ISLE OF CAPRI CASINOS, INC.
711 XX. XXXXXX XXXXXX XXXX, XX. XXXX.
XXXXXX, XXXXXXXXXXX 00000
October 5, 1999
BRDC, Inc.
Bettendorf Riverfront Development
Company, L.C.
0000 Xxxxx Xxxxxx
Xxxxxxxxxx, Xxxx 00000
Ladies and Gentlemen:
The term sheet attached to this letter of intent sets forth the
principal terms and conditions upon which Isle of Capri Casinos, Inc. (the
"Purchaser"), itself or through a wholly owned subsidiary, is prepared to
acquire all of the capital stock of BRDC, Inc., which we understand owns
100% of the equity interests in Bettendorf Riverfront Development Company,
L.C., which we understand owns 50% of the equity interests in Lady Luck
Xxxxxxxxxx, X.X. As you know, the Purchaser has, or is about to, enter into
an Agreement and Plan of Merger with respect to the proposed acquisition of
Lady Luck Gaming Corporation, the owner of the other 50% interest in Lady
Luck Xxxxxxxxxx, X.X.
By our execution of this letter, we are confirming to you that our
Board of Directors, acting upon the recommendation of a Special Committee
thereof, has approved the principal terms and conditions set forth on the
attached term sheet, and we are committing to you to negotiate in good
faith toward the execution of definitive documentation reflecting those
terms and conditions. By your execution of this letter, you confirm to us
the approval of such terms and conditions by your management committee or
board of directors, as the case may be, as well as each of your equity
holders, and your (and their) commitment to so negotiate.
If for any reason a definitive Purchase Agreement or other binding
agreement has not been signed on or before November 15, 1999 (or such later
date as the parties may agree), then at the option of either party
communicated to the other in writing, this letter and all obligations set
forth herein shall terminate. Prior to the termination of this letter, each of
BRDC, Inc.
Bettendorf Riverfront Development
Company, L.C.
October 5, 1999
Page 2
you agrees that you will not directly or indirectly solicit or encourage
offers with respect to the sale of the subject business, or engage in any
discussions relating thereto.
This letter is not intended to be, and is not, a binding agreement
between the parties but is merely an expression of their intent with regard
to the transactions described herein, and no binding agreement shall be
deemed to exist between the parties unless and until a definitive agreement
is executed.
If the foregoing correctly sets forth our understanding, please
execute and return to the undersigned the enclosed copy of this letter.
Very truly yours,
Isle of Capri Casinos, Inc.
By: /s/ Xxxxx X. Xxxxxxx
-------------------------------------
Xxxxx X. Xxxxxxx
ACCEPTED:
BRDC, Inc.
Bettendorf Riverfront Development
Company, L.C.
By: /s/ Xxxxxxx Xxxxxxxxx
--------------------------------
Authorized Signatory
PROJECT CYCLONE
TERM SHEET
Transaction: G Company and Xxxxx will enter into a tax-free
reorganization (the form and structure of
which will be acceptable to both parties) in
which Xxxxx will acquire all of the capital
stock of G Company (the "G Company
Interests"). G Company owns, directly or
indirectly, (i) 50% of the outstanding
ownership interests in Cyclone and (ii) an
interest in the land currently used by
Cyclone, other than the leased temporary
parking (the "Land").
Consideration: In exchange for acquiring all of the G
Company Interests, the G Company
shareholders will receive 6,300,000
shares (adjusted for any stock splits
or stock dividends) of Xxxxx Common
Stock (the "Consideration"), adjusted
as provided below.
Adjusted Consideration: The Consideration will be adjusted at closing
valuing each Xxxxx share at $9.486 (the
average of the per share closing price for
Dixie's shares for the 45 trading days ended
September 22, 1999), as follows:
(i) If Actual Cyclone EBITDA for the twelve
months ended September 30, 1999 is greater
or less than $18.744 million the
Consideration will be increased or
decreased by one-half of the
product of the increase or
decrease multiplied by 6.35;
(ii) If Cyclone's "Net Debt" at September 30,
1999 is greater than $17,000,000 the
Consideration will be decreased by
one-half of the difference and if
Cyclone's Net Debt at September 30, 1999
is less than $17,000,000 the
Consideration will be increased by
one-half of the difference. "Net Debt"
means indebtedness for borrowed money
(including guarantees), the deferred
purchase price of property or assets and
capitalized lease obligations less
"Excess Cash." "Excess Cash" mans total
cash and cash equivalents minus "cage
cash" of $2.5 million.
1
(iii) If G Company indebtedness at
closing, including all
indebtedness secured by the
Land is greater than
$10,200,000 the Consideration
will be decreased by the
difference and if such
indebtedness at closing is
less than $10,200,000 the
Consideration will be
increased by the difference.
(iv) The Consideration will be
increased by one-half of the
net income of Cyclone for the
period from October 1, 1999
through the closing (the
"Allocated Net Income").
(v) The Consideration will be
decreased by the amount of all
cash distributed to the G
Company shareholders after
September 30, 1999.
Related Party Loan: Xxxxx agrees that it will cause
G Company to prepay, immediately
following the closing, the loan owed
to Valley Corporation (in the
approximate amount of $3,200,000).
Cash Withdrawals Prior Prior to the closing, it is understood that,
to Closing: Cyclone will distribute to G Company and G
Company will distribute to its shareholders
the following amounts in cash: (i) 45% of
one-half of Cyclone's September, 1999 net
income (the "October Tax Distribution"), (ii)
45% of Allocated Net Income on a monthly basis
(the "Additional Tax Distributions"), and
(iii) such additional amount as requested by
the G Company shareholders on the closing date
(the "Discretionary Distribution"); provided
that the Discretionary Distribution and the
Additional Tax Distributions (i) shall not
exceed $10,000,000 plus the Allocated Net
Income, (ii) results in less than $2,500,000
in Cyclone cash at closing, and (iii) shall
not be less than any amount necessary such
that the number of shares of Xxxxx Common
Stock to be received by the G Company
shareholders is equal to or less than
6,300,000 shares.
Expenses: Each of the parties shall pay all costs and
expenses incurred or to be incurred by it in
connection with the transaction including,
without limitation, any legal, investment
banking and accounting fees.
2
Representations, Customary representations and warranties which
Warranties, Covenants shall survive only until closing, except for the
Agreements: representations and warranties relating to the
Land (including environmental), which shall
survive for an agreed period, and customary
covenants, agreements and conditions,
including conduct of business prior to
closing. Due diligence to be performed prior
to execution of definitive agreement. The
parties shall use all reasonable efforts prior
to closing to (i) obtain the release of the G
Company shareholders and all of their
affiliates ("G Affiliates") from all
guarantees of Cyclone indebtedness and G
Company indebtedness, (ii) obtain the release
of all collateral pledged by G Affiliates to
secure such indebtedness and (iii) eliminate
or document (to the satisfaction of the
parties) all agreements and arrangements
between Cyclone and any G Affiliates.
Reasonable efforts shall include, if
necessary, the guarantee by Xxxxx of all the
guaranteed indebtedness but shall not require
the payment of any significant amount or the
release of any significant rights.
Indemnification: Xxxxx agrees to indemnify G Company and its
affiliates and their respective directors,
officers, employees, agents and controlling
persons from and against any losses, claims,
damages and liabilities, to which G Company or
such persons may become subject in connection
with their entering into and consummating the
transaction contemplated herein. G Company
agrees to indemnify Xxxxx and its affiliates
and their respective directors, officers,
employees, agents and controlling persons from
and against any losses, claims, damages and
liabilities, to which Xxxxx or such persons
may become subject as a result of inaccuracies
in the representations and warranties
regarding the Land.
Conditions Precedent: Receipt of fairness opinion from CIBC World
Markets with respect to the transaction
described herein (subject to the approval of
CIBC World Markets' M&A Committee), Dixie's
due diligence review and the closing of the
proposed transaction with Gypsy, which at the
time shall include its 50% interest in
Cyclone. CIBC World Markets has indicated that
subject to the results of due diligence and
preparation of the definitive agreement, it is
prepared to provide its fairness opinion.
Assumption: "Clean" company as to absence of material
contingent liabilities as determined
prior to execution of definitive agreement.
Closing: Simultaneous with closing of Gypsy merger.
3