Item 1.01 Entry into a Material Definitive Agreement.
On September 18, 2018, Nevada Gold & Casinos,
Inc., a Nevada corporation (the “Company”), entered into an Agreement and Plan of Merger with Maverick Casinos LLC,
a Nevada limited liability company (“Parent”), and Maverick Casinos Merger Sub, Inc., a Nevada corporation and a wholly-owned
subsidiary of Parent (the “Merger Sub”), dated as of that date (the “Merger Agreement”). Under the terms
of the Merger Agreement, Merger Sub will be merged (the “Merger”) with and into the Company, as a result of which the
Company will continue as the surviving corporation and a wholly-owned subsidiary of Parent.
Under the terms of the Merger Agreement, at
the effective time of the Merger (the “Effective Time”), each issued and outstanding share of the Company’s common
stock (each a “Company Share”), other than shares owned by Parent, Merger Sub, or any wholly-owned subsidiary of the
Company, or held in the Company’s treasury, will be cancelled and converted into the right to receive $2.50 per share in
cash, subject to adjustment as described below, without interest (the “Merger Consideration”);
provided
that
if the Merger occurs after February 1, 2019, the Merger Consideration will be automatically increased by $0.01 for each month following
such date until (and including) the date of the Merger (prorated by the number of days for partial months). Each option to purchase
Company Shares that is outstanding as of the Effective Time (whether vested or unvested) will be cancelled in exchange for the
right to receive the excess of the Merger Consideration over the exercise price of such option, less applicable taxes required
to be withheld. Restricted stock and restricted stock units that are not vested immediately prior to the Effective Time will be
automatically fully vested and free of any restrictions immediately prior to the Effective Time, and will be treated as Company
Shares for all purposes of the Merger Agreement, including the right to receive the Merger Consideration, subject to applicable
withholdings.
The total Merger Consideration will be (i) adjusted
up or down to the extent the net working capital and closing cash adjustments (the “Club Fortune Working Capital Adjustment)
under the Asset Purchase Agreement dated as of June 26, 2018 (the “Club Fortune Asset Purchase Agreement”), by and
among Truckee Gaming, LLC, Nevada Gold & Casinos LV, LLC, and the Company, as preliminarily determined as of the closing of
the sale of the Company’s Club Fortune Casino located in Henderson, Nevada (“Club Fortune”) is greater or less
than $146,000, and (ii) increased by the amount, if any, that the Cash Closing Payment (as defined in the Club Fortune Asset Purchase
Agreement) exceeds $14.6 million for any reason other than on account of the Club Fortune Working Capital Adjustment.
The board of directors of the Company (the “Company
Board”) has unanimously approved and declared advisable the Merger Agreement, the Merger, and the other transactions contemplated
thereby.
Completion of the transaction is subject to
the satisfaction or waiver of specified closing conditions, including (i) the approval of the Merger Agreement by the holders of
a majority of the issued and outstanding Company Shares (the “Company Stockholder Approval”), (ii) receipt of required
regulatory approvals, (iii) closing of the sale of Club Fortune in accordance with the terms of the Club Fortune Asset Purchase
Agreement and the Cash Closing Payment thereunder being no less than $14.6 million, before giving effect to the Club Fortune Working
Capital Adjustment, (iv) payoff of all amounts due under the Company’s credit agreement with Mutual of Omaha Bank, (v) evidence
that the Company and its subsidiaries have no less than $7 million of cash and cash equivalents (exclusive of cash generated by
the Cash Closing Payment), and (vi) other customary closing conditions, including the accuracy of each party’s representations
and warranties (subject to customary materiality qualifiers), each party’s performance in all material respects of its obligations
under the Merger Agreement, and the absence of a Company Material Adverse Effect (as defined in the Merger Agreement) since April
30, 2108. Assuming the satisfaction of conditions, the Company expects the transaction to close by the end of 2018.
The Company has made customary representations
and warranties in the Merger Agreement that expire at the Effective Time, as well as customary covenants, including covenants regarding
the conduct of the business of the Company and its subsidiaries prior to the consummation of the Merger. The Merger Agreement also
contains covenants that require, subject to certain limited exceptions, (i) the Company to file a proxy statement with the United
States Securities and Exchange Commission (the “SEC”) and call and hold a meeting of the Company’s stockholders
(the “Company Stockholders’ Meeting”) for the purpose of obtaining the Company Stockholder Approval, and (ii)
the Company Board to recommend that the Company’s stockholders vote in favor of adoption of the Merger Agreement (the “Company
Board Recommendation”).
The Merger Agreement prohibits the Company,
its subsidiaries, and their respective representatives from soliciting, initiating, causing, knowingly facilitating, or encouraging
(including by way of furnishing information) the submission of any inquiries, proposals that constitutes or would reasonably be
expected to lead to any Acquisition Proposal (as defined in the Merger Agreement), or engage in any discussions or negotiations
with respect thereto, or subject to certain exceptions, enter into an agreement relating to an Acquisition Proposal. Subject to
certain exceptions, the Company Board may not withhold, withdraw, or qualify, in a manner adverse to Parent, the Company Board
Recommendation, or approve, recommend, or resolve to, or publicly propose to, approve or recommend any Acquisition Proposal (an
“Adverse Recommendation Change”). However, prior to obtaining the Company Stockholder Approval, (a) the Company may,
subject to certain notice and other requirements, furnish information to and participate in discussions or negotiations with third
parties with respect to unsolicited Acquisition Proposals that the Company Board determines in good faith, after consultation with
its financial advisors and outside counsel, (x) constitutes or is reasonably likely to lead to a Superior Proposal (as defined
in the Merger Agreement), and (y) that the failure to take such action would be inconsistent with its fiduciary duties to the Company’s
stockholders under applicable law, provided a material breach by the Company of Section 6.04 of the Merger Agreement has not contributed
to the making of such Acquisition Proposal, and (b) the Company Board may, subject to certain notice and other requirements, (x)
effect an Adverse Recommendation Change and/or (y) terminate the Merger Agreement in order to enter into a definitive agreement
with respect to an unsolicited Acquisition Proposal, if the Company Board determines in good faith, after consultation with its
financial advisors and outside counsel, that (1) such Acquisition Proposal constitutes a Superior Proposal, after giving effect
to all of the adjustments to the terms of the Merger Agreement which may be offered by Parent, and (2) failure to take such action
would be inconsistent with its fiduciary duties to the Company’s stockholders under applicable law, provided a material breach
by the Company of Section 6.04 of the Merger Agreement has not contributed to the making of such Acquisition Proposal.
The Merger Agreement contains certain termination
rights, including the right of either party to terminate the Merger Agreement if the Merger is not consummated on or before April
15, 2019 (the “Outside Date”). The Merger Agreement provides that, upon termination of the Merger Agreement under specified
circumstances, the Company will be required to pay Parent a termination fee of $1.72 million. The Merger Agreement also provides
that, upon termination of the Merger Agreement under specified circumstances, the Company will be required to pay Parent an amount
equal to all reasonable and documented out-of-pocket costs and expenses actually incurred by Parent and Merger Sub in connection
with the Merger Agreement and the transactions contemplated thereby in an aggregate amount up to $300,000. The Merger Agreement
further provides that Parent will be required to pay the Company a termination fee of $2 million if the Merger Agreement is terminated
under specified circumstances. Concurrently with the signing of the Merger Agreement, Parent deposited $2 million in escrow, which
will be released to the Company to satisfy Parent’s obligation to pay such fee, if applicable. If the Merger Agreement is
terminated and such fee is not payable, the escrowed funds will be returned to Parent, and if the Merger occurs, the escrowed funds
will be used to fund a portion of the aggregate Merger Consideration.
The transaction will be financed through equity
contributed by Eric Persson, a principal of Parent, and other equity investors and debt financing of $29 million from Nevada State
Bank. The transaction is not subject to a financing condition.
If the transactions contemplated by the Merger
Agreement are consummated, the Company Shares will be delisted from the New York Stock Exchange and deregistered under the Securities
Exchange Act of 1934, as amended.
Rossoff & Company LLC is serving as financial
advisor and Hughes Hubbard & Reed LLP is serving as lead legal advisor to the Company.
The foregoing summaries of the Merger Agreement
and the transactions contemplated thereby do not purport to be complete and are subject to, and qualified in their entirety by,
the full text of the Merger Agreement, a copy of which is attached as Exhibit 2.1 to this report and is incorporated herein by
reference. The Merger Agreement has been included to provide investors with information regarding its terms. It is not intended
to provide any other factual information about the Company, Parent, Merger Sub, or their respective subsidiaries or affiliates.
The representations, warranties, and covenants contained in the Merger Agreement were made only for the purposes of the Merger
Agreement and as of the specific dates therein, were solely for the benefit of the parties to the Merger Agreement, and may be
subject to limitations agreed upon by the parties to the Merger Agreement, including being qualified by information in confidential
disclosure schedules that the parties have exchanged in connection with signing the Merger Agreement and made for the purposes
of allocating contractual risk among the parties to the Merger Agreement instead of establishing these matters as facts, and may
be subject to standards of materiality applicable to the contracting parties that differ from those applicable to investors. Investors
are not third-party beneficiaries of the Merger Agreement and should not rely on the representations, warranties, or covenants
or any description thereof as characterizations of the actual state of facts of conditions of the parties thereto or any of their
respective subsidiaries or affiliates at the time they were made or otherwise. Moreover, information concerning the subject matter
of the representations and warranties may change after the date of the Merger Agreement, which subsequent information may or may
not be fully reflected in the Company’s public disclosures.