Membership Interest Purchase Agreement

MEMBERSHIP INTEREST PURCHASE AGREEMENT


This Membership Interest Purchase Agreement (the "Agreement") is made and entered into this 31st day of March, 1999 by and among HWCC-Louisiana, Inc., a Louisiana corporation ("Purchaser"), Sodak Gaming, Inc., a South Dakota corporation ("Seller"), and Sodak Louisiana, L.L.C., a Louisiana limited liability company (the "Company"). Certain definitions for this Agreement are set forth in Section 10.15.
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RECITALS:


A. Purchaser, the Company and Shreveport Paddlewheels, L.L.C. ("Paddlewheels") are parties to that certain Amended and Restated Joint Venture Agreement of QNOV (formerly known as the "Queen of New Orleans at the Hilton Joint Venture") dated July 31, 1998 (as amended from time to time, the "Joint Venture Agreement").


B. Pursuant to the Joint Venture Agreement, Purchaser, the Company and Paddlewheels agreed to enter into a joint venture named QNOV (the "Joint Venture") for the purposes of participating in, constructing and operating a riverboat gaming vessel, hotel and casino in Shreveport, Louisiana.


C. Seller owns all of the outstanding membership interest in the Company (the "Membership Interest");


D. Seller desires to sell the Membership Interest to Purchaser, and Purchaser desires to purchase the Membership Interest from Seller, all on the terms and subject to the conditions set forth herein;


THEREFORE, Purchaser, Seller and the Company agree as follows:


ARTICLE I


SALE OF MEMBERSHIP INTEREST AND CLOSING


1.1 Purchase and Sale of Membership Interest. Subject to the terms and
---------------------------------------- conditions of this Agreement, Seller agrees to sell the Membership Interest to Purchaser and Purchaser agrees to purchase the Membership Interest from Seller.


1.2 Purchase Price.
--------------


Purchaser shall pay to Seller the amount of $2,500,000 in cash in consideration for the sale of the Membership Interest (the "Purchase Price"), $1,000 of which is payable at Closing (as defined herein) and the balance of which is payable on the six month anniversary of the Commencement Date (as defined in the Joint Venture Agreement) (the "Subsequent Payment Date").


1.3 Closing.
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(a) Within 5 days after the satisfaction of the conditions set forth in ARTICLES V and VI, the closing (the "Closing") will take place at the offices
---------- -- of Purchaser, or at such other place as Seller and Purchaser may agree in writing.


(b) At the Closing, Purchaser shall deliver to Seller (i) a check payable to Seller in the amount of $1,000 and (ii) such documents and instruments required to be delivered by Purchaser pursuant to this Agreement. On the Subsequent Payment Date, Purchaser shall deliver to Seller via wire transfer of immediately available funds, cash in the amount of $2,499,000.


(c) At the Closing, Seller will deliver to Purchaser (i) a certificate or certificates, if any, representing all the Membership Interest in appropriate form for transfer to Purchaser duly endorsed in blank and (ii) such other documents and instruments required to be delivered by Seller pursuant to this Agreement.


ARTICLE II


REPRESENTATIONS AND WARRANTIES OF SELLER AND COMPANY


Each of Seller and the Company hereby represents and warrants to Purchaser as follows:


2.1 Organization of Seller. Seller is a corporation duly organized,
---------------------- validly existing and in good standing under the laws of the State of South Dakota.


2.2 Corporate Authority. Seller has all requisite corporate power and
------------------- authority to enter into this Agreement and to perform its obligations hereunder. Seller's execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly and validly authorized by all requisite corporate action on the part of Seller. This Agreement has been duly and validly executed and delivered by Seller and constitutes the legal, valid and binding obligation of Seller, enforceable against it in accordance with its terms.


2.3 Organization and Operation of the Company. The Company is a limited
----------------------------------------- liability company duly organized, validly existing and in good standing under the laws of the State of Louisiana and has all requisite limited liability company power and authority to own, lease and operate its assets and carry on its business as it is now being conducted. The Company has no, and has never had any, (i) assets or property or debts, obligations or other liabilities (whether absolute, accrued, contingent, fixed or otherwise) (collectively, "Liabilities"), other than by virtue of its ownership interest in the Joint Venture or (ii) employees. Since its formation, the Company has not conducted any business other than any business related to its ownership in the Joint Venture.


2.4 Membership Interest of the Company. The Membership Interest is duly
---------------------------------- authorized, validly issued, fully paid and nonassessable, and has not been issued in violation of any preemptive or


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similar rights. Seller is the owner of record and beneficially of the Membership Interest, free and clear of all mortgages, pledges, encumbrances, security interests, charges, agreements or claims of any kind (collectively, "Liens). There are no authorized or outstanding options, warrants, calls, subscriptions or rights, commitments or other agreements of any kind to purchase any membership interest or other capital stock of the Company or to cause the Company to issue any membership interest or other shares of capital stock or securities convertible into or exchangeable or exercisable for any membership interest or other shares of such stock. There are no authorized or outstanding securities of the Company convertible into or exchangeable or exercisable for any membership interest or other capital stock of the Company. There are no agreements or understandings to which the Company is a party or by which it is bound with respect to the voting, sale or transfer of the Membership Interest, other than the Joint Venture Agreement. Upon delivery of the Membership Interest against payment therefor in accordance with this Agreement, Purchaser will acquire good and marketable title to the Membership Interest, free and clear of any and all Liens.


2.5 Interest in the Joint Venture. The Company owns 2,500,000 JV
----------------------------- Interests (as defined in the Joint Venture Agreement), which accounts for 50% of the total JV Interests of the Joint Venture (the "Company JV Interests"). The Company is the owner of record and beneficially of the Company JV Interests, free and clear of all Liens. There are no agreements or understandings to which the Company is a party or by which it is bound with respect to the voting, sale or transfer of the Company JV Interests, other than the Joint Venture Agreement. As of the date hereof, the Company has made all capital contributions required by it to be made to the Joint Venture pursuant to the Joint Venture Agreement.


2.6 Consents and Approvals. Neither the Seller, the Company nor the Joint
---------------------- Venture is required to make any filing with, or to obtain any permit, authorization, consent or approval of or from, any governmental authority as a condition to the consummation of the transactions contemplated by this Agreement, except to obtain the approval of the State of Louisiana Gaming Control Board (the "Gaming Board"). The execution and delivery of this Agreement by Seller does not, and the performance by Seller of its obligations under this Agreement will not: (i) conflict with or result in a breach of any of the terms, conditions or provisions of the certificate of incorporation or bylaws of Seller or the articles of organization or operating agreement of the Company; (ii) conflict with or constitute a default under, or give rise to any right to terminate, cancel, modify or accelerate, or to the loss of any material right under, any contract, agreement, license, mortgage, note, debenture or other evidence of indebtedness to which Seller or the Company is a party or by which any of their respective properties may be bound; (iii) violate any term or provision of any law, rule or regulation or any permit, concession, grant, franchise, license, writ, judgment, decree, injunction, order or ruling of any court or governmental or regulatory authority applicable to Seller or the Company; or (iv) result in the creation or imposition of any Lien upon Seller or the Company or any of their respective assets.


2.7 Absence of Changes. Except as set forth in Schedule 2.7, since its
------------------ ------------ formation, there has not been (i) any material adverse change in the condition, financial or otherwise, business, assets, properties or results of operations of the Company, or any event, occurrence or circumstance that could reasonably be expected to result in such a material adverse change, (ii) any event which, if it had taken


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place after the execution of this Agreement, would not have been permitted by ARTICLE IV hereof, or (iii) any condition, event or occurrence which could - ---------- reasonably be expected to prevent, hinder or materially delay the ability of the Company to consummate the transactions contemplated by this Agreement.


Without limiting the generality of the foregoing, since the formation of the Company, there has not been:


(a) any declaration, setting aside, or payment of any dividend
or distribution (whether in cash, securities, property or a combination
thereof) in respect of the Membership Interest of the Company or any direct
or indirect redemption, purchase, or other acquisition by the Company of
any membership interest of the Company or of any interest in or right to
acquire any such membership interest;


(b)(i) any employment, deferred compensation, or other salary,
wage, or compensation contract entered into between the Company and any of
its officers, managers, agents, consultants or representatives; (ii) any
salary, wages, or other compensation, whether current or deferred, of any
officer, manager, agent, consultant or representative of the Company or
(iii) any creation of an Employee Benefit Plan (as hereinafter defined);


(c) any mortgage or pledge of, or the creation of any Lien on,
any assets of the Company securing Liabilities of the Company or another
person or the creation of any Liabilities of the Company;


(d) any change in any financial reporting, tax, or accounting
practice or policy followed by the Company or in any assumption underlying
such a practice or policy, or in any method of calculating any contingency
or other reserve for financial reporting purposes or for any other tax or
accounting purposes;


(e) any cancellation of any Liability owed to the Company by any
other person;


(f) any write-off or write-down of, or any determination to
write off or write down, the assets of the Company or any portion thereof;


(g) any sale, transfer, or conveyance of any assets of the
Company;


(h) any amendment, termination, waiver, disposal, or lapse of,
or other failure to preserve, any license, permit, or other form of
authorization of the Company, the result of which individually or in the
aggregate has had or could have a material adverse effect on the business,
condition (financial or otherwise), assets, results of operations or
prospects of the Company;


(i) any transaction or arrangement under which the Company paid,
lent, advanced


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or invested any amount to or in respect of, or sold, transferred, or leased
any of its assets or any services to, (i) Seller, (ii) any officer or
manager of the Company or of any affiliate of Seller; (iii) any affiliate
of Seller, the Company or any subsidiary or of any such officer or manager,
or (iv) any business or other person in which Seller, the Company, any
subsidiary, any such officer or manager, or any such affiliate has any
material interest;


(j) any amendment to the articles of organization or operating
agreement of the Company;


(k) any agreement or commitment to take any of the actions that
should be disclosed as exceptions to this Section 2.7.
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2.8 Taxes. Except as disclosed on Schedule 2.8,
----- ------------


(a) Since the date of the organization of the Company, all of the Membership Interests of the Company have been owned by Seller;


(b) For federal and Louisiana income tax purposes, at all times the Company has been a disregarded entity and all of its assets have been properly treated as being owned directly by Seller;


(c) Since the date of its organization, the Company's only asset has been its interest in the Joint Venture;


(d) Since the date of its organization, the Company has not been required to file any Tax Returns in any Taxing Jurisdiction;


(e) There are no encumbrances for Taxes upon the assets or properties of the Company, except for statutory encumbrances for current Taxes not yet due;


(f) The Company is not liable for Taxes of any other Person by agreement or pursuant to any applicable law or regulation;


(g) No power of attorney has been granted with respect to either of the Company and the Joint Venture as to any matter relating to Taxes;


(h) No property owned by any of the Company and the Joint Venture (i) is property required to be treated as being owned by another person pursuant to the provisions of Section 168(f)(8) of the Internal Revenue Code of 1954, as amended, and in effect immediately prior to the enactment of the Tax Reform Act of 1986, (ii) constitutes "tax-exempt use property" within the meaning of Section 168(h)(1) of the Code, or (iii) is tax-exempt bond financed property within the meaning of Section 168(g) of the Code;


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(i) Since its formation, the Company has not incurred any liability for Taxes other than in the ordinary course of business;


(j) Schedule 2.8 sets forth each and every Taxing Jurisdiction
------------ in which (A) consummation of the transactions that are the subject of this Agreement subjects the Purchaser to a liability for any Taxes of the Seller or the Company, or (B) the nature of the Seller's or the Company's business or assets requires the Seller, the Company or the Purchaser to notify a Taxing Authority of the transactions that are the subject of this Agreement, if the failure to make such notification would subject the Purchaser to a liability for any Taxes of Seller or the Company; and


(k) The Seller is not a foreign person within the meaning of Section 1445 of the Code.


2.9 Litigation. Except as disclosed in Schedule 2.9:
---------- ------------


(a) There are no actions, suits, investigations, arbitrations, or proceedings pending, or, to the knowledge of Seller or the Company, threatened, against Seller or the Company or, to the knowledge of the Seller or the Company, the Joint Venture or any of their assets that questions the validity or enforceability of this Agreement or that could have an adverse effect on the ability of Seller to perform its obligations hereunder.


(b) There are no actions, suits, investigations, arbitrations, or proceedings pending, or, to the knowledge of Seller or the Company, threatened, against the Seller or Company or, to the knowledge of the Seller or the Company, the Joint Venture, which relates to, or effects the Company, the Joint Venture or any of their assets.


(c) There are no writs, judgments, decrees, injunctions, or similar orders of any court or governmental or arbitral authority outstanding against Seller or the Company or to the knowledge of Seller or the Company, the Joint Venture, which relates to, or effects the Company, the Joint Venture or any of their assets.


2.10 Compliance With Laws. Except as disclosed in Schedule 2.10, since its
-------------------- ------------- formation, the Company has not been in violation (or with or without notice or lapse of time or both would be in violation) of any term or provision of any law, rule or regulation or any writ, judgment, decree, injunction, or similar order applicable to such entity or any of its assets. Without limiting the generality of the foregoing the Company has duly and validly filed or caused to be filed all reports, statements, documents, registrations, filings, or submissions that were required by law, rule or regulation to be filed with any court or other governmental authority. All such filings complied with applicable laws, rules or regulations in all material respects when filed, and to the knowledge of Seller and the Company, no deficiencies have been asserted by any person with respect to any such filings.


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2.11 ERISA. The Company does not employ, and has never employed, any
----- person. The Company does not sponsor, maintain or contribute to, and has never sponsored, maintained or contributed to, any "employee benefit plan" (within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")), nor does the Company have any direct or indirect liability with respect to any employee benefit plan.


2.12 Contracts. Schedule 2.12 contains a true and complete list of each of
--------- ------------- the contracts (whether or not in writing) or other documents or arrangements (true and complete copies, or, in the case of oral contracts or arrangements, written summaries of the terms, of which have been furnished to Purchaser), to which the Company is a party or by which any of its assets is or may be bound.


2.13 Licenses and Permits. Except as disclosed in Schedule 2.13, the
-------------------- ------------- Company owns or validly holds all licenses, franchises, permits, approvals, authorizations, exemptions, classifications, certificates, registrations and similar documents or instruments that are required for its business, operations and affairs. All such licenses, franchises, permits, approvals, authorizations, exemptions, classifications, certificates, registrations and similar documents or instruments are valid, binding and in full force and effect.


2.14 Insurance. Schedule 2.14 contains a true and complete list and
--------- ------------- description of all liability, property, workers compensation, managers and officers liability and other similar insurance contracts that insure the business, operations, or affairs of the Company or that affect or relate to the ownership, use, or operations of any of its assets.


2.15 Intercompany Liabilities. Except as disclosed in Schedule 2.15,
------------------------ ------------- (a) neither Seller nor any other Affiliate of Seller or the Company provides or causes to be provided to the Company any products, services, equipment, facilities, or similar items and (b) there are no Liabilities between the Company and Seller or any other affiliate of the Company or the Seller.


2.16 Limited Liability Company Records. The minute books and membership
--------------------------------- records of the Company contain complete and accurate records of all proceedings and actions taken at all meetings, or by written consent in lieu of meetings, of the members and the managers and all authorized committees of the managers thereof.


2.17 Bank Accounts. Schedule 2.17 contains (a) a true and complete list of
------------- ------------- the names and locations of all banks, trust companies, securities brokers and other financial institutions at which the Company has accounts or safe deposit boxes or maintain banking, custodial, trading, or other similar relationships and (b) a true and complete list and description of each such account, box and relationship.


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2.18 Disclosure. No representation or warranty made by Seller or the
---------- Company in this Agreement, in the schedules hereto, or in any certificate furnished by Seller or the Company to Purchaser in connection with this Agreement or the transactions contemplated hereby contains any untrue statement of material fact or omits to state a material fact necessary to make the statements herein or therein not misleading in light of the circumstances under which they were made.


ARTICLE III


REPRESENTATIONS, WARRANTIES AN ...