 3 and 4 hereof, Jansen hereby appoints the Investor
as his true and lawful proxy and attorney-in-fact, with full power of
substitution, to vote all of his 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 Paragraphs 3 and 4. The Investor may exercise the
irrevocable proxy granted to it hereunder at any time Jansen fails to comply
with the provisions of this Agreement, subject to the receipt of the required
Licensing Approval. The proxies and powers granted by Jansen pursuant to this
Paragraph 5 are coupled with an interest and are given to secure the performance
of Jansen's obligations to the Investor under this Agreement. Such proxies and
powers shall be irrevocable and shall survive the death, incompetency,
disability, bankruptcy or dissolution of Jansen and the subsequent holders of
his Shares. If for any reason whatsoever the proxy described above is deemed to
expire after seven years from the date hereof, this Agreement shall be deemed an
agreement entered into in accordance with Section 78.365(3) of the Nevada
General Corporate Law, effective for a term of 15 years following the date
hereof.
6. REPRESENTATIONS, WARRANTIES AND COVENANTS.
(a) Jansen represents and warrants that (i) Jansen is the
record owner of the number of Shares set forth on Schedule A attached hereto,
and (ii) Jansen has not granted and is not a party to any proxy, voting trust or
other agreement which is inconsistent
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<PAGE> 6
with, conflicts with or violates any provision of this Agreement. Jansen shall
not 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. Jansen shall at all times during the term of this Agreement own
unencumbered and have available for immediate transfer to the Investor the
number of Shares pursuant to which Investor has been granted an Option or right
to purchase hereunder.
(b) The Investor hereby affirms the representations and
warranties being made by it pursuant to Section 5(c) of the Purchase Agreement.
7. LEGEND.
Each certificate evidencing Shares of Jansen, individually and
as trustee, and each certificate issued in exchange for or upon the transfer of
any such Shares shall also be stamped or otherwise imprinted with a legend in
substantially the following form:
"The securities represented by this certificate are subject to
the conditions, restrictions and obligations specified in the
Option and Proxy Agreement, dated as of September 24, 1996
and as amended and modified from time to time, among the
issuer (the "Company"), Norbert W. Jansen, individually and as
trustee under an agreement dated July 14, 1993 and Diversified
Opportunities Group Ltd., or its permitted assignee(s), and
the Company reserves the right to refuse the transfer of such
securities until such conditions, restrictions and obligations
have been fulfilled with respect to such transfer."
Jansen shall deliver all certificates representing Shares held
by him, individually and as trustee, as of the date hereof and the Company shall
or shall cause its transfer agent to imprint such legend on all such
certificates.
8. TRANSFER. Prior to transferring any Shares, except for a
Transfer to the Investor and a permitted third party transferee pursuant to
Paragraph 2, Jansen shall cause the prospective transferee (including his family
members) to be bound by all of the obligations of Jansen under this Agreement
with respect to the Shares so transferred and to execute and deliver to the
Company and the Investor a counterpart of this Agreement.
9. 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 recitals.
"Closing" has the meaning set forth in the Purchase Agreement.
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<PAGE> 7
"Company" has the meaning set forth in the introductory paragraph.
"Gaming Board" has the meaning set forth in the Purchase Agreement.
"Investor" has the meaning set forth in the introductory paragraph.
"Investor Directors" has the meaning set forth in Paragraph 3.
"Licensing Approval" has the meaning set forth in the Purchase
Agreement.
"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/or a governmental entity or any
department, agency or political subdivision thereof.
"Purchase Agreement" has the meaning set forth in the recitals.
"Shares" means the Company's shares of common stock, $.001 par value.
10. TRANSFERS IN VIOLATION OF AGREEMENT. Any Transfer or attempted
Transfer of any Shares of Jansen 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 Shares as the owner of such Shares for
any purpose.
11. AMENDMENT AND WAIVER. Except as otherwise provided herein, no
modification, amendment or waiver of any provision of this Agreement shall be
effective against the parties hereto 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.
12. 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.
13. 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
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<PAGE> 8
understandings, agreements or representations by or among the parties, written
or oral, which may have related to the subject matter hereof in any way.
14. 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; provided, however, the Investor may
assign its rights and obligations hereunder, in whole or in part, to one or more
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, the Investor or Jeffrey P. Jacobs; it being
acknowledged that any entity in which Jeffrey P. Jacobs beneficially owns 15% or
more of the voting equity securities and is the Chairman of the Board and/or
Chief Executive Officer constitutes common control.
15. 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.
16. REMEDIES. The Investor shall be entitled to enforce its 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 its
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
Investor may in its 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.
17. NOTICES. Any notice, demand or other communication provided for in
or required by this Agreement shall be given in accordance with Section 19 of
the Purchase Agreement.
18. 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
Nevada.
19. 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 Nevada, the time period shall automatically be extended to the
business day immediately following such Saturday, Sunday or legal holiday.
20. DESCRIPTIVE HEADINGS. The descriptive headings of this Agreement
are inserted for convenience only and do not constitute a part of this
Agreement.
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<PAGE> 9
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first above written.
BOARDWALK CASINO, INC.
By: /s/ Louis Sposato
----------------------------------------
Title: Secretary/Treasurer
-------------------------------------
/s/ Norbert W. Jansen
-------------------------------------------
Norbert W. Jansen, individually and as
trustee under an agreement dated July 14,
1993
DIVERSIFIED OPPORTUNITIES GROUP LTD.
By: Jacobs Entertainment Ltd., its manager
By: /s/ Jeffrey P. Jacobs
----------------------------------------
Jeffrey P. Jacobs, President
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<PAGE> 10
SCHEDULE A
OPTION AND PROXY AGREEMENT
JANSEN SHARES/OPTIONS
Shares 3,250,000
Options* 340,000
*all issued under 1994 Stock Compensation Plan
<PAGE> 1
Exhibit G
BOARDWALK CASINO, INC.
REGISTRATION AGREEMENT
THIS AGREEMENT is made as of September 24, 1996, between BOARDWALK CASINO,
INC., a Nevada Corporation (the "Company"), and DIVERSIFIED OPPORTUNITIES GROUP
LTD., an Ohio limited liability company, or its nominee as described in
Paragraph 8(e) ("Purchaser").
The parties to this Agreement are parties to a Purchase Agreement dated as
of even date herewith (the "Purchase Agreement"), pursuant to which the Company
shall issue to Purchaser unregistered Shares and a convertible subordinated note
(the "Note"), which Note is convertible into Shares. It is contemplated pursuant
to the Purchase Agreement that Purchaser and Norbert W. Jansen, individually and
as trustee under an agreement dated July 14, 1993 ("Jansen"), shall have entered
into an option and proxy agreement (the "Option Agreement"), pursuant to which
Purchaser shall have the obligation to acquire certain Shares and the right to
acquire additional Shares of the Company owned by Jansen. 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 under the Purchase
Agreement. Unless otherwise provided in this Agreement, capitalized terms used
herein shall have the meanings set forth in Paragraph 7 hereof.
The parties hereto agree as follows:
1. DEMAND REGISTRATIONS.
(a) REQUESTS FOR REGISTRATION. For a period of five (5) years following
the Closing, Purchaser may request registration under the Securities Act of
1933, as amended (the "Securities Act"), of all or any portion of its Shares on
Form S-1 or any similar long-form registration 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 1(a) are referred to herein
as "Demand Registrations". Each request for a Demand Registration shall specify
the approximate number of Shares requested to be registered and the anticipated
per share price range for such offering.
(b) NUMBER OF DEMAND REGISTRATIONS. Purchaser shall be entitled to
request (i) two Demand Registrations in which the Company shall pay all
Registration Expenses (as defined in Paragraph 5) (the "Company-paid
Registrations") and (ii) one Demand Registration in which Purchaser shall pay
its share of the Registration Expenses as set forth in paragraph 5 hereof. A
registration shall not count as one of the permitted Demand Registrations until
it has become effective, and Purchaser is able to register at least 90% of the
Shares requested to be included in such registration by Purchaser; provided that
in any event the Company shall pay all Registration Expenses in connection with
any
<PAGE> 2
registration initiated as a Company-paid Registration whether or not it has
become effective. Demand Registrations shall be Short-Form Registrations
whenever the Company is permitted to use any applicable short form; provided,
however, Purchaser shall have the right to determine whether an underwriter or
underwriters will be retained and shall select any such underwriter for the sale
of Shares included in the Demand Registration, but the selection shall be
subject to the reasonable approval of the Company. The Company shall use its
reasonable best efforts to make Short-Form Registrations on Form S-3 available
for the sale of Shares.
(c) PRIORITY ON DEMAND REGISTRATIONS. Any Person other than Purchaser
who participates 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 registration.
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 or on Form S-8 or S-4) and the registration form to be used may be
used for the registration of Shares (a "Piggyback Registration"), the Company
shall give prompt written notice to Purchaser of its intention to effect such a
registration and shall include in such registration all Shares with respect to
which Purchaser requests for inclusion therein within 20 days after the receipt
of the Company's notice.
(b) PIGGYBACK EXPENSES. The Registration Expenses of Purchaser 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 Shares
requested to be included in such registration by Purchaser, and other securities
requested to be included in such registration relating to registration rights
existing on the date hereof, on a pro rata basis, and (iii) third, the other
securities requested to be included in such registration relating to
registration rights granted by the Company after the date hereof.
(d) PRIORITY ON SECONDARY REGISTRATIONS. If a Piggyback Registration is
an underwritten secondary registration on behalf of holders of the Company's
securities, 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 Shares and other securities requested
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to be included therein by Purchaser and other securities requested to be
included in such registration relating to registration rights existing as the
date hereof, on a pro rata basis, and (ii) second, the other securities
requested to be included in such registration relating to registration rights
granted by the Company after the date hereof.
3. HOLDBACK AGREEMENTS.
(a) Purchaser 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 (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 during the
60-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 Shares, or any securities convertible into or
exchangeable or exercisable for Shares, 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 Purchaser has requested that any
Shares be registered pursuant to this Agreement, the Company shall use its best
efforts to effect the registration and sale of such Shares 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
("SEC") a registration statement with respect to such Shares 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 copies of all such documents proposed to be filed, which documents
shall be subject to the review and comment of such counsel;
(b) notify Purchaser of the effectiveness of each registration
statement filed hereunder and prepare and file with the SEC 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
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intended methods of disposition by the sellers thereof set forth in such
registration statement;
(c) furnish to Purchaser 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 Purchaser may reasonably request in order to facilitate the
disposition of the Shares owned by Purchaser;
(d) use its best efforts to register or qualify such Shares under such
other securities or blue sky laws of such jurisdictions as Purchaser reasonably
requests and do any and all other acts and things which may be reasonably
necessary or advisable to enable Purchaser to consummate the disposition in such
jurisdictions of the Shares; 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 Purchaser, at any time when a prospectus 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 Purchaser, the Company shall
prepare a supplement or amendment to such prospectus so that, as thereafter
delivered to the purchasers of such Shares, 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 Shares 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;
(g) provide a transfer agent and registrar for all such Shares 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 Purchaser may
reasonably request in order to expedite or facilitate the disposition of such
Shares;
(i) make available for inspection by Purchaser, any underwriter
participating in any disposition pursuant to such registration statement and any
attorney, accountant or other agent retained by Purchaser 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 Purchaser,
underwriter, attorney, accountant or agent in connection with such registration
statement;
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(j) otherwise use its best efforts to comply with all applicable rules
and regulations of the SEC, 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 Purchaser in its sole and exclusive judgment, to participate
in the preparation of such registration or comparable statement;
(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 Shares 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 Shares covered by such
registration statement to be registered with or approved by such other
governmental agencies or authorities as may be necessary to enable Purchaser to
consummate the disposition of such Shares; 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 Purchaser may reasonably request.
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,
independent certified public accountants, underwriters (excluding discounts and
commissions) and other Persons retained by the Company and fees and
disbursements of counsel for 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 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) 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.
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6. INDEMNIFICATION.
(a) The Company agrees to indemnify, to the extent permitted by law,
Purchaser, its members, managers, officers, directors, shareholders, agents 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 Purchaser expressly for use
therein. 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 Purchaser.
(b) In connection with any registration statement in which Purchaser is
participating, Purchaser 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, to 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 to the extent that such untrue statement or omission is
contained in any information or affidavit so furnished in writing by Purchaser;
provided that Purchaser's obligation to indemnify shall be limited to the gross
amount of proceeds received by Purchaser 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.
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(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. DEFINITIONS.
(a) "AFFILIATES" of a Person means any other Person controlling,
controlled by or under common control with such first Person.
(b) "CLOSING" has the meaning set forth in the Purchase Agreement.
(c) "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/or a governmental entity or
any department, agency, or political subdivision thereof.
(d) "SHARES" means, collectively, any shares of the Company's common
stock $.001 par value acquired by Purchaser pursuant to the Purchase Agreement,
issued or issuable upon conversion of the Note or acquired pursuant to the
Option Agreement and any Shares issuable with respect to such shares by way of a
stock dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization.
8. 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 Purchaser in this Agreement.
(b) ADJUSTMENTS AFFECTING SHARES. 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 Purchaser to include such Shares in a
registration undertaken pursuant to this Agreement.
(c) REMEDIES. Purchaser 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.
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(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 Purchaser.
(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 hereunder and may not be assigned; provided, however,
Purchaser may assign its rights and obligations hereunder, in whole or in part,
to one or more 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 Jeffrey P. Jacobs; it
being acknowledged that any entity in which Jeffrey P. Jacobs beneficially owns
15% or more of the voting equity securities and is Chairman of the Board and/or
Chief Executive Officer 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
Nevada, without giving effect to any choice of law or conflict of law rules or
provisions (whether of the State of Nevada or any other jurisdiction) that would
cause the application of the laws of any jurisdiction other than the State of
Nevada.
(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 given in accordance with Section 19 of the Purchase
Agreement.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
BOARDWALK CASINO, INC.
By: /s/ Louis Sposato
-------------------------------------
Its: Secretary/Treasurer
-------------------------------------
DIVERSIFIED OPPORTUNITIES GROUP
LTD.
By: Jacobs Entertainment Ltd., its manager
By: /s/ Jeffery P. Jacobs
--------------------------------------
Jeffrey P. Jacobs, President
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