Exhibit
10.15


 


ASSET PURCHASE AGREEMENT


 


by and between


 


 


CAPITAL CITY ENTERTAINMENT, INC., as “Seller”


 


and


 


JACOBS PINON PLAZA ENTERTAINMENT, INC., as “Purchaser”


 


 


Dated as of November 2, 2005


 





















 


TABLE OF CONTENTS


 


	
  ARTICLE I

  	
   

  
	
  DEFINITIONS; CONSTRUCTION AND
  INTERPRETATION

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 1.1

  	
  Definitions

  	
   

  
	
  Section 1.2

  	
  Construction and Interpretation

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE II

  	
   

  
	
  SALE, LEASE AND OPTION OF THE ASSETS

  	
   

  
	
   

  	
   

  
	
  Section 2.1

  	
  Sale, Lease and Option of the Assets

  	
   

  
	
  Section 2.2

  	
  Excluded
  Assets

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE III

  	
   

  
	
  ASSUMPTION OF LIABILITIES

  	
   

  
	
   

  	
   

  
	
  Section 3.1

  	
  Assumption of Liabilities

  	
   

  
	
  Section 3.2

  	
  Retained Liabilities

  	
   

  
	
   

  	
   

  
	
  ARTICLE IV

  	
   

  
	
  PURCHASE PRICE AND PAYMENT

  	
   

  
	
  Section 4.1

  	
  Deposit

  	
   

  
	
  Section 4.2

  	
  Purchase Price and Payment

  	
   

  
	
  Section 4.3

  	
  Allocation of Purchase Price

  	
   

  
	
  Section 4.4

  	
  Purchase Price Adjustment

  	
   

  
	
  Section 4.5

  	
  Prorations

  	
   

  
	
   

  	
   

  
	
  ARTICLE V

  	
   

  
	
  TITLE

  	
   

  
	
   

  	
   

  
	
  Section 5.1

  	
  Title
  Exceptions

  	
   

  
	
  Section 5.2

  	
  Purchaser’s Title as Lessee

  	
   

  
	
   

  	
   

  
	
  ARTICLE VI

  	
   

  
	
  THE CLOSING; THE CLOSING DATE; ACTION AT
  CLOSING

  	
   

  
	
   

  	
   

  
	
  Section 6.1

  	
  Closing

  	
   

  
	
  Section 6.2

  	
  Seller’s Closing Deliverables

  	
   

  
	
  Section 6.3

  	
  Purchaser’s Closing Deliverables

  	
   

  
	
  Section 6.4

  	
  Transfer of Possession

  	
   

  
	
  Section 6.5

  	
  Expenses

  	
   

  
	
  Section 6.6

  	
  Further Assurances

  	
   

  



 


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  ARTICLE VII

  	
   

  
	
  REPRESENTATIONS AND WARRANTIES

  	
   

  
	
   

  	
   

  
	
  Section 7.1

  	
  Representations and Warranties of Seller
  and Trust

  	
   

  
	
  Section 7.2

  	
  Representations and Warranties of Purchaser

  	
   

  
	
  Section 7.3

  	
  Continued Validity

  	
   

  
	
   

  	
   

  
	
  ARTICLE VIII

  	
   

  
	
  COVENANTS

  	
   

  
	
   

  	
   

  
	
  Section 8.1

  	
  Operation of the Business

  	
   

  
	
  Section 8.2

  	
  Non-Solicitation

  	
   

  
	
  Section 8.3

  	
  Access to Properties and Records

  	
   

  
	
  Section 8.4

  	
  Notice of Inaccuracy

  	
   

  
	
  Section 8.5

  	
  ERISA

  	
   

  
	
  Section 8.6

  	
  Labor Agreement Commitments; Employees

  	
   

  
	
  Section 8.7

  	
  Governmental Permits and Approvals

  	
   

  
	
  Section 8.8

  	
  Consents and Approvals for Assumed
  Contracts

  	
   

  
	
  Section 8.9

  	
  Observers

  	
   

  
	
  Section 8.10

  	
  Certificates of Inspection

  	
   

  
	
  Section 8.11

  	
  Notices of Governmental Action

  	
   

  
	
  Section 8.12

  	
  Nevada Gaming Authorities

  	
   

  
	
  Section 8.13

  	
  Consummation of Agreement

  	
   

  
	
  Section 8.14

  	
  Continued Efforts for Consents to Assumed
  Contracts

  	
   

  
	
  Section 8.15

  	
  Substitution

  	
   

  
	
  Section 8.16

  	
  Access to Employee Records

  	
   

  
	
  Section 8.17

  	
  Telephone and Fax Numbers

  	
   

  
	
  Section 8.18

  	
  Press
  Releases

  	
   

  
	
  Section 8.19

  	
  Confirmation of Certain Personal Property

  	
   

  
	
  Section 8.20

  	
  Liabilities Paid at Closing

  	
   

  
	
  Section 8.21

  	
  Casualty Loss and Condemnation

  	
   

  
	
   

  	
   

  
	
  ARTICLE IX

  	
   

  
	
  CONDITIONS PRECEDENT TO THE OBLIGATIONS OF
  PURCHASER

  	
   

  
	
   

  	
   

  
	
  Section 9.1

  	
  Licenses

  	
   

  
	
  Section 9.2

  	
  Approval to Transfer Gaming Devices

  	
   

  
	
  Section 9.3

  	
  Absence of Material Change

  	
   

  
	
  Section 9.4

  	
  Representations and Warranties

  	
   

  
	
  Section 9.5

  	
  Covenants

  	
   

  
	
  Section 9.6

  	
  Absence of Litigation

  	
   

  
	
  Section 9.7

  	
  No
  Change in Law

  	
   

  
	
  Section 9.8

  	
  Required
  Consents

  	
   

  
	
  Section 9.9

  	
  Best Western Franchise

  	
   

  
	
  Section 9.10

  	
  Seller’s Closing Deliverables

  	
   

  



 


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  ARTICLE X

  	
   

  
	
  CONDITIONS PRECEDENT TO THE OBLIGATIONS OF
  SELLER

  	
   

  
	
   

  	
   

  
	
  Section 10.1

  	
  Licenses

  	
   

  
	
  Section 10.2

  	
  Approval to Transfer Gaming Devices

  	
   

  
	
  Section 10.3

  	
  Representations and Warranties

  	
   

  
	
  Section 10.4

  	
  Covenants

  	
   

  
	
  Section 10.5

  	
  Absence of Litigation

  	
   

  
	
  Section 10.6

  	
  No
  Change in Law

  	
   

  
	
  Section 10.7

  	
  Required
  Consents

  	
   

  
	
  Section 10.8

  	
  Purchaser’s Closing Deliverables

  	
   

  
	
   

  	
   

  
	
  ARTICLE XI

  	
   

  
	
  TERMINATION

  	
   

  
	
   

  	
   

  
	
  Section 11.1

  	
  Termination by Mutual Consent

  	
   

  
	
  Section 11.2

  	
  Termination by Seller

  	
   

  
	
  Section 11.3

  	
  Termination by Purchaser

  	
   

  
	
  Section 11.4

  	
  Effect of Termination

  	
   

  
	
   

  	
   

  
	
  ARTICLE XII

  	
   

  
	
  NO PROVISION

  	
   

  
	
   

  	
   

  
	
  ARTICLE XIII

  	
   

  
	
  GENERAL INDEMNIFICATION

  	
   

  
	
   

  	
   

  
	
  Section 13.1

  	
  Agreement of Seller and Trust to Indemnify
  Purchaser

  	
   

  
	
  Section 13.2

  	
  Agreement of Purchaser to Indemnify Seller

  	
   

  
	
  Section 13.3

  	
  Effect of Closing Over Known Unsatisfied
  Conditions or Breached Representations, Warranties or Covenants

  	
   

  
	
  Section 13.4

  	
  Mitigation

  	
   

  
	
  Section 13.5

  	
  Limitations on Indemnification

  	
   

  
	
  Section 13.6

  	
  Exclusive
  Remedy

  	
   

  
	
   

  	
   

  
	
  ARTICLE XIV

  	
   

  
	
  PROCEDURES AND INDEMNIFICATION

  	
   

  
	
   

  	
   

  
	
  Section 14.1

  	
  Procedures for Indemnification

  	
   

  
	
  Section 14.2

  	
  Defense of a Third Party Claim

  	
   

  
	
  Section 14.3

  	
  Settlement of Third Party Claims

  	
   

  
	
   

  	
   

  
	
  ARTICLE XV

  	
   

  
	
  LIMITATION OF LIABILITY

  	
   

  



 


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  ARTICLE XVI

  	
   

  
	
  DISPUTE RESOLUTION

  	
   

  
	
   

  	
   

  
	
  Section 16.1

  	
  Negotiation

  	
   

  
	
  Section 16.2

  	
  Mediation

  	
   

  
	
  Section 16.3

  	
  Arbitration

  	
   

  
	
   

  	
   

  
	
  ARTICLE XVII

  	
   

  
	
  MISCELLANEOUS PROVISIONS

  	
   

  
	
   

  	
   

  
	
  Section 17.1

  	
  Notices

  	
   

  
	
  Section 17.2

  	
  Construction and Governing Law

  	
   

  
	
  Section 17.3

  	
  Counterparts

  	
   

  
	
  Section 17.4

  	
  Integrated Agreement

  	
   

  
	
  Section 17.5

  	
  No Oral Modification

  	
   

  
	
  Section 17.6

  	
  Successors and Assigns; No Third Party
  Beneficiaries

  	
   

  
	
  Section 17.7

  	
  Assignment

  	
   

  
	
  Section 17.8

  	
  Partial Invalidity

  	
   

  
	
  Section 17.9

  	
  No Presumption Against the Draftsman

  	
   

  
	
  Section 17.10

  	
  Expenses

  	
   

  
	
  Section 17.11

  	
  Guarantee

  	
   

  
	
  Section 17.12

  	
  Further Assurances

  	
   

  
	
  Section 17.13

  	
  Confidentiality

  	
   

  
	
   

  	
   

  
	
  DISCLOSURE SCHEDULES

  	
   

  
	
   

  	
   

  
	
  EXHIBITS

  	
   

  
	
   

  	
   

  
	
  EXHIBIT A

  	
  The
  Leased Land

  	
   

  
	
  EXHIBIT B

  	
  Form of
  Lease Cancellation Agreement

  	
   

  
	
  EXHIBIT C

  	
  Form of
  Purchaser’s Lease Agreement

  	
   

  
	
  EXHIBIT D

  	
  Form of
  Bill of Sale

  	
   

  
	
  EXHIBIT E

  	
  Form of
  Trade Name and Trademark Assignment Agreement

  	
   

  
	
  EXHIBIT F

  	
  Assignment
  of Equipment Leases and Contracts

  	
   

  
	
  EXHIBIT G

  	
  Purchaser
  Assumed Liabilities

  	
   

  
	
  EXHIBIT H

  	
  Purchaser
  Assignment and Assumption Agreement

  	
   

  
	
  EXHIBIT I

  	
  Working
  Balance Sheet

  	
   

  
	
  EXHIBIT J

  	
  Allocation
  of Purchase Price Among the Assets

  	
   

  
	
  EXHIBIT K

  	
  Form of
  Confidentiality and Non-Competition Agreement—Capital City
  Entertainment, Inc.

  	
   

  
	
  EXHIBIT L

  	
  Form of
  Confidentiality and Non-Competition Agreement—Clark G. Russell

  	
   

  
	
  EXHIBIT M

  	
  Escrow
  Agreement

  	
   

  
				



 


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  APPENDIX

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  APPENDIX
  A

  	
  Glossary of Defined Terms

  	
   

  



 


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ASSET PURCHASE AGREEMENT


 


This ASSET PURCHASE AGREEMENT (herein
referred to as this “Agreement”) is dated as of November 2, 2005 and is by
and between CAPITAL CITY ENTERTAINMENT, INC., a Nevada corporation (herein
referred to as “Seller”), the CLARK AND JEAN RUSSELL FAMILY TRUST, CLARK G.
RUSSELL and JEAN M. RUSSELL, Co-Trustees (herein referred to as “Trust”), and
JACOBS PINON PLAZA ENTERTAINMENT, INC., a Nevada corporation (herein referred
to as “Purchaser”). Seller, Trust and Purchaser are sometimes referred to
herein individually as a “Party” and collectively as the “Parties.”


 


RECITALS:


 


Seller and Trust desire to enter into the
Lease Cancellation Agreement in the form attached hereto as Exhibit B in
order to cancel that certain Amended Lease Agreement dated March 31, 2005
between themselves covering the Leased Land (“the Leased Land”).


 


Trust desires to lease and grant an option to
Purchaser to buy that certain land described on Exhibit A (the “Leased
Land”);


 


Seller also desires to sell and transfer to
Purchaser, and Purchaser desires to purchase from Seller, substantially all of
the assets, buildings, physical plant, equipment and personal property of
Seller associated with and used in the operation of the Best Western Pinon
Plaza Resort (“Resort”); and


 


Seller desires to delegate to Purchaser, and
Purchaser desires to assume from Seller, certain liabilities associated with
the Resort.


 


NOW, THEREFORE, for and in consideration of
the mutual covenants and agreements contained in this Agreement and each act
done pursuant hereto, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Parties,
intending to be legally bound hereby, represent, warrant, covenant and agree as
follows:


 


ARTICLE I


DEFINITIONS;
CONSTRUCTION AND INTERPRETATION


 


Section 1.1                                      Definitions. The capitalized words,
terms and phrases used in this Agreement, including in the preamble and the recitals
hereto, shall have the meanings ascribed to such words, terms and phrases in
the “Glossary of Defined Terms” attached to this Agreement as APPENDIX A.


 


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Section 1.2                                      Construction and Interpretation. Unless
the context of this Agreement requires otherwise: (a) words of any gender
include each other gender; (b) words using the singular or plural number
also include the plural or singular number, respectively; (c) the words “hereof,”
“herein,” “hereby,” “hereto” and similar words refer to this entire Agreement
and not to any particular Article, Section, Clause, Exhibit, Schedule or
Appendix or any other subdivision of this Agreement; (d) references to “Article,”
“Section,” “Clause,” “Exhibit” “Schedule” or “Appendix” are to the Articles,
Sections, Clauses, Exhibits, Schedules and Appendices respectively of this
Agreement; (e) the words “include” or “including” shall be deemed to be
followed by the phrases “without limitation” or “but not limited to” whether or
not such words are followed by such phrases or phrases of like import; (f) references
to “this Agreement” or any other agreement or document shall be construed as a
reference to such agreement or document as amended, modified or supplemented
and in effect from time to time and shall include a reference to any document
which amends, modifies or supplements it; (g) the word “knowledge” means
such party’s actual knowledge after due and diligent inquiry of officers,
directors, shareholders, and employees of such party and its subsidiaries
reasonably believed to have knowledge of such matters; and (h) titles for
captions of Sections contained in this Agreement are inserted only as a matter
of convenience and for reference, and in no way define, limit, extend, describe
or otherwise affect the scope or meaning of this Agreement or the intent of any
provision hereof. Each of the Schedules, Exhibits and Appendices referred to in
this Agreement is expressly made a part hereof. In addition, the disclosures in
the Schedules, and those in any supplement thereto, relate only to the
representations and warranties in the Section of this Agreement to which
they expressly relate and not to any other representation or warranty in this
Agreement. In the event of any inconsistency between the statements in the body
of this Agreement and those in the Schedules, Exhibits or Appendices (other
than an exception expressly set forth as such in the applicable Schedule with
respect to a specifically identified representation or warranty in a specific Section of
this Agreement), the statements in the body of this Agreement will control.
Whenever this Agreement refers to actions to be taken by any Person, or which
any Person is prohibited from taking, such provision shall be applicable
whether such action is taken (or not taken) directly or indirectly by such
Person, including actions taken by or on behalf of any Affiliate of such
Person. Whenever any provision of this Agreement refers to any Person’s right
to consent to or be satisfied with any action, such consent or satisfaction
shall be in the Person’s commercially reasonable discretion, unless the
provision granting such Person the right to consent or be satisfied limits the
Person’s consent or satisfaction right in some other manner. Whenever this
Agreement refers to a number of days, such number shall refer to calendar days
unless Business Days are specified. All accounting terms used herein and not
expressly defined herein shall have the meanings given to them under GAAP as
used in the United States.


 


ARTICLE II


SALE, LEASE AND OPTION OF THE ASSETS


 


Section 2.1                                      Sale, Lease and Option of the Assets.
Upon the terms and subject to the conditions set forth in this Agreement, at
the Closing on the Closing Date, Seller and Trust shall sell, lease, option,
assign, transfer, convey and deliver to Purchaser, and Purchaser shall
purchase, lease and option from Seller, all of Seller’s right, title, interest
and benefit in and to all assets owned by Seller constituting, or used
primarily in connection with, the Resort (the


 


2





















 


“Assets”), except the assets specifically
identified in Section 2.2 (the “Excluded Assets”). The Assets shall be
transferred by Seller to Purchaser free and clear of all liens and
encumbrances, mortgages and security interests. The Assets shall include, but
shall not be limited to, the following:


 


(a)                                 the lease and option to purchase the Leased Land all as more fully
described in the form of the Purchaser’s Lease Agreement attached hereto as Exhibit C;


 


(b)                                all buildings, improvements, structures, appurtenances, physical
plant, equipment, construction in progress, and all other tangible assets of
whatever kind and nature related thereto (“Real Property,” which does not
include the underlying fee ground);


 


(c)                                 all of Seller’s rights and interests arising under or in connection
with any Contracts to which Seller is a party and which relate primarily to the
Business (the “Assumed Contracts”), including any prepayments made by Seller
under such Contracts;


 


(d)                                all of Seller’s right, title and interest in and to all furniture,
furnishings, fixtures, gaming devices, equipment, keys, pass keys, phone
numbers, fax numbers, e-mail addresses, website and domain names, appliances,
tools, motor vehicles, supplies, signs and signage, public relations pamphlets
and related supplies, Inventory, and all other tangible personal property used
in the ownership, operation and maintenance of the Resort (the “Business”)
conducted by Seller on or with respect to the Resort (collectively, the “Personal
Property”), including, without limitation, the property held as of the Closing
and listed on the Second Personal Property Inventory, subject to the rights of
lessors under any of the Assumed Contracts;


 


(e)                                 the name “Best Western Pinon Plaza Resort” and any variation thereof
and all right, title and interest in and to any and all copyrights, trademarks,
trade names, service marks, patents, trade secrets, displays, symbols, color
arrangements, business methods, designs and logos with respect thereto and/or
relating to and/or used by Seller in the ownership, use and/or operation of the
Business and/or the Assets, and other names, words or devices and related
applications and registrations, and all goodwill associated therewith,
(collectively, the “Intellectual Property Rights”);


 


(f)                                   all plans and specifications, historical reservation data, advance
reservations, bookings, credit files (including specifically casino credit
files), and other similar files and reports in the possession of Seller,
including, but not limited to, computer records and all other books and records
of Seller used exclusively in the operation of the Business by Seller,
including, but not limited to, all financial statements, customer lists,
customer and slot tracking systems information, credit records and files
(including casino files) and all other accounting records (in whatever form
they may exist, including computer disk or tape), excluding Carson Station and
Station Grille;


 


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(g)                                all cash in the vault, cages, slot machines, tables, cash in the
retail, restaurants, bars, bowling center, and other non-gaming areas of the
Resort and bankrolls including cash which shall aggregate the minimum amount of
slot fills (loads) equal to $300.00 for all dollar and $100.00 for all quarter
machines and $50.00 for all other machines;


 


(h)                                all manufacturers’ or other assignable warranties applicable to any
other items included in the Assets (the “Warranties”);


 


(i)                                    all computer hardware used by Seller in the operation of the
Business or the Assets and computer software owned or licensed by Seller and
used in connection with the Business or the Assets, to the extent transferable
without fees, including, without limitation, if possessed by Seller, all source
codes and data, whether on tape, disc or other computerized format, and all
related user manuals, computer records, service codes, programs, stored
materials and databases, including, without limitation, all access codes and
instructions needed to obtain access to and to utilize the information
contained on such computer records (the “Computer Software”), except that to
the extent the software provider will allow the right to retain accounting
software and gaming tracking system for use by Carson Station and Station
Grille;


 


(j)                                    to the extent permitted by Law, all transferable licenses (including
liquor licenses), permits, approvals and other authorizations, including the
Best Western franchise agreement (the “Transferred Permits”);


 


(k)                                 the accounts receivable, deposits, prepaid expenses, returned checks
and other assets of the type historically accounted for in the categories
listed on Exhibit I; and


 


(l)                                    all gaming chips and tokens.


 


Section 2.2                                      Excluded Assets. The assets that
constitute Excluded Assets shall include only:


 


(a)                                 the consideration delivered to Seller pursuant to this Agreement,
and all of Seller’s rights and interests arising under or in connection with
this Agreement;


 


(b)                                all formation and organization documents, minute books, stock record
books and all other documents relating to the legal existence of Seller or its
Affiliates, and all income tax returns and records, gaming tax returns
(including supporting schedules) and records and nontransferable licenses,
permits, approvals and other authorizations; provided, however, that copies of
such corporate and tax records and nontransferable licenses, permits, approvals
and other authorizations shall be provided to Purchaser at the Closing as the
request of Purchaser;


 


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(c)                                 all of Seller’s interests, claims and choses of action in any past
or current insurance policy or Contract (other than those that may be assigned
pursuant to the assignment of the Assumed Plans), and subject to Section 8.22,
all rights to contribution and insurance proceeds in respect of Assets;


 


(d)                                all of Seller’s interests in any claims (including cross claims or
counterclaims) relating to any Taxes (including any deposits, refunds, rebates,
credits or other Tax benefits) (other than those that both relate to the Assets
and arise after the Closing Date);


 


(e)                                 any claims, causes of action or other rights related to any Retained
Liability;


 


(f)                                   Purchaser expressly acknowledges that Seller owns and operates the
separate business entities known as the Carson Station and Station Grille,
which will be operated in competition with Purchaser after Closing.  All assets of the Carson Station and Station
Grille, of any nature, are excluded from this sale.  There are certain joint assets that include
the accounting software and gaming tracking system that the parties will need
to seek permission to divide out in accordance with their use; and


 


(g)                              the name “Capital City Rewards”.


 


ARTICLE III


ASSUMPTION OF LIABILITIES


 


Section 3.1                                      Assumption of Liabilities. Upon the
terms and subject to the conditions set forth in this Agreement, and to the
extent not paid by Seller prior to or at Closing, at the Closing on the Closing
Date, Purchaser shall assume, shall take subject to, and thereafter shall pay,
satisfy, discharge and perform when due, the liabilities and obligations of
Seller listed on Exhibit G (the “Assumed Liabilities”):


 


(a)                                 current or accrued liabilities of the type historically accounted
for in the categories listed on Exhibit I (the “Payables”);


 


(b)                                pursuant to one or more Assignment and Assumption Agreements, the
liabilities and obligations arising after the Closing Date under the Assumed
Contracts and the Transferred Permits (including executory obligations);


 


(c)                                 pursuant to the Purchaser’s Lease Agreement, all liabilities and
obligations arising after the Closing Date under that lease (including
executory obligations);


 


(d)                                any liability or obligation of Seller with respect to the Assumed
Plans and the Collective Bargaining Agreements;


 


(e)                                 any liability or obligation of Seller resulting from the
consummation of the transactions contemplated herein and arising under or
related to the WARN Act;


 


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(f)                                   any liability to holders of winning keno tickets for wagers booked
by Seller prior to or at the Closing for events which have not yet occurred by
the Closing, provided that Seller pays to Purchaser the value of such wagers
pursuant to Section 4.5;


 


(g)                                all liabilities for purchase money obligations whether structured as
debt, lease or otherwise, to the extent set forth on Exhibit G;


 


(h)                                any liability for food, merchandise, rooms, show tickets or other
complimentaries issued to third parties for services or goods furnished to the
Business prior to or at the Closing;


 


(i)                                    any liability for cash or for food, merchandise, rooms, show tickets
or other complimentaries, owed to patrons of the Business prior to or at the
Closing, and to the extent recorded as a liability in the Seller’s financial
statements, any liability for points or credits earned by patrons of the
Business prior to or at the Closing, under any slot club or other program
offering awards or other incentives to gamble to patrons of the Business;


 


(j)                                    all liabilities or obligations for due bill contracts or other “trade-out”
liabilities listed on Exhibit G other than Payables;


 


(k)                                 any liability for workers’ compensation claims made or reopened
after the Closing by employees of the Business; and


 


(l)                                    except for the Retained Liabilities, all liabilities and obligations
arising out of or in any way related to the ownership or operation of the
Business or the Assets after the Closing (including any Taxes relating to the
Business or the Assets after the Closing Date), including prorated amounts
payable by Purchaser pursuant to Section 4.5 arising out of or in any way
related to the Business or the Assets on or after the Closing Date.


 


Section 3.2                                      Retained Liabilities. Except for the Assumed
Liabilities specifically and expressly assumed by Purchaser pursuant to Section 3.1,
Purchaser shall not assume or become liable on or with respect to any Contract
of Seller or for or with respect to any indebtedness, obligations, commitments
or liabilities of Seller, direct or indirect, known or unknown, or absolute,
vested or contingent, all of which shall be retained by Seller (herein referred
to collectively as the “Retained Liabilities”). Without limiting the generality
of the foregoing, Purchaser shall not assume or become liable for, and the
Retained Liabilities shall include the following:


 


(a)                                 all liabilities to any federal, state or local Governmental
Authority, or to any special purpose district, for unpaid Taxes of any type or
description, or penalties or interest thereon, arising by reason of the
ownership, use and/or operation of the Assets prior to or at the Closing Date,
or any sales/use Tax, in each case arising from the implementation and closing
of the transactions contemplated by this Agreement, whether


 


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or not imposed on or measured by income,
including any amounts due or which may become due and owing under NRS 244.335,
244.3352, 360.525 and 612.695;


 


(b)                                all liabilities of Seller to the Nevada State Gaming Control Board,
the Nevada Gaming Commission and Carson City (collectively, the “Nevada Gaming
Authorities”) relating to gaming activities prior to or at the Closing Date;


 


(c)                                 all litigation pending with respect to Seller or the Business as of
the Closing Date;


 


(d)                                any liability or obligation under any Contract that was not an
Assumed Contract;


 


(e)                                 any liabilities and obligations of Seller to the extent arising
under any Environmental Law and associated with, related to or arising from any
environmental condition at, in, on or under the Premises that existed at the
date of Closing; and


 


(f)                                   any other liability, obligation or commitment not specifically and
expressly assumed by Purchaser hereunder.


 


ARTICLE IV


PURCHASE PRICE AND PAYMENT


 


Section 4.1                                      Deposit. Upon execution of this
Agreement by both parties, Purchaser shall pay the Deposit by wire transfer
into the Escrow Account.


 


(a)                                 Until the earlier of (i) the Closing Date or (ii) the date
of the termination of this Agreement, the Deposit shall be held in such account
and subject to the provisions of this Section 4.1. The Deposit shall be
invested by Escrow Agent as mutually directed by Purchaser and Seller, or, if
no such direction is given, the Deposit shall be invested in either (a) direct
obligations of the United States of America or any agency thereof, (b) certificates
of deposit issued by any bank organized under the laws of the United States or
any state thereof, provided such bank has capital and surplus aggregating at
least Five Hundred Million Dollars ($500,000,000) or (c) commercial paper
given the highest rating by a nationally recognized credit rating agency.


 


(b)                                Withdrawals shall be made from the escrow account only with the
written authorization of both Purchaser and Seller and only as provided in this
ARTICLE IV.  Each of Purchaser and
Seller covenants and agrees to authorize and to cause to be made all
withdrawals required to be made by this ARTICLE IV.


 


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(c)                                 At the Closing, Seller and Purchaser shall direct the Escrow Agent
to pay the Deposit, plus any interest accrued thereon from the date of Deposit
(the “Accrued Interest”), to Seller, which amounts shall be a direct credit to
the Purchase Price payable by Purchaser to Seller as described in Section 4.2
below.


 


(d)                                In the event that this Agreement is terminated (1) by Purchaser
(A) in accordance with Section 11.3(a) on account of a willful
and material breach by Seller of any representation, warranty or covenant contained
in this Agreement or (B) as a result of the failure to be satisfied of the
conditions set forth in Section 9.1, Section 9.3, Section 9.5, Section 9.6,
or Section 9.7, or (2) by Seller as a result of the failure to be
satisfied of the conditions set forth in Section 10.5 or Section 10.6,
Seller and Purchaser shall promptly direct the Escrow Agent to pay the Deposit
and any Accrued Interest thereon to Purchaser, and Seller shall have no claim
to, or interest in, the Deposit and any Accrued Interest thereon. In the event
that this Agreement is terminated for any other reasons, Seller and Purchaser
shall promptly direct the Escrow Agent to pay the Deposit plus any Accrued
Interest thereon to Seller.


 


Section 4.2                                      Purchase Price and Payment. In addition
to the assumption by Purchaser of the Assumed Liabilities, Purchaser shall pay
to Seller an amount equal to (i) FOURTEEN MILLION FIVE HUNDRED THOUSAND
DOLLARS ($14,500,000) less the Deposit and the Accrued Interest plus (ii) the
amount of the Cash as of midnight on the Closing Date (i.e., the midnight
immediately after 11:59 p.m. on the Closing Date) minus (iii) the
Estimated Liability Adjustment minus (iv) the Estimated Liability
Difference, if any (the “Purchase Price”) for the Assets. At the Closing, the Purchase
Price shall be payable by Purchaser to Seller in immediately available funds.


 


Section 4.3                                      Allocation of Purchase Price. The
parties shall agree on the allocation of the purchase price prior to Closing.
The allocation shall be generally consistent with Exhibit J hereto.


 


Section 4.4                                      Purchase Price Adjustment.


 


(a)                                 Not less than three (3) Business Days prior to the Closing
Date, Seller shall deliver a notice (the “Purchase Price Notice”) to Purchaser
which sets forth in reasonable detail (i) the Seller’s good faith estimate
of the Liability Adjustment (the “Estimated Liability Adjustment”) and the
Liability Difference (the “Estimated Liability Difference”) and (ii) based
thereon, the calculation of the Purchase Price.


 


(b)                                Within sixty (60) days after the Closing Date, Seller shall prepare
and deliver (by same day or next day delivery) to Purchaser a statement setting
forth its determination of the Liability Adjustment and the Liability
Difference (the “Initial Liability Statement”), which statement shall set forth
in reasonable detail the basis for such determinations. During the thirty (30)
days after receipt of such statement, Purchaser and its representatives will be
permitted to review Seller’s working papers relating to the Initial Liability
Statement.


 


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(c)                                 Purchaser shall notify Seller in writing (the “Notice of
Disagreement”) within thirty (30) days after receipt of the Initial Liability
Statement if Purchaser disagrees with Seller’s calculation of the Liability
Adjustment or the Liability Difference, which Notice of Disagreement shall set
forth in reasonable detail the basis for such dispute and the U.S. dollar
amounts involved and Purchaser’s good faith estimate of the Liability
Adjustment or the Liability Difference. If no Notice of Disagreement is
received by Seller within such thirty (30) day period, then the Initial
Liability Statement shall be deemed to have been accepted by Purchaser, shall
become final and binding upon the parties and shall be the Final Liability
Statement.


 


(d)                                During the twenty (20) Business Days immediately following the
delivery of a Notice of Disagreement, Seller and Purchaser shall seek in good
faith to resolve any differences which they may have with respect to any matter
specified in the Notice of Disagreement. If at the end of such twenty (20)
Business Day period Seller and Purchaser have been unable to agree upon a Final
Liability Statement, Seller and Purchaser shall submit to the Independent
Accounting Firm for review and resolution any and all matters which remain in
dispute with respect to the Notice of Disagreement. The Independent Accounting
Firm shall use commercially practicable efforts to make a final determination,
which shall be binding on the parties hereto, of the Liability Adjustment and
the Liability Difference within twenty (20) Business Days after any such
referral, and such final determination shall be the Final Liability Statement.
This Section is an agreement to arbitrate as such is defined in Chapter 38
of the Nevada Revised Statutes; provided, however, that: (a) Sections
38.075, 38.085, 38.095 and 38.145(1)(d) of such Chapter are hereby waived;
and (b) the time periods contained in Sections 38.145(2) and 38.155(1) of
such Chapter are hereby shortened to thirty (30) days. The arbitration is to be
performed in Reno, Nevada. Purchaser and Seller each consent to the procedure
herein set forth and waive any rights (including any right to a hearing,
representation by attorney at such hearing, or any rights with respect to
witnesses, cross-examination, subpoenas and depositions) they may have under
conflicting provisions of the Nevada Uniform Arbitration Act, Nevada Revised
Statutes Subsection 38.015 et seq., as now or hereafter in effect. The
Parties agree that judgment may be entered upon the decision of the Independent
Accounting Firm.


 


If the amount in dispute is less than FIFTY
THOUSAND AND NO/100 DOLLARS ($50,000.00), the parties agree to split the
difference and not go through arbitration.


 


(e)                                 The cost of the Independent Accounting Firm’s review and
determination shall be paid by the party which has determined an amount of the
sum of the Liability Adjustment and the Liability Difference that is the
greatest amount different from the amount of such sum on the Final Liability
Statement. During the twenty (20) Business Day review by the Independent
Accounting Firm, Purchaser and Seller will each make available to the
Independent Accounting Firm interviews with such individuals and such
information, books and records as may be reasonably required by the Independent
Accounting Firm to make its final determination.


 


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(f)                                   (i) If the Liability Adjustment (as set forth in the Final
Liability Statement) exceeds the Estimated Liability Adjustment, then Seller or
Trust, jointly and severally, shall pay to Purchaser an amount equal to such
excess or (ii) if the Estimated Liability Adjustment exceeds the Liability
Adjustment (as set forth in the Final Liability Statement), then Purchaser
shall pay to Seller an amount equal to such excess, in either case within five (5) Business
Days after the Final Liability Statement becomes final and binding on the
parties hereto. If the Liability Adjustment (as set forth in the Final
Liability Statement) is equal to the Estimated Liability Adjustment, then
neither Purchaser nor Seller shall owe any amount to the other party pursuant
to this Section 4.4(f).


 


Section 4.5                                      Prorations. To the extent not otherwise
included in the Final Liability Statement, real estate taxes and assessments,
personal property taxes, Ground Lease rents and rents and any other receipts
attributable to space leases shall be prorated as of midnight on the Closing
Date. Wagers received by Seller prior to or at the Closing for keno and other
events occurring after the Closing shall be paid to Purchaser. In lieu of
prorating power, gas, water and other utility fees and charges (other than
telephone), the appropriate utilities shall be informed to take meter readings
as close as practicable to the Closing Date, to bill Seller for service prior
to such readings and to bill Purchaser for service thereafter. Said readings
must occur on or before the Closing Date. The telephone company shall be
informed to cancel Seller’s service as of the Closing Date and to transfer
service and the telephone numbers of the Business to Purchaser. The next
regular billing of the telephone company after the Closing Date will be sent to
Purchaser. Upon receiving a copy of said bill, Seller shall pay Purchaser for
those charges attributable to calls made before midnight on the Closing Date.
General service charges will be prorated as of the time of the billing on the
basis of the number of days before and after the Closing Date, respectively. At
the Closing, Seller and Purchaser shall estimate or actually determine the
prorations and shall adjust the Purchase Price accordingly. Prorated amounts
are to be paid to the appropriate party promptly on demand when computed.


 


ARTICLE V


TITLE


 


Section 5.1                                      Title Exceptions.


 


(a)                                 On the date hereof, Seller will order from Northern Nevada Title Company (the “Title Company”), and
cause the Title Company to deliver to Purchaser within ten (10) days of
the date of this Agreement, a preliminary title report with respect to the
Leased Land, together with copies of all exceptions to title appearing in such
report (the “Exception Matters”). Seller shall also deliver to Purchaser within
ten (10) days of the date of this Agreement a copy of the most recent
survey in Seller’s possession, custody or control of the Leased Land. Within
ten (10) days of receipt of the later of the Exception Matters and survey,
Purchaser shall notify Seller of any title exceptions to which it objects (“Disapproved
Exceptions”). Purchaser shall be deemed to have approved all title exceptions
except for objections made within the above-mentioned ten (10) day period,
and each shall constitute a “Permitted Exception.” Further,


 


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notwithstanding anything to the contrary
contained herein, all of the following shall also constitute Permitted
Exceptions (regardless of whether Purchaser disapproves of them): (i) real
estate taxes and assessments, personal property taxes for the year 2005 and
thereafter, water and/or meter charges, sewer taxes, charges or rents, in each
case not yet due and payable; (ii) liens, encumbrances or other matters
made, created or suffered by or on behalf of Purchaser, including, without
limitation, liens arising as a result of any act or omission of Purchaser or
Purchaser’s agents, contractors or representatives; (iii) zoning and other
land use restrictions and ordinances; (iv) the existing lease with the
Trust; (v) consents previously granted by any former owner of the Leased
Land for the erection of any structure or structures on, under or above any
street or streets on which the Leased Land may abut; (vi) liens for any
unpaid real estate tax, water charge, sewer rent and assessment, provided
Purchaser receives a credit for such sums in an amount sufficient to discharge
such liens at the Closing in accordance with this Agreement; (vii) any
liens or encumbrances as to which the Title Company will insure, or commit to
insure, Purchaser against loss or forfeiture of title to, or collection from
the Assets without additional cost to Purchaser, whether by payment, bonding,
indemnity of Seller or Trust or otherwise; (viii) the revocable nature of
the right, if any, to maintain street and sidewalk vaults and other vault
spaces, coal chutes, excavations, canopies, marquees and signs; and (ix) any
other leases, liens, encumbrances or other exceptions which are approved by
Purchaser pursuant to Section 5.1(b) below.


 


(b)                                Within five (5) Business Days after the date Seller receives
Purchaser’s written notice of any Disapproved Exception within the time period
specified above, Seller shall notify Purchaser in writing of any Disapproved
Exceptions which Seller is unable or unwilling to cause to be removed or
insured against prior to or at the Closing (the “Unresolved Exceptions”). With
respect to any Unresolved Exception, Purchaser shall elect, by giving written
notice to Seller within five (5) Business Days after receipt of Seller’s
notice (i) to terminate this Agreement (and upon such election to
terminate, neither Party shall have any further obligations hereunder), or (ii) to
waive Purchaser’s disapproval of such Unresolved Exception, in such latter
event each such Unresolved Exception shall then be deemed to be a Permitted
Exception. Purchaser’s failure to terminate this Agreement within such five (5) Business
Day period shall constitute Purchaser’s agreement to treat such Unresolved
Exceptions as Permitted Exceptions.


 


Section 5.2                                     Purchaser’s Title as Lessee. This
Agreement (and Purchaser’s obligation to consummate by Closing) is subject to
Seller being able to obtain and to deliver to Purchaser at Closing at Seller’s
sole cost and expense an ALTA lessee’s policy of title insurance from a company
reasonably satisfactory to Purchaser in the amount of the Purchase Price
insuring that Seller and the Trust have fee title to the Leased Land and fee
title to the improvements on the Leased Land (including the Resort and the
Business), and that the Purchaser holds a valid leasehold estate in the land in
accordance with the terms of the Purchaser’s Lease Agreement, subject only to
the Permitted Exceptions, agreements subject to which Purchaser takes the
Leased Land pursuant to Section 5.1(a), items arising after the date
hereof and approved by Purchaser and items caused by Purchaser. Said policy
shall have attached thereto such endorsements as Purchaser may require (and for
which Seller or Trust shall have received a commitment from such title company
no later than thirty (30) days after the date hereof),


 


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including, but not limited to, endorsements
insuring against encroachments, violations of covenants and restrictions and
mechanic’s liens and insuring contiguity. Liability under such policy shall be
reinsured to the extent, in the form, and from companies satisfactory to
Purchaser (to the extent committed by such companies no later than thirty (30)
days after the date hereof).


 


ARTICLE VI


THE
CLOSING; THE CLOSING DATE; ACTION AT CLOSING


 


Section 6.1                                      Closing.


 


(a)                                 The Closing shall be as provided in this Section 6.1 and shall
occur at the offices of the Title Company, at 10:00 a.m. the later of: (1) the
last Business Day of the calendar month in which Purchaser and all other
Persons required to do so have obtained all licenses and approvals (including,
without limitation, gaming and liquor licenses) to permit Purchaser to lawfully
operate the Business as it is now conducted, if, and only if, Purchaser has
completed the Purchaser’s Refinancing on or before such Business Day; or (2) if
the Purchaser’s Refinancing has not been completed, Closing shall occur on the
last Business Day of the calendar month in which all licenses and approvals
have been obtained and the Purchaser’s Refinancing has been completed; but in
any event on or before the Outside Date (the “Closing Date”). Upon the Closing,
the Closing shall, for all purposes under this Agreement, be deemed to have
occurred as of the Closing Date. The matters and deliveries hereafter described
in this Section 6.1 shall be deemed accomplished concurrently. The
effective date of the sale of the Assets shall be at midnight on the Closing
Date and all prorations and allocations provided for hereunder shall be made as
of midnight on the Closing Date, except as otherwise agreed in writing by the
Parties.


 


(b)                                Notwithstanding anything to the contrary herein, Purchaser may elect
to extend the Outside Date to not later than September 30, 2006 by written
notice to Seller and payment of $250,000 to Seller on or before June 30,
2006. Any such payment made under this Section 6.1(b) shall not be
refundable and shall not be applied or credited to the Purchase Price.


 


Section 6.2                                      Seller’s Closing Deliverables. At the
Closing, and concurrently with the making of the deliveries by Purchaser of the
Purchaser’s Closing Deliverables as set forth in Section 6.3, Seller shall
deliver, or cause to be delivered, to Purchaser the following (herein referred
to collectively as “Seller’s Closing Deliverables”):


 


(a)                                 the duly executed Bill of Sale and Deed;


 


(b)                                the duly executed Lease Cancellation Agreement;


 


(c)                                 the duly executed Purchaser’s Lease Agreement;


 


(d)                                the duly executed Trademark Assignment Agreements;


 


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(e)                                 the duly executed Assignment of Equipment Leases and Contracts;


 


(f)                                   title certificates to all vehicles included in the Personal
Property;


 


(g)                                the certificates and other instruments and documents described in ARTICLE IX;


 


(h)                                a designation of the representative of Seller described in Section 6.4(e);
and


 


(i)                                    Confidentiality and Non-Competition Agreements executed by the
Seller and Clark G. Russell.


 


Section 6.3                                      Purchaser’s Closing Deliverables. At the
Closing, and concurrently with the making of deliveries by Seller of the Seller’s
Closing Deliverables to Purchaser as set forth in Section 6.2, Purchaser
shall deliver, or cause to be delivered, to Seller each and every payment,
agreement, certificate, instrument and other document that is to be executed,
delivered and/or performed by Purchaser pursuant hereto including the following
(herein referred to collectively as “Purchaser’s Closing Deliverables”):


 


(a)                                 payment of the Purchase Price in the manner set forth in Section 4.2;


 


(b)                                the duly executed Assignment and Assumption Agreement;


 


(c)                                 the duly executed Trademark Assignment Agreements;


 


(d)                                the certificates, instruments and other documents described in ARTICLE X.


 


Section 6.4                                      Transfer of Possession.


 


(a)                                 Possession of the Assets shall be delivered to Purchaser as of midnight
on the Closing Date.


 


(b)                                To the extent applicable, the transfer of possession shall be
pursuant to the closing memorandum approved by the Nevada Gaming Authorities.


 


(c)                                 To effectuate the transfer of unopened alcoholic beverages,
Purchaser and Seller shall utilize the services of a licensed alcoholic
beverage wholesaler to purchase alcoholic beverages from Seller and then resell
them, at cost, to Purchaser.


 


(d)                                On the Closing Date, authorized representatives of Purchaser and
Seller shall take inventory of (i) all baggage, suitcases, luggage,
valises and trunks of Resort guests checked or left in the care of Seller, (ii) the
contents of the storage room, and (iii) sporting equipment and clothing
left in the care of Seller; provided, however, that no such baggage, suitcases,
luggage, valises or trunks shall be opened. All such baggage and


 


13





















 


other items shall be sealed in a manner to be
agreed upon by the parties and listed in an inventory prepared and signed
jointly by representatives of Purchaser and Seller on the Closing Date.
Purchaser shall be responsible from and after said date for all baggage and
other items listed in such inventory and, where the seals have been broken, for
the contents thereof. Seller shall be responsible for said contents if the
seals have not been broken and for all luggage or other property of guests not
listed on such inventory. By conveying the Assets to Purchaser on the Closing
Date, Seller shall be deemed, without further action, to have assigned any
storage, warehouse or innkeepers liens it may have under applicable Law.


 


(e)                                 At the Closing, Seller and Purchaser shall perform the following
functions for all motor vehicles that were checked and placed in the care of
Seller: (i) mark all motor vehicles with a sticker or tape; and (ii) prepare
an inventory of such items (“Inventoried Vehicles”) indicating the check number
applicable thereto and any damage thereto. Thereafter, Purchaser shall be
responsible for the Inventoried Vehicles except for damage indicated in the
inventory and Seller shall be liable for claims with respect to any other
vehicles.


 


(f)                                   Purchaser and Seller shall confirm the amount of customer front
money on deposit in the cage at the Resort as of midnight on the Closing Date (“Customer
Front Money”), and identify what Persons are entitled to what portions of such
Customer Front Money. After the Closing, all Customer Front Money shall be kept
in the cage at the Resort without cost to Purchaser. Purchaser shall distribute
Customer Front Money only to the Persons and only in the amounts determined as
provided in the first sentence of this Section 6.4(g). Seller shall remain
solely responsible and liable for all claims for front money allegedly
deposited at the Resort prior to the Closing, except for claims in the amounts
and from the Persons identified pursuant to this Section 6.4(g).


 


Section 6.5                                      Expenses. Except as expressly set forth
herein, the parties shall divide equally all costs and expenses to include without
limitation, transfer taxes, sales taxes, escrow fees, title insurance premiums,
recording fees, the costs of any survey required to obtain title
insurance.  Purchaser shall bear the cost
of any lender’s title insurance premiums and any title policy endorsements
specifically requested by Purchaser.


 


Section 6.6                                      Further Assurances. It is the intent of
this Agreement that Seller shall at the Closing convey, or cause to be
conveyed, to Purchaser all property related to the Business or the Assets or
necessary in order to operate the Business in the manner in which it is
currently being operated. Seller and Purchaser agree that at the Closing and
any time thereafter, upon request of Seller or Purchaser, the other Party
shall, and shall cause any of its Affiliates to, execute, acknowledge and
deliver such deeds, assignments, conveyances, transfers and other instruments
and documents and perform such acts as Seller or Purchaser, as applicable,
shall from time to time reasonably require for the better perfecting, assuring,
conveying, assigning, transferring and confirming unto Purchaser the property
and rights herein conveyed or assigned or intended now or hereafter so to be.


 


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ARTICLE VII


REPRESENTATIONS AND WARRANTIES


 


Section 7.1                                      Representations and Warranties of Seller and Trust. Except as set forth in the Disclosure Schedule, Seller and Trust
and each of them jointly and severally represent and warrant for the benefit
and reliance of Purchaser as follows (all of the foregoing representations and
warranties shall be deemed to have been restated in full for the benefit and
reliance of Purchaser at Closing):


 


(a)                                 Status, Power and Authority. Seller is a corporation duly organized, validly existing and in
good standing under the Laws of the State of Nevada, with all requisite
corporate power and authority to enter into and carry out its obligations under
this Agreement. Seller does not have any subsidiaries. The Trust has all
requisite power and authority to enter into the Lease Cancellation Agreement
and Purchaser’s Lease Agreement.


 


(b)                                Due Authorization, Execution and Delivery. Approval of this Agreement and the transactions contemplated
hereby, the execution, delivery, and performance of this Agreement by the persons
executing the same on behalf of Seller have been duly and validly authorized by
Seller’s directors and sole shareholder.


 


(c)                                 Legal, Valid, Binding and Enforceable. This Agreement and the other agreements and instruments
contemplated hereby constitute legal, valid and binding obligations of Seller
and Trust, enforceable in accordance with their respective terms.


 


(d)                                No Consents.
Other than (i) approvals from the Nevada Gaming Authorities and (ii) consents
that may be necessary to assign to Purchaser the Assumed Contracts as listed in
Section 7.1(d) of the Disclosure Schedule, no material consent,
license, permit, order, approval or authorization of any Governmental Authority
or private party is required in connection with the execution, delivery and performance
of this Agreement by Seller and Trust.


 


(e)                                 No Conflict/No Breach. Assuming receipt of all requisite consents and approvals in
connection with the consummation of the transactions contemplated hereby, the
execution, delivery or performance of this Agreement do not, with or without
the giving of notice and/or the passage of time (a) violate any provision
of Law applicable to Seller, the Assets or the Business or which would prevent
the consummation of the transactions contemplated by this Agreement or (b) conflict
with or result in the breach or termination of, or constitute a default under
or pursuant to any indenture, mortgage or deed of trust or any judgment, order,
injunction, decree or ruling of any court or Governmental Authority, or any
other agreement or instrument by which Seller, the Assets or the Business are
bound, or to which any of them are subject, or which would prevent the
consummation of the transactions contemplated by the Agreement, or (c) result
in the creation of any lien, charge or encumbrance upon any of the Assets or
the Business.


 


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(f)                                   Personal Property.


 


(i)                                  Seller has delivered to Purchaser a true, correct and complete
inventory of all items of tangible Personal Property. The Personal Property as
of such date is set forth in Section 7.1(f)(i) of the Disclosure Schedule (the
“First Personal Property Inventory”).


 


(ii)                               (A) Seller has good title to the tangible Personal Property
(other than Personal Property leased or licensed pursuant to an Assumed
Contract) except as specifically stated herein or in the schedules attached
hereto, and (B) except as set forth in Section 7.1(f)(ii) of the
Disclosure Schedule, the Personal Property will be transferred (subject to the
terms of any applicable leases or licenses) to Purchaser at the Closing free
and clear of all liens, charges, pledges, security interests, claims or other
encumbrances arising by or through Seller.


 


(g)                                The Resort.


 


(i)                                  Except as noted in Section 7.1(g)(i) of the Disclosure
Schedule, none of the following are applicable to the Assets: (a) annexation
agreements; (b) claims or agreements relating to property owners or
homeowners association; (c) agreements to which Seller is a party with
state or local authorities relating to contributions to off-site improvements
in connection with the impact of developmental activities or existing
improvements; and (d) environmental impact or other environmental studies
or reports made on behalf of or to the knowledge of Seller in the past five (5) years,
other than those made by or on behalf of Purchaser.


 


(ii)                               Legal title to the Improvements (as described in the Purchaser’s
Lease Agreement attached hereto as Exhibit C) have been severed from the
underlying fee simple title to the Real Property and the owners of such
Improvements are “Clark G. Russell and Jean M. Russell, Trustees of The Clark
and Jean Russell Family Trust.” Seller disclaims any right, title, interest or
claim to or against the Improvements.


 


(iii)                            The Assets are sufficient to conduct the Business substantially as
currently conducted by Seller and its Affiliates, and Seller is not currently
using any other assets material to the conduct of Business.


 


(iv)                           All water, sewer, electric and telephone facilities and all other utilities
required for the normal use and operation of the Business are installed at the
Resort and duly connected and are being used by the Business. Such utilities
are subject to standard, nondiscriminatory utilities charges. The utilities
presently connected to the Resort are adequate to service the needs of the
Business substantially as currently conducted by Seller.


 


16





















 


(v)                              Except as set forth in Section 7.1(g)(iv) of the
Disclosure Schedule, to Seller’s knowledge, the Resort has been constructed in
a good, workmanlike manner and in compliance with all applicable Laws and with
all applicable covenants, conditions and restrictions, except in each case as
would not have a material adverse effect on the Business. The building and
improvements making up the Resort have been maintained to the date hereof and
are in good condition except for ordinary wear and tear.


 


(vi)                           Neither Seller nor any of its Affiliates has received notice of any
condemnation proceedings with respect to the Assets and the Leased Land.


 


(h)                                Compliance with Laws. The use of the Assets by Seller and the operation of the Business
thereat conform in all material respects to any and all applicable Laws.
Without limiting the generality of the foregoing, to the knowledge of Seller,
the use of the Assets by Seller and the operation of the Business thereat
conform in all material respects to any and all applicable zoning and buildings
ordinances and codes, and health, safety and fire ordinances, without relying
on any variance, non-conforming use or similar Law. Since January 1, 2000,
no notice from any Governmental Authority has been served relating to the
Business or Assets claiming any current violation of any such Law, or requiring
any work, repairs, construction, alterations or installation on or in
connection with the Business, and Seller has no knowledge of any ongoing
investigation with respect to the foregoing. To Seller’s knowledge, the
Premises comply with the Americans With Disabilities Act and the Occupational
Safety and Health Act.


 


(i)                                    Restaurants.
The restaurants owned and operated by Seller on the Premises have been given a “Grade
A” health rating by the Carson City Health Department as of the date of the
most recent inspection.


 


(j)                                    Licenses and Permits. Seller has delivered to Purchaser true, correct and complete
copies of: (a) all currently valid certificates of occupancy for the
Resort; (b) any and all certificates from the Carson City Department of
Building and Safety relating to the Resort; and (c) all other current
transferable, assignable or relinquishable permits and licenses, if any, in
Seller’s possession relating to the Assets and/or Business, in each case as
requested by Purchaser.


 


(k)                                 Drawings, Plans and Specifications. Seller has made available to Purchaser true, correct and complete
copies of all final working drawings, plans and specifications, as built plans,
all change orders and other documents and papers relating thereto, and all soil
tests and other engineering reports that relate to the Assets and are in
possession of or under the control of Seller or its Affiliates, all of which
are set forth in Section 7.1(k) of the Disclosure Schedule.


 


17





















 


(l)                                    Taxes. Seller
has timely filed all Tax returns, reports and declarations required to be filed
in connection with the income, sales, property and all other aspects of the
Business and/or the ownership and operation thereof and/or the Leased Land. All
Taxes shown to be due on such returns, reports and declarations, including any
interest or penalties, have been paid. Seller is not delinquent in the payment
of any tax, estimated tax, assessment or governmental charge. There are no Tax
liens affecting any of the Assets, except liens for non-delinquent Taxes.


 


(m)                              No Litigation.
As of the date hereof, there are no actions, claims, suits or proceedings
pending or, to the best of Seller’s knowledge, threatened against Seller, its
Affiliates, the Business or the Assets in any court or before any
administrative agency which would prevent Seller from completing the
transactions provided for herein or would in any way materially and adversely
affect the operation of the Business.


 


(n)                                Assumed Contracts.


 


(i)                                  Section 7.1(n) of the Disclosure Schedule sets forth a
list of each Assumed Contract (other than Assumed Contracts that, in the
aggregate, provide for payments by Seller of less than $25,000).


 


(ii)                               All copies of the Assumed Contracts requested by Purchaser and
delivered by Seller to Purchaser will be, when delivered, true, complete and
correct;


 


(iii)                            The material Assumed Contracts are, to Seller’s knowledge, in good
standing, valid and enforceable by Seller and are in full force and effect; and


 


(iv)                           To Seller’s knowledge, there exists no event of default under any
Assumed Contract, or event which, with notice or lapse of time, or both, would
constitute an event of default under any material Assumed Contract on the part
of Seller or any third party thereunder.


 


(o)                                 Intellectual Property.


 


(i)                                  The Intellectual Property Rights are listed in Section 7.1(o)(i) of
the Disclosure Schedule. To Seller’s knowledge, no other Intellectual Property
Rights (other than licenses and leases included in the Assumed Contracts) are
used in the Business as it is presently conducted by Seller.


 


18





















 


(ii)                               Seller is the sole and exclusive owner of the “Best Western Pinon
Plaza Resort” trademark (“Trademark”) and variations thereof, and, has, to
Seller’s knowledge, the sole and exclusive right to use the Trademark and has
received no notice from any other party pertaining to Seller’s use of or
challenging the right of Seller to use the Trademark. Seller has not granted
any licenses or other rights to use the Trademark and has not agreed to grant
any such licenses or other rights.


 


(p)                                Insurance. Section 7.1(p)
of the Disclosure Schedule lists all insurance policies (including
policies providing property, casualty, liability, workers’ compensation, and
bond and surety arrangements) under which Seller is an insured, a named insured
or otherwise the principal beneficiary of coverage.


 


(q)                                No Orders. No
judgment, order, injunction, decree or ruling of any court or Governmental
Authority exists by which Seller, its Affiliates, the Assets or the Business
are bound, or to which any of them are subject, which in any manner materially
and adversely affects the operation of Business.


 


(r)                                   Deposits. All
deposits by or with Seller, either as security, prepayment of rent or
otherwise, are set forth in Section 7.1(r) of the Disclosure Schedule.


 


(s)                                 Benefit Plans and Employees.


 


(i)                                  All pension plans, retirement plans and other employee benefit plans
applicable to any of the employees of the Business (including, without
limitation, any multi-employer contracts or multi-employer pension or other
benefit plans) (collectively, “Benefit Plans”) and all Collective Bargaining
Agreements are listed in Section 7.1(s)(i) of the Disclosure
Schedule, and complete and correct copies of such items have been made
available to Purchaser. Seller, its subsidiaries, the Premises and the Business
are in material compliance with all applicable Laws and Collective Bargaining
Agreements respecting employment and employment practices, terms and conditions
of employment, wages and hours, and occupational safety and health, and Seller
is not engaged in any unfair labor practice within the meaning of Section 8
of the National Labor Relations Act. Seller has no labor strike, dispute,
slowdown or stoppage actually pending or, to Seller’s knowledge,
threatened against Seller. No certification or decertification proceeding is
pending or was filed within the past twenty-four (24) months respecting the
employees of the Business and, to Seller’s knowledge, no certification or
decertification petition is being or was circulated among the employees of the
Business within the past twelve months. There are no charges, administrative
proceedings or formal complaints of discrimination (including, but not limited
to, discrimination based upon sex, age, marital status, race, national origin,
sexual preference, disability or veteran status) pending or, to Seller’s
knowledge, threatened, or to Seller’s knowledge, any investigation pending or
threatened before the Equal Employment Opportunity Commission or any federal,
state or local agency or court except as noted in Section 7.1(s)(i) of
the


 


19





















 


Disclosure Schedule. There have been no
audits of the equal employment opportunity practices of the Business and, to
Seller’s knowledge, no act or omission has occurred, and no circumstance
exists, that could give rise to any basis for such an audit.


 


(ii)                               Each of the Benefit Plans which is an “employee pension benefit
plan,” as defined in Section 3(2) of ERISA, other than Multi-Employer
Plans (collectively the “Employee Pension Benefit Plans”), is “qualified”
within the meaning of Section 401(a) of the Code, except as disclosed
in Section 7.1(s)(ii) of the Disclosure Schedule, and a favorable
determination letter has been issued by the Internal Revenue Service with
respect to each such qualified plan and nothing has occurred, whether by action
or failure to act, which would cause the loss of such qualification. Each
Employee Pension Benefit Plan has been administered in all material respects in
accordance with the requirements of ERISA and, where applicable, Section 401(a) of
the Code.


 


(iii)                            All material reports and information required to be filed with the
United States Department of Labor, Internal Revenue Service, Pension Benefit
Guaranty Corporation (the “PBGC”), and plan participants and their
beneficiaries with respect to the Benefit Plans which are maintained by Seller
(“Seller Benefit Plans”) have been timely filed or delivered by Seller.


 


(iv)                           With respect to each Seller Benefit Plan for which an annual report
has been filed, no material change has occurred with respect to the matters
covered by the annual report since the date thereof, except as indicated in Section 7.1(s)(iv) of
the Disclosure Schedule. The financial statements of Seller reflect all
employee liabilities arising under each such plan, fund, or arrangement in a
manner satisfying the requirements of GAAP.


 


(v)                              Since January 1, 2000, Seller has not maintained any Employee
Pension Benefit Plan subject to Title IV of ERISA, except as described in Section 7.1(s)(v) of
the Disclosure Schedule.


 


(vi)                           Neither Seller nor any Person claiming by or through Seller has
received any notification that any Multi-Employer Plan to which it contributes
is in “reorganization” as defined under Section 4241 of ERISA. Except as
disclosed in Section 7.1(s)(vi) of the Disclosure Schedule, no
Employee Pension Benefit Plan is subject to Title IV of ERISA or to the
requirements of Section 412 of the Code. As of the most recent valuation
date with respect to each such plan, the present value of the accrued benefits
thereunder do not exceed the assets of such plan available to fund such
benefits.


 


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(vii)                        No Employee Pension Benefit Plan has been terminated, nor have there
been any “reportable events,” as that term is defined in Section 4043 of
ERISA, since January 1, 2000. None of the Benefit Plans maintained by
Seller or the Controlled Group (i) has any “accumulated funding
deficiency,” as such term is defined in Section 302 of ERISA, whether or
not waived, or (ii) has been terminated in a manner which could result in
the imposition of a lien on the Assets pursuant to Section 4068 of ERISA.


 


(viii)                     Seller has made available to Purchaser a true, correct and complete
list showing (i) the job classifications, number of employees in each job
classification and compensation rate for each job classification, with respect
to all present hourly employees of the Business, and (ii) the name, job
classification, current annual compensation rate (including bonus and
commissions), current base salary rate, accrued bonus, seniority, accrued sick
leave, accrued severance pay and accrued vacation benefits of each other
present employee of the Business. Seller has also delivered to Purchaser true,
correct and complete copies of any employee handbook(s); and any reports and/or
plans prepared or adopted pursuant to the Equal Employment Opportunity Act of
1972, as amended.


 


(ix)                             Except as otherwise provided in this Agreement, the execution and
delivery of this Agreement by Seller and the consummation of the transactions
contemplated hereunder will not result in any obligation or liability (with
respect to accrued benefits or otherwise) of Purchaser to any Benefit Plan or
to any employee or former employee of Seller or the Business.


 


(x)                                For each plan, fund, or arrangement maintained by Seller which is an
employee welfare benefit plan (within the meaning of ERISA Section 3(1))
(a “Welfare Plan”), the following is true:


 


(a)                                  each such Welfare Plan intended to meet the requirements for
tax-favored treatment under Subchapter B of Chapter 1 of the Code meets such
requirements;


 


(b)                                 there is no VEBA maintained with respect to any such Welfare Plan;


 


(c)                                  there is no disqualified benefit (as such term is defined in Code Section 4976(b))
which would subject Purchaser to a tax under Code Section 4976(a);


 


(d)                                 each such Welfare Plan which is a group health plan (as such term is
defined in Code Section 4980B(g)(2)) complies and has complied, in all
material respects, with the applicable requirements of Code Section 4980B(f) and
the applicable provisions of the Social Security Act; and


 


21





















 


(e)                                  each such Welfare Plan (including any such plan covering former
employees of the Business) may be amended or terminated by Seller on or at any
time before the Closing Date.


 


(xi)                             There are no leased employees (as such term is defined in Code Section 414(n))
with respect to the Business who must be taken into account for the
requirements of Code Section 414(n)(3).


 


(xii)                          Seller has made available to Purchaser true, correct and complete
copies of (i) the most recent Internal Revenue Service determination
letter relating to each Employee Pension Benefit Plan for which a letter of
determination was obtained, (ii) to the extent required to be filed, the
two (2) most recent Annual Reports (Form 5500 Series) and
accompanying schedules of each Employee Pension Benefit Plan, as filed with the
Internal Revenue Service, (iii) any summary plan descriptions relating to
the Employee Pension Benefit Plans, and (iv) if available, the most recent
certified financial statement or statements of each Employee Pension Benefit
Plan.


 


(t)                                   Bank Accounts and Safe Deposit Boxes. A true and complete list showing the names of each bank in which
the Business has accounts or safe deposit boxes, and other boxes and lockers,
located inside and outside of the Resort and containing elements of the Assets,
a description of the contents of such boxes and lockers, and the names of all
persons authorized to have access thereto are set forth in Section 7.1(t)
of the Disclosure Schedule.


 


(u)                                Inventory. As
of midnight on the Closing Date, the Inventory included in the Assets shall not
be less than that normally maintained and in any event shall be adequate to
serve the patrons of the Business.


 


(v)                                Financial Statements. Seller has heretofore furnished Purchaser with copies of the
following financial statements of Seller:


 


(i)                                  Consolidated audited balance sheets as at December 31, 2004;


 


(ii)                               Consolidated audited statements of income and consolidated audited
statements of cash flows for the three fiscal years ending December 31,
2004;


 


(iii)                            An unaudited balance sheet for the Pinon Plaza as at June 30,
2005; and


 


(iv)                           An unaudited statement of income for Pinon Plaza for the six month
periods ending June 30, 2004 and 2005.


 


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Except as noted therein and except for normal
year end adjustments with respect to the unaudited financial statements, all of
such financial statements and all other financial statements provided by Seller
to Purchaser, were prepared in accordance with GAAP and present fairly the
financial position of Seller as of such dates and the results of its operations
for the periods then ended for Pinon Plaza.


 


(w)                              Absence of Material Change. Since December 31, 2004, except as reflected in the financial
statements referenced in Section 7.1(v), there has not been:


 


(i)                                  any material adverse change in the Business’ financial condition,
assets or liabilities; or


 


(ii)                               any damage, destruction, other casualty loss or forfeiture with
respect to the Assets (or assets which would, but for such damage, destruction,
loss or forfeiture, comprise part of the Assets), whether or not covered by
insurance, in excess of $100,000.


 


(x)                                  No Withholding Obligation; Foreign Person.
Neither Seller nor any person constituting Seller
is or has been a foreign person or, in the case of corporations, a U.S. real
property holding corporation, as defined in Section 897 of the Code and
Seller will deliver to Purchaser at the Closing affidavit(s) under penalty of
perjury and otherwise in the form and substance necessary to satisfy the requirements
under the Code relating to withholding of a portion of the purchase price,
stating the U.S. taxpayer identification number of each Person constituting
Seller and that such Person is not a foreign person or U.S. real property
holding corporation, as the case may be.


 


(y)                                Affiliates of Seller. Except as noted in Section 7.1(y) of the Disclosure Schedule,
no officer, director or employee whose annual compensation exceeds Eighty
Thousand Dollars ($80,000) or consultant receiving fees at an annual rate of
Twenty Thousand Dollars ($20,000) of Seller or any of its Affiliates, to Seller’s
knowledge (a) owns, directly or indirectly, any interest in, or is an
officer, director, consultant, agent or employee of any Person or business
which is a competitor, lessor, lessee, lender, borrower, customer, supplier or
distributor of Seller or its Affiliates or (b) owns, directly or
indirectly, in whole or in part, any property, asset, permit, license or secret
or confidential information which Seller or its Affiliates is using or the use
of which is necessary or material to the conduct of the Business. Any such
transaction involving Seller or its Affiliates, on the one hand, and any such
Person on the other, which are required in accordance with GAAP to be reflected
in the consolidated financial statements of Seller has been so reflected.


 


23





















 


(z)                                  Suppliers. Section 7.1(z)
of the Disclosure Schedule sets forth an accurate and complete list of the
twenty (20) largest suppliers of Seller in terms of purchases during the twelve
(12) months ending December 31, 2004 and the approximate total purchases
by Seller from each such supplier during such period. To Seller’s knowledge,
within the last twelve (12) months, there has been no change in the business
relationship of Seller and such twenty (20) largest suppliers having a material
adverse effect on the Business.


 


(aa)                           Racebook and Sportsbook. No racebook or sportsbook operations are conducted by Seller on
the Premises, other than those conducted by Sierra Development Company d/b/a
Club Cal Neva.


 


(bb)                         Investment Company. Seller is not an “investment company” or an “affiliated person”
thereof, as such terms are defined in the Investment Company Act of 1940 as
amended, and the rules and regulations thereunder.


 


(cc)                           Environmental Matters.


 


(i)                                  Except as set forth in any environmental report provided to
Purchaser with respect to the Leased Land and Real Property, to Seller’s
knowledge, the Leased Land and Real Property, and any adjoining real property
owned by Seller or any Affiliate, if any, are not in violation of, or subject
to any existing, pending or threatened investigation by any Governmental
Authority under, any of the Environmental Laws except as would not have a
material adverse effect on the Business.


 


(ii)                               Except as set forth in any environmental report provided to
Purchaser with respect to the Leased Land and Real Property, Seller and its
Affiliates have complied, and shall continue to comply, in all material
respects with all notice and reporting requirements applicable to the Leased
Land and Real Property under the Environmental Laws.


 


(iii)                            Except as set forth in any environmental report provided to
Purchaser with respect to the Leased Land and Real Property, Seller and its
Affiliates have never installed or used any underground storage tank (as
defined in RCRA) or any above-ground storage tank for storing or dispensing any
hydrocarbon or other Hazardous Substance on or at the Leased Land and Real
Property, and to the knowledge of Seller, after due inquiry, there has never
been an underground storage tank installed or used on or at the Leased Land and
Real Property for such purposes.


 


(iv)                           Seller has provided Purchaser access to true, correct and complete
copies of all environmental site assessments and asbestos surveys with respect
to the Leased Land and Real Property in Seller’s and its Affiliate’s
possession, custody or control, and all such assessments and surveys are set
forth in Section 7.1(cc)(iv) of the Disclosure Schedule.


 


24





















 


(v)                              All environmental registrations, permits, licenses, certificates and
approvals held by Seller and its Affiliates and related to the Leased Land and
Real Property are set forth in Section 7.1(cc)(v) of the Disclosure
Schedule.


 


(vi)                           Seller and its Affiliates have not received any notification from
any Governmental Authority of any asserted present or past failure by Seller or
its Affiliates to comply with the Environmental Laws.


 


(dd)                         Brokers and Finders. Except as set forth in Section 7.1(dd) of the Disclosure
Schedule, Seller has not incurred any obligation or liability to any party for
any broker fees, agent’s commissions or finder’s fees in connection with the
transactions contemplated hereby.


 


(ee)                           Complimentaries; Clubs. Seller is not, and will not be, committed to any slot-club
liability or any complimentary arrangement for food or beverage or lodging for
any guest or customer as of the Closing Date or any period thereafter which has
not been taken into account in determining its “current liabilities,” as
determined in accordance with GAAP consistently applied and consistent with
Seller’s past practice.


 


(ff)                               Absence of Undisclosed or Contingent
Liabilities. Seller does not have any liabilities
(whether accrued, absolute, contingent, unliquidated or otherwise, whether due
or to become due, whether known or unknown, and regardless of when asserted) in
connection with the Assets or the Business except as set forth in the financial
statements or that are current liabilities incurred in the ordinary course of
business consistent with the past practice after December 31, 2004 and
prior to the Closing Date and which are neither material in amount nor
inconsistent with any of the representations or warranties made herein.


 


(gg)                         Material Misstatements or Omissions. Neither this Agreement nor any other document, certificate or
statement furnished to Purchaser by or on behalf of Seller in connection with
this Agreement contains any untrue statements of a material fact, or omits any
material fact necessary to make the statements contained herein or therein not
misleading in light of the context in which they were made.


 


(hh)                         Representations Concerning Solvency. Seller has not incurred, and does not intend to incur, and has no
reasonable basis to believe that it will incur, any debts beyond its ability to
pay as they become due. Seller has assets greater that its debts. Purchaser may
rely on such representations in asserting that Purchaser has no reasonable
cause to believe that Seller is or will become insolvent as a result of the
transactions contemplated hereby. Seller has undertaken the transactions
described herein in good faith, considering its obligations to any person to
whom it owes a right to payment, whether or not the right is reduced to
judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured,
disputed, undisputed, legal, equitable, secured or unsecured and has undertaken
the transaction described herein without any intent to hinder, delay or defraud
its creditors. Seller has not concealed this transaction or the


 


25





















 


proceeds of such transaction from any of its
creditors. Seller has not removed or concealed any assets from its creditors
and will not incur debt that is significantly greater than its normal and
customary debts in the ordinary course. Seller does not contemplate and has no
reason to contemplate that it will seek protection under the bankruptcy laws
and believes in good faith that it will receive consideration reasonably equivalent
to the value of the property being sold to Purchaser.


 


Section 7.2                                      Representations and Warranties of Purchaser. Purchaser represents and warrants for the benefit and reliance of
Purchaser as follows:


 


(a)                                 Status, Power and Authority. Purchaser is a corporation duly organized, validly existing and in
good standing under the Laws of the State of Nevada, with all requisite
corporate power and authority to enter into and carry out its obligations under
this Agreement.


 


(b)                                Due Authorization, Execution and Delivery. The execution, delivery, and performance of this Agreement by the
persons executing the same on behalf of Purchaser have been duly and validly
authorized.


 


(c)                                 Legal, Valid, Binding and Enforceable. This Agreement and the other agreements and instruments
contemplated hereby constitute legal, valid and binding obligations of
Purchaser, enforceable in accordance with their respective terms.


 


(d)                                No Consents.
Other than approvals from the Nevada, Colorado and Virginia Gaming Authorities
and consents that may be necessary to assign to Purchaser the Assumed Contracts
as contemplated herein, no material consent, license, permit, order, approval
or authorization of any Governmental Authority or private party is required in
connection with the execution, delivery and performance of this Agreement by
Purchaser.


 


(e)                                 No Conflict / No Breach. Assuming receipt of all requisite consents and approvals in
connection with the consummation of the transactions contemplated hereby, the
execution, delivery or performance of this Agreement do not, with or without
the giving of notice and/or the passage of time (a) violate any provision
of Law applicable to Purchaser or which would prevent the consummation of the
transactions contemplated by this Agreement or (b) conflict with or result
in the breach or termination of, or constitute a default under or pursuant to
any indenture, mortgage or deed of trust or any judgment, order, injunction,
decree or ruling of any court or Governmental Authority, or any other agreement
or instrument by which Purchaser is bound, or to which it is subject, or which
would prevent the consummation of the transactions contemplated by the
Agreement.


 


(f)                                   Brokers and Finders. Purchaser has not incurred any obligation or liability to any
party for any broker fees, agent’s commissions or finder’s fees in connection
with the transactions contemplated hereby.


 


26





















 


Section 7.3                                     Continued Validity. The representations
and warranties contained herein shall survive the Closing for a period of
twenty-four (24) months and shall terminate and be of no further force or
effect twenty-four months following the Closing Date (except to the extent a
Party has made a claim with respect to such representations or warranties prior
to such expiration, as provided below, in which case the representations and
warranties subject to such proceeding shall survive until final resolution or
settlement of such claim); provided that the representations and warranties of
Seller set forth in (i) Section 7.1(l) and Section 7.1(s) shall
survive for the applicable statute of limitations, (ii) Section 7.1(f)(ii)(A) shall
survive indefinitely, and (iii) Section 7.1(cc) shall survive for
three (3) years. Any claim with respect to the truth, accuracy or
completeness of any representation or warranties of either Party (other than
those referenced in clauses (i), (ii) or (iii) above) must be made in
writing, if at all, prior to twenty-four months following the Closing Date and,
if not made on or before such date, shall be void and of no force or effect.


 


ARTICLE VIII


COVENANTS


 


Section 8.1                                      Operation of the Business. Except to the
extent set forth in Section 8.1 of the Disclosure Schedule, during the
period from the date hereof until the Closing:


 


(a)                                 Seller shall operate the Business in the ordinary course and only in
the ordinary course of business in accordance with past practices consistently
applied.


 


(b)                                Seller shall not, without the prior written consent of Purchaser
(which consent shall not be unreasonably withheld), enter into any Contract or
lease providing for payments by Seller in excess of $50,000, or any Contracts
providing for payments by Seller in excess of $200,000 in the aggregate, or
modify, extend or terminate any existing material Contract with respect to the
Business, other than in the ordinary course of business. All insurance policies
with respect to the Business shall be maintained in full force and effect.


 


(c)                                 Seller shall not waive any rights of material value which are included
in the Assets.


 


(d)                                Seller will not enter into advance bookings for any time after
fifteen months from the date hereof. Seller will not enter into any other
advance bookings other than in the ordinary course of business.


 


(e)                                 Seller shall not sell or otherwise dispose of any Asset with a value
in excess of $50,000, or any Assets with an aggregate value in excess of
$200,000, except Inventory used or sold in the ordinary course of business.


 


27





















 


(f)                                   Except as otherwise requested by Purchaser and without making any
commitment on its behalf, Seller shall maintain the Assets in the ordinary
course of business. Seller shall also use commercially reasonable efforts to
keep its business organization at the Business substantially intact and to
preserve for Purchaser the good will of suppliers, customers and others having
business relations with Seller in connection with the Business or otherwise
serving the Business.


 


(g)                                Seller shall not adopt or amend any bonus, profit sharing,
compensation, stock option, pension, retirement, deferred compensation,
employment or other employee benefit plan, agreement, trust, plan, fund or
other arrangement for the benefit or welfare of any employee or increase in any
manner the compensation or fringe benefits of any employee or pay any benefit
not required by any existing plan.


 


(h)                                Seller shall not make any representation to any employee of Seller
that is inconsistent with or contrary to the provisions of this Agreement.


 


(i)                                    Seller shall use commercially reasonable efforts to comply in all
material respects with the Laws of the Nevada, and with all such other
applicable Laws as may be required for the conduct of the Business;


 


(j)                                    No change will be made affecting the banking of the Business without
Purchaser’s prior written approval.


 


(k)                                 No indebtedness shall be incurred with respect to the Assets or the
Business nor shall any lien, mortgage, deed of trust, security interest or
other encumbrance be created or suffered with respect thereto or any portion
thereof, except such as would be repaid by Seller at the Closing.


 


(l)                                    Seller shall not make any guaranty of any third party obligation,
except for endorsement of checks in the ordinary course of business.


 


(m)                              All business and financial records of the Business shall be
maintained in accordance with practices current on the date hereof.


 


(n)                                Within twenty (20) days after the end of each month following the
date of this Agreement Seller shall provide to Purchaser an unaudited balance
sheet as of the end of such month and an unaudited statement of income for
Pinon Plaza for the periods commencing on the first of such month and ending as
of the end of such month.


 


(o)                                At Purchaser’s request, Seller shall provide Purchaser with copies
of all material gaming financial reports, if any, filed by Seller with respect
to the Business with the State of Nevada and/or local gaming authorities
between the date hereof and the Closing.


 


28





















 


(p)                                Seller will notify Purchaser in writing of any actual, threatened or
pending claims arising in relation to the conduct of the Business and
reasonably expected to result in a judgment against Seller in excess of
$25,000, a lien on any of the Assets or the inability to close the transactions
contemplated hereby promptly after Seller learns of any such actual, threatened
or pending claims.


 


(q)                                From and after the date hereof, Seller shall, in the event of a
spill or other release of Hazardous Substances on or at the Leased Land, give
Purchaser a copy of any notice or report filed with any and all Governmental
Authorities relating to such spill or release concurrently with such agency
filings. Seller shall promptly forward to Purchaser copies of all
correspondence, orders, notices, permits, applications or other communications
and reports in connection with any such event or any other matter relating to
Environmental Laws as they may affect the Leased Land.


 


(r)                                   Seller shall consult with Purchaser with respect to any renegotiation
of any Collective Bargaining Agreement.


 


(s)                                 Seller shall not, without Purchaser’s prior written approval, enter
into any new Collective Bargaining Agreement with any union, unless such
agreement is on terms substantially similar to agreements entered into between
such union and other resort and casino properties in downtown Carson City,
Nevada.


 


(t)                                   Seller shall not take any action which would require any
notification pursuant to the notice provisions of the WARN Act.


 


Section 8.2                                      Non-Solicitation. From and after the
date hereof, until the earlier of the Closing or the Outside Date (the “No
Solicitation Period”), Seller shall not in any way, directly or indirectly,
solicit, accept, negotiate, consider or request other offers or proposals for
the purchase or sale (or change of ultimate ownership in any form) of all or
any portion of the Assets or the Business (a “Purchase Offer”) or enter into
discussions therefor. If Seller receives a Purchase Offer during the No
Solicitation Period, Seller shall immediately notify Purchaser in writing.


 


Section 8.3                                      Access to Properties and Records.


 


(a)                                 During the period from the date hereof to the Closing Date,
Purchaser and Purchaser’s counsel, accountants and other representatives shall
have full access during normal business hours, to the Business, the Assets and
all books, contracts, commitments and records with respect to the Business,
shall be able to consult with any and all of Seller’s employees, accountants
and other advisors and consultants regarding the Business and shall be
furnished during such period with all such information concerning the Business
and the Assets as Purchaser may reasonably request. In connection therewith,
Purchaser and its representatives shall be entitled to make tests and surveys.
Purchaser shall not, however, conduct any on-site investigations or contact any
of Seller’s employees without the prior approval, oral or written, of Clark G.
Russell, which shall not be unreasonably withheld, conditioned or delayed.
After the Closing Date,


 


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Purchaser shall provide Seller with access
to, upon prior reasonable written request specifying the need therefor, during
regular business hours, such books and records, and Seller and its representatives
shall have the right to make copies of such books and records.


 


(b)                                During the period from the date hereof to the Closing Date, Seller
covenants and agrees to promptly furnish to Purchaser all information and data
in Seller’s possession, under Seller’s control or to which Seller has access
reasonably requested by Purchaser in order to assist Purchaser to secure the
permits, licenses, approvals and other authorizations contemplated by this
Agreement.


 


(c)                                 Each of Seller and Purchaser shall preserve until the fourth (4th)
anniversary of the Closing Date, all books and records possessed or to be
possessed by such Party relating to any of the Assets or the Assumed
Liabilities, except that either Party may destroy any such books and records in
its possession, provided that (i) such Party provides reasonable written
notice to the other Party stating its intent to do so and offering to transfer
such books and records to the other Party, and (ii) the other Party
declines in writing or does not respond to the notice for a period of 30 days.


 


(d)                                After the Closing Date, Purchaser shall provide Seller with access
to all books and records relating to the Assets and the operation of the
Business prior to the Closing, and to employees of Seller who have been hired
by Purchaser, in each case as is reasonably necessary for Seller to discharge
the Retained Liabilities, comply with all Laws, and otherwise to wind up the
affairs of Seller.


 


Section 8.4                                      Notice of Inaccuracy.


 


(a)                                 Promptly upon either Party becoming aware of the occurrence of, or
the impending or threatened occurrence of, any event which would cause a breach
of any of its own representations or warranties contained in Section 7.1
or Section 7.2, as the case may be, or an inability of such Party to
deliver the certificate to be delivered by it pursuant to Section 9.4, Section 9.5,
Section 10.3 or Section 10.4, as the case may be, such Party shall
disclose each such event, in reasonable detail, by means of a written notice
thereof to the other Party and such Party shall use its reasonable commercial
efforts to remedy the same. No disclosure by any Party pursuant to this Section 8.4(a),
however, shall be deemed to amend or supplement the Schedules attached hereto
or to prevent or cure any misrepresentations, breach of warranty, or breach of
covenant or to satisfy any Closing condition.


 


(b)                                Each Party shall, promptly upon acquiring knowledge of the
occurrence of any event that would cause the conditions to its obligations set
forth in ARTICLE IX and ARTICLE X, as applicable, to fail to be
fulfilled at the Closing, notify the other Party of such event.


 


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(c)                                 Each Party shall promptly notify the other Party of any action, suit
or proceeding that shall be instituted or overtly threatened against such Party
to restrain, prohibit or otherwise challenge the legality of any transaction
contemplated by this Agreement.


 


Section 8.5                                      ERISA. Promptly after execution of this
Agreement, Seller shall request (and furnish to Purchaser when obtained)
writings from all Multi-Employer Plans to which Seller contributes with respect
to the Business, confirming Seller’s and its subsidiaries’ potential withdrawal
liability (“Withdrawal Liability”) with respect to each such Multi-Employer Plan
as of the most recent practicable date before the Closing Date.


 


Section 8.6                                      Labor Agreement Commitments; Employees.


 


(a)                                 Purchaser shall offer employment as of the Closing Date to each
Represented Employee, Nonrepresented Employee and employees who are hired after
the date hereof (the “Transferred Employees”) (i) in a position comparable
to the position that such Person held with Seller, and (ii) at an initial
base salary at an annual rate of not less than that which the Person was
receiving from Seller immediately prior to the Closing. Each such Person who is
a Nonrepresented Employee (other than Nonrepresented Employees of Seller who
are parties to written employment agreements listed in Section 8.6(a) of
the Disclosure Schedule which are required to be assigned to and assumed
by Purchaser under Section 3.1(b)) shall be employed on an at-will basis.
Nothing in this Section 8.6(a), express or implied, is intended to confer,
nor shall anything herein confer, (a) on any Person other than the Parties
and the respective successors or permitted assigns of the Parties, any rights
or remedies or (b) on any Person hired by Purchaser any right to remain in
the employ of Purchaser or its Affiliates, nor shall anything in this Section 8.6(a) affect
the right of Purchaser or its Affiliates to discharge at any time, with or
without notice or cause, any such Person hired by Purchaser. Provided that
Purchaser has complied with the covenants set forth in this Section 8.6(a),
effective as of the Closing, Seller shall terminate the employment by the
Business of all individuals on its active payroll, on lay-off status, and on
leave of absence.


 


(b)                                Purchaser shall not take any action which causes the notice
provisions of the WARN Act to be applicable to the transactions contemplated by
this Agreement.


 


(c)                                 Effective as of the Closing, Purchaser shall assume from Seller any
and all liabilities and obligations to Transferred Employees of Seller as of
the Closing Date in respect of paid time off accrued on or prior to the Closing
Date to the extent set forth in Section 3.1(a). Purchaser shall indemnify
and hold harmless Seller and its Affiliates from and against any and all Losses
incurred, suffered by, or claimed against them directly or indirectly as a
result of, or based upon or arising from the foregoing assumption or the
failure by Seller to have paid such amounts to such personnel upon the
termination of their employment with Seller.


 


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(d)                                Promptly after the execution of this Agreement, Seller shall advise
each union that is party to a Collective Bargaining Agreement of the matters
contemplated hereunder and use its best efforts to secure such union’s written
agreement that Purchaser shall be Seller’s successor to the Collective
Bargaining Agreement. Upon consummation of the Closing, Purchaser agrees to be
bound by all terms and conditions of the Collective Bargaining Agreement on and
after the Closing Date.


 


(e)                                 Purchaser will provide continuation health care coverage to all Transferred
Employees and their qualified beneficiaries who incur a qualifying event after
the Closing Date in accordance with and to the extent required under the
continuation health care coverage requirements of Section 4980B of the
Code and Sections 601 through 608 of ERISA (“COBRA”). Seller and its Affiliates
will be responsible for providing continuation coverage and all related notices
to the extent required by law to any employee of Seller or qualified
beneficiary who incurs or incurred a qualifying event under COBRA on or before
the Closing Date, until such time as Seller and its Affiliates no longer
maintain any group health plans, and thereafter Purchaser shall be responsible
for all COBRA compliance as provided in the COBRA regulations.


 


Section 8.7                                      Governmental Permits and Approvals. Each
of the Parties shall as promptly as practicable prepare, submit and file (or
cause to be prepared, submitted and filed) all applications, notices and
requests for, and shall use all reasonable efforts to obtain as promptly as
practicable, all permits and approvals of all Governmental Authorities that may
be or become necessary on each of their part, respectively, for their execution
and delivery of, and the performance of their obligations under, this
Agreement, and will cooperate fully with each other in promptly seeking to
obtain all such permits and approvals. The Seller, on the one hand, and
Purchaser, on the other hand, shall bear their own costs and expenses incurred
or fees paid to Governmental Authorities to obtain such approvals and permits.


 


Section 8.8                                      Consents and Approvals for Assumed Contracts.


 


(a)                                 To the extent that the assignment of any of the Assumed Contracts
requires the consent of any other party thereto, or shall be subject to any
option in any other Person by virtue of a request for permission to assign, or
by reason of or pursuant to any assignment to Purchaser, this Agreement shall
not constitute a contract to assign the same if any attempted assignment would
constitute a breach thereof or give rise to such an option. Each of the Parties
shall as promptly as practicable prepare, submit and file (or cause to be
prepared, submitted and filed) all applications, notices and requests for, and
shall use all reasonable efforts to obtain as promptly as practicable, all such
consents, and will cooperate fully with each other in promptly seeking to
obtain all such permits and approvals. All such consents shall be in writing
and in a form reasonably acceptable to Purchaser.


 


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(b)                                If any such consent is not obtained, or if for any reason any such
assignment is not consummated, then, without limiting any other rights or
remedies Purchaser may have, Seller shall, at Purchaser’s request, cooperate
with Purchaser to provide for Purchaser the benefit, monetary or otherwise, of
the Assumed Contract at issue, including, without limitation, enforcement of
any and all rights of Seller against the other party to such Assumed Contract
arising out of any breach or cancellation thereof by such party or otherwise.


 


(c)                                 Purchaser shall bear all costs of obtaining and shall make any
deposits or similar payments reasonably requested in connection with obtaining
the required consents of third parties to the assignment, novation or renewal
of any Assumed Contract or Transferred Permit, if the party from whom such
consent is required has refused, and is contractually entitled to refuse, to
grant such consent by reason of Purchaser’s credit quality. Otherwise, costs of
obtaining such consents shall be borne by Seller.


 


Section 8.9                                      Observers. Subject to any required
approval of any Nevada Gaming Authority, Purchaser shall have the right, prior
to Closing, to place its agents in the Business for the purpose of observing
the conduct of the Business. Purchaser agrees that such agents shall not
interfere with the normal operation of the Business prior to Closing.
Notwithstanding the foregoing, prior to the Closing Date, Purchaser shall not
directly or indirectly control, supervise, direct or interfere with, or attempt
to control, supervise, direct or interfere with, the Business.


 


Section 8.10                                Certificates of Inspection. Prior to the
Closing, upon Purchaser’s request, Seller will use its commercially reasonable
efforts to deliver to Purchaser full, correct and complete copies of
certificates of inspection bearing a date not more than thirty (30) days prior
to the Closing Date with respect to the Premises from the Carson City Fire
Department, the Carson City Department of Building and Safety and the Carson
City County Health Department.


 


Section 8.11                                Notices of Governmental Action. Prior to
the Closing, Seller shall provide Purchaser with written notice of any zoning
proceedings which would materially and adversely affect the use and operation
of the Premises as it is currently used and operated by Seller, including, but
not limited to, any action which could cause the operation of the Business on
any portion of the Assets or Business to constitute a non-conforming use.


 


Section 8.12                                Nevada Gaming Authorities. The Parties
shall cooperate to prepare a detailed closing memorandum with respect to the
transactions contemplated hereby and submit it to the Nevada Gaming Authorities
with sufficient time to allow their review and approval prior to the Closing
Date. The parties agree that Purchaser shall within thirty (30) days of
execution of this Agreement submit any and all necessary applications to
complete this sale and lease to the Nevada Gaming Authorities.


 


Section 8.13                                Consummation of Agreement. Each of the
Parties and the Trust shall use their commercially reasonable efforts to
perform and fulfill all obligations and conditions on their part to be
performed and fulfilled under this Agreement to the end that the transactions
contemplated by this Agreement shall be fully carried out.


 


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Section 8.14                                Continued Efforts for Consents to Assumed Contracts. If any consent, approval, novation or waiver necessary for
assignment and delegation of any Assumed Contract or Transferred Permit is not
obtained prior to or on the Closing Date, then, for a period of six (6) months
after the Closing Date, each of Seller and Purchaser shall use their respective
commercially reasonable efforts and shall cooperate with each other to obtain
all such consents, approvals, novations and waivers necessary to assign and
delegate to Purchaser all such Assumed Contracts and Transferred Permits;
provided, however, that, in each such case, neither Seller nor Purchaser shall
be obligated to commence any litigation or offer or grant any accommodation
(financial or otherwise) to any Person or incur any other obligation or
liability therefor.


 


Section 8.15                                Substitution. Purchaser shall use all
commercially reasonable efforts to substitute, as of the Closing Date, with
respect to each Assumed Contract (including any guaranties or other credit
support with respect thereto) and Transferred Permit, Purchaser or Jacobs
Entertainment, Inc. (or such other Person as may be acceptable to the
obligee thereunder) for the Seller or its Affiliates, as the case may be, and
to cause the Seller and its Affiliates to be forever released from all
liability in respect thereof; provided that in no event shall any Person other
than Purchaser or Jacobs Entertainment, Inc. be required to assume any
such obligation. If such substitution is not accepted by any third party to any
such Assumed Contract, guaranty, letter of credit, bond or other indemnity
obligation, Purchaser shall provide to Seller bonds, letters of credit or other
reasonable assurances of performance reasonably acceptable to Seller to support
Seller’s (or an Affiliate of Seller’s) performance under each such Assumed
Contract, guaranty, letter of credit, bond or other indemnity obligation.


 


Section 8.16                                Access to Employee Records. Until
Closing, upon written request from Purchaser, Seller shall provide Purchaser
reasonable access to its employee records to the extent permitted by applicable
Law.  Notwithstanding the foregoing, in
no event shall Seller be liable to Purchaser for any inaccuracy or omission
contained in such records.


 


Section 8.17                                Telephone and Fax Numbers. On or before
the Closing Date, Seller shall arrange for the transfer of the telephone
numbers, e-mail addresses and domain names associated with the Business to
Purchaser effective as of the Closing Date.


 


Section 8.18                                Press Releases. Except as expressly
permitted in this Section 8.19 or as required by applicable Law, prior to
the completion of the Closing, neither Party shall grant interviews, issue any
press release or make any similar public announcement concerning the execution
or performance of this Agreement or the transactions contemplated hereunder
unless the content thereof is approved in advance by Purchaser and Seller.
Thereafter, each party may grant interviews and make public statements
regarding the general transactions contemplated hereunder without the approval
of the other party.


 


Section 8.19                                Confirmation
of Certain Personal Property. Not more than fifteen
(15) days prior to Closing, the Parties shall jointly participate in taking a
physical count and inventory of the Personal Property to ensure compliance with
Section 8.1(e) (the “Second Personal Property Inventory”).


 


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Section 8.20                                Liabilities Paid at Closing. On or
before the Closing Date, Seller shall pay off any liabilities of the type
historically accounted for in the categories listed in Section 3.1(a) and
Section 3.2(d). In addition, Seller shall be permitted on or before the
Closing Date to pay off any other liabilities of the type historically
accounted for in the categories listed in Section 3.2.


 


Section 8.21                                Casualty Loss and Condemnation. After
the date hereof and prior to the Closing, in the event of, (i) the
destruction of, or material damage to, any material Asset, or (ii) the
condemnation of any material Asset, Purchaser, at its option, may by written
notice to Seller prior to Closing request that Seller, and upon any such
request, Seller shall (x) pay to Purchaser, at the Closing, all sums
theretofore paid to Seller by third parties by reason of such condemnation,
destruction or damage, and (y) assign to Purchaser, at the Closing, all of the
right, title and interest of Seller in any to any unpaid awards or other
amounts payable by third parties or under Seller’s personal property and
casualty insurance policies arising out of such condemnation, destruction or
damage; provided that, upon making such request, Purchaser shall waive its
right to terminate this Agreement pursuant to Section 11.3(d). Except as
set forth in the preceding sentence, nothing in this Section 8.22 shall
affect the rights of Purchaser to terminate this Agreement pursuant to Section 11.3(d).


 


ARTICLE IX


CONDITIONS
PRECEDENT TO THE OBLIGATIONS OF
PURCHASER


 


The obligations of Purchaser to consummate at
the Closing the purchase of the Assets, the assumption of the Assumed
Liabilities and the other transactions contemplated hereby are subject to the
fulfillment, prior to or at the Closing on the Closing Date, of each of the
following express conditions precedent (the “Purchaser’s Conditions Precedent”),
any or all of which may be waived by Purchaser in writing:


 


Section 9.1                                      Licenses. Purchaser and all other
Persons affiliated with Purchaser required to do so in order to operate the
Business in the manner conducted by Seller as of the date hereof shall have
obtained the necessary gaming licenses and approvals to the assignment of
relevant liquor licenses to permit them to lawfully operate the Business as so
contemplated.


 


Section 9.2                                      Approval to Transfer Gaming Devices.
Seller shall have obtained all material approvals necessary to transfer all
gaming devices constituting a portion of the Assets to Purchaser, except as
would not have a material adverse effect on the Business.


 


Section 9.3                                      Absence of Material Change. There shall
not have occurred any material adverse change since the date hereof in the
Business, the Assets or results of operations of the Business, including,
without limitation, a material decrease in revenues.


 


Section 9.4                                      Representations and Warranties. Each of
the representations and warranties of Seller and Trust set forth in Section 7.1
of this Agreement shall be true and correct in all material respects on the
Closing Date as though made on the Closing Date, and Seller shall have
delivered to Purchaser a certificate or certificates to such effect, in form
and substance reasonably satisfactory to Purchaser and dated the Closing Date,
signed by and on behalf of Seller and Trust by their duly authorized
representatives.


 


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Section 9.5                                      Covenants. Seller shall have performed
and complied in all material respects with all of the covenants and agreements
on Seller’s part to be performed and complied with as set forth herein and
Seller shall have delivered to Purchaser a certificate or certificates to such
effect, in form and substance reasonably satisfactory to Purchaser and dated
the Closing Date, signed by and on behalf of Seller by its duly authorized
representative(s).


 


Section 9.6                                      Absence of Litigation. No action or
proceeding by any unaffiliated third party shall have been instituted (or
threatened or proposed) before any court or Governmental Authority to enjoin,
restrain, prohibit or otherwise challenge the legality or validity of the
transactions contemplated hereby or to obtain substantial damages in respect
of, or which is related to or arises out of, this Agreement or the consummation
of the transactions contemplated hereby or thereby.


 


Section 9.7                                      No Change in Law. Since the date of this
Agreement there shall have been no change in any applicable Law that makes it
illegal for any Party hereto to perform its obligations hereunder (i) enacted
(and not effectively vetoed), whenever effective, (ii) adopted as a final
regulation pursuant to formal rule making, order-issuing or regulatory
authority by any agency, board, commission, or other administrative, executive,
or other regulatory body having jurisdiction over the Assets, or (iii) embodied
in a final, formal ruling, order or decision of any judicial body having
jurisdiction over the Assets.


 


Section 9.8                                      Required Consents. The Parties shall
have received all of the consents, estoppels and approvals described in Section 7.1(d) of
the Disclosure Schedule (the “Required Consents”) and such consents,
estoppels and approvals shall remain in effect on the Closing Date.


 


Section 9.9                                      Best Western Franchise. Purchaser shall
have obtained a license or franchise to use the name “Best Western”, its
signage and computer reservation systems.


 


Section 9.10                                Seller’s Closing Deliverables. At the
Closing, and concurrently with the delivery of the Purchaser’s Closing
Deliverables, Seller and Trust shall have executed and delivered, or caused to
have been delivered, to Purchaser Seller’s Closing Deliverables, each of which
shall be in full force and effect and shall be in form and substance reasonably
satisfactory to Purchaser.


 


ARTICLE X


CONDITIONS
PRECEDENT TO THE OBLIGATIONS OF
SELLER


 


The obligations of Seller to consummate at
Closing the sale of the Assets, the assignment of the Assumed Liabilities and
other transactions contemplated hereby are subject to the fulfillment, prior to
or at the Closing on the Closing Date, of each of the following express
conditions precedent (the “Seller’s Conditions Precedent”), any or all of which
may be waived by Seller in writing:


 


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Section 10.1                                Licenses. Purchaser and all other
Persons affiliated with Purchaser required to do so in order to operate the
Business in the manner conducted by Seller as of the date hereof shall have
obtained the necessary gaming licenses and approvals to the assignment of
relevant liquor licenses to permit them to lawfully operate the Business as so
contemplated.


 


Section 10.2                                Approval to Transfer Gaming Devices.
Seller shall have obtained all material approvals necessary to transfer all
gaming devices constituting a portion of the Assets to Purchaser, except as
would not have a material adverse effect on the Business.


 


Section 10.3                                Representations and Warranties. Each of
the representations and warranties of Purchaser contained or referred to herein
shall be true and correct in all material respects on the Closing Date as
though made on the Closing Date and Purchaser shall have delivered to Seller a
certificate or certificates to such effect, in form and substance reasonably
satisfactory to Seller and dated the Closing Date, signed by and on behalf of
Purchaser by its duly authorized representative.


 


Section 10.4                                Covenants. Purchaser shall have
performed and complied in all material respects with all of the covenants and
agreements on Purchaser’s part to be performed and complied with as set forth
herein and Purchaser shall have delivered to Seller a certificate or
certificates to such effect, in form and substance reasonably satisfactory to
Seller and dated the Closing Date, signed by and on behalf of Purchaser by its
duly authorized representative.


 


Section 10.5                                Absence of Litigation. No action or
proceeding by any unaffiliated third party shall have been instituted (or
threatened) before any court or Governmental Authority to enjoin, restrain,
prohibit or otherwise challenge the legality or validity of the transactions
contemplated hereby or to obtain substantial damages in respect of, or which is
related to or arises out of, this Agreement or the consummation of the
transactions contemplated hereby.


 


Section 10.6                                No Change in Law. Since the date of this
Agreement there shall have been no change in any applicable Law that makes it
illegal for any Party hereto to perform its obligations hereunder (i) enacted
(and not effectively vetoed), whenever effective, (ii) adopted as a final
regulation pursuant to formal rule making, order-issuing or regulatory
authority by any agency, board, commission, or other administrative, executive,
or other regulatory body having jurisdiction over the Assets, or (iii) embodied
in a final, formal ruling, order or decision of any judicial body having
jurisdiction over the Assets.


 


Section 10.7                                Required Consents. The Parties shall
have received all of the Required Consents and such consents and approvals
shall remain in effect on the Closing Date.


 


Section 10.8                                Purchaser’s Closing Deliverables. At the
Closing, and concurrently with the delivery by the Seller of the Seller’s
Closing Deliverables, Purchaser shall have executed and delivered, or caused to
have been executed and delivered, to Seller the Purchaser’s Closing
Deliverables, each of which shall be in full force and effect and shall be in
form and substance reasonably satisfactory to Seller.


 


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ARTICLE XI


TERMINATION


 


Section 11.1                                Termination by Mutual Consent. This
Agreement may be terminated prior to Closing by mutual agreement of Seller and
Purchaser. Upon such termination, this Agreement shall terminate and neither
Purchaser nor Seller shall have any further obligation or liability to the
other hereunder.


 


Section 11.2                                Termination by Seller. Seller may
terminate this Agreement by giving written notice to Purchaser at any time
prior to the Closing:


 


(a)                                 in the event Purchaser has breached any representation, warranty, or
covenant contained in this Agreement in any material respect, Seller has
notified Purchaser of the breach, and the breach has continued without cure for
a period of thirty (30) days after the notice of breach;


 


(b)                                in the event any of the Seller’s Conditions Precedent shall have
become incapable of fulfillment; or


 


(c)                                 if the Closing shall not have occurred on or before the Outside
Date.


 


Section 11.3                                Termination by Purchaser. In addition to
its termination rights under Article V hereof, Purchaser may terminate
this Agreement by giving written notice to Seller at any time prior to the
Closing:


 


(a)                                 in the event Seller has breached any representation, warranty, or
covenant contained in this Agreement in any material respect, Purchaser has
notified Seller of the breach, and the breach has continued without cure for a
period of thirty (30) days after the notice of breach or until the Outside
Date, whichever is sooner;


 


(b)                                in the event any of the Purchaser’s Conditions Precedent shall have
become incapable of fulfillment;


 


(c)                                 if the Closing shall not have occurred on or before the Outside
Date; or


 


(d)                                in the event there shall have occurred any casualty, damage, injury
or other adverse change to the Assets which could reasonably be expected to
have a replacement cost in excess of $250,000.


 


Section 11.4                                Effect of Termination. If any Party
terminates this Agreement pursuant to ARTICLE V or this ARTICLE XI,
all rights and obligations of the Parties hereunder shall terminate without any
liability of any Party to any other Person; provided, however, that no
termination shall relieve Seller from any liability arising from or relating to
Seller’s breach of this Agreement at or prior to termination; and provided
further, that if the Deposit is paid to Seller under Section 4.1(d) such
amount with Accrued Interest shall constitute liquidated


 


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damages and the Seller shall have no further
rights or remedies against Purchaser at law or in equity.


 


ARTICLE XII—NO PROVISION


 


 


ARTICLE XIII


GENERAL INDEMNIFICATION


 


Section 13.1                                Agreement of Seller and Trust to Indemnify Purchaser. Subject to the terms and conditions of this ARTICLE XIII,
after the Closing, Seller and Trust hereby agree jointly and severally to
indemnify, defend and hold harmless Purchaser, its Affiliates, and their
respective directors, officers, employees, agents and representatives from,
against, for and in respect of any and all Losses asserted against, relating
to, imposed upon or incurred by Purchaser by reason of, resulting from, based
upon or arising out of:


 


(a)                                 Seller’s or Trust’s breach of any representation or warranty of
Seller or Trust contained in or made pursuant to this Agreement, or the breach
by Seller or Trust of any covenant or agreement made in or pursuant to this
Agreement;


 


(b)                                Seller’s ownership or operation of the Business prior to the Closing
Date, other than Losses relating to, imposed by reason of, resulting from,
based on or arising out of the Assumed Liabilities; or


 


(c)                                 the Retained Liabilities.


 


Section 13.2                                Agreement of Purchaser to Indemnify Seller. Subject to the terms and conditions of this ARTICLE XIII,
after the Closing, Purchaser hereby agrees to indemnify, defend and hold
harmless Seller, its Affiliates, and their respective directors, officers,
employees, agents and representatives from, against, for, and in respect of any
and all Losses asserted against, relating to, imposed upon or incurred by
Seller or such persons by reason of, resulting from, based upon or arising out
of:


 


(a)                                 Purchaser’s breach of any representation or warranty of Purchaser
contained in or made pursuant to this Agreement, or the breach by the Purchaser
of any covenant or agreement made in or pursuant to this Agreement;


 


(b)                                Purchaser’s ownership or operation of the Business on or after the
Closing Date, other than Losses relating to, imposed by reason of, resulting
from, based on or arising out of the Retained Liabilities;


 


(c)                                 the exercise by Purchaser and/or its agents, employees or
contractors of Purchaser’s rights under Section 8.3(a); or


 


(d)                                the Assumed Liabilities.


 


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Section 13.3                                Effect of Closing Over Known Unsatisfied Conditions or Breached
Representations, Warranties or Covenants. If either
Party elects to proceed with the Closing with actual knowledge of any failure
to be satisfied of any condition in its favor or the breach of any
representation, warranty or covenant by the other Party, the condition that is
unsatisfied or the representation, warranty or covenant which is breached at
the Closing Date shall be deemed to be irrevocably waived by such Party, and
such Party shall be deemed to fully release and forever discharge the other
Party on account of any and all claims, demands or charges, known or unknown,
with respect to the same.


 


Section 13.4                                Mitigation. The Indemnified Parties
shall take all reasonable steps to mitigate all Losses, including availing
themselves of any defenses, limitations, rights of contribution, claims against
third parties and other rights at law or in equity, and shall provide such
evidence and documentation of the nature and extent of any liability as may be
reasonably requested by the Indemnitor. Each Indemnified Party shall act in a
commercially reasonable manner in addressing any Losses that may provide the
basis for an indemnifiable claim (that is, each Indemnified Party shall respond
to such Loss in the same manner that it would respond to such Loss in the
absence of the indemnification provided for in this Agreement). Any request for
indemnification of specific costs shall include invoices and supporting documents
containing reasonably detailed information about the costs and/or damages for
which indemnification is being sought.


 


Section 13.5                                Limitations on Indemnification. Any
indemnifiable claim shall be limited to the amount of actual damages sustained
by the Indemnified Parties by reason of such breach or nonperformance, net of (i) any
net Tax benefits realized or realizable by the Indemnified Parties based on the
present value thereof by reason of such Losses, and (ii) the dollar amount
of any insurance proceeds receivable by the Indemnified Parties with respect to
such Losses. Seller and Trust shall not be required to indemnify any Person
under Section 13.1 except to the extent that the aggregate of all amounts
for which indemnity would otherwise be payable by Seller exceeds $50,000 and
then only to the extent of the excess over that amount. For purposes of
measuring the Loss suffered as a result of a breach of representations and
warranties in calculating whether the threshold in the preceding sentence has
been met (but not for purposes of determining whether any representation or
warranty has been breached), any representation or warranty which contains a
materiality or similar limitation (such as a dollar threshold) shall be read as
if it did not contain such limitation. For purposes of indemnification, in no
event shall an individual breach of any representation or warranty be
considered until the Loss relating thereto exceeds $10,000. Sellers’ and Trust’s
indemnity obligations under Section 13.1 shall be limited, in the
aggregate, to the amount of the Purchase Price.


 


Section 13.6                                Exclusive Remedy. Except in respect of
remedies for actual fraud by a Party, the indemnities set forth in this
Agreement shall be the exclusive remedies of the Parties with respect to each
other related to the subject matter of this Agreement, and each Party waives
any other statutory, equitable or common law remedy which such party would
otherwise have for any breach of this Agreement or with respect to any
liability arising from, or related to, the Business, the Assets or the Assumed
Liabilities.


 


40





















 


ARTICLE XIV


PROCEDURES FOR INDEMNIFICATION


 


Section 14.1                                Procedures for Indemnification.


 


(a)                                 A claim for indemnification hereunder (herein referred to as an “Indemnification
Claim”) other than a Third Party Claim shall be made by Indemnitee by delivery
of a written declaration to Indemnitor requesting indemnification and
specifying the basis on which indemnification is sought and the amount of
asserted Losses.


 


(b)                                If the Indemnification Claim involves a Third Party Claim, the
procedures set forth in Section 14.2 shall be observed by Indemnitee and
Indemnitor.


 


(c)                                 If the Indemnification Claim involves a matter other than a Third
Party Claim, the Indemnitor shall have sixty (60) days to object to such
Indemnification Claim by delivery of a written notice of such objection to
Indemnitee specifying in reasonable detail the basis for such objection. During
such time, the Indemnified Parties shall make available to Indemnitor all facts
and records within their possession or control relating to such claim. Failure
by Indemnitor to timely so object shall constitute acceptance of the
Indemnification Claim by the Indemnitor and the Claim shall be paid in
accordance with Section 14.1(d).


 


(d)                                Upon a final determination of the amount of an Indemnification
Claim, Indemnitor shall pay the amount of such finally determined
Indemnification Claim within ten (10) days of the date such amount is
determined.


 


Section 14.2                                Defense of a Third Party Claim. If any
claim is made, or suit or proceeding (including a binding arbitration or an
audit by any Taxing authority) is instituted against an Indemnified Party by
any Person other than Indemnitor that, if prosecuted successfully, would be a
matter for which such Indemnified Party is entitled to indemnification under
this Agreement (herein referred to as a “Third Party Claim”), the obligations
and liabilities of the Parties hereunder with respect to such Third Party Claim
shall be subject to the following terms and conditions:


 


(a)                                 The Indemnified Party shall give the Indemnitor written notice of
any such claim promptly after receipt by the Indemnified Party of actual notice
thereof, but any failure to do so shall not relieve the Indemnitor from any
liability which it may have except to the extent such failure would prejudice
the Indemnitor. Upon receipt of such notice, Indemnitor shall undertake the
defense thereof by representatives of its own choosing reasonably acceptable to
the Indemnified Party. If, however, the Indemnitor fails or refuses to
undertake the defense of such claim within thirty (30) days after written
notice of such claim has been given to the Indemnitor by the Indemnified Party,
or at least five (5) days before any answer or similar pleading is
required, whichever is sooner, the Indemnified Party shall have the right to
undertake the defense and, subject to Section 14.3, settlement of such
claim with counsel of its own choosing. In the circumstances described in the
preceding sentence, the Indemnified Party shall, promptly upon its


 


41





















 


determination of the amount of such Loss,
make an Indemnification Claim as specified in Section 14.1.


 


(b)                                The Indemnified Parties and the Indemnitor shall cooperate with each
other in all reasonable respects in connection with the defense of any Third
Party Claim including making available records relating to such claim and
furnishing, without expense to the Indemnitor, and providing access to
management employees of the Indemnified Party as may be reasonably necessary
for the preparation of the defense of any such claim or for testimony as
witnesses in any proceeding relating to such claim.


 


Section 14.3                                Settlement of Third Party Claims. No
settlement of a Third Party Claim involving the asserted liability of a Party
under this ARTICLE XIV shall be made without the prior written consent by
or on behalf of such Party, unless such settlement includes a full release of
such Party acceptable to such party in its reasonable discretion.


 


ARTICLE XV


LIMITATION OF LIABILITY


 


IN NO EVENT WILL EITHER PARTY OR ANY OF THEIR
RESPECTIVE OFFICERS, DIRECTORS, AGENTS, CONTRACTORS, SUBCONTRACTORS, VENDORS OR
EMPLOYEES HAVE ANY LIABILITY TO THE OTHER INDEMNIFIED PARTY FOR LOSSES WHICH
ARE INCIDENTAL, SPECIAL, CONSEQUENTIAL, INDIRECT, PUNITIVE OR EXEMPLARY.
NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY TO THE EXTENT THAT SUCH OTHER
PARTY HAS RECEIVED PAYMENT FOR SUCH A CLAIM FROM ANOTHER SOURCE, AND ANY
PAYMENT OBLIGATION PAYABLE BY A PARTY SHALL BE NET OF ANY TAX BENEFITS OBTAINED
BY OR INSURANCE PROCEEDS AVAILABLE TO THE OTHER PARTY.


 


ARTICLE XVI


DISPUTE
RESOLUTION


 


Section 16.1                                Negotiation. In the event of any dispute
or disagreement between Seller and Purchaser as to the interpretation of any
provision of this Agreement or the performance of obligations hereunder (a “Dispute”),
such Dispute, upon written request of Seller or Purchaser, shall be referred to
representatives of the Parties for decision, each Party being represented by a
senior executive officer (herein referred to as the “Negotiation Representative”).
The Negotiation Representatives shall promptly meet in a good faith effort to
resolve the Dispute.


 


Section 16.2                                Mediation. If the Negotiation
Representatives do not agree upon a resolution within thirty (30) days after
reference of the Dispute to them (unless such period is extended by mutual
agreement of the Parties), the Parties will attempt in good faith to resolve
the controversy or claim in accordance with the Model Procedures for Mediation
as in effect at such time. The costs of mediation shall be shared equally by
the Parties. Any settlement reached by mediation shall be resolved in writing,
signed by the Parties and binding on the Parties. The place of any such
mediation shall be in Reno, Nevada.


 


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Section 16.3                                Arbitration. If the Dispute has not been
resolved pursuant to the foregoing procedures within sixty (60) days after the
first meeting with respect to the mediation (which period may be extended by
mutual agreement), the Dispute shall be resolved, at the request of either
Party, by arbitration conducted in accordance with the provisions of the
Federal Arbitration Act (9 U.S.C. Section 1-16) and in accordance with the
American Arbitration Association’s Commercial Arbitration Rules as then in
effect, by three neutral arbitrators selected by the Parties as follows. Each
Party shall select a neutral arbitrator, subject to objection of the other
Party, and the two neutral arbitrators chosen by the Parties shall select a
third neutral arbitrator. If the two neutral arbitrators selected by the
Parties are unable to agree on the selection of the third arbitrator, they shall
select an arbitrator according to the procedures established by the American
Arbitration Association’s Commercial Arbitration Rules as then in effect.
The arbitration of such Dispute, including the determination of any amount of
damages suffered by any party hereto by reason of the acts or omissions of any
Party, shall be final and binding upon the Parties, except that the arbitrator
shall not be authorized to award punitive damages with respect to any such
Dispute. The arbitrators shall have the power to decide all questions of
arbitrability and of such arbitrators’ jurisdiction. No Party shall seek any
punitive damages relating to any matters under, arising out of, in connection
with or relating to this Agreement. The Parties intend that this agreement to arbitrate
be valid, binding, enforceable and irrevocable. The substantive and procedural
Law of the State of Nevada shall apply to any such arbitration proceedings, and
the decision of the arbitrators shall be bound by such Law and by the terms of
this Agreement. The place of any such arbitration shall be Reno, Nevada.
Judgment upon the award rendered by the arbitrators may be entered by any court
having jurisdiction thereof.


 


ARTICLE XVII


MISCELLANEOUS PROVISIONS


 


Section 17.1                                Notices. Any and all notices and demands by any Party hereto to any
other Party, required or desired to be given hereunder shall be in writing and
shall be validly given or made only if deposited in the United States mail,
certified or registered, postage prepaid, return receipt requested, if made by
Federal Express or other similar courier service keeping records of deliveries
and attempted deliveries or when served by telecopy or similar facsimile
transmission. Service by mail or courier shall be conclusively deemed made on
the first Business Day delivery is attempted or upon receipt, whichever is
sooner. Facsimile transmissions received during business hours during a
Business Day shall be deemed made on such Business Day. Facsimile transmissions
received at any other time shall be deemed received on the next Business Day.
The Parties may change their address for the purpose of receiving notices or
demands as herein provided by a written notice given in the manner aforesaid to
the others, which notice of change of address shall not become effective,
however, until the actual receipt thereof by the others.


 


43





















 


(a)                                  Any notice or demand to Seller or Trust shall be addressed to Seller
at:


 


Capital City Entertainment, Inc.


c/o Best Western Pinon


Plaza Resort


2171 Highway 50 East


Carson City, Nevada 89701


Attention: 
Clark G. Russell, President


Facsimile:


 


With a copy to:


 


James Todd Russell


Allison, MacKenzie, Russell, Pavlakis, Wright &
Fagan, Ltd.


402 North Division Street


Post Office Box 646


Carson City, Nevada 89702


Facsimile:


 


(b)                                 Any notice or demand to Purchaser shall be addressed to Purchaser
at:


 


Jacobs Entertainment, Inc.


17301 West Colfax Avenue, Suite 250


Golden, Colorado 80401


Attention: 
Stephen R. Roark


Facsimile: 
303-215-5219


 


With a copy to:


 


Samuel E. Wing


Jones & Keller, P.C.


1625 Broadway, Suite 1600


Denver, Colorado 80202


Facsimile: 
303-573-0769


 


Section 17.2                                Construction and Governing Law. The
internal laws of the State of Nevada applicable to contracts made and wholly
performed therein shall govern the validity, construction, performance and
effect of this Agreement.


 


Section 17.3                                Counterparts. This Agreement may be
executed in one or more counterparts, all of which shall be considered one and
the same agreement.


 


Section 17.4                                Integrated Agreement. This Agreement and
the other agreements described herein supersede all prior and contemporaneous
agreements, oral and written, between the Parties hereto with respect to the
subject matter hereof.


 


44





















 


Section 17.5                                No Oral Modification. Neither this
Agreement, nor any provision hereof, may be changed, waived, discharged,
supplemented or terminated orally, but only by an agreement in writing signed
by the Party against which the enforcement of such change, waiver, discharge or
termination is sought.


 


Section 17.6                                Successors and Assigns; No Third Party Beneficiaries. This Agreement shall inure to the benefit of and be binding upon
the parties hereto and their respective successors and assigns. Except as
specifically provided in this Section 17.6, this Agreement is not intended
to, and shall not, create any rights in any Person whomsoever except Purchaser
and Seller and Trust.


 


Section 17.7                                Assignment. Neither Party shall assign
its rights or delegate its duties under this Agreement without the prior
written consent of the other Party hereto. Notwithstanding the foregoing,
Purchaser shall have the right, without the consent of Seller, to assign its
rights and delegate its duties under this Agreement to an Affiliate of
Purchaser; provided, however, that such assignment shall not relieve Purchaser
of its obligations and liabilities hereunder. Purchaser shall not sell or
otherwise transfer any material asset that constitutes a portion of the Assets
to any Affiliate of Purchaser unless, at the time of such transfer, such
Affiliate executes a guarantee of Purchaser’s obligations hereunder in form
reasonably satisfactory to Seller.


 


Section 17.8                                Partial Invalidity. If any term,
provision, covenant or condition of this Agreement, or any application thereof,
should be held by a court of competent jurisdiction to be invalid, void or
unenforceable, all terms, provisions, covenants and conditions of this
Agreement, and all applications thereof, not held invalid, void or
unenforceable shall continue in full force and effect and shall in no way be
affected, impaired or invalidated thereby, provided that the invalidity,
voidness or unenforceablity of such term, provision, covenant or condition
(after giving effect to the next sentence in this Section 17.8) does not
materially impair the ability of the parties to consummate the transactions
contemplated hereby. In lieu of such invalid, void or unenforceable term,
provision, covenant or condition, there shall be added to this Agreement a
term, provision, covenant or condition that is valid, not void and enforceable
and is as similar to such invalid, void or unenforceable term, provision,
covenant or condition as may be possible.


 


Section 17.9                                No Presumption Against the Draftsman.
Each Party having been represented in the negotiation of this Agreement, and
having had ample opportunity to review the language hereof, there shall be no
presumption against any Party on the ground that such Party was responsible for
preparing this Agreement, any of Seller’s Closing Deliverables or any of
Purchaser’s Closing Deliverables.


 


45





















 


Section 17.10                          Expenses. Subject to the provisions of ARTICLE XIII,
all expenses incurred by the Parties hereto in connection with or related to
the authorization, preparation and execution of this Agreement and the Closing
of the transaction contemplated hereby, including fees and expenses of agents,
representatives, counsel and accountants employed by any such Party, shall be
borne solely and entirely by the Party which has incurred the same.


 


Section 17.11                          Guarantee. Jacobs Entertainment, Inc.
hereby agrees to cause Purchaser to fulfill, and additionally guarantees, the
timely payment and performance of all of the obligations of Purchaser under
this Agreement.


 


Section 17.12                          Further Assurances. The Seller and Trust
jointly and severally agree to execute, acknowledge, seal and deliver, after
the date hereof, without additional consideration, such further assurances,
instruments and documents, and to take such further actions, as the Purchaser
may request in order to fulfill the intent of this Agreement and the
transactions contemplated hereby.


 


Section 17.13                          Confidentiality. The parties agree to
hold in complete confidence the terms and conditions of this agreement, subject
to the obligations of disclosure to the Nevada Gaming Authorities and under
federal securities laws. All proprietary information provided to Purchaser
shall not be disclosed and shall remain confidential. The parties agree that no
announcement of the entering into this Purchase Agreement and or sale shall be
made without the consent of the other party. Seller will be given the
opportunity to duly notify its employees prior to any disclosure by either
party.


 


IN WITNESS WHEREOF, the parties have executed
this Agreement as of the day and year first above written.


 


	
   

  	
  CAPITAL
  CITY ENTERTAINMENT, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  
	
   

  	
  Its:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  JACOBS
  PINON PLAZA ENTERTAINMENT, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  
	
   

  	
  Its:

  	
   

  



 


46





















 


	
   

  	
  THE
  CLARK AND JEAN RUSSELL

  
	
   

  	
  FAMILY
  TRUST

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
    Clark G. Russell, Trustee

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
    Jean M. Russell, Trustee

  



 


47





















 


APPENDIX A


to


ASSET PURCHASE AGREEMENT


by and between


CAPITAL CITY ENTERTAINMENT, INC., as “Seller”


and


JACOBS PINON PLAZA ENTERTAINMENT, INC., as “Purchaser”


 


Glossary of Defined Terms


 


“Accrued Interest” has the meaning ascribed
to it in Section 4.1(c).


 


“Affiliate” means, with respect to any
Person, any other Person that, directly or indirectly, through one or more
intermediaries, controls, is controlled by or is under common control with,
such Person. For purposes of this definition, “control” means the direct or indirect
ownership of more than fifty percent (50%) of the outstanding capital stock or
other equity interests having ordinary voting power.


 


“Agreement” means this Asset Purchase
Agreement, together with all Schedules, Exhibits, Appendices and other attachments
hereto, and all amendments and supplements hereto and thereto.


 


“Asset Amount” means the value as of the
Closing of the assets of the type historically accounted for in the categories
listed in Exhibit I.  The values of
the assets shall be calculated in the same manner and using the same policies
and methods as the corresponding line items on any applicable prior date on
which such values were calculated.


 


 “Assets”
has the meaning ascribed to such term in Section 2.1.


 


“Assignment and Assumption Agreement(s)”
means that certain Assignment and Assumption Agreement(s), the form of which is
attached hereto as Exhibit H, to be executed by Seller and Purchaser and
delivered at the Closing on the Closing Date providing for, among other
matters, the assignment by Seller, and the assumption by Purchaser, of the
Transferred Permits and the Assumed Contracts.


 


“Assumed Contract(s)” has the meaning
ascribed to such term in Section 2.1(c).


 


“Assumed Liabilities” has the meaning
ascribed to such term in Section 3.1.


 


“Benefit Plans” has the meaning ascribed to
such term in Section 7.1(s)(i).


 


“Bill of Sale and Deed” means that certain
Bill of Sale and Deed, the form of which is attached hereto as Exhibit D,
to be executed by Seller and delivered at the Closing on the Closing Date
providing for the sale, assignment, transfer and conveyance of the Assets from
Seller to Purchaser, including all Personal Property and Real Property not
including the Leased Land.


 


1





















 


“Business” has the meaning ascribed to such
term in Section 2.1(d).


 


“Business Day” means any day other than a
Saturday, Sunday or other day upon which banks in the State of Nevada are
authorized or required to be closed.


 


“Cash” has the meaning ascribed to such term
in Section 2.1(g).


 


“Closing” means the proceedings pursuant to
which the sale of the Purchased Assets is consummated.


 


“Closing Date” has the meaning ascribed to
such term in Section 6.1.


 


“COBRA” has the meaning ascribed to such term
in Section 8.6(e).


 


“Code” means the Internal Revenue Code of
1986, as amended, and as the same may be further amended from time to time, or
any successor law, and the rules and regulations promulgated thereunder.
Any reference to any specific provision of the Code also shall be deemed to
refer to any successor provision thereto.


 


“Collective Bargaining Agreement” means any
collective bargaining agreement with respect to the Business.


 


“Confidentiality and Non-Competition
Agreements” mean the forms of such agreements attached as Exhibits K and L
hereto.


 


“Computer Software” has the meaning ascribed
to such term in Section 2.1(i).


 


“Contract” means any binding contract,
agreement, arrangement, guaranty, letter of credit, bond, indemnity
obligations, commitment, franchise, indenture, instrument, lease or license.


 


“Controlled Group” means Seller and the other
organizations of a controlled group of organizations (within the meaning of
Sections 414(b), (c), (m) or (o) of the Code) of which Seller is a member.


 


“Controlled Group Plans” means the Benefit
Plans adopted by the Controlled Group that are applicable to the employees of
the Business.


 


“Customer Front Money” has the meaning
ascribed to such term in Section 6.4(g).


 


“Deposit” shall mean the sum of Five Hundred
Thousand Dollars ($500,000) to be deposited by Purchaser into the Escrow
Account upon execution of this Agreement, together with all interest earned
thereon.


 


 “Disapproved
Exceptions” has the meaning ascribed to such term in Section 5.1(a).


 


2





















 


“Disclosure Schedule” means the Disclosure Schedule to
this Agreement which sets forth certain information called for by this
Agreement and certain exceptions to the representations and warranties made by
the Seller in this Agreement.


 


“Dispute” has the meaning ascribed to such
term in Section 16.1.


 


“Employee Pension Benefit Plans” has the
meaning ascribed to such term in Section 7.1(s)(ii).


 


“Environmental Law(s)” means any federal,
state or local law, statute, ordinance, rule or regulation or order
pertaining to health or the protection of the environment, including, but not
limited to: RCRA; the Clean Air Act, as now or hereafter amended (42 U.S.C. Section 7401
et. seq.); the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as now or hereafter amended (42 U.S.C. Section 9601 et.
seq.); the Emergency Planning and Community Right-to-Know Act of 1986, as now
or hereafter amended (42 U.S.C. Section 11001 et. seq.); the Federal
Hazardous Substances Act, as now or hereafter amended (15 U.S.C. Section 1261
et. seq.); the Federal Insecticide, Fungicide, and Rodenticide Act, as now or
hereafter amended (7 U.S.C. Section 136 et. seq.); the Federal Water
Pollution Control Act, as now or hereafter amended (33 U.S.C.  Section 1251 et.  seq.); the Hazardous Materials Transportation
Act, as now or hereafter amended (49 U.S.C. Section 1801 et. seq.); the
Occupational Safety and Health Act of 1970, as now or hereafter amended (29
U.S.C. Section 651 et. seq.); (the Toxic Substances Control Act, as now or
hereafter amended (15 U.S.C. Section 2601 et. seq.); Nev. Rev. Stat. chs.
444, 445A, 445B, 459, 477, 590 and 618, each as now or hereafter amended; the
Uniform Fire Code, as now or hereafter adopted in Nevada; and the regulations, rules and
orders promulgated under each of them.


 


“ERISA” means the Employee Retirement Income
Security Act of 1974, as amended from time to time, and the regulations
promulgated and rulings issued thereunder.


 


“Escrow Agent” has the meaning ascribed to
such term in Section 4.1.


 


“Estimated Liability Adjustment” has the
meaning ascribed to such term in Section 4.4(a).


 


“Estimated Liability Difference” has the
meaning ascribed to such term in Section 4.4(a).


 


“Excluded Assets” has the meaning ascribed to
such term in Section 2.1.


 


“Final Liability Statement” means the
determination of the Liability Adjustment that is final and binding on the
Parties, either through agreement of the Parties or through the action of the
Independent Accounting Firm in the manner set forth in Section 4.4(d).


 


“First Personal Property Inventory” has the
meaning ascribed to such term in Section 7.1(f)(i).


 


3





















 


“GAAP” means generally accepted accounting
principles in the United States of America, which shall include official
interpretations thereof by the Financial Accounting Standards Board and its
successors, consistently applied.


 


“Governmental Authority” means the federal
government of the United States, the government of any state of the United
States or any political subdivision thereof, and any Person exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government and any other governmental entity, instrumentality,
agency, authority or commission.


 


“Hazardous Substances” means one or more of
the chemicals, substances, materials, mixtures, compounds, hydrocarbons,
pollutants and wastes classified or regulated under the Environmental Laws.


 


“Indemnification Claim” has the meaning
ascribed to such term in Section 14.1(a).


 


“Indemnified Party(ies)” means an Indemnitee,
its Affiliates, and their respective directors, officers, employees, agents and
representatives.


 


“Indemnitee” means the Party seeking
indemnification under ARTICLE XIII of the Agreement.


 


“Indemnitor” means the Party against whom
indemnity is sought under ARTICLE XIII of the Agreement.


 


“Independent Accounting Firm” means (i) an
independent certified public accounting firm in the United States of national
or regional recognition mutually acceptable to Seller and Purchaser or (ii) if
Seller and Purchaser are unable to agree upon such a firm within five (5) days,
then each Party shall select one such firm and those two firms shall select a
third firm, in which case “Independent Accounting Firm” shall mean such third
firm.


 


“Initial Liability Statement” has the meaning
ascribed to such term in Section 4.4(b).


 


“Intellectual Property Rights” has the
meaning ascribed to such term in Section 2.1(e).


 


“Inventoried Vehicles” has the meaning
ascribed to such term in Section 6.4(f).


 


“Inventory” means all inventories maintained
in connection with the Business, including, but not limited to, liquor, food
and beverage, linen, uniforms, utensils, chinaware, glassware, silverware and
office supplies.


 


“Law(s)” means any law, statute, act, decree,
ordinance, rule, writ, injunction, directive (to the extent having the force of
law), order (unilateral or consensual), final nonappealable judgment directly
applicable to the relevant Party, treaty, code or regulation (including any of
the foregoing relating to health or safety matters), any Environmental Law or
any interpretation of any of the foregoing, as enacted, issued or promulgated
by any Governmental Authority,


 


4





















 


including all amendments, modifications,
extensions, replacements or reenactments thereof or thereto.


 


“Lease Cancellation Agreement” has the
meaning ascribed to it in the recitals hereto.


 


“Leased Land” has the meaning ascribed to
such term in the recitals hereto but such term does not include the Real
Property.


 


“Liability Adjustment” means, as of the
Closing, an amount equal to the liabilities of the type historically accounted
for in the categories listed in Exhibit I, calculated in the same manner
and using the same policies and methods as the corresponding line items on any
applicable prior date on which such values were calculated and set forth
herein.


 


“Liability Difference” means the amount, if
any, by which the liabilities of the type historically accounted for in the
categories listed in Exhibit I exceeds the Minimum Asset Amount. In each
case, the values of the assets and liabilities shall be calculated in the same
manner and using the same policies and methods as the corresponding line items
on any applicable prior date on which such values were calculated.


 


“Loss(es)” means any and all assessments,
judgments, damages (including natural resource damage), penalties, interest,
fines, investigations, liabilities (including strict liability), reasonable
costs and expenses of investigation and defense of any claim.


 


 “Multi-Employer
Plan” means a “multi-employer plan” as defined in Section 4001(a)(3) of
ERISA.


 


“Negotiation Representative” has the meaning
ascribed to such term in Section 16.1.


 


“Nevada Gaming Authorities” has the meaning
ascribed to such term in Section 3.2(b).


 


“Nonrepresented Employee” means any employee
of Seller employed in the Business who is not a Represented Employee.


 


“No Solicitation Period” has the meaning
ascribed to such term in Section 8.2(a).


 


“Notice of Disagreement” has the meaning
ascribed to such term in Section 4.4(c).


 


“Outside Date” means June 30, 2006
unless extended by Purchaser in accordance with Section 6.1(b).


 


“Party(ies)” has the meaning ascribed to such
term in the preamble hereto.


 


“Payables” has the meaning ascribed to such
term in Section 3.1(a).


 


“PBGC” has the meaning ascribed to such term
in Section 7.1(s)(iii).


 


5





















 


“Permitted Exception” has the meaning
ascribed to such term in Section 5.1(a).


 


“Person” means any individual natural person
or any artificial person including any corporation, general or limited
partnership, joint venture, association, unincorporated organization, trust,
business trust, limited liability company or partnership, Governmental
Authority or other entity.


 


“Personal Property” has the meaning ascribed
to such term in Section 2.1(d).


 


“Purchaser” means Jacobs Pinon Plaza
Entertainment, Inc., a Nevada corporation.


 


“Purchase Offer” has the meaning ascribed to
such term in Section 8.2(a).


 


“Purchase Price” has the meaning ascribed to
such term in Section 4.2.


 


“Purchase Price Notice” has the meaning
ascribed to such term in Section 4.4(a).


 


“Purchaser’s Closing Deliverables” has the
meaning ascribed to such term in Section 6.3.


 


“Purchaser’s Conditions Precedent” has the
meaning ascribed to such term in ARTICLE IX.


 


“Purchaser’s Lease Agreement” means the lease
and option agreement covering the Leased Land attached as Exhibit C.


 


“Purchaser’s Refinancing” shall mean the
completion of Purchaser’s refinancing of its 117/8%
Senior Secured Notes by the issuance of new notes, bonds, equity or a
combination thereof.


 


“RCRA” means the Resource Conservation and
Recovery Act of 1976, as now or hereafter amended, 42 U.S.C. Section 6901
et. seq., and the rules, regulations and orders promulgated thereunder.


 


“Real Property” has the meaning ascribed to
such term in Section 2.1(b) but such term does not include the Leased
Land.


 


“Represented Employee” means any employee of
Seller who is represented by a union and employed in the Business.


 


“Required Consents” has the meaning ascribed
to such term in Section 9.8.


 


“Resort” has the meaning ascribed to such
term in the recitals.


 


“Retained Liabilities” has the meaning
ascribed to such term in Section 3.2.


 


6





















 


“Second Personal Property Inventory” has the
meaning ascribed to such term in Section 8.20.


 


“Seller” means Capital City Entertainment, Inc.,
a Nevada corporation.


 


“Seller Benefit Plans” has the meaning
ascribed to such term in Section 7.1(s)(iii).


 


“Seller’s Closing Deliverables” has the
meaning ascribed to such term in Section 6.2.


 


“Seller’s Conditions Precedent” has the meaning
ascribed to such term in ARTICLE X.


 


“Tax(es)” means any tax, charge, impost,
tariff, duty or fee of any kind charged, imposed or levied, directly or
indirectly, by any Governmental Authority including any value-added tax, sales
tax, stamp duty, import duty, withholding tax (whether on income, dividends,
interest payments, fees, equipment rentals or otherwise), tax on foreign
currency loans or foreign exchange transactions, excise tax, franchise tax,
transfer tax, property tax, unemployment tax or social security tax including
any interest, penalties or other additions thereon.


 


“Third Party Claim” has the meaning ascribed
to such term in Section 14.2.


 


“Title Company” has the meaning ascribed to
such term in Section 5.1(a).


 


“Trademark Assignment Agreements” means those
certain Trademark Assignment Agreements, the form of which is attached hereto
as Exhibit E, to be executed by Seller in favor of Purchaser and delivered
at the Closing on the Closing Date.


 


“Transferred Employees” has the meaning ascribed
to such term in Section 8.6(a).


 


“Transferred Permit(s)” has the meaning
ascribed to such term in Section 2.1(j).


 


“Trust” means the Clark G. Russell and Jean
M. Russell Trust.


 


“Unresolved Exceptions” has the meaning
ascribed to such term in Section 5.1(b).


 


“VEBA” means a voluntary employee’s
beneficiary association providing for the payment of life, sickness, accident
or other benefits to employees or their dependents.


 


“WARN Act” means the Worker Adjustment and
Retraining Notification Act, 29 U.S.C. Section 2101, et. seq. and as the
same may be amended from time to time, or any successor law, and the rules and
regulations promulgated thereunder.


 


“Warranties” has the meaning ascribed to such
term in Section 2.1(h).


 


“Welfare Plan” has the meaning ascribed to
such term in Section 7.1(s)(x).


 


“Withdrawal Liability” has the meaning
ascribed to such term in Section 8.5.


 


7