<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 12, 1999
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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THE MAJESTIC STAR CASINO, LLC
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
INDIANA 7993 43-1664986
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION OF INDUSTRIAL IDENTIFICATION NO.)
INCORPORATION OR CLASSIFICATION CODE
ORGANIZATION) NUMBER)
ONE BUFFINGTON HARBOR DRIVE
GARY, INDIANA 46406-3000
219-977-7777
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
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MICHAEL E. KELLY
VICE PRESIDENT, CHIEF OPERATING AND FINANCIAL OFFICER
THE MAJESTIC STAR CASINO, LLC
ONE BUFFINGTON HARBOR DRIVE
GARY, INDIANA 46406-3000
219-977-7823
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
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COPY TO:
FRANK K. ZINN, ESQ.
DYKEMA GOSSETT, PLLC
400 RENAISSANCE CENTER
DETROIT, MICHIGAN 48243-1668
(313) 568-6800
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APPROXIMATE DATE OF COMMENCEMENT OF THE PROPOSED SALE OF THE SECURITIES TO
THE PUBLIC: As soon as practicable after the effective date of this
Registration Statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [_]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
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CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
PROPOSED
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO MAXIMUM AGGREGATE AMOUNT OF
SECURITIES BE OFFERING PRICE OFFERING REGISTRATION
TO BE REGISTERED REGISTERED PER UNIT(1) PRICE(1) FEE
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<S> <C> <C> <C> <C>
10 7/8% Senior Notes Due
2006................... $130,000,000 100% $130,000,000 $36,140
</TABLE>
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(1) Estimated pursuant to Rule 457(f) solely for the purposes of calculating
the registration fee.
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THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATES AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION
8(A), MAY DETERMINE.
----------------
TABLE OF ADDITIONAL REGISTRANTS
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<TABLE>
<CAPTION>
PRIMARY STANDARD
EXACT NAME OF REGISTRANT INDUSTRIAL
AS JURISDICTION OF IRS EMPLOYER CLASSIFICATION CODE
SPECIFIED IN ITS CHARTER INCORPORATION IDENTIFICATION NO. NUMBER
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<S> <C> <C> <C>
The Majestic Star Casino
Capital Corp. Indiana [43-1664986] 7993
</TABLE>
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<PAGE>
SUBJECT TO COMPLETION, DATED AUGUST 12, 1999
PROSPECTUS
THE MAJESTIC STAR CASINO, LLC
[LOGO OF MAJESTIC STAR CASINO]
OFFER TO EXCHANGE
10 7/8% SENIOR SECURED NOTES DUE 2006, SERIES B
FOR ALL OF ITS OUTSTANDING
10 7/8% SENIOR SECURED NOTES DUE 2006, SERIES A
TERMS OF THE EXCHANGE OFFER
. The exchange offer expires at 5:00 p.m. New York City time, on ,
1999, unless extended.
. All outstanding notes that are validly tendered and not validly withdrawn
will be exchanged.
. Tenders of the outstanding notes may be withdrawn any time before 5:00 p.m.
New York City time, on the expiration of the exchange offer.
. The exchange offer is not subject to any condition, other than that the
exchange offer may not violate applicable law or any applicable
interpretation of the staff of the Securities and Exchange Commission.
. We will not receive any proceeds from the exchange offer.
. The exchange of notes will not be a taxable exchange for U.S. federal income
tax purposes.
. The terms of the new notes to be issued are substantially identical to your
old notes, except that the new notes will not have transfer restrictions and
you will not have registration rights.
. There is no existing market for the new notes, and we do not intend to apply
for listing of the new notes on any securities exchange.
FOR A DISCUSSION OF CERTAIN FACTORS THAT YOU SHOULD CONSIDER PRIOR TO YOUR
PARTICIPATION IN THE EXCHANGE OFFER, SEE "RISK FACTORS" BEGINNING ON PAGE 11.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE NOTES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
NEITHER THE INDIANA GAMING COMMISSION NOR ANY OTHER REGULATORY AGENCY HAS
APPROVED OR DISAPPROVED OF THESE NOTES OR PASSED UPON THE ADEQUACY OR ACCURACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this prospectus is , 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Incorporation of Information We file with the SEC........................ ii
Forward-Looking Statements............................................... ii
Available Information.................................................... iii
Prospectus Summary....................................................... 1
Risk Factors............................................................. 11
Use of Proceeds.......................................................... 16
Capitalization........................................................... 17
Selected Financial Information........................................... 18
The Exchange Offer....................................................... 20
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 30
Business................................................................. 40
Management............................................................... 45
Summary Compensation Table............................................... 46
Principal Owner.......................................................... 47
Certain Relationship and Related Transaction............................. 47
Description of Credit Facility and Intercreditor Agreement............... 47
Description of the New Notes............................................. 49
Material Agreements...................................................... 81
Regulatory Matters....................................................... 84
Specific Federal Income Tax Considerations............................... 88
Plan of Distribution..................................................... 89
Legal Matters............................................................ 90
Independent Accountants.................................................. 90
Index to Consolidated Financial Statements............................... F-1
</TABLE>
i
<PAGE>
INCORPORATION OF INFORMATION WE FILE WITH THE SEC
This prospectus "incorporates by reference" important business and financial
information about our company that is not included in or delivered with this
prospectus. This means:
. incorporated documents are considered part of this prospectus;
. we can disclose important information to you by referring you to those
documents; and
. information that we file with the Securities and Exchange Commission
after the date of this prospectus will automatically update and
supersede this prospectus.
The following documents are incorporated into this prospectus by reference:
. our Annual Report on Form 10-K for the fiscal year ended December 31,
1998;
. our Quarterly Report on Form 10-Q for the period ended March 31, 1999;
and
. all documents filed by us under Section 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934 after the date of this prospectus and
before the exchange offer is complete.
You may obtain copies of the information incorporated by reference into this
prospectus without charge upon oral or written request to: The Majestic Star
Casino, LLC; Attention: Chief Financial Officer; One Buffington Harbor, Gary,
Indiana 46406-3000; Telephone: (219) 977-7823
To obtain timely delivery of any of this information, you must make your
request at least five business days prior to the expiration of the exchange
offer. The date by which you must make your request is , 1999.
FORWARD-LOOKING STATEMENTS
This prospectus includes or incorporates by reference forward-looking
statements as they are defined in the Securities Act of 1933 and the Securities
Exchange Act of 1934. Forward-looking statements include the words "may,"
"will," "estimate," "intend," "continue," "believe," "expect" or "anticipate"
and other similar words. The forward-looking statements contained in this
prospectus are generally located in the material set forth under the headings
"Prospectus Summary," "Risk Factors," "Capitalization," "Management's
Discussion and Analysis of Financial Condition and Results of Operations," and
"Business," but may be found in other locations as well. These forward-looking
statements generally relate to our plans and objectives for future operations
and are based upon management's reasonable estimates of future results or
trends. Although we believe that our plans and objectives reflected in or
suggested by such forward-looking statements are reasonable, we may not achieve
such plans or objectives. Actual results may differ from projected results due,
but not limited, to unforeseen developments, including developments relating to
the following:
. the availability and adequacy of our cash flow to meet our requirements,
including payment of your notes and the new notes to be issued pursuant
to this exchange offer,
. economic, competitive, demographic, business and other conditions in our
local and regional markets,
. changes or developments in laws, regulations or taxes in the gaming
industry,
. actions taken or omitted to be taken by third parties, including our
customers, suppliers, competitors and members as well as legislative,
regulatory, judicial and other governmental authorities,
. competition in the gaming industry,
. changes in personnel or compensation, including federal minimum wage
requirements,
. the loss of any license or permit or our failure to obtain an
unconditional renewal of our gaming license on a timely basis,
. the loss of our riverboat casino or our joint venture's land-based
facilities due to casualty, weather, mechanical failure or any extended
or extraordinary maintenance or inspection that may be required,
ii
<PAGE>
. changes in our business strategy, capital improvements or development
plans,
. the availability of additional capital to support capital improvements
and development, and
. other factors discussed under "Risk Factors" or elsewhere in this
prospectus.
All future written and oral forward-looking statements made by us or on our
behalf are also subject to these factors. We undertake no obligation to
publicly update or revise any forward-looking statements, whether as a result
of new information, future events or otherwise. In light of these risks,
uncertainties and assumptions, the forward-looking events discussed in or
incorporated by reference into this prospectus might not occur.
AVAILABLE INFORMATION
We file annual quarterly and current reports, proxy statements and other
information with the U.S. Securities and Exchange Commission. You may read and
copy the reports, statements and other information with the U.S. Securities and
Exchange Commission's public reference room at 450 Fifth Street, N.W.,
Washington, D.C. 20549. You can request copies of these documents by writing to
the U.S. Securities and Exchange Commission but must pay photocopying fees.
Please call the U.S. Securities and Exchange Commission at 1-800-SEC-0330 for
further information on the operation of the public reference rooms. Our U.S.
Securities and Exchange Commission filings are also available to the public on
the U.S. Securities and Exchange Commission's Internet site
(http://www.sec.gov).
iii
<PAGE>
PROSPECTUS SUMMARY
The following is a summary of certain information contained elsewhere in
this prospectus and is qualified by the more detailed information set forth
elsewhere in this prospectus, which should be read in its entirety. This
summary does not contain all of the information that may be important to you in
deciding whether to participate in the exchange offer. We encourage you to read
the entire prospectus, including the financial data and the information
described under the heading "Risk Factors" on page 11 and under the heading
"Forward-Looking Statements" on page ii. Unless otherwise indicated, the terms
"we," "our," "us" and other similar terms mean The Majestic Star Casino, LLC
and our wholly owned subsidiary, The Majestic Star Casino Capital Corp., and
all references to numbers of slot machines and table games are as of June 30,
1999. The Majestic Star Casino Capital Corp. is a co-issuer of the notes to be
issued pursuant to the exchange offer. It was formed to facilitate the offering
of the notes sold by us on June 18, 1999 and has no assets or operations.
THE EXCHANGE OFFER
On June 18, 1999, we sold $130.0 million of our 10 7/8% Senior Secured Notes
due 2006, Series A, to the initial purchaser--Jefferies & Company, Inc. The
initial purchaser resold those notes in reliance on Rule 144A and other
exemptions under the Securities Act of 1933.
Simultaneously with the purchase and sale of such notes, we entered into a
registration rights agreement with the initial purchaser. Under the
registration rights agreement, we agreed, among other things, to:
. file a registration statement with the Securities and Exchange Commission
related to the exchange offer on or before August 17, 1999;
. deliver this prospectus to you;
. cause the registration statement, which includes this prospectus, to
become effective on or before October 18, 1999;
. complete the exchange offer within 30 days after the registration
statement becomes effective.
You are entitled to exchange your old notes for new registered 10 7/8%
Senior Secured Notes due 2006, Series B, with substantially identical terms as
the old notes, except that the new notes will not have transfer restrictions
and registration rights. If we do not complete the exchange offer on or before
the 30th day after the registration statement becomes effective, we must pay
liquidated damages to the holders of the old notes until the exchange offer is
completed. You should read the discussion under the heading "The Exchange
Offer--Purpose and Effect; Registration Rights" and "Description of the New
Notes" for further information regarding the new notes that we are offering in
exchange for your old notes.
We believe that you may resell the new notes issued in the exchange offer
without compliance with the registration and prospectus deliver provisions of
the Securities Act of 1933, subject to the conditions described under "The
Exchange Offer." You should read that section for further information regarding
the exchange offer.
THE MAJESTIC STAR CASINO, LLC
We own and operate the Majestic Star Casino, the newest and one of the
largest gaming vessels serving the Chicago metropolitan area. We are
conveniently located at Buffington Harbor in Gary, Indiana, approximately 23
miles southeast of downtown Chicago. The Chicago metropolitan area is the third
largest metropolitan area in the United States. In 1998, casinos in this market
generated approximately $1.5 billion of gaming revenue. During the six months
ended June 30, 1999, our EBITDA (as defined) increased 43.5% to approximately
$15.1 million compared to $10.5 million in the same period in 1998.
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<PAGE>
In October 1997, we replaced a chartered vessel with the current Majestic
Star Casino, a newly constructed 360 foot long vessel with a contemporary
design and a stable V-shaped hull. The casino accommodates approximately 43,000
square feet of gaming space across three expansive decks, which contain 1,410
slot machines and 56 table games. The Majestic Star Casino offers patrons an
exciting gaming environment with a bright and spacious layout, high ceilings,
an atrium spanning two decks, colorful chandeliers and mirrors. Passengers move
freely between the various levels of the casino through escalators, elevators
and stair towers. The Majestic Star Casino also offers its customers on-board
food and beverage facilities. In addition, in July 1999, we opened a new VIP
lounge on board the vessel and remodeled a VIP boarding lounge in the dockside
pavilion.
We are indirectly wholly owned by Don H. Barden, our Chairman, President and
Chief Executive Officer. Mr. Barden has invested approximately $24.0 million to
design, develop, and construct the Majestic Star Casino and the Buffington
Harbor gaming complex and to make related expenditures. Mr. Barden has also
successfully built, owned and operated numerous businesses in the cable
television, international trade and real estate industries and has owned and
operated several radio stations over the past 30 years. In addition, we have a
proven management team with substantial experience both industry-wide and in
the Chicago metropolitan market.
Our principal executive offices are located at One Buffington Harbor Drive,
Gary, Indiana 46406-3000. Our telephone number is (219) 977-7777.
BUFFINGTON HARBOR
The Majestic Star Casino operates from the Buffington Harbor gaming complex,
which we share with the Trump Casino. The Buffington Harbor gaming complex
includes a guest pavilion, vessel berths, parking lots and other common area
facilities. Buffington Harbor has the largest concentration of gaming positions
in the Chicago metropolitan market, offering patrons a total of approximately
3,455 gaming positions, which is greater than the number of gaming positions
that exist at any other site in northwest Indiana. This number is also
substantially greater than the number of gaming positions allowed at any
individual Illinois gaming site, which is currently limited by Illinois gaming
laws to 1,200. We believe that we have achieved operating cost savings and
marketing advantages over our competitors as a result of the operation of two
casinos at the same location.
Buffington Harbor offers two cruising vessel casinos (ours and the Trump
Casino) with a staggered cruising schedule. As a result, patrons enjoy
significantly reduced waiting times to board a casino. Specifically, the
maximum scheduled waiting time for Buffington Harbor patrons is 30 minutes,
compared to a maximum of 90 minutes in all other northwest Indiana gaming
locations. Further, gaming customers in the Chicago area, Indianapolis, South
Bend and Fort Wayne, Indiana, and Kalamazoo and Grand Rapids, Michigan can
conveniently access Buffington Harbor, which is located at the interchange of
U.S. 12 and Indiana State Highway 912, just off of I-80/94 and the Indiana Toll
Road.
The Buffington Harbor gaming complex is a two-level, 90,000 square foot
structure containing a 352-seat buffet, a 110-seat steakhouse restaurant,
several bars and lounges, gift shops and areas for staging and ticketing. The
complex features a grand entrance, granite and marble floors, unique metallic
finishes, two large fountains and a variety of lighting effects. The Buffington
Harbor gaming complex is situated on an approximately 100-acre site, containing
approximately 3,000 parking spaces, and offers valet parking and convenient bus
loading and unloading facilities. The Buffington Harbor gaming complex was
developed and constructed by Buffington Harbor Riverboats, L.L.C., a joint
venture between us and an indirect subsidiary of Trump Hotels and Casino
Resorts, Inc.
2
<PAGE>
MARKET OVERVIEW
The Chicago metropolitan area is the third most populated metropolitan area
in the United States. According to demographic sources, there were
approximately nine million adults living in the area in 1998, and the average
household income was approximately $48,200. The population and average
household income of the Chicago metropolitan market are the largest among all
United States riverboat/cruising vessel casino markets. The Chicago
metropolitan market is a relatively young gaming market, as gaming was first
introduced in 1992. This market is primarily served by nine riverboat/cruising
vessel casinos, including our casino, operating under licenses granted by the
States of Illinois and Indiana. These casinos generated 1998 gaming revenue of
approximately $1.5 billion, ranking first among all United States
riverboat/cruising vessel casino markets. Such revenue has increased at a
compound annual rate of approximately 26.1% since 1995. Notwithstanding the
recent growth trends, we believe that the Chicago metropolitan market remains
underserved.
GROWTH STRATEGY
Leverage Existing Customer Base. We have established the Club M-Star Slot
Club to increase the frequency of visits by our existing customers. This
program enables us to maintain a comprehensive database of information about
our gaming patrons, including their gaming levels, duration of play and
preferences. We use this information to create a comprehensive direct mail
marketing program. As a result, we have reduced our overall marketing costs and
have improved the efficiency of our marketing expenditures. In addition, we
recently opened a VIP lounge on board the vessel and remodeled a VIP boarding
lounge in the dockside pavilion. We believe these amenities will differentiate
us from our competitors who currently provide only dockside lounges. We have
also introduced a concierge service to assist in providing superior service to
our higher activity gaming patrons.
Attract New Customers. We continue to use mass media, such as radio,
television, newspaper and billboard advertising, to enhance our brand image and
attract new customers. In this effort, we promote the convenience of two
casinos at Buffington Harbor and major events, such as player parties and
promotional giveaways. Once new patrons visit the Majestic Star Casino, we
endeavor to register them in the Club M-Star. This allows us to expand our
database of customers and to tailor our marketing programs accordingly. To
further these efforts, in the first quarter of 1999, we created a player
development function with the mission of attracting and creating marketing
programs directed towards higher activity gaming customers.
Increase Emphasis on Slot Play. Slot machine wagering is the fastest growing
and most profitable segment of our casino, representing approximately 76.4% of
our gaming revenues in 1998. We continue to enhance slot machine revenue by
modifying our mix of slot machine types and introducing the latest slot machine
models. For example, in 1998, we introduced nickel slot machines, various poker
video and participation games, including Wheel of Fortune(R) and Jeopardy(R),
and in the first quarter of 1999, we introduced Monopoly(R). These
participation games provide patrons with the opportunity to conduct more
advanced betting on a single game. As a result, we have substantially increased
our revenues with respect to these games compared to the house average.
Provide Attentive, Friendly Customer Service. As part of our commitment to
providing a quality casino entertainment experience for our patrons, we are
dedicated to ensuring a high level of customer satisfaction and loyalty by
providing attentive customer service in a clean, friendly and relaxed
atmosphere. We recognize that consistent quality and a comfortable atmosphere
stem from the collective care and friendliness of each of our employees. Toward
this end, we conduct ongoing training sessions to emphasize the importance of
customer contact and to encourage our employees to be friendly, smile and wish
each customer good luck. In addition, we offer competitive employee benefit
programs to recruit and retain friendly, professional employees.
3
<PAGE>
Construction of New Parking Facility. We currently intend to construct a
multi-level covered parking structure with our joint venture partner. The
parking structure is expected to provide customers with approximately 1,600
covered parking spaces and indoor access to the Buffington Harbor gaming
complex. Customers currently either park their automobiles in an approximately
3,000 space flat parking lot or use our valet parking services. We currently
expect to contribute approximately $3.5 million of capital toward the project.
We believe that the convenience of the new parking structure will attract a
significant number of new customers to the Buffington Harbor gaming complex,
thereby providing substantial opportunities to increase our net revenues and
related cash flow.
Expand Operations. The Buffington Harbor gaming complex is located on an
approximately 100-acre site. We believe that we are one of only two locations
in the Chicago metropolitan market with the capacity to significantly expand
our land-based facilities. In addition to the property owned by the joint
venture, an affiliate of ours has entered into discussions with various parties
concerning the feasibility of purchasing additional land adjacent to the joint
venture property for future development. We also continually evaluate the
acquisition and/or construction of gaming facilities in new locations.
TERMS OF THE EXCHANGE OFFER
NEW NOTES............... We are offering registered 10 7/8% Senior Secured
Notes due 2006, Series B, for your notes. The terms
of the new notes and your old notes are substantially
identical, except:
. the new notes will be registered under the
Securities Act of 1933;
. the new notes will not bear any legends
restricting transfer; and
. your rights under the registration rights
agreement, including your right to receive
liquidated damages, will terminate.
THE EXCHANGE OFFER...... We are offering to exchange $130.0 million total
principal amount of the new notes for your old notes.
As of the date of this prospectus, $130,000,000
aggregate principal amount of the old notes is
outstanding.
EXPIRATION DATE......... You have until 5:00 p.m., New York City time, on
, 1999 to validly tender your old notes
if you want to exchange your old notes for new notes.
We may extend that date under certain conditions.
CONDITIONS OF THE
EXCHANGE OFFER.........
The exchange offer is not subject to any conditions,
other than that the exchange offer does not violate
applicable law or any applicable interpretation of
the staff of the Securities and Exchange Commission.
INTEREST................ You will receive interest on the new notes from the
date interest was last paid on your old notes, or, if
no interest was paid on your old notes, you will
receive interest from June 18, 1999. If your old
notes are exchanged for new notes, you will not
receive any accrued interest on your old notes.
PROCEDURES FOR
TENDERING OLD NOTES;
SPECIAL PROCEDURES FOR
BENEFICIAL OWNERS......
If you want to participate in the exchange offer, you
must transmit a properly completed and signed letter
of transmittal, and all other documents required by
the letter of transmittal, to the exchange agent.
4
<PAGE>
Please send these materials to the exchange agent at
the address set forth in the accompanying letter of
transmittal prior to 5:00 p.m., New York City time,
on the expiration date. You must also send one of the
following:
. a certificate of your old notes;
. a timely confirmation of book-entry transfer of
your old notes into the exchange agent's
account at The Depository Trust Company; or
. the items required by the guaranteed delivery
procedures described below.
If you are a beneficial owner of your old notes and
your old notes are registered in the name of a
nominee, such as a broker, dealer, commercial bank or
trust company, and you wish to tender your old notes
in the exchange offer, you should instruct your
nominee to promptly tender the old notes on your
behalf.
If you are a beneficial owner and you want to tender
your old notes on your own behalf, you must, before
completing and executing the letter of transmittal
and delivering your old notes, make appropriate
arrangements to either register ownership of your old
notes in your name or obtain a properly completed
bond power from the registered holder of your old
notes. By executing the letter of transmittal, you
will represent to us that:
. you are not our "affiliate" (as defined in Rule
405 under the Securities Act of 1933);
. you will acquire the new notes in the ordinary
course of your business;
. you are not a broker-dealer that acquired your
notes directly from us in order to resell them
pursuant to Rule 144A under the Securities Act
of 1933 or any other available exemption under
the Securities Act of 1933;
. if you are a broker-dealer that acquired your
notes as a result of market-making or other
trading activities, you will deliver a
prospectus in connection with any resale of new
notes; and
. you are not participating, do not intend to
participate and have no arrangement or
understanding with any person to participate in
the distribution of the new notes.
If your old notes are not accepted for exchange for
any reason, we will return your old notes to you at
our expense.
GUARANTEED DELIVERY
PROCEDURES.............
If you wish to tender your old notes and:
. your old notes are not immediately available;
. you are unable to deliver on time your old
notes or any other document that you are
required to deliver to the exchange agent; or
. you cannot complete the procedures for delivery
by book-entry transfer on time;
then you may tender your old notes according to the
guaranteed delivery procedures that are discussed in
the letter of transmittal and in "The Exchange
Offer--Guaranteed Delivery Procedures."
5
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ACCEPTANCE OF OLD NOTES
AND DELIVERY OF NEW
NOTES .................
We will accept all old notes that you have properly
tendered on time when all conditions of the exchange
offer are satisfied or waived. The new notes will be
delivered promptly after we accept the old notes.
WITHDRAWAL RIGHTS....... You may withdraw the tender of your old notes at any
time before 5:00 p.m., New York City time, on the
expiration date.
THE EXCHANGE AGENT...... IBJ Whitehall Bank & Trust Company is the exchange
agent. Its address and telephone number are set forth
in "The Exchange Offer--The Exchange Agent."
FEES AND EXPENSES....... We will pay all expenses relating to the exchange
offer and compliance with the registration rights
agreement. We will also pay certain transfer taxes,
if applicable, relating to the exchange offer.
RESALES OF NEW NOTES.... We believe that the new notes may be offered for
resale, resold and otherwise transferred by you
without further compliance with the registration and
prospectus delivery requirements of the Securities
Act of 1933 if:
. you are not our "affiliate" (as defined in Rule
405 under the Securities Act of 1933);
. you acquire the new notes in the ordinary
course of your business;
. you are not a broker-dealer that purchased old
notes from us to resell them pursuant to Rule
144A under the Securities Act of 1933 or any
other available exemption under the Securities
Act of 1933; and
. you are not participating, and have no
arrangement or understanding with any person to
participate, in a distribution (within the
meaning of the Securities Act of 1933) of the
new notes.
You should read the information under the heading
"The Exchange Offer--Resales of the New Notes" for a
more complete description of why we believe that you
can freely transfer the new notes received in the
exchange offer without registration or delivery of a
prospectus.
All broker-dealers that are issued new notes for
their own accounts in exchange for old notes that
were acquired as a result of market-making or other
trading activities must acknowledge that they will
deliver a prospectus meeting the requirements of the
Securities Act of 1933 in connection with any resale
of the new notes. If you are a broker-dealer and are
required to deliver a prospectus, you may use this
prospectus for an offer to resell, a resale or other
transfer of the new notes.
FEDERAL INCOME TAX
CONSEQUENCES...........
The issuance of the new notes will not constitute a
taxable exchange for U.S. federal income tax
purposes. You will not recognize any gain or loss
upon receipt of the new notes. See "Certain Federal
Income Tax Consequences."
6
<PAGE>
REGISTRATION RIGHTS In connection with the sale of the old notes, we
AGREEMENT............... entered into a registration rights agreement with the
initial purchaser of the old notes that grants the
holders of the old notes registration rights. As a
result of making and consummating this exchange
offer, we will have fulfilled most of our obligations
under the registrations rights agreement. If you do
not tender your old notes in the exchange offer, you
will not have any further registration rights under
the registration rights agreement or otherwise unless
you were not eligible to participate in the exchange
offer or do not receive freely transferrable new
notes in the exchange offer. See "The Exchange
Offer--Purpose and Effect; Registration Rights."
USE OF PROCEEDS......... We will not receive any proceeds from the issuance of
the new notes, and we will pay the expenses of the
exchange offer.
CONSEQUENCES OF NOT EXCHANGING OLD NOTES
If you do not exchange your old notes for the new notes in the exchange
offer, your old notes will continue to be subject to the restrictions on
transfer contained in the legend on the old notes. In general, the old notes
may not be offered or sold unless they are registered under the Securities Act
of 1933. However, you may offer or sell your old notes under an exemption from,
or in a transaction not subject to, the Securities Act of 1933 and applicable
state securities laws. We do not currently anticipate that we will register the
old notes under the Securities Act of 1933.
SUMMARY OF TERMS OF THE NEW NOTES
The form and terms of the new notes are the same as the form and terms of
the old notes, except that the new notes will be registered under the
Securities Act of 1933. As a result, the new notes will not bear legends
restricting their transfer and will not contain the registration rights and
liquidated damage provisions contained in the old notes. The new notes
represent the same debt as the old notes. Both the old notes and the new notes
are governed by the same indenture.
ISSUERS................. The Majestic Star Casino, LLC and its wholly owned
subsidiary, The Majestic Star Casino Capital Corp.
SECURITIES OFFERED...... $130,000,000 principal amount of 10 7/8% Senior
Secured Notes due 2006, Series B.
MATURITY DATE........... July 1, 2006.
INTEREST RATE........... 10 7/8% per year.
INTEREST PAYMENT Semi-annually beginning on January 1, 2000.
DATES...................
RANKING................. The new notes will rank senior in right of payment to
any of our subordinated indebtedness and will rank
equal in right of payment to any of our senior
indebtedness.
SECURITY INTEREST....... The new notes will be secured by, among other things,
a pledge or assignment of the Majestic Star Casino
vessel, each member's interest in
7
<PAGE>
The Majestic Star Casino, LLC, our membership
interest in our joint venture, the Berthing
Agreement, dated as of April 26, 1996, by and between
us and our joint venture, our rights to the service
mark "Majestic Star Casino" and substantially all of
our other assets, other than certain specified
excluded assets. The lien on the collateral securing
the proposed new credit facility will be senior to
the lien on the collateral securing the new notes.
OPTIONAL REDEMPTION..... After July 1, 2003, all or some of the new notes may
be redeemed at our option at the following premiums,
plus interest:
<TABLE>
<CAPTION>
FOR THE PERIOD BELOW PERCENTAGE
-------------------- ----------
<S> <C>
On or after July 1, 2003...................... 105.438%
On or after July 1, 2004...................... 102.719%
July 1, 2005 and thereafter................... 100.000%
</TABLE>
Prior to July 1, 2002, up to 35% of the principal
amount of the new notes may be redeemed at our option
with the net proceeds of certain public equity
offerings at 110.875% of their face amount, plus
interest.
REQUIRED REGULATORY
REDEMPTION ............
The new notes may be redeemed in the event of certain
determinations by the gaming authorities in
jurisdictions in which we conduct gaming operations.
See "Description of New Notes--Redemption."
GUARANTEES.............. Subject to certain exceptions, if we create or
acquire new wholly owned subsidiaries, they will
guarantee our obligations under the new notes.
CHANGE OF CONTROL If we go through a change of control, we must give
OFFER................... holders of the new notes the opportunity to sell us
their new notes at 101% of their face amount, plus
interest.
ASSET SALE PROCEEDS..... If we do not reinvest cash proceeds from the sale of
assets in our business, we may have to use these
proceeds to offer to buy back some of the new notes
at their face amount, plus interest.
CERTAIN INDENTURE The new notes will be governed by the same indenture
PROVISIONS.............. governing the old notes. The provisions of the
indenture will limit our ability to:
.incur more debt;
.pay management fees;
.pay dividends, redeem stock, or make other
distributions;
.issue ownership interests in subsidiaries;
.make certain investments;
.create liens;
.merge or consolidate; and
.transfer or sell our assets.
These covenants are subject to a number of important
exceptions.
8
<PAGE>
SUMMARY FINANCIAL AND OPERATING DATA
The following table presents our summary financial and operating data for
the fiscal years ended December 31, 1996 through 1998 and for the six months
ended June 30, 1998 and 1999 and balance sheet data at June 30, 1999. This data
is derived from our financial statements, which have been audited by
PricewaterhouseCoopers LLP, except that the financial and operating data for
the six months ended June 30, 1998 and 1999 and the balance sheet data at June
30, 1999 have been derived from our unaudited financial statements which, in
our opinion, contain all adjustments (consisting only of normal and recurring
adjustments) necessary for a fair representation of our financial position and
results of operations at such dates and for such periods. Because the data in
this table is only a summary and does not provide all of the data contained in
our financial statements, including the related notes, you should read
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and our financial statements and the notes thereto appearing
elsewhere in this prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SIX MONTHS
DECEMBER 31, ENDED JUNE 30,
-------------------------- ----------------
1996(A) 1997 1998 1998 1999
------- ------- -------- ------- -------
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT OPERATING
DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues.................... $54,221 $94,543 $114,263 $56,685 $60,710
Operating expenses.............. $48,949 86,236 92,758 47,850 45,648
Depreciation and amortization... 5,320 7,700 7,820 3,832 3,915
Operating income................ (48) 607 13,685 5,003 11,147
OTHER FINANCIAL DATA:
EBITDA(b)....................... $10,738 $12,701 $ 23,219 $10,494 $15,062
EBITDA margin................... 19.8% 13.4% 20.3% 18.5% 24.8%
Capital expenditures............ 20,242 39,641 2,100 1,516 2,067
OPERATING DATA:
Number of slot machines(c)...... 924 1,532 1,499 1,459 1,410
Number of table games(c)(d)..... 50 64 61 61 56
Win per slot per day............ $ 198 $ 187 $ 154 $ 153 $ 176
Win per table per day(d)........ 1,496 1,248 1,116 1,174 1,319
Win per patron.................. 53 56 57 55 68
PRO FORMA DATA:
EBITDA to interest expense, net(e)............................... 2.0x
Net Debt to EBITDA(f)............................................ 4.2x
</TABLE>
<TABLE>
<CAPTION>
AT JUNE 30, 1999
----------------------
ACTUAL
----------------------
(DOLLARS IN THOUSANDS,
UNAUDITED)
<S> <C>
BALANCE SHEET DATA:
Cash and cash equivalents(g)........................... $ 14,302
Total assets........................................... $129,169
Total debt............................................. $138,046
Members' (deficit)..................................... $(16,022)
</TABLE>
- --------
Footnotes on following page:
9
<PAGE>
(a) We had 205 days of gaming operations during 1996.
(b) EBITDA represents operating income before depreciation, amortization, pre-
opening expenses, loss on disposition of assets, and lease and termination
payments on the chartered vessel. Pre-opening expenses were $4.6 million
and $1.3 million in 1996, and 1997, respectively. Loss on disposition of
assets was approximately $1.6 million, $1.0 million and $0.9 million in
1997, 1998, and the six months ended June 30, 1998, respectively. Prior to
October 27, 1997, we chartered a vessel to conduct our gaming operations.
Lease and termination payments on the chartered vessel were approximately
$0.9 million, $1.5 million, $0.8 million, and $0.8 million in 1996, 1997,
1998, and the six months ended June 30, 1998, respectively. EBITDA is
presented to enhance the understanding of our financial performance and our
ability to service our debt, including the notes issued on June 18, 1999.
We understand that EBITDA is used by certain investors as one measure of
cash flow and enables a comparison of our performance with the performance
of other companies that report EBITDA. EBITDA is not a generally accepted
accounting principles financial indicator and should not be considered an
alternative to, or more meaningful than, net income or income from
operations as an indicator of our operating performance or net cash
provided by operating activities as a measure of liquidity. EBITDA as
presented may not be comparable to similarly titled measures reported by
other companies.
(c) Reflects data at year-end or period end.
(d) Excludes poker table data.
(e) Pro forma interest expense, net, is $14.7 million and represents pro forma
interest expense (excluding the non-cash component), of the $130 million 10
7/8% and $6 million 12 3/4% notes and $4.3 million of equipment financing
for the full year, net of interest income.
(f) Net Debt to EBITDA is total debt less cash and cash equivalents (other than
cage cash) at the end of the period presented. The net debt to EBITDA ratio
is computed on an annualized basis.
(g) Includes approximately $3.1 million of cage cash as of June 30, 1999.
10
<PAGE>
RISK FACTORS
You should carefully consider the following risk factors and the other
information in this prospectus before tendering your old notes in the exchange
offer.
IF YOU DO NOT EXCHANGE YOUR OLD NOTES FOR THE REGISTERED NOTES IN THE EXCHANGE
OFFER, YOU MAY LOSE YOUR RIGHTS TO HAVE YOUR NOTES REGISTERED AND MAY NOT BE
ABLE TO SELL YOUR OLD NOTES
We did not register your old notes under the Securities Act of 1933 or any
state securities laws. If you do not exchange your old notes for new notes in
the exchange offer, your old notes will continue to be subject to the
restrictions on transfer as stated in the legend on the old notes. In general
you may not offer or sell the old notes unless they are:
. registered under the Securities Act of 1933;
. offered or sold pursuant to an exemption from the Securities Act of 1933
and applicable state securities laws; or
. offered or sold in a transaction not subject to the Securities Act of
1933 and applicable state securities laws.
We do not currently anticipate that we will register the old notes under the
Securities Act of 1933. In addition, holders who do not tender their old notes,
except for certain instances involving the initial purchaser or holders of old
notes who are not eligible to participate in the exchange offer or who do not
receive freely transferrable new notes pursuant to the exchange offer, will not
have any further registration rights under the registration rights agreement or
otherwise and will not have rights to receive liquidated damages.
THE MARKET FOR THE OLD NOTES MAY BE SIGNIFICANTLY MORE LIMITED AFTER THE
EXCHANGE OFFER
If the old notes are tendered and accepted for exchange pursuant to the
exchange offer, the trading market for the old notes that remain outstanding
may be significantly more limited. As a result, the liquidity of the old notes
not tendered for exchange may be adversely affected. The extent of the market
for the old notes and the availability of price quotations would depend upon a
number of factors, including the number of holders of old notes remaining
outstanding and the interest of securities firms in maintaining a market in the
old notes. An issue of securities with a similar outstanding market value
available for trading, which is called the "float," may command a lower price
than would be comparable to an issue of securities with a greater float. As a
result, the market price for the old notes that are not exchanged in the
exchange offer may be affected adversely as the old notes exchanged pursuant to
the exchange offer reduce the float. The reduced float also may make the
trading price of the old notes that are not exchanged more volatile.
OUR SIGNIFICANT INDEBTEDNESS COULD ADVERSELY AFFECT OUR FINANCIAL HEALTH AND
PREVENT US FROM FULFILLING OUR OBLIGATIONS UNDER THE NEW NOTES
We now have, and after this exchange offer will continue to have, a
significant amount of debt. The new notes will rank senior in right of payment
to any of our subordinated indebtedness and will rank equally with any of our
senior indebtedness. As of June 30, 1999, we had outstanding $127.8 million of
long-term debt represented by the old notes, $6.0 million of long-term debt
represented by the senior secured notes due 2003, and approximately $4.3
million of outstanding equipment financing. In addition, promptly following
this offering, we expect to enter into a new $20.0 million senior credit
facility. The proposed new credit facility will only be available to us if the
Indiana Gaming Commission approves the facility. Although we currently
anticipate that the Indiana Gaming Commission will approve the proposed
facility, there can be no assurance of such approval.
11
<PAGE>
The indenture governing the new notes will impose certain operating and
financial restrictions on us, but it will permit us to incur additional
indebtedness under certain circumstances, including to fund future
acquisitions, if any.
Our high level of debt could, among other things,
. limit our flexibility in planning for, or reacting to, changes in our
business and industry,
. increase our vulnerability to adverse economic and industry conditions or
a downturn in our business,
. limit our ability to fund or obtain additional financing for future
working capital, capital expenditures, development projects, acquisitions
and other general corporate requirements, and
. limit our ability to fund a change of control offer.
WE WILL NEED A SIGNIFICANT AMOUNT OF CASH TO SERVICE OUR DEBT; OUR ABILITY TO
GENERATE CASH DEPENDS ON MANY FACTORS
Our high level of debt with financial restrictions poses a substantial risk
to holders of the new notes, including the risk that we might not be able to
generate sufficient cash flow to service our debt or to meet unanticipated
capital needs or shortfalls in our projections. Our ability to meet these
obligations is dependent upon the performance of our sole property, the
Majestic Star Casino, which is subject to economic, political, competitive,
regulatory and other factors that are beyond our control. In addition, our
ability to repay the new notes when due on July 1, 2006, will depend upon our
ability to generate sufficient cash from our operations or to refinance the
new notes on or before the date they become due. We plan to be able to service
our debt and repay the new notes when due with cash from operations. However,
if we are not able to do so, we may need to seek additional financing in the
debt or equity markets, refinance the new notes, sell selected assets or
reduce or delay planned capital expenditures. Any such financing, refinancing
or sale of assets might not be available on economically favorable terms, if
at all.
YOUR RIGHT TO RECEIVE PAYMENTS ON THE NEW NOTES WILL BE EFFECTIVELY
SUBORDINATED TO PAYMENTS UNDER OUR PROPOSED NEW CREDIT FACILITY AND OUR
EQUIPMENT FINANCING TO THE EXTENT OF THE COLLATERAL SECURING THIS OTHER DEBT;
THE VALUE OF THE COLLATERAL MAY BE LESS THAN THE AMOUNTS DUE ON THE NEW NOTES
The new notes and any future subsidiary guarantees will be effectively
subordinated to (a) up to $20.0 million principal amount of indebtedness that
may be incurred under our proposed new credit facility because the lender's
lien on the collateral will be senior to the lien of the trustee under the new
notes, and (b) approximately $4.3 million of outstanding equipment financing,
and future equipment financing and purchase money debt, in each case to the
extent of the assets securing that indebtedness. As a result, upon any
distribution to our creditors or the creditors of any future subsidiary
guarantors in bankruptcy, liquidation, reorganization or similar proceedings,
our lenders under our proposed new credit facility, our equipment financing
and our purchase money indebtedness will be entitled to be repaid in full
before any payment is made to you from the proceeds of the assets securing
such indebtedness, or the sale of the equipment subject to such equipment
financing. Consequently, it is unlikely that the liquidation of the collateral
securing the new notes would produce proceeds in an amount sufficient to pay
the principal of, premium, if any, and accrued interest on the new notes after
also satisfying the obligations to pay any senior secured creditors.
In addition, the trustee under the indenture and the lenders under our
proposed new credit facility will enter into an intercreditor agreement to
govern the relationships among them and their obligations and rights.
Financing by multiple lenders with security interests in common collateral may
result in increased complexity and lack of flexibility in a debt restructuring
or other work-out relating to us.
12
<PAGE>
GAMING OR OTHER REGULATIONS MAY DELAY OR OTHERWISE IMPEDE THE TRUSTEE'S
ABILITY TO FORECLOSE ON THE COLLATERAL
Our new notes will be governed under the indenture with IBJ Whitehall Bank
& Trust Company, as trustee, and will be secured by substantially all of our
current and future assets, other than certain excluded assets. The new notes
will not be secured by our riverboat gaming license or any of the assets of
our joint venture. The Indiana Riverboat Gambling Act prohibits borrowing
money against an owner's gaming license and further requires that the Indiana
Gaming Commission approve any sale or transfer of a license. In the event we
fail to pay the new notes or otherwise default under the indenture before the
trustee or the holders of the new notes can foreclose or take possession of
the assets, they may need to file applications with the Indiana Gaming
Commission in order to become licensed. This process, along with other
foreclosure and sale laws, could substantially delay the ability of the
trustee or any noteholder to obtain the benefit of any collateral securing the
new notes and reduce the proceeds from the sale of such collateral by reducing
the number of potential bidders. See "Regulatory Matters."
IF THE JOINT VENTURE WERE TO LOSE ITS LEASE OR BE REQUIRED TO CONSTRUCT A NEW
HARBOR, ITS OPERATIONS WOULD BE SIGNIFICANTLY DISRUPTED, WHICH WOULD ADVERSELY
AFFECT OUR BUSINESS
The joint venture leases the harbor and certain other property on which the
Buffington Harbor gaming complex is situated from Lehigh Portland Cement
Company under a lease dated as of June 29, 1995, which was rent free prior to
1998. Since January 1998, the joint venture has paid rent of $125,000 per
month under the lease, of which we fund $62,500. The lease places certain
restrictions on the use of the harbor by us and our joint venture partner and
requires the joint venture to diligently seek permits for the construction of
a new harbor. The term of the lease has been extended to the earlier of
December 31, 2005 or such time as the joint venture has obtained the necessary
permits and completed construction of a new harbor. If the joint venture is
required to reconfigure or construct a new harbor, it will significantly
disrupt our operations. A new harbor may require new guest facilities. The
construction of new facilities would entail significant risks, including
possible shortages of construction materials or labor, unforeseen engineering
or environmental problems, weather interference and other factors, any of
which could cause a temporary stoppage of our operations or could otherwise
adversely affect our operations. The joint venture is currently negotiating
the purchase of the harbor and property adjacent thereto, which would
eliminate its obligations under its lease. There can be no assurance, however,
that the harbor and adjacent property will be purchased on favorable terms or
at all. If the joint venture or an affiliate of the joint venture or its
members does not purchase the harbor property, the joint venture would have to
construct a new harbor under the terms of its lease or request an extension of
the lease. Such construction or the loss of such lease upon its termination
would have a material adverse effect on our operations and our financial
condition. See "Material Agreements--Harbor Lease Agreement."
LOSS OF OUR VESSEL OR THE DOCKSIDE PAVILION FROM SERVICE WOULD ADVERSELY
AFFECT OUR BUSINESS
Our revenues are solely dependent on the Majestic Star Casino and,
indirectly, on the Buffington Harbor gaming complex. We are therefore subject
to greater risks than a more diversified gaming operation with multiple
locations. Also, if mechanical failure, damage to the vessel or the dockside
pavilion or other casualty, including severe weather conditions or extended or
extraordinary maintenance or inspection (including routine inspections
required by the U.S. Coast Guard) took the Majestic Star Casino out of service
for any period of time, it would materially adversely affect our operations.
Due to severe winter weather conditions during the first ten days of January
1999, combined with the fact that we failed to operate on two weekend days in
January 1999, our revenues for the first quarter were adversely impacted by an
estimated $1.5 million.
ANY SIGNIFICANT CONFLICTS BETWEEN US AND OUR JOINT VENTURE PARTNER COULD HAVE
AN ADVERSE EFFECT ON THE OPERATIONS OF THE BUFFINGTON HARBOR GAMING COMPLEX,
WHICH WOULD ADVERSELY AFFECT OUR BUSINESS
In 1995, we formed the joint venture, Buffington Harbor Riverboats, L.L.C.,
with Trump Indiana, Inc. to develop and operate the dockside pavilion and
common areas of the Buffington Harbor gaming complex. Efficient operation
13
<PAGE>
of the joint venture to support our casino will depend upon our continuing
ability, as well as that of our joint venture partner, to fund day-to-day
operations and agree on related business matters. Any failure by the joint
venture partner to fund operations of the joint venture when required, or any
significant conflict in this relationship that is not promptly resolved, would
adversely affect the operations of the gaming complex. A significant
disruption in the business of the gaming complex is likely to adversely affect
the operations of the Majestic Star Casino and our ability to generate
revenues.
WE EXPERIENCE INTENSE COMPETITION FROM OTHER GAMING FACILITIES
Our operations are subject to intense competition from other gaming
facilities. We compete primarily with gaming facilities in the Chicago
metropolitan market, including our joint venture partner and other riverboat
casinos at East Chicago, Hammond and Michigan City, Indiana, and at Elgin,
Aurora and Joliet, Illinois, and to a lesser extent, with four additional
riverboat casinos currently authorized to operate in southern Indiana. We also
compete with various gaming operations on Native American lands located in
Michigan, Wisconsin and potentially northern Indiana. We expect future
competition from three land-based casinos to be developed in Detroit, Michigan
pursuant to a November 1996 voter initiative. The MGM Grand currently operates
from a temporary facility in Detroit, Michigan, and we anticipate that the
other two casinos will operate from temporary facilities shortly. We
anticipate that competition will increase with the recent purchase and pending
sale of two area casinos to larger and stronger competitors. Many of our
competitors have greater gaming industry management experience and financial
resources than we do.
Currently, there are only nine gaming licenses authorized in the Chicago
metropolitan market. Indiana or Illinois could authorize additional gaming
licenses in the future. Legislation has been introduced on numerous occasions
in recent years in Illinois to provide for land-based casinos in Chicago and
to expand riverboat gaming in Illinois. In May 1999, legislation was signed
into law to relocate an existing but not operating riverboat gaming license to
Rosemont, Illinois (excluding the City of Chicago) and to provide for dock-
side gaming. In the last Indiana legislative session, legislation was
introduced to allow certain organizations to operate a limited number of
electronic gaming devices. We are unable to predict whether any such
legislation, in Illinois, Indiana or elsewhere, will be enacted or whether, if
passed, it would have a material adverse impact on our operations. See
"Business--Competition."
LOSS OF OUR LICENSE AND CHANGES IN GAMING REGULATIONS AND LEGISLATION COULD
ADVERSELY IMPACT OUR OPERATIONS
Under the Indiana Riverboat Gambling Act, the Indiana Gaming Commission has
broad rule making authority to adopt regulations regarding riverboat gaming
operations and to require extensive information regarding parties having an
interest in the owner's license. Our license is subject to renewal in June
2001. Under the Indiana Riverboat Gambling Act, an owner's license does not
create a property right, but is a revocable privilege contingent upon
continuing suitability for licensure. We cannot assure you that the Indiana
Gaming Commission will renew our license. The Indiana Gaming Commission may
revoke, restrict or suspend an owner's license at any time that the Indiana
Gaming Commission determines the licensee is in violation of the Indiana
Riverboat Gambling Act or the rules and regulations of the Indiana Gaming
Commission or if the Indiana Gaming Commission determines revocation of the
license is in the best interest of Indiana and will protect and enhance the
credibility and integrity of riverboat gambling operations.
From time to time, various proposals have been introduced in the Indiana
General Assembly that, if enacted, could adversely affect the regulation,
taxation and operation of the gaming industry, including the Majestic Star
Casino. Future legislation or regulations could have a material adverse effect
on our business and our results of operations. See "Regulatory Matters."
The National Gambling Impact Study Commission, established by Congress to
study the social and economic impact of gambling, issued its findings and
recommendations for legislation and administrative
14
<PAGE>
actions June 18, 1999. These recommendations could result in new regulatory
requirements that could adversely impact the gaming industry in general. While
we do not know what recommendations, if any, will be made, many observers
believe that this Commission will recommend a moratorium on additional casinos
and lottery games, more federal regulation of Native American reservation
casinos, and prohibition of all forms of Internet gambling.
THE LOSS OF KEY PERSONNEL AND ANY INABILITY TO ATTRACT AND RETAIN QUALIFIED
EMPLOYEES COULD ADVERSELY IMPACT OUR OPERATIONS
Our operations depend on the efforts and skills of a few key executives.
The loss of any one of them could have a material adverse effect on us. In the
event of such loss, we may not be able to attract and hire suitable
replacements. Additionally, our operations require qualified managers and
skilled employees with gaming industry experience to operate our business
successfully. We believe there is a shortage of skilled labor in the gaming
industry, which may make it more difficult and expensive for us to attract and
retain qualified employees. We expect that increased competition in the gaming
industry will intensify this problem. If we are unable to attract and retain
qualified individuals, our operations would be adversely affected.
MANY OF OUR EMPLOYEES BELONG TO UNIONS; ANY LABOR DISRUPTIONS OR WORK
STOPPAGES COULD HAVE AN ADVERSE IMPACT ON OUR BUSINESS
Approximately 13% of our workforce and approximately 36% of the joint
venture's workforce is unionized. We and the joint venture have collective
bargaining agreements with Local 1 of the Hotel Employees and Restaurant
Employees International Union, both of which expire on June 30, 2001. We and
the joint venture have collective bargaining agreements with the Operating
Engineers Union, which expire on September 30, 2003 in our case and June 30,
2001 in the case of the joint venture. We also have an agreement with the
Seafarers International Union, which expires on July 10, 2003. The joint
venture is currently negotiating an amendment to its collective bargaining
agreement with the Hotel Employees and Restaurant Employees International
Union to cover an additional group of employees. Any labor disruptions or work
stoppages could have a material adverse effect on our operations. See
"Business--Employees."
MANY FACTORS AFFECTING THE LABOR POOL IN INDIANA COULD INCREASE OUR LABOR
COSTS
We are dependent upon the available labor pool of unskilled and semi-
skilled employees. We are also subject to the Fair Labor Standards Act, which
governs such matters as minimum wage, overtime and other working conditions.
In addition, our agreement with the City of Gary, Indiana, requires us to use
our best efforts to have an employee base comprised of 70% racial minorities,
52% females, 67% residents of the City of Gary and 90% residents of Lake
County, Indiana. A shortage in the labor pool, especially in the City of Gary
and in Lake County, or other general inflationary pressures or changes in
applicable state or federal minimum wage or other labor laws, could result in
increased labor costs to us.
WE ARE SUBJECT TO SIGNIFICANT TAXES, WHICH COULD BE INCREASED AT ANY TIME
Gaming companies are typically subject to significant taxes and fees in
addition to standard Federal and state income taxes. We now pay substantial
taxes and fees, which are subject to increase at any time. See "Regulation and
Licensing."
The Indiana General Assembly could enact higher wagering or admissions
taxes at any time. There have been proposals from time to time to tax all
gaming establishments, (including riverboat/cruising vessel casinos), at the
Federal level. Any significant increase in our tax rates would have a material
adverse effect on operations.
15
<PAGE>
IF WE OR OUR SIGNIFICANT VENDORS FAIL TO BECOME YEAR 2000 COMPLIANT IN A TIMELY
MANNER, OUR OPERATIONS COULD BE ADVERSELY AFFECTED
Beginning in the year 2000, our business operations will depend on the
ability of the computer programs used in our gaming operations and financial
reporting systems to accommodate the date change. As of this date,
<PAGE>
we have modified or upgraded, or scheduled an upgrade of, all of such systems
to meet year 2000 requirements. We are also requesting assurances from our
significant suppliers and vendors that their systems are year 2000 compliant or
that they are identifying and addressing problems to ready themselves for the
year 2000. We expect to have confirmation that all systems are compliant by
September 1999. We do not anticipate that our expenditures with respect to year
2000 compliance will have a material impact on our operations. If, however, we
or one of our significant vendors fails to become year 2000 compliant, our
operations could be significantly disrupted. Due to the general uncertainty
inherent in the year 2000 problem, we are unable to determine at this time the
extent to which year 2000 issues could impact our business.
WE ARE SUBJECT TO POTENTIAL EXPOSURE TO ENVIRONMENTAL LIABILITIES
The Buffington Harbor gaming complex is located on a site where prior
industrial operations and activities may have resulted in contamination of the
environment. As the owner and operator of the Majestic Star Casino and a member
of the joint venture, we could be held responsible for the costs of addressing
any contamination. Our liability under applicable environmental laws may be
imposed without regard to whether we knew of, or were responsible for, the
presence of hazardous substances and, in some cases, may not be limited to the
value of the affected property. There can be no assurance that further
development of the facility, including the proposed new parking facility, or of
a new harbor, and the related construction, will not identify environmental
contamination. If this were to occur, the costs of remediation or the
disruption to our business could adversely affect our operations and may also
adversely affect our ability to sell, lease or operate the property or to
borrow against it. Neither we nor the joint venture is entitled to
indemnification from any prior owners or operators of the site with respect to
environmental matters. See "Regulatory Matters--Other Non-Gaming Regulations."
WE MAY BE REQUIRED TO CONSUMMATE A REQUIRED REGULATORY REDEMPTION OR A
REPURCHASE UPON A CHANGE OF CONTROL
The new notes will be redeemable, in whole or in part, at any time, at 100%
of the principal amount, plus accrued interest to the redemption date, pursuant
to, and in accordance with, any Required Regulatory Redemption (as defined in
this prospectus under "Description of the New Notes"). In addition, upon a
change of control, you will, subject to certain limitations, have the right to
require us to repurchase all or a portion of the new notes at a price equal to
101% of the principal amount thereof, plus accrued and unpaid interest thereon,
if any, to the date of repurchase. There can be no assurance that we will have
sufficient funds to consummate a Required Regulatory Redemption or a repurchase
upon a change of control or that such a redemption or repurchase, if
consummated, would not have a material adverse effect on our business. See
"Description of the New Notes--Redemption" and "--Repurchase Upon Change of
Control."
THERE IS CURRENTLY NO PUBLIC MARKET FOR THE NEW NOTES
There is no existing market for the new notes and there can be no assurance
as to the liquidity of any market that may develop for the new notes. An active
market may not develop for the new notes. If not, the market price and
liquidity of the new notes may be adversely affected. If any of the new notes
are traded after their initial issuance, they may trade at a discount from
their initial offering price. Future trading prices of the new notes will
depend on many factors, including, among other things, our ability to effect
the exchange offer, prevailing interest rates, our operating results and the
market for similar securities. See "Exchange Offer," "Description of the New
Notes," and "Plan of Distribution."
USE OF PROCEEDS
We will not receive any proceeds from the exchange offer. In consideration
for issuing the new notes, we will receive outstanding old notes in like
original principal amount at maturity. All old notes received in the exchange
offer will be canceled.
16
<PAGE>
CAPITALIZATION
The following table sets forth our capitalization as of June 30, 1999. The
following table should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and our financial
statements and the notes thereto appearing elsewhere in this prospectus.
<TABLE>
<CAPTION>
AS OF JUNE 30, 1999
----------------------
ACTUAL
(DOLLARS IN THOUSANDS,
UNAUDITED)
<S> <C>
Cash and cash equivalents(a)............................. $ 14,302
========
Total debt:
Bank credit facility(b)................................ $ --
Senior Secured Notes due 2003.......................... 6,000
Senior Secured Notes due 2006(c)....................... 127,749
Capital lease obligations.............................. 4,297
--------
Total debt........................................... $138,046
Members' (deficit)....................................... (16,022)
Total capitalization................................. $122,024
========
</TABLE>
- --------
(a) Includes approximately $3.1 million of cage cash as of June 30, 1999.
(b) Promptly following this offering, we expect to enter into a $20.0 million
senior secured credit facility. The establishment of the credit facility is
subject to approval by the Indiana Gaming Commission.
(c) Reflects issuance of $130.0 million aggregate principal amount thereof.
17
<PAGE>
SELECTED FINANCIAL INFORMATION
The following table presents our selected financial information for each of
the three fiscal years ended December 31, 1996, 1997 and 1998 and for the six
months ended June 30, 1998 and 1999. This data is derived from our financial
statements, which have been audited by PricewaterhouseCoopers LLP, except that
the data for the six months ended June 30, 1998 and 1999 has been derived from
our unaudited financial statements which, in our opinion, contain all
adjustments (consisting only of normal and recurring adjustments) necessary for
a fair presentation of our financial position and results of operations at such
dates and for such periods. Because the data in this table is only a summary
and does not provide all of the data contained in our financial statements,
including the related notes, you should read "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and our financial
statements and the notes thereto appearing elsewhere in this prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SIX MONTHS
DECEMBER 31, ENDED JUNE 30,
-------------------------- ----------------
1996(A) 1997 1998 1998 1999
------- ------- -------- ------- -------
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT OPERATING
DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Casino......................... $52,788 $92,305 $111,481 $55,219 $59,413
Food and beverage.............. 809 1,559 1,643 858 968
Other.......................... 636 849 1,477 818 468
------- ------- -------- ------- -------
Gross revenues............... 54,233 94,712 114,601 56,895 60,849
Less promotional allowances.. (12) (169) (337) (211) (139)
------- ------- -------- ------- -------
Net revenues................. 54,221 94,543 114,263 56,685 60,710
Costs and expenses
Casino......................... 9,257 16,758 18,853 9,488 10,216
Gaming and admission taxes..... 15,538 26,956 32,722 16,307 16,663
Food and beverage.............. 1,129 1,937 2,390 1,176 1,236
Advertising and promotion...... 4,563 12,709 10,156 6,129 3,319
General and administrative..... 12,289 22,230 24,222 12,138 12,379
Economic incentive-City of
Gary.......................... 1,586 2,789 3,456 1,707 1,835
Loss on disposition of assets.. -- 1,603 959 904 --
Pre-opening costs.............. 4,587 1,254 -- -- --
Depreciation and amortization.. 5,320 7,700 7,820 3,832 3,915
------- ------- -------- ------- -------
Total costs and expenses..... 54,269 93,936 100,578 51,681 49,563
------- ------- -------- ------- -------
Operating income (loss).......... (48) 607 13,685 5,003 11,147
Other income (expense):
Loss on investment in the
Joint Venture (b)............. (2,440) (3,448) (3,167) (1,601) (1,404)
Interest income................ 2,199 1,831 860 460 396
Interest expense............... (8,247) (12,261) (15,326) (7,630) (7,758)
Interest expense to affiliate.. (351) (616) (525) (291) (167)
------- ------- -------- ------- -------
Total other income (loss).... (8,839) (14,494) (18,158) (9,061) (8,933)
======= ======= ======== ======= =======
Income (loss) before
extraordnary item .......... (8,887) (13,887) (4,473) (4,058) 2,214
======= ======= ======== ======= =======
EXTRAORDINARY ITEM:
Loss on Bond Redemption........ -- -- -- -- (15,238)
Net income (loss) (8,887) (13,887) (4,473) (4,058) (13,024)
OTHER DATA:
EBITDA(c)...................... 10,738 12,701 23,219 10,494 15,062
Capital Expenditures........... 20,242 39,641 2,100 1,516 2,067
Ratio of earnings to fixed
charges(d).................... -- -- -- -- 1.28
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
FISCAL YEAR ENDED DECEMBER
31,
-------------------------- AT JUNE 30,
1996 1997 1998 1999
-------- -------- -------- -----------
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Current assets.......................... $ 10,688 $ 9,993 $ 19,172 $ 23,626
Total assets............................ 142,384 134,762 125,261 129,169
Current liabilities..................... 8,141 11,699 11,109 15,338
Long-term liabilities................... 118,880 121,588 117,150 129,853
Members' deficit........................ 15,363 1,475 (2,998) (16,022)
</TABLE>
- --------
(a) We had 205 days of gaming operations during 1996.
(b) The loss represents our 50% share of the joint venture's non-cash net loss.
(c) EBITDA represents operating income before depreciation, amortization, pre-
opening expenses, loss on disposition of assets, and lease and termination
payments on the chartered vessel. Pre-opening expenses were $4.6 million
and $1.3 million in 1996 and 1997, respectively. Loss on disposition of
assets was approximately $1.6 million, $1.0 million and $0.9 million in
1997, 1998, and the six months ended June 30, 1998, respectively. Prior to
October 27, 1997, we chartered a vessel to conduct our gaming operations.
Lease and termination payments on the chartered vessel were approximately
$0.9 million, $1.5 million, $0.8 million, and $0.8 million in 1996, 1997,
1998, and the six months ended June 30, 1998, respectively. EBITDA is
presented to enhance the understanding of our financial performance and our
ability to service our debt, including the Notes. We understand that EBITDA
is used by certain investors as one measure of cash flow and enables a
comparison of our performance with the performance of other companies that
report EBITDA. EBITDA is not a generally accepted accounting principles
financial indicator and should not be considered an alternative to, or more
meaningful than, net income or income from operations as an indicator of
our operating performance or net cash provided by operating activities as a
measure of liquidity.
(d) As indicated above, through December 31, 1998, earnings were not adequate
to cover fixed charges. For the fiscal years ended December 31, 1996, 1997
and 1998, and the six months ended June 30, 1998, the deficiency was
approximately $9.1 million, $16.2 million, $4.5 million and $4.1 million,
respectively. For the six months ended June 30, 1999, fixed charges were
$7.9 million and the earnings before fixed charges, which exclude the
impact of the extraordinary loss on bond redemption, were $10.1 million.
Fixed charges include interest charges, amortization of debt expense and
discounts.
19
<PAGE>
THE EXCHANGE OFFER
PURPOSE AND EFFECT; REGISTRATION RIGHTS
We sold the old notes to the initial purchaser on June 18, 1999. The initial
purchaser then resold the old notes under an offering circular dated June 15,
1999 in reliance on rule 144A and other available exemptions under the
Securities Act of 1933. On June 18, 1999, we entered into a registration rights
agreement with the initial purchaser. Under the registration rights agreement
we agreed to:
. file a registration statement with the Securities and Exchange Commission
relating to the exchange offer under the Securities Act of 1933 no later
than August 17, 1999;
. use our best efforts to cause the exchange offer registration statement
to be declared effective under the Securities Act of 1933 on or before
October 18, 1999;
. commence the exchange offer promptly after the exchange offer
registration statement is declared effective by the Securities and
Exchange Commission;
. keep the exchange offer open for acceptance for not less than 30 days
after notice of the exchange offer is mailed to holders of the old notes;
. cause the exchange offer to be consummated not later than 30 days
following the date of the effectiveness of the exchange offer
registration statement;
. use our best efforts to keep the exchange offer registration statement
effective until the closing of the exchange offer and thereafter until we
have issued new notes in exchange for all old notes that have been
properly tendered for exchange prior to the expiration of the exchange
offer.
In the registration rights agreement, we agreed to file a shelf registration
statement if:
. we are not permitted to effect the exchange offer under applicable law or
applicable interpretations of law by the Securities and Exchange
Commission staff;
. the exchange offer is not consummated by November 18, 1999;
. any holder of old notes notifies us that it (i) is not entitled to
participate in the exchange offer, (ii) may not resell the new notes
acquired by it in the exchange offer to the public without delivering a
prospectus and this prospectus is not appropriate or available for
purposes of these resales or (iii) is a broker-dealer and owns old notes
acquired directly from us or one of our affiliates; or
. the holders of a majority in aggregate principal amount of the old notes
are not eligible to participate in the exchange offer and to receive new
notes that they may resell to the public without restriction under the
Securities Act of 1933 and the Securities Exchange Act of 1934 and
without material restrictions under applicable blue sky or state
securities laws.
If we are required to file a shelf registration statement, we must make our
best efforts to keep the shelf registration statement continuously effective,
supplemented and amended until the second anniversary of the effective date of
the shelf registration statement or a shorter period that will terminate when
all the notes covered by the shelf registration statement have been sold
pursuant to the shelf registration statement.
A holder who sells old notes pursuant to the shelf registration statement
generally will be required to be named as a selling security holder in the
prospectus and to deliver a copy of the prospectus to purchasers. If we are
required to file a shelf registration statement, we will provide to each holder
of the old notes copies of the prospectus that is a part of the self
registration statement and notify each such holder when the self registration
statement becomes effective.
Such holder will be subject to some of the civil liability provisions under
the Securities Act of 1933 in connection with these sale sand will be bound by
the provisions of the registration rights agreement that are applicable to such
holder, including certain indemnification and contribution obligations.
20
<PAGE>
The registration rights agreement requires us to pay the holders of the
notes liquidated damages if a registration default exists. A registration
default will exist if:
. we fail to file any of the registration statements required by the
registration rights agreement on or prior to the date specified for such
filing;
. any of such registration statements is not declared effective by the
Securities and Exchange Commission on or prior to the date specified for
such effectiveness;
. the exchange offer required to be consummated under the registration
rights agreement is not consummated by September 20, 1999;
. the shelf registration statement is declared effective but thereafter,
during the period for which we are required to maintain the effectiveness
of the shelf registration statement, it ceases to be effective or usable
in connection with the resale of the new notes covered by the shelf
registration statement.
If a registration default exists, we are required to pay liquidated damages
in the amount of $0.05 per week per $1,000 principal amount of notes to each
holder for each weekly period following the registration default during the
first 90-day period following such default. The amount of liquidated damages
increases by $0.05 per week per $1,000 principal amount of the notes with
respect to each subsequent 90-day period following such default, up to a
maximum amount of $0.20 per week per $1,000 principal amount of the notes.
The exchange offer is intended to satisfy our exchange offer obligations
under the registration rights agreement. The above summary of the registration
rights agreement is not complete and is subject to, and qualified by reference
to, all of the provisions of the registration rights agreement. A copy of the
registration rights agreement is filed as an exhibit to the registration
statement that includes this prospectus.
If you participate in the exchange offer, you will, with limited exceptions,
receive notes that are freely tradeable and not subject to restrictions on
transfer. You should read this prospectus under the heading "--Resales of the
New Notes" for more information relating to your ability to transfer new notes.
The exchange offer is not being made to, nor will we accept tenders for
exchange from, holders of old notes in any jurisdiction in which the exchange
offer or the acceptance of the exchange offer would not be in compliance with
the securities laws or blue sky laws of such jurisdiction.
EXPIRATION DATE; EXTENSIONS
The expiration date at the exchange offer is , 1999 at 5:00
p.m., New York City time. We may extend the exchange offer in our sole
discretion. If we extend the exchange offer, the expiration date will be the
latest date and time to which the exchange offer is extended. We will notify
the exchange agent of any extension by oral or written notice and will make a
public announcement of the extension no later than 9:00 a.m., New York City
time, on the next business day after the previously scheduled expiration date.
We expressly reserve the right, in our sole and absolute discretion:
. to delay accepting an old notes;
. to extend the exchange offer;
. if any of the conditions under "--Conditions of the Exchange Offer" have
not been satisfied, to terminate the exchange offer; and
. to waive any condition or otherwise amend the terms of the exchange offer
in any manner.
If the exchange offer is amended in a manner we deem to constitute a
material change, we will promptly disclose the amendment by means of a
prospectus supplement that will be distributed to the registered holders of the
old notes. Any delay in acceptance, extension, termination or amendment will be
followed promptly by
21
<PAGE>
an oral or written notice of the event to the exchange agent. We will also make
a public announcement of the vent. Without limiting the manner in which we may
choose to make any public announcement and subject to applicable law, we have
no obligation to publish, advertise or otherwise communicate any such public
announcement other than by issuing a release to a national news service.
TERMS OF THE EXCHANGE OFFER
We are offering, upon the terms and subject to the conditions set forth in
this prospectus and in the accompanying letter of transmittal, to exchange up
to $130.0 million total principal amount of new notes for a like total
principal amount of outstanding old notes. We will accept for exchange any and
all old notes that are validly tendered on or before 5:00 p.m. New York City
time, on the expiration date. Tenders of the old notes may be withdrawn at any
time before 5:00 p.m. New York City time, on the expiration date. The exchange
offer is not conditioned upon any minimum principal amount of old notes being
tendered for exchange. However, the exchange offer is subject to the terms of
the registration rights agreement and the satisfaction of the conditions
described under "--Conditions of the Exchange Offer." Holders may tender less
than the aggregate principal amount represented by their old notes if they
appropriately indicate this fact on the letter of transmittal accompanying the
tendered old notes or indicate this pursuant to the procedures for book-entry
transfer described below.
As of the date of this prospectus, $130.0 million in aggregate principal
amount of the old notes were outstanding. Solely for reasons of administration,
we have fixed the close of business on , 1999 as the record date
for purposes of determining the persons to whom this prospectus and the letter
of transmittal will be mailed initially. Only a holder of the old notes (or
such holder's legal representative or attorney-in-fact) whose ownership is
reflected in the records of IBJ Whitehall Bank & Trust Company, as registrar,
or whose notes are held of record by the depositary, may participate in the
exchange offer. There will be no fixed record date for determining the eligible
holders of the old notes who are entitled to participate in the exchange offer.
We believe that, as of the date of this prospectus, no holder is our
"affiliate" (as defined in Rule 405 under the Securities Act of 1933).
We will be deemed to have accepted validly tendered old notes when, as and
if we give oral or written notice of our acceptance to the exchange agent. The
exchange agent will act as agent for the tendering holders of old notes and for
purposes of receiving the new notes from us. If any tendered old notes are not
accepted for exchange because of an invalid tender or otherwise, certificates
for the unaccepted old notes will be returned, without expense, to the
tendering holder as promptly as practicable after the expiration date.
Holders of old notes do not have appraisal or dissenters' rights under
applicable law or the indenture as a result of the exchange offer. We intend to
conduct the exchange offer in accordance with the applicable requirements of
the Securities Exchange Act of 1934 and the rules and regulations under the
Securities Exchange Act of 1934, including Rule 14e-1.
Holders who tender their old notes in the exchange offer will not be
required to pay brokerage commissions or fees or, subject to the instructions
in the letter of transmittal, transfer taxes with respect to the exchange of
old notes pursuant to the exchange offer. We will pay all charges and expenses,
other than transfer taxes in certain circumstances, in connection with the
exchange offer. See "--Fees and Expenses."
We do not make any recommendations to holders of old notes as to whether to
tender any of their old notes pursuant to the exchange offer. In addition, no
one has been authorized to make any such recommendation. Holders of old notes
must make their own decision whether to participate in the exchange offer and,
if the holder chooses to participate in the exchange offer, the aggregate
principal amount of old notes to tender, after reading carefully this
prospectus and the letter of transmittal and consulting with their advisors, if
any, based on their own financial position and requirements.
22
<PAGE>
CONDITIONS OF THE EXCHANGE OFFER
You must tender your old notes in accordance with the requirements of this
prospectus and the letter of transmittal in order to participate in the
exchange offer.
Notwithstanding any other provision of the exchange offer, or any extension
of the exchange offer, we will not be required to accept for exchange any old
notes, and we may terminate or amend the exchange offer if we are not permitted
to effect the exchange offer under applicable law or any interpretation of
applicable law by the staff of the Securities and Exchange Commission. If we
determine in our sole discretion that any of these events or conditions has
occurred, we may, subject to applicable law, terminate the exchange offer and
return all old notes tendered for exchange or may waive any condition or amend
the terms of the exchange offer.
We expect that the above conditions will be satisfied. The above conditions
are for our sole benefit and may be waived by us at any time in our sole
discretion. Our failure at any time to exercise any of the above rights will
not be a waiver of those rights and each right will be deemed an ongoing right
that may be asserted at any time. Any determination by us concerning the events
described above will be final and binding upon all parties.
INTEREST
Each new note will bear interest from the most recent date to which interest
has been paid or duly provided for on the old note surrendered in exchange for
such new note or, if no interest has been paid or duly provided for on such old
note, from June 18, 1999. Holders of the old notes whose old notes are accepted
for exchange will not receive accrued interest on their old notes for any
period from and after the last interest payment date to which interest has been
paid or duly provided for on their old notes prior to the original issue date
of the new notes or, if no such interest has been paid or duly provided for,
will not receive any accrued interest on their old notes, and will be deemed to
have waived the right to receive any interest on their old notes accrued from
and after such interest payment date or, if no such interest has been paid or
duly provided for, from and after June 18, 1999.
PROCEDURES FOR TENDERING OLD NOTES
The tender of a holder's old notes and our acceptance of old notes will
constitute a binding agreement between the tendering holder and us upon the
terms and conditions of this prospectus and the letter of transmittal. Unless a
holder tenders old notes according to the guaranteed delivery procedures or the
book-entry procedures described below, the holder must transmit the old notes,
together with a properly completed and executed letter of transmittal and all
other documents required by the letter of transmittal, to the exchange agent at
its address before 5:00 p.m., New York City time, on the expiration date. The
method of delivery of old notes, letters of transmittal and all other required
documents is at the election and risk of the tendering holder. If delivery is
by mail, we recommend delivery by registered mail, properly insured, with
return receipt requested. Instead of delivery of mail, we recommend that each
holder use an overnight or hand delivery service. In all cases, sufficient time
should be allowed to assure timely delivery.
Any beneficial owner of the old notes whose old notes are registered in the
name of a broker, dealer, commercial bank, trust company or other nominee and
who wishes to tender old notes in the exchange offer should contact that
registered holder promptly and instruct that registered holder to tender on its
behalf. If the beneficial owner wishes to tender directly, it must, prior to
completing and executing the letter of transmittal and tendering old notes,
make appropriate arrangements to register ownership of the old notes in its
name. Beneficial owners should be aware that the transfer of registered
ownership may take considerable time.
23
<PAGE>
Any financial institution that is a participant in DTC's Book-Entry Transfer
Facility system may make book-entry delivery of the old notes by causing DTC to
transfer the old notes into the exchange agent's account in accordance with
DTC's procedures for such transfer. To be timely, book-entry delivery of old
notes requires receipt of a confirmation of a book-entry transfer before the
expiration date. Although delivery of the old notes may be effected through
book-entry transfer into the exchange agent's account at DTC, the letter of
transmittal, properly completed and executed, with any required signature
guarantees and any other required documents or an agent's message (as described
below), must in any case be delivered to and received by the exchange agent at
its address on or before the expiration date, or the guaranteed delivery
procedure set forth below must be complied with.
DTC has confirmed that the exchange offer is eligible for DTC's Automated
Tender Offer Program. Accordingly, participants in DTC's Automated Tender Offer
Program may, instead of physically completing and signing the applicable letter
of transmittal and delivering it to the exchange agent, electronically transmit
their acceptance of the exchange offer by causing DTC to transfer old notes to
the exchange agent in accordance with DTC's Automated Tender Offer Program
procedures for transfer. DTC will then send an agent's message to the exchange
agent.
The term "agent's message" means a message transmitted by DTC, received by
the exchange agent and forming part of the book-entry confirmation, which
states that DTC has received an express acknowledgment from a participant in
DTC's Automated Tender Offer Program that is tendering old notes that are the
subject of such book-entry confirmation; that the participant has received and
agrees to be bound by the terms of the applicable letter of transmittal or, in
the case of an agent's message relating to guaranteed delivery, that the
participant has received and agrees to be bound by the applicable notice of
guaranteed delivery; and that we may enforce such agreement against that
participant.
Each signature on a letter of transmittal or a notice of withdrawal must be
guaranteed unless the old notes are tendered:
. by a registered holder who has not completed the box entitled "Special
Delivery Instructions;" or
. for the account of an eligible institution (as described below).
If a signature on a letter of transmittal or a notice of withdrawal is
required to be guaranteed, the signature must be guaranteed by a participant in
a recognized Medallion Signature Program (a "Medallion Signature Guarantor").
If the letter of transmittal is signed by a person other than the registered
holder of the old notes, the old notes surrendered for exchange must be
endorsed by the registered holder, with the signature guaranteed by a Medallion
Signature Guarantor. If any letter of transmittal, endorsement, bond power,
power of attorney or any other document required by the letter of transmittal
is signed by a trustee, executor, administrator, guardian, attorney-in-fact,
officer of a corporation or other person acting in a fiduciary or
representative capacity, such person should sign in that capacity when signing.
Such person must submit to us evidence satisfactory, in our sole discretion, of
his or her authority to so act unless we waive such requirement.
As used in this prospectus with respect to the old notes, a "registered
holder" is any person in whose name the old notes are registered on the books
of the registrar. An "eligible institution" is a firm that is a member of a
registered national securities exchange or of the National Association of
Securities Dealers, Inc., a commercial bank or trust company having an office
or correspondent in the United States or any other "eligible guarantor
institution" as such term is defined in Rule 17Ad-15 under the Securities
Exchange Act of 1934.
We will determine in our sole discretion all questions as to the validity,
form, eligibility (including time of receipt), acceptance and withdrawal of old
notes tendered for exchange. Our determination will be final and binding. We
reserve the absolute right to reject old notes not properly tendered and to
reject any old notes if acceptance might, in our judgment or our counsel's
judgment, be unlawful. We also reserve the absolute right to waive any defects
or irregularities or conditions of the exchange offer as to particular old
notes at any time, including the right to waive the ineligibility of any holder
who seeks to tender old notes in the exchange offer.
24
<PAGE>
Our interpretation of the terms and conditions of the exchange offer,
including the letter of transmittal and its instructions, will be final and
binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of old notes for exchange must be cured within such
period of time as we determine. Neither our company nor the exchange agent is
under any duty to give notification of defects in such tenders or will incur
any liability for failure to give such notification. The exchange agent will
use reasonable efforts to give notification of defects or irregularities with
respect to tenders of old notes for exchange but will not incur any liability
for failure to give such notification. Tenders of old notes will not be deemed
to have been made until such irregularities have been cured or waived.
By tendering, you will represent to us that, among other things:
. you are not our "affiliate" (as defined in Rule 405 under the Securities
Act of 1933);
. you will acquire the new notes in the ordinary course of your business;
. you are not a broker-dealer that acquired your notes directly from us in
order to resell them pursuant to Rule 144A under the Securities Act of
1933 or any other available exemption under the Securities Act of 1933;
. if you are a broker-dealer that acquired your notes as a result of
market-making or other trading activities, you will deliver a prospectus
in connection with any resale of new notes; and
. you are not participating, do not intend to participate and have no
arrangement or understanding with any person to participate in the
distribution of the new notes.
In connection with a book-entry transfer, each participant will confirm that
it makes the representations and warranties contained in the letter of
transmittal.
GUARANTEED DELIVERY PROCEDURES
If you wish to tender your old notes and:
. your old notes are not immediately available;
. you are unable to deliver on time your old notes or any other document
that you are required to deliver to the exchange agent; or
. you cannot complete the procedures for delivery by book-entry transfer on
time;
you may tender your old notes according to the guaranteed delivery procedures
described in the letter of transmittal. Those procedures require that:
. tender must be made by or through an eligible institution and a notice of
guaranteed delivery must be signed by the holder;
. on or before the expiration date, the exchange agent must receive from
the holder and the eligible institution a properly completed and executed
notice of guaranteed delivery by mail or hand delivery setting forth the
name and address of the holder, the certificate number or numbers of the
tendered old notes and the principal amount of tendered old notes; and
. properly completed and executed documents required by the letter of
transmittal and the tendered old notes in proper form for transfer or
confirmation of a book-entry transfer of such old notes into the exchange
agent's account at DTC must be received by the exchange agent within four
business days after the expiration date of the exchange offer.
Any holder who wishes to tender old notes pursuant to the guaranteed
delivery procedures must ensure that the exchange agent receives the notice of
guaranteed delivery and letter of transmittal relating to such old notes before
5:00 p.m., New York City time, on the expiration date.
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<PAGE>
ACCEPTANCE OF OLD NOTES FOR EXCHANGE; DELIVERY OF NEW NOTES
Upon satisfaction or waiver of all the conditions to the exchange offer, we
will accept old notes that are properly tendered in the exchange offer prior to
5:00 p.m., New York City time, on the expiration date. The new notes will be
delivered promptly after acceptance of the old notes. For purposes of the
exchange offer, we will be deemed to have accepted validly tendered old notes
when, as and if we have given notice to the exchange agent.
WITHDRAWAL RIGHTS
Tenders of the old notes may be withdrawn by delivery of a written or
facsimile transmission notice to the exchange agent at its address set forth
under "--The Exchange Agent; Assistance" at any time before 5:00 p.m., New York
City time, on the expiration date. Any such notice of withdrawal must:
. specify the name of the person having deposited the old notes to be
withdrawn;
. identify the old notes to be withdrawn, including the certificate number
or numbers and principal amount of such old notes, or, in the case of old
notes transferred by book-entry transfer, the name and number of the
account at DTC to be credited;
. be signed by the holder in the same manner as the original signature on
the letter of transmittal by which old notes were tendered, including any
required signature guarantees, or be accompanied by a bond power in the
name of the person withdrawing the tender, in satisfactory form as
determined by us in our sole discretion, executed by the registered
holder, with the signature guaranteed by a Medallion Signature Guarantor,
together with the other documents required upon transfer by the
indenture; and
. specify the name in which the old notes are to be re-registered if
different from the person who deposited the old notes.
All questions as to the validity, form and eligibility (including time of
receipt) of such notices will be determined by us, in our sole discretion. Any
old notes withdrawn will be deemed not to have been validly tendered for
exchange for purposes of the exchange offer and will be returned to the holder
without cost as soon as practicable after withdrawal. Properly withdrawn old
notes may be retendered pursuant to the procedures described under "--
Procedures for Tendering Old Notes" at any time on or before the expiration
date.
THE EXCHANGE AGENT; ASSISTANCE
IBJ Whitehall Bank & Trust Company is the exchange agent. All tendered old
notes, executed letters of transmittal and other related documents should be
directed to the exchange agent. Questions and requests for assistance and
requests for additional copies of the prospectus, the letter of transmittal and
other related documents should be addressed to the exchange agent as follows:
By Registered or Certified Mail: By Hand or Overnight Courier: By Telephone:
IBJ Whitehall Bank & Trust CompanyIBJ Whitehall Bank & Trust Company
(212) 858-
P.O. Box 84 One State Street 2103
Bowling Green Station New York, New York 10004 (212) 858-
Attn: Reorganization Operations Department 2611-fax
Attn: Securities Processing Window,
Subcellar One, (SC-1)
To confirm
facsimile
transmission
call:
(212) 858-
2103
FEES AND EXPENSES
We will bear the expenses of soliciting the old notes for exchange. The
principal solicitation is being made by mail by the exchange agent. Additional
solicitation may be made by telephone, facsimile or in the person by officers
and regular employees of our company and our affiliates and by persons so
engaged by the exchange agent.
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<PAGE>
We will pay the exchange agent reasonable and customary fees for its
services and will reimburse the exchange agent for its reasonable out-of-pocket
expenses in connection with its services and pay other registration expenses,
including fees and expenses of the trustee under the indenture, filing fees,
blue sky fees and printing and distribution expenses.
We have not retained any dealer-manager in connection with the exchange
offer and will not make any payments to brokers, dealers or others soliciting
acceptance of the exchange offer.
We will pay all transfer taxes, if any, applicable to the exchange of old
notes pursuant to the exchange offer. If, however, a transfer tax is imposed
for any reason other than the exchange of old notes pursuant to the exchange
offer, then the amount of those transfer taxes, whether imposed on the
registered holder or any other persons, will be payable by the tendering
holder. If satisfactory evidence of payment of those taxes or exemption is not
submitted with the letter of transmittal, the amount of those transfer taxes
will be billed directly to such tendering holder.
ACCOUNTING TREATMENT
The new notes will be recorded at the same carrying value as the old notes,
as reflected in our accounting records on the date of the exchange.
Accordingly, we will recognize no gain or loss for accounting purposes. The
expenses of the exchange offer will be amortized over the term of the new
notes.
CONSEQUENCES OF NOT EXCHANGING OLD NOTES
As a result of this exchange offer, we will have fulfilled most of our
obligations under the registration rights agreement. Holders who do not tender
their old notes, except for certain instances involving the initial purchasers
or holders of old notes who are not eligible to participate in the exchange
offer or who do not receive freely transferrable new notes pursuant to the
exchange offer, will not have any further registration rights under the
registration rights agreement or otherwise and will not have rights to receive
additional interest. Accordingly, any holder who does not exchange its old
notes for new notes will continue to hold the untendered old notes and will be
entitled to all the rights and subject to all the limitations applicable under
the indenture, except to the extent that such rights or limitations, by their
terms, terminate or cease to have further effectiveness as a result of the
exchange offer.
Any old notes that are not exchanged for new notes pursuant to the exchange
offer will remain restricted securities within the meaning of the Securities
Act of 1933. In general, such old notes may be resold only:
. to our company or any of our subsidiaries;
. inside the United States to a "qualified institutional buyer" in
compliance with Rule 144A under the Securities Act of 1933;
. inside the United States to an institutional "accredited investor" (as
defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act of
1933) or an "accredited investor" that, prior to such transfer, furnishes
or has furnished on its behalf by a U.S. broker-dealer to the trustee
under the indenture a signed letter containing certain representations
and agreements relating to the restrictions on transfer of the new notes,
the form of which letter can be obtained from the trustee;
. outside the United States in compliance with Rule 904 under the
Securities Act of 1933;
. pursuant to the exemption from registration provided by Rule 144 under
the Securities Act of 1933, if available; or
. pursuant to an effective registration statement under the Securities Act
of 1933.
Each accredited investor that is not a qualified institutional buyer and
that is an original purchaser of any of the old notes from the initial
purchasers will be required to sign a letter confirming that it is an
accredited investor under the Securities Act of 1933 and that it acknowledges
the transfer restrictions summarized above.
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<PAGE>
RESALES OF THE NEW NOTES
We are making the exchange offer in reliance on the position of the staff of
the Securities and Exchange Commission as set forth in interpretive letters
addressed to third parties in other transactions. However, we have not sought
our own interpretive letter. Although there has been no indication of any
change in the staff's position, we cannot assure you that the staff of the
Securities and Exchange Commission would make a similar determination with
respect to the exchange offer as it has in its interpretive letters to third
parties. Based on these interpretations by the staff, and except as provided
below, we believe that new notes may be offered for resale, resold and
otherwise transferred by a holder who participates in the exchange offer and is
not a broker-dealer without further compliance with the registration and
prospectus delivery provisions of the Securities Act of 1933. In order to
receive new notes that are freely tradeable, a holder must acquire the new
notes in the ordinary course of its business and may not participate, or have
any arrangement or understanding with any person to participate, in the
distribution (within the meaning of the Securities Act of 1933) of the new
notes. Holders wishing to participate in the exchange offer must make the
representations described in "--Procedures for Tendering Old Notes" above.
Any holder of old notes:
. who is our "affiliate" (as defined in Rule 405 under the Securities Act
of 1933);
. who did not acquire the new notes in the ordinary course of its business;
. who is a broker-dealer that purchased old notes from us to resell them
pursuant to Rule 144A under the Securities Act of 1933 or any other
available exemption under the Securities Act of 1933; or
. who intends to participate in the exchange offer for the purpose of
distributing (within the meaning of the Securities Act of 1933) new
notes;
will be subject to separate restrictions. Each holder in any of the above
categories:
. will not be able to rely on the interpretation of the staff of the
Securities Act of 1933 in the above-mentioned interpretive letters;
. will not be permitted or entitled to tender old notes in the exchange
offer; and
. must comply with the registration and prospectus delivery requirements of
the Securities Act of 1933 in connection with any sale or other transfer
of old notes, unless such sale is made pursuant to an exemption from such
requirements.
In addition, if you are a broker-dealer holding old notes acquired for your
own account, then you may be deemed a statutory "underwriter" within the
meaning of the Securities Act of 1933 and must deliver a prospectus meeting the
requirements of the Securities Act of 1933 in connection with any resales of
your new notes. Each broker-dealer that receives new notes for its own account
pursuant to the exchange offer must acknowledge that it acquired the old notes
for its own account as a result of market-making activities or other trading
activities and must agree that it will deliver a prospectus meeting the
requirements of the Securities Act of 1933 in connection with any resale of
those new notes. The letter of transmittal states that. by making the above
acknowledgment and by delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the
Securities Act of 1933.
Based on the position taken by the staff of the Securities and Exchange
Commission in the interpretive letters referred to above, we believe that
broker-dealers that acquired old notes for their own accounts, as a result of
market-making or other trading activities ("Participating Broker-Dealers"), may
fulfill their prospectus delivery requirements with respect to the new notes
received upon exchange of old notes (other than old notes that represent an
unsold allotment from the original sale of the old notes) with a prospectus
meeting the requirements of the Securities Act of 1933, which may be the
prospectus prepared for an exchange offer so
28
<PAGE>
long as it contains a description of the plan of distribution with respect to
the resale of such new notes. Accordingly, this prospectus, as it may be
amended or supplemented, may be used by a Participating Broker-Dealer during
the period referred to below in connection with resales of new notes received
in exchange for old notes where such old notes were acquired by the
Participating Broker-Dealer for its own account as a result of market-making or
other trading activities. Subject to the provisions of the registration rights
agreement, we have agreed that this prospectus may be used by a Participating
Broker-Dealer in connection with resales of such new notes. See "Plan of
Distribution." However, a Participating Broker-Dealer that intends to use this
prospectus in connection with the resale of new notes received in exchange for
old notes pursuant to the exchange offer must notify us, or cause us to be
notified, on or before the expiration date of the exchange offer, that it is a
Participating Broker-Dealer. Such notice may be given in the space provided for
that purpose in the letter of transmittal or may be delivered to the exchange
agent at the address set forth under "--The Exchange Agent; Assistance." Any
Participating Broker-Dealer that is our "'affiliate" may not rely on such
interpretive letters and must comply with the registration and prospectus
delivery requirements of the Securities Act of 1933 in connection with any
resale transaction.
Each Participating Broker-Dealer that tenders old notes pursuant to the
exchange offer will be deemed to have agreed, by execution of the letter of
transmittal, that upon receipt of notice from us of the occurrence of any event
or the discovery or any fact that makes any statement contained in this
prospectus untrue in any material respect or that causes this prospectus to
omit to state a material fact necessary in order to make the statements
contained herein, in light of the circumstances under which they were made, not
misleading or of the occurrence of other events specified in the registration
rights agreement, such Participating Broker-Dealer will suspend the sale of new
notes pursuant to this prospectus until we have amended or supplemented this
prospectus to correct such misstatement or omission and have furnished copies
of the amended or supplemented prospectus to the Participating Broker-Dealer or
we have given notice that the sale of the new notes may be resumed, as the case
may be.
29
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
Our company was formed in December 1993 as an Indiana limited liability
company, to develop a riverboat casino in the City of Gary, Indiana as its sole
operation. In June 1996, the Indiana Gaming Commission granted us a gaming
license. At that time, we commenced operations with a leased vessel. In October
1997, we replaced the leased vessel with the newly constructed Majestic Star
Casino, which we own.
Together with our joint venture partner, we own and operate certain common
facilities at the Buffington Harbor gaming complex, including the guest
pavilion, vessel berths, parking lots and other infrastructure. We each have a
fifty-percent ownership interest in the joint venture.
In the fourth quarter of 1998, we implemented a multifaceted strategy to
increase operating revenues and cash flow. We implemented an aggressive
marketing strategy designed to increase the total number of passengers and the
win per passenger. We also reduced the number of chartered bus passengers. At
the same time, we expanded our amenities and focused on enhancing the service
that we deliver to our customers. These changes also included an enhanced
overall management structure.
Because of the climate in the Chicago metropolitan area, the Majestic Star
Casino's operations are seasonal, with stronger results expected during the
period from May through September. Accordingly, our results of operations are
expected to fluctuate from quarter to quarter, and the results for any fiscal
quarter may not be indicative of results for future fiscal quarters. Future
operating results will be subject to significant business, economic, regulatory
and competitive uncertainties and contingencies, many of which are beyond our
control.
30
<PAGE>
RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
SIX MONTHS
FISCAL YEAR ENDED ENDED JUNE
DECEMBER 31, 30,
--------------------- -------------
1996 1997 1998 1998 1999
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
REVENUES:
Casino............................... 97.4% 97.5% 97.3% 97.1% 97.6%
Food and beverage.................... 1.5 1.6 1.4 1.5% 1.6%
Other................................ 1.1 0.9 1.3 1.4 0.8
----- ----- ----- ----- -----
Gross revenues..................... 100.0 100.0 100.0 100.0 100.0
Less promotional allowances........ 0.0 (0.2) (0.3) (0.4) (0.2)
Net revenues....................... 100.0 99.8 99.7 99.6 99.8
COSTS AND EXPENSES:
Casino............................... 17.1% 17.7% 16.5% 16.7% 16.8%
Gaming and admission taxes........... 28.7 28.5 28.6 28.7 27.4
Food and beverage.................... 2.1 2.0 2.1 2.1 2.0
Advertising and promotion............ 8.4 13.4 8.9 10.8 5.5
General and administrative........... 22.7 23.5 21.1 21.3 20.3
Economic incentive--City of Gary..... 2.9 2.9 3.0 3.0 3.0
Depreciation and amortization........ 9.8 8.1 6.8 6.7 6.4
Loss on disposition of assets........ 0.0 1.7 0.8 1.6 --
Pre-opening costs.................... 8.5 1.3 -- -- --
----- ----- -----
Total costs and expenses........... 100.2 99.1 87.8 90.9 81.5
OPERATING INCOME (LOSS)................ (0.2) 0.7 11.9 8.7 18.3
OTHER INCOME (EXPENSE):
Loss on investment in the BHR Joint
Venture............................. (4.5) (3.6) (2.8) (2.8)% (2.3)%
Interest income...................... 4.1 1.9 0.8 0.8 0.7
Interest expense..................... (15.2) (12.9) (13.4) (13.4) (12.7)
Interest expense to affiliate........ (0.6) (0.7) (0.5) (0.5) (0.3)
----- ----- ----- ----- -----
Total other income (loss).......... (16.2) (15.3) (15.9) (15.9) (14.7)
NET INCOME (LOSS) BEFORE EXTRAORDINARY
ITEM.................................. (16.4)% (14.6)% (4.0)% (7.2)% 3.6%
EXTRAORDINARY ITEM:
Loss on bond redemption -- -- -- -- (25.0)%
NET INCOME (LOSS)...................... (16.4)% (14.6)% (4.0)% (7.2)% (21.4)%
===== ===== ===== ===== =====
EBITDA................................. 19.8% 13.4% 20.3% 18.4% 24.75%
===== ===== ===== ===== =====
</TABLE>
- --------
EBITDA (defined as earnings before interest, income taxes, depreciation and
amortization and, for purposes hereof, does not include payments associated
with, and termination of, the chartered vessel lease) is presented solely as a
supplemental disclosure to assist in the evaluation of our ability to generate
cash flow. In particular, we believe that an analysis of EBITDA enhances the
understanding of the financial performance of companies with substantial
depreciation and amortization. EBITDA is not a generally accepted accounting
principles financial indicator and should not be considered an alternative to,
or more meaningful than, net income or income from operations as an indicator
of our operating performance or net cash provided by operating activities as
measure of liquidity.
Comparison of the Three Months Ended June 30, 1999 and 1998
Gross revenues for the second quarter ended June 30, 1999, amounted to
approximately $31.3 million, an increase of approximately $3.0 million from
gross revenues recorded in the second quarter ended June 30, 1998. The 10.6%
increase in gross revenues was primarily attributable to an increase in the win
per patron.
31
<PAGE>
Casino revenues during the three months ended June 30, 1999, totaled
approximately $30.5 million, of which slot machines accounted for approximately
$23.3 million (76.2%) and table games accounted for approximately $7.3 million
(23.8%). The average number of slot machines in operation decreased to 1,410
during the three months ended June 30, 1999, from 1,526 during the three months
ended June 30, 1998. The average win per slot machine per day increased to
approximately $179 for the three months ended June 30, 1999, from approximately
$153 during the three months ended June 30, 1998. The average number of table
games in operation during the three months ended June 30, 1999, decreased to 56
from 61 during the three months ended June 30, 1998. The average win per table
game per day during the three months ended June 30, 1999, increased to
approximately $1,425 compared to approximately $1,075 during the three months
ended June 30, 1998. The average daily win per state passenger count was
approximately $38 and the average daily win per patron was approximately $69
during the three months ended June 30, 1999, compared to an average daily win
per state passenger count of approximately $31 and an average daily win per
patron of approximately $54 for the three months ended June 30, 1998.
<PAGE>
Food and beverage revenues for the three months ended June 30, 1999, totaled
approximately $500,000 or 1.6% of gross revenues, compared to approximately
$392,000 or 1.4% of gross revenues for the three months ended June 30, 1998.
Other revenue, consisting of primarily of commission income, totaled
approximately $249,000, or 0.8% of gross revenues, compared to approximately
$254,000, or 0.9% of gross revenues, for the three months ended June 30, 1998.
Promotional allowances (complementaries) included in our gross food revenues
for the three months ended June 30, 1999, and 1998, were approximately $77,000
and $79,000, respectively. Promotional allowances provided to our gaming
patrons at facilities located in, and/or owned by the joint venture for the
three months ended June 30, 1999, and 1998, totaled approximately $204,000 and
$104,000, respectively, and are characterized in the financial statements as an
expense to the casino. The joint venture invoices us monthly for these
promotional allowances at cost, which approximates the retail value of these
promotional allowances.
Casino operating expenses for the three months ended June 30, 1999, totaled
approximately $5.1 million, or 16.2% of gross revenues and 16.6% of casino
revenues, respectively, compared to approximately $4.6 million, or 16.3% of
gross revenues and 16.7% of casino revenues, respectively, for the three months
ended June 30, 1998. These expenses were primarily comprised of salaries, wages
and benefits, and operating and promotional expenses of the casino. The dollar
increase of $448,000, or 9.7%, in casino operating expenses is primarily
attributed to an increase in for gaming equipment rental and progressive
expense for jackpots offset by a slight decrease in payroll expenses.
Gaming and admissions taxes totaled approximately $8.5 million for the three
months ended June 30, 1999, compared to approximately $8.2 million for the
three months ended June 30, 1998. These taxes are levied on adjusted gross
receipts, as defined by Indiana gaming laws, at the rate of 20%, plus $3 per
passenger per the state passenger count. An additional $942,000 was paid during
the three months ended June 30, 1999, compared to approximately $854,000 in the
three months ended June 30, 1998, to the City of Gary, Indiana under an
agreement whereby we pay approximately 3% of the adjusted gross receipts
directly to the City of Gary.
Advertising and promotion expenses for the three months ended June 30, 1999,
totaled approximately $1.8 million, or 5.8% of gross revenues, compared to
approximately $3.2 million, or 11.4% of gross revenues during the three months
ended June 30, 1998. Advertising and promotion expenses included salaries,
wages and benefits of the marketing and casino service departments, as well as
promotions, advertising and special events. The $1.4 million or 43.7% decrease
in advertising and promotion expenses during the three months ended June 30,
1999, was primarily the result of us redirecting our marketing dollars to
target or direct marketing from mass marketing and also significantly reducing
the amount of chartered bus passengers.
General and administrative expenses for the three months ended June 30,
1999, were approximately $6.2 million, or 19.8% of gross revenues, compared to
$5.6 million, or 19.8% of gross revenues, during the three months ended June
30, 1998. These expenses included approximately $1.8 million for berthing fees
paid to the joint venture, $1.3 million for marine operations and $612,524 for
security and surveillance operations during the second quarter of 1999. The
$584,000 increase in these expenses is primarily attributed to an increase of
approximately $174,000 in berthing fees primarily for property taxes of the
joint venture, approximately $140,000 in security due to an increase in
staffing, and approximately $115,000 for property taxes associated with the
larger vessel during the three months ended June 30, 1999.
Depreciation and amortization for the second quarter ended June 30, 1999,
was approximately $1,972,000, or 6.3% of gross revenues, compared to
approximately $1,902,000, or 6.7% of gross revenues, during the three months
ended June 30, 1998. The $70,000 increase in depreciation expense for the three
months ended June 30, 1999, is attributable to the increased expense associated
with machinery and equipment placed into service during the past year.
32
<PAGE>
Operating income for the three months ended June 30, 1999, was approximately
$6.0 million, or 19.5% of gross revenues, compared to an operating income for
the three months ended June 30, 1998 of $3.0 million, or 11.0% of gross
revenues. During the three months ended June 30, 1998, we had a net loss on
disposition of assets totaling approximately $169,000. We wrote off assets used
on our chartered vessel that had a net book value of approximately $20,000 and
disposed of slot machines that had a net book value of approximately $149,000.
The $3.0 million, or 97.4%, increase in operating income is principally
attributable to the increase of the average daily win per patron to $69 during
the three months ended June 30, 1999, from $54 during the three months ended
June 30, 1998, combined with a $1.4 million, or 43.7%, decrease in overall
marketing expenses.
Net interest expense for the three months ended June 30, 1999, was
$3,747,000, or approximately 12.0% of gross revenues, compared to $3,719,000,
or approximately 13.2% for the same period last year. The $28,000 increase in
net interest expense is principally attributed to the overall increase in
outstanding debt during the second quarter of 1999 compared to the second
quarter of 1998. For the three months ended June 30, 1999, we paid accrued
contingent interest of approximately $3,018,000.
Our loss on the redemption of our old notes was approximately $15,238,000,
comprised of $12,836,000 of premium and $2,402,000 of unamortized deferred
financing costs, and the loss relating to our investment in the joint venture
for the three months ended June 30, 1999, was approximately $600,000. The joint
venture loss represents our 50% share of the joint venture's non-cash net loss
(primarily depreciation and amortization).
As a result of the foregoing, we experienced income before the extraordinary
item of $1.7 million and a loss of $1.3 million, during the three months ended
June 30, 1999 and 1998, respectively. Net losses were approximately $13.5
million and $1.3 million during the three months ended June 30, 1999, and 1998,
respectively.
Comparison of the Six Months Ended June 30, 1999 and 1998
Gross revenues for the six months ended June 30, 1999, amounted to
approximately $60.8 million, an increase of $4.0 million over gross revenues
recorded in the six months ended June 30, 1998. The 7.0% increase in gross
revenues was attributable to an increase in the daily win per patron.
Casino revenues during the six months ended June 30, 1999, totaled
approximately $59.4 million, of which slot machines accounted for approximately
$45.4 million (76.4%) and table games accounted for approximately $14.0 million
(23.6%). The average number of slot machines in operation decreased to 1,442
during the six months ended June 30, 1999, from 1,531 during the six months
ended June 30, 1998. The average win per slot machine per day increased to
approximately $176 for the six months ended June 30, 1999, from approximately
$153 during the six months ended June 30, 1998. The average number of table
games in operation during the six months ended June 30, 1999, decreased to 59
from 61 during the six months ended June 30, 1998. The average win per table
game per day during the six months ended June 30,1999, increased to
approximately $1,319, compared to approximately $1,174 during the six months
ended June 30, 1998. The average daily win per state passenger count was
approximately $37 and the average daily win per patron was approximately $68
during the six months ended June 30, 1999, compared to an average daily win per
state passenger count of approximately $31 and an average daily win per patron
of approximately $55 for the six months ended June 30, 1998.
Food and beverage revenues for the six months ended June 30, 1999, totaled
approximately $968,000, or 1.6% of gross revenues, compared to approximately
$858,000, or 1.5% of gross revenues, for the six months ended June 30, 1998.
The dollar increase in food and beverage revenues is attributed to an overall
increase in the number of customers served. Other revenue totaling
approximately $468,000, or 0.8% of gross revenues for the six months ended June
30, 1999, consisted primarily of commission income compared to approximately
$818,000 during the six months ended June 30, 1998. Other revenue during the
six months ended June 30, 1998 included a lump sum payment of $314,000 from our
joint venture partner to compensate us for the loss of certain parking spaces
to be utilized by our joint venture partner for the construction of a hotel
facility.
33
<PAGE>
Promotional allowances (complementaries) included in our gross food revenues
for the six months ended June 30, 1999, and 1998, were approximately $139,000
and $211,000, respectively. The $72,000 dollar decrease on board the vessel was
offset by increased complementaries provided at BHR operated facilities.
Promotional allowances provided to our gaming patrons at facilities located in,
and/or owned by the joint venture for the six months ended June 30, 1999, and
1998, totaled approximately $387,000 and $238,000, respectively, and are
characterized in the financial statements as an expense to the casino. The
joint venture invoices us monthly for these promotional allowances at cost,
which approximates the retail value of these promotional allowances.
Casino operating expenses for the six months ended June 30, 1999, totaled
approximately $10.2 million, or 16.8% of gross revenues and 17.2% of casino
revenues, respectively, compared to approximately $9.5 million, or 16.7% of
gross revenues and 17.2% of casino revenues, respectively, for the six months
ended June 30, 1998. These expenses were primarily comprised of salaries, wages
and benefits, and operating and promotional expenses of the casino. The dollar
increase of $728,000 or 7.0% in casino operating expenses is primarily
attributed to an increase of approximately $544,000 for gaming equipment rental
and approximately $172,000 for progressive expense related to jackpots.
Gaming and admissions taxes totaled approximately $16.7 million for the six
months ended June 30, 1999, compared to approximately $16.3 million for the
three months ended June 30, 1998. These taxes are levied on adjusted gross
receipts, as defined by Indiana gaming laws, at the rate of 20%, plus $3 per
passenger per the state passenger count. An additional $1,835,000 was paid
during the six months ended June 30, 1999, compared to approximately $1,707,000
in the six months ended June 30, 1998, to the City of Gary, Indiana under an
agreement whereby we pay approximately 3% of the adjusted gross receipts
directly to the City of Gary.
Advertising and promotion expenses for the six months ended June 30, 1999,
totaled approximately $3.3 million, or 5.0% of gross revenues, compared to
approximately $6.1 million, or 10.8% of gross revenues during the six months
ended June 30, 1998. Advertising and promotion expenses included salaries,
wages and benefits of the marketing and casino service departments, as well as
promotions, advertising and special events. The $2.8 million or 45.8% decrease
in advertising and promotion expenses as a percentage of gross revenues during
the six months ended June 30, 1999, was primarily the result of redirecting its
marketing dollars to target or direct marketing from mass marketing and special
events combined with a significant reduction in the amount of chartered bus
passengers.
General and administrative expenses for the six months ended June 30, 1999,
were approximately $12.4 million, or 20.3% of gross revenues, compared to $12.2
million, or 21.3% of gross revenues, during the six months ended June 30, 1998.
These expenses included approximately $3.5 million for berthing fees paid to
the joint venture, $2.6 million for marine operations and $1.1 million for
security and surveillance operations during the six months ended June 30, 1999.
The $241,000 dollar increase in these expenses is primarily attributed to an
increase for property taxes during the six months ended June 30, 1999.
Depreciation and amortization for the six months ended June 30, 1999, was
approximately $3.9 million, or 6.4% of gross revenues, compared to
approximately $3.8 million, or 6.7% of gross revenues, during the six months
ended June 30, 1998. The $83,000 dollar increase in depreciation expense for
the six months ended June 30, 1999, is principally attributable to the
increased expense associated with machinery and equipment placed into service
during the past year.
Operating income for the six months ended June 30, 1999, was approximately
$11.1 million, or 18.3% of gross revenues, compared to an operating income for
the six months ended June 30, 1998, of $5.0 million, or 8.7% of gross revenues.
During the six months ended June 30, 1998, we had a net loss on the disposition
of assets totaling approximately $904,000. We wrote-off slot machines that had
a net book value of approximately $149,000 and assets used on our chartered
vessel that had a net book value of approximately $755,000. The $6.1 million or
122.8% increase in operating income is principally attributable to the increase
of the average daily win per patron to $68 during the six months ended June 30,
1999 from $55 during the six months ended June 30, 1998, combined with a 45.8%
decrease in marketing expenses.
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Net interest expense for the six months ended June 30, 1999, was $7,529,000,
or approximately 12.4% of gross revenues, compared to $7,461,000, or
approximately 13.1% for the same period last year. The decrease in interest
expense is primarily attributed to the repayment of the $8.8 million demand
note due to Barden Development, Inc. and was partially offset by a $28,000
increase in interest expense due to an increase in overall outstanding debt
during the six months ended June 30, 1999, compared to the six months ended
June 30, 1998. For the six months ended June 30, 1999, we paid accrued
contingent interest of approximately $3,018,000.
Our loss on the redemption of our old notes was approximately $15.2 million
and the loss relating to our investment in the joint venture for the six months
ended June 30, 1999, was approximately $1.4 million. The joint venture loss
represents the our 50% share of the joint venture's non-cash net loss
(primarily depreciation and amortization).
As a result of the foregoing, we experienced income before the extraordinary
item of $2.2 million and a loss of $4.1 million, during the six months ended
June 30, 1999 and 1998, respectively. Net losses were approximately $13.0
million and $4.1 million during the six months ended June 30, 1999, and 1998,
respectively.
Fiscal Year Ended December 31, 1998 Compared to Fiscal Year Ended December 31,
1997
Gross revenues for the year ended December 31, 1998, amounted to
approximately $114.6 million, an increase of approximately $19.9 million or
21.0% from gross revenues recorded in the year ended December 31, 1997. The
increase was attributable to the increased capacity associated with our new
vessel combined with an aggressive marketing strategy designed to increase the
total number of passengers.
Casino revenues during the year ended December 31, 1998 totaled
approximately $111.5 million of which slot machines accounted for approximately
$85.2 million (76.4%) and table games accounted for approximately $26.3 million
(23.6%). The average number of slot machines in operation increased to 1,519
during the year ended December 31, 1998 from 1,038 during the year ended
December 31, 1997. The average win per slot machine per day decreased to $154
for the year ended December 31, 1998 from approximately $187 during the year
ended December 31, 1997. During the year ended December 31, 1998, slot machine
capacity and coin-in increased by approximately 46% and 25%, respectively,
compared to the year ended December 31, 1997, resulting in a lower win per slot
machine per day. The average number of table games in operation during the year
ended December 31, 1998, increased to 61 from 52 during the year ended December
31, 1997. The average win per table game per day during the year ended December
31, 1998, declined to approximately $1,116 versus $1,248 in the year ended
December 31, 1997, due primarily to a 17% increase in table unit capacity and a
0.6% decrease in the table game hold percentage. The average daily win per
patron was $57 during the year ended December 31, 1998, an increase of 2%
compared to the year ended December 31, 1997.
Food and beverage revenue for the year ended December 31, 1998, totaled
approximately $1.6 million, or 1.4% of gross revenues, compared to
approximately $1.6 million, or 1.6% of gross revenues, for the year ended
December 31, 1997. Other revenue, consisting primarily of lump sum payments
totaling $504,000 from the Joint Venture Partner to compensate us for the loss
of certain parking spaces and commission income, totaled approximately $1.5
million, or 1.3% of gross revenues, for the year ended December 31, 1998,
compared to approximately $849,000, or 0.9% of gross revenues for the year
ended December 31, 1997. The dollar increase in food and beverage revenue, as
well as other revenue, was principally attributable to the increased capacity
associated with our new vessel.
Promotional allowances (complementaries) included in our 1998 and 1997 gross
food revenues were approximately $337,000 and $169,000, respectively.
Promotional allowances provided to our gaming patrons at the Buffington Harbor
facilities, totaled approximately $567,000 in 1998 and $646,000 in 1997, and
are characterized in the financial statements as an expense. Overall,
promotional allowances increased slightly in the aggregate as a result of
increased capacity. We were able to more effectively utilize facilities on
board the
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vessel as opposed to those operated by the joint venture, thus altering the
ratio of complementaries provided by us compared to those provided by the joint
venture.
Casino operating expenses for the year ended December 31, 1998 totaled
approximately $18.9 million, or 16.5% and 16.9% of gross revenues and casino
revenues, respectively, versus approximately $16.8 million, or 17.7% and 18.2%,
respectively, for the year ended December 31, 1997. These expenses were
primarily comprised of salaries, wages and benefits, and operating and
promotional expenses. The increase of approximately $2.1 million or 12.5% in
casino operating expenses is primarily attributed to an increase in payroll
expenses of which table games accounted for approximately $1.0 million and
slots accounted for approximately $320,000. Also, approximately $800,000 is
associated with general expenses related to operating the new and larger
vessel, including approximately $300,000 for gaming equipment rental.
Gaming and admissions taxes totaled approximately $32.7 million for the year
ended December 31, 1998, compared to approximately $27.0 million in the year
ended December 31, 1997. An additional $3.5 million was paid during the year
ended December 31, 1998 compared to approximately $2.8 million in the year
ended December 31, 1997, to the City of Gary under an agreement whereby we pay
3% of the adjusted gross receipts directly to the City of Gary.
Advertising and promotion expenses for the year ended December 31, 1998,
totaled approximately $10.2 million, or 8.9% of gross revenues, compared to
approximately $12.7 million, or 13.4% of gross revenues, during the year ended
December 31, 1997. Advertising and promotion expenses included salaries, wages
and benefits of the marketing and casino service departments as well as
promotions, advertising and special events. The $2.6 million, or 20.1%,
decrease in advertising and promotion expenses as a percentage of gross
revenues during the year ended December 31, 1998 compared to the year ended
December 31, 1997 was primarily the result of redirecting our marketing
dollars. During the first half of 1998, we focused our marketing dollars on
mass marketing to build our customer database. Beginning late third quarter and
all of the fourth quarter, we redirected our marketing dollars to target or
direct marketing and also significantly reduced the amount of chartered bus
passengers from approximately 10.0% to approximately 3.0% of total customers.
General and administrative expenses for the year ended December 31, 1998,
were approximately $24.2 million, or 21.1% of gross revenues, compared to $22.2
million, or 23.5% of gross revenues, for the year ended December 31, 1997.
These expenses included approximately $7.1 million for berthing fees paid to
the joint venture, $6.0 million for marine operations and $1.9 million for
security and surveillance operations. The $2.0 million or 9.0% increase in
these expenses is primarily attributed to an increase of approximately $1.2
million in property taxes associated with the new vessel and approximately
$686,000 in berthing fees paid to the joint venture.
Depreciation and amortization for the year ended December 31, 1998, was
approximately $7.8 million, or 6.8% of gross revenues, compared to
approximately $7.7 million, or 8.1% of gross revenues, during the year ended
December 31, 1997. The $120,000 or 1.6% increase is attributed to approximately
$51,000 in depreciation expense associated with the acquisition of additional
slot machines in mid 1998 and the write off of organization costs with a net
book value of approximately $69,000 in the fourth quarter of 1998.
Operating income for the year ended December 31, 1998, was approximately
$13.7 million, or 11.9% of gross revenues, compared to approximately $607,000,
or 0.6% of gross revenues, in the year ended December 31, 1997. The results
included approximately $755,000 in expenses associated with the lease and
subsequent termination of our chartered vessel lease agreement effective March
1, 1998, losses on disposal of assets previously utilized on the chartered
vessel of approximately $755,000 in 1998 and $1.6 million in 1997, losses on
disposal of slot machines of approximately $204,000 replaced in 1998, and
approximately $1.3 million in pre-opening costs associated with the development
of the new vessel in 1997. The increase in operating income is principally
attributable to the increase in vessel capacity, which allowed us to achieve
higher gross revenues in 1998 based upon increased passenger counts.
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Net interest expense for the year ended December 31, 1998 was approximately
$15.0 million, or 13.1% of gross revenues, compared to approximately $11.0
million, or 11.7% of gross revenues, for the year ended December 31, 1997. The
increase in net interest expense is attributed to the new vessel being placed
into service and the additional interest expense associated with the financing
of additional slot machine equipment in late 1997 for use on the new vessel.
Also, approximately $2.3 million of interest was capitalized in 1997. The
contingent interest ordinarily payable on May 15, 1998, and November 15, 1998,
was deferred, as allowed under the indenture related to the 12 3/4% Senior
Secured Notes.
Our loss in our investment in the joint venture for the year ended December
31, 1998 was approximately $3.2 million. The loss represents our 50% share of
the joint venture's non-cash net loss (primarily depreciation and
amortization).
As a result of the foregoing, we experienced net losses of approximately
$4.5 million and $13.9 million during the years ended December 31, 1998 and
1997, respectively.
Fiscal Year Ended December 31, 1997 Compared to Fiscal Year Ended December 31,
1996
Because we commenced operations on June 7, 1996, we have a limited operating
history and we lack a comparable period for prior years with respect to the
twelve month period ended December 31, 1997. This discussion of results of
operations provides a comparison of the full twelve month period ended December
31, 1997 with the 205 days of operations in 1996. Gross revenues for the year
ended December 31, 1997, amounted to approximately $94.7 million, an increase
of approximately $40.5 million from gross revenues recorded in the year ended
December 31, 1996. The increase was because we operated the entire twelve
months ended December 31, 1997, compared to 205 days of operations in the year
ended December 31, 1996.
Casino revenues during the year ended December 31, 1997, totaled
approximately $92.3 million of which slot machines accounted for approximately
$69.1 million (74.8%) and table games accounted for approximately $23.2 million
(25.2%). The average number of slot machines in operation increased to 1,038
during the year ended December 31, 1997, from 924 during the year ended
December 31, 1996. The average win per slot machine per day was approximately
$187 and $198 for each of the years ended December 31, 1997 and 1996,
respectively. The average number of table games in operation during the year
ended December 31, 1997, increased to 52 from 50 during the year ended December
31, 1996. The average win per table game per day during the year ended December
31, 1997, declined to approximately $1,248 versus $1,496 in the year ended
December 31, 1996, due primarily to a 1.7% decrease in the table game hold
percentage. The average daily win per patron was $56 during the year ended
December 31, 1997, an increase of 6% compared to the year ended December 31,
1996.
Food and beverage revenue for the year ended December 31, 1997, totaled
approximately $1.6 million, or 1.6% of gross revenues, compared to
approximately $809,000 or 1.5% of gross revenues for the year ended December
31, 1996. Other revenue, consisting primarily of commission income, totaled
approximately $849,000, or 0.9% of gross revenues, compared to approximately
$636,000 or 1.1% of gross revenues for the year ended December 31, 1996. The
dollar increase in food and beverage revenue as well as other revenue is
because we operated the entire twelve months ended December 31, 1997, compared
to 205 days of operations in the year ended December 31, 1996.
Promotional allowances (complementaries) included in our 1997 and 1996 gross
food revenues were approximately $169,000 and $12,000, respectively. The
increase in promotional allowances is because we operated the entire twelve
months ended December 31, 1997 compared to 205 days of operations in the year
ended December 31, 1996. Promotional allowances provided to our gaming patrons
at the Buffington Harbor facilities, totaled approximately $646,000 and
$288,000 in 1997 and 1996, respectively, and are characterized in the financial
statements as an expense.
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Casino operating expenses for the year ended December 31, 1997, totaled
approximately $16.8 million, or 17.7% and 18.2% of gross revenues and casino
revenues, respectively, versus approximately $9.3 million, or 17.1% and 17.5%
gross revenues and casino revenues, respectively, for the year ended December
31, 1996. These expenses were primarily comprised of salaries, wages and
benefits, and operating and promotional expenses of the casino. Both the dollar
increase in casino operating expenses of $7.5 million and the slight increase
of 0.6% as a percentage of gross revenues and casino revenues were primarily
the result of an increase in payroll expenses combined with us operating the
entire twelve months ended December 31, 1997 compared to 205 days of operations
in the year ended December 31, 1996.
Gaming and admissions taxes totaled approximately $27.0 million for the year
ended December 31, 1997, compared to approximately $15.5 million in the year
ended December 31, 1996. An additional $2.8 million was paid during the year
ended December 31, 1997, compared to approximately $1.6 million in the year
ended December 31, 1996 to the City of Gary.
Advertising and promotion expenses for the year ended December 31, 1997,
totaled approximately $12.7 million, or 13.4% of gross revenues, compared to
approximately $4.6 million, or 8.4% of gross revenues, during the year ended
December 31, 1996. Advertising and promotion expenses included salaries, wages
and benefits of the marketing and casino service departments as well as
promotions, advertising and special events. The 5.0% increase in advertising
and promotion expenses as a percentage of gross revenues during the year ended
December 31, 1997, compared to the 205 days of operation in the year ended
December 31, 1996, was primarily the result of increased expenditures
associated with direct mail (i.e., promotions and rebates offered to customers
using the slot machines), bus subsidies (i.e., promotions and discounts for
customers traveling by bus to our gaming complex), and an increase in general
media including billboards, print and radio to heighten our overall presence
within the marketplace in light of additional competition as well as increased
advertising associated with the opening of our new vessel.
General and administrative expenses for the year ended December 31, 1997,
were approximately $22.2 million, or 23.5% of gross revenues, compared to $12.3
million, or 22.7% of gross revenues for the year ended December 31, 1996. These
expenses included approximately $6.4 million for berthing fees paid to the BHR
Joint Venture, $6.8 million for marine operations and $1.9 million for security
and surveillance operations. The dollar increase in these expenses is primarily
attributed to operating a full twelve months for the year ended December 31,
1997, compared to 205 days for the year ended December 31, 1996.
Depreciation and amortization for the year ended December 31, 1997, was
approximately $7.7 million, or 8.1% of gross revenues, compared to
approximately $5.3 million, or 9.8% of gross revenues, during the year ended
December 31, 1996. The dollar increase in these expenses is attributed to
operating a full twelve months for the year ended December 31, 1997, compared
to the 205 days for the year ended December 31, 1996.
Operating income for the year ended December 31, 1997, approximated
$607,000, or 0.6% of gross revenues, compared to an operating loss in the year
ended December 31, 1996, of $48,000, or (0.1%) of gross revenues. The results
for the years ended 1997 and 1996, included pre-opening costs associated with
the start-up of the new vessel and the chartered vessel, were approximately
$1.3 million and $4.6 million, respectively.
Net interest expense for the year ended December 31, 1997, was approximately
$11.0 million, or 11.7% of gross revenues, compared to approximately $6.4
million, or 11.7% of gross revenues, for the year ended December 31, 1996. The
dollar increase is attributed to operating a full twelve months for the period
ended December 31, 1997 compared to 205 days for the year ended December 31,
1996. $2.3 million and $213,000 of interest were capitalized in 1997 and 1996,
respectively. The contingent interest under the 12:% Senior Secured Notes
payable on May 15, 1997, and November 15, 1997, was deferred, as allowed under
the indenture related to the 12:% Senior Secured Notes.
The loss from our investment in the BHR Joint Venture for the year ended
December 31, 1997, was approximately $3.4 million. The loss represents our 50%
share of BHR's non-cash net loss.
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As a result of the foregoing, we experienced net losses of approximately
$13.9 million and $8.9 million during the years ended December 31, 1997, and
1996, respectively.
YEAR 2000 COMPUTER COMPLIANCE
The approach of the year 2000 has become a potential problem for businesses
using computers and "embedded systems" in their operations. "Embedded systems"
consist of hardware and systems software other than applications software. Many
computer programs and embedded systems are date-sensitive and will only
recognize the last two digits of the year, thereby recognizing the year 2000 as
the year 1900 or not at all (the "Year 2000 Issue"). This could result in
system failures or miscalculations, causing disruptions of operations.
Readiness
We have undertaken a comprehensive assessment of our exposure to the Year
2000 Issue to identify and implement actions required to ensure that our
computers are year 2000 compliant.
The primary computer programs used in our operations and financial reporting
systems have been acquired from independent software vendors. We have contacted
these vendors to determine whether their programs are year 2000 compliant, and,
if not, to establish timelines as to when we will receive the required upgrades
that assure that these programs are year 2000 compliant. As of June 30, 1999,
substantially all of the computer programs used in our operations had been
upgraded, and the vendors have represented that these upgraded programs are
year 2000 compliant. We expect to confirm the compliance of all our computer
programs by September 1999.
Embedded systems affect much of the Majestic Star Casino's operations, such
as power, security and general ship functions. Also, embedded systems control
some building security and operations, such as power management, ventilation
and elevator control at the Buffington Harbor gaming complex. The primary
embedded systems used in our operations have been acquired from independent
vendors. We have contacted these vendors to determine whether their systems are
year 2000 compliant, and, if not, to establish timelines as to when we will
receive the required upgrades that assure that these systems are year 2000
compliant. As of the date hereof, substantially all of the embedded systems
used in our operations had been upgraded, and the vendors have represented that
these upgraded systems are year 2000 compliant. We expect to confirm the
compliance of all our embedded systems by September 1999.
Although we presently believe that all of our computer programs and embedded
systems will be year 2000 compliant in a timely manner, there can be no
assurance that we will not be adversely affected by the Year 2000 Issue.
Our operations are also dependent upon certain third parties, including
utility providers and financial institutions. Significant public disclosure of
the state of readiness among basic infrastructure and other third-party
suppliers has not generally been available. Although our inquiries are
underway, we do not yet have the information to estimate the likelihood of
significant disruptions among our third-party suppliers.
Cost
We do not expect to incur costs in connection with the Year 2000 Issue that
will have a material impact on our operations. We currently estimate that
maintenance or modification costs associated with the Year 2000 Issue will be
approximately $400,000 to $500,000 in the aggregate. Of this amount,
approximately $55,000 has been incurred and expensed as of June 30, 1999.
Approximately $400,000 of the expected remaining cost is attributable to the
purchase of new hardware and software, which will be capitalized and amortized
over the useful lives of these assets. The remaining estimated amount of
$25,000 will be expensed as incurred.
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Risks
Our failure to correct a material problem relating to the Year 2000 Issue
could result in an interruption in, or a failure of, certain of our normal
business activities or operations. Such failures could materially and adversely
affect our results of operations, liquidity or financial condition. Due to the
general uncertainty inherent in the Year 2000 Issue, resulting in part from the
uncertainty of the year 2000 readiness of third-party suppliers, we are unable
to determine at this time whether the consequences of year 2000 failures will
have a material impact on our results of operations, liquidity or financial
condition. Our operations would be adversely impacted if our third-party
suppliers that provide basic services, such as telecommunications, electric
power, and financial services, were adversely affected by the Year 2000 Issue.
Our actions are expected to significantly reduce our level of uncertainty about
the Year 2000 Issue. We believe that, with the implementation of new systems
and completion of our year 2000 efforts as scheduled, the possibility of
significant interruptions of normal operations should be reduced.
Contingency Plans
We are developing remediation contingency plans and business resumption
contingency plans specific to the Year 2000 Issue. Remediation contingency
plans address the actions to be taken if the current approach to remediating a
system is falling behind schedule or otherwise appears in jeopardy of failing
to deliver a year 2000 ready system when needed. Business resumption
contingency plans address the actions that would be taken if critical business
functions cannot be carried out in the normal manner upon entering the next
century due to system or supplier failure.
LIQUIDITY AND CAPITAL RESOURCES
During the quarter ended June 30, 1999, we issued $130.0 million of 10 7/8%
Senior Secured Notes due 2006. The net proceeds from the offering were utilized
to redeem $99 million principal amount of our 12 3/4% Senior Secured Notes due
2003. During June 1999, approximately $7.5 million was classified as restricted
cash to effect a covenant defeasance of the remaining $6.0 million of the 12
3/4% Senior Secured Notes. Holders of the outstanding 10 7/8% Senior Secured
Notes have the right to require that we repurchase the notes at a premium under
certain conditions including a change in control.
At June 30, 1999, we had cash and cash equivalents of approximately $14.3
million. During the six months ended June 30, 1999, our capital expenditures
were approximately $2.1 million. Approximately $773,000 was expended for the
construction of two VIP lounge facilities of which one is located on the
vessel. The lounge on the vessel is located in the former Poker Room and was
opened on July 15, 1999. The second lounge is located adjacent to the boarding
area. Approximately $520,000 was expended on slot machines and upgrading gaming
equipment. We also contributed approximately $73,000 from working capital to
the joint venture for general enhancements during this period.
We, to date, have met our capital requirements through net cash from
operations, capital contributions and loans. For the six months ended June 30,
1999, net cash provided from operations totaled approximately $3.0 million
compared to approximately $1.7 million for the six months ended June 30, 1998.
For the six months ended June 30, 1999, $2,155,000 in cash was used by
investing activities, compared to $7,595,000 provided by investing activities
for the six months ended June 30, 1998. The majority of this change was caused
by cash released from restriction during the six months ended June 30, 1998.
Net cash used by financing activities was $3,801,000 for the six months ended
June 30, 1999, compared to $1,591,000 used by financing activities for the six
months ended June 30, 1998. This change was caused by the net impact of the
debt refinancing, including the restriction of cash for the covenant
defeasance. During the six months ended June 30, 1999, we also repaid an $8.8
million demand note originally borrowed from Barden Development, Inc. in 1996.
As of June 30, 1999, loans included: (i) $130.0 million principal amount of
10 7/8% Senior Secured Notes due 2006; (ii) $6.0 million principal amount of 12
3/4% Senior Secured Notes due 2003; and (iii) approximately $4.3 million of
equipment financing. The 10 7/8% million Senior Secured Notes are secured by
substantially all current and future assets other than certain excluded assets.
We are negotiating a new $20.0
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million credit facility, which will also be secured by substantially all
current and future assets, other than certain excluded assets. The lien on the
collateral securing the proposed credit facility will be senior to the lien on
the collateral securing the 10 7/8% Senior Secured Notes. The establishment of
the proposed credit facility is subject to approval of the Indiana Gaming
Commission.
Under the terms of our development agreement with the City of Gary, we
committed, among other things, to make development expenditures of $116 million
for its casino and associated infrastructure in the City of Gary over the next
five years. We have met or accrued a significant portion of these commitments.
The two principal components of the remaining portion of these commitments are
as follows: (1) $10 million for off-site development in the City by December
31, 1999 with the particular project(s) to be agreed to by the City; and (2) an
investment of $12 million to be expended over the five years following the June
1996 opening of the casino for enhancements to our operations at Buffington
Harbor and/or the gaming complex. We have already expended this $12 million for
enhancements of operations at Buffington Harbor and must receive approval from
the City of Gary that these expenditures satisfy the second component of the
remaining portion of the development agreement. With respect to the off-site
development commitment, we arranged for a $12.5 million surety bond which
provides collateral for completion of this development. We have deposited $3.6
million with a bank to guarantee a letter of credit to benefit the bonding
company that provided the surety bond.
We anticipate that additional capital contributions, currently estimated to
be between $500,000 and $700,000, for an emergency back-up generator and food
service area upgrade may be required for the joint venture facilities. We and
our joint venture partner also intend to construct a multi-level covered
parking structure. The parking structure is expected to provide customers with
approximately 1,600 covered parking spaces and indoor access to the Buffington
Harbor gaming complex. Customers currently either park their automobiles in a
parking lot or use valet parking services. The parking project is estimated to
cost approximately $35.0 million, including approximately $15.0 million for the
land. We currently expect to contribute approximately $3.5 million of capital
toward the project and to fund such further investments from operations. We
believe that the convenience of the new parking structure will attract a
significant number of new customers to Buffington Harbor, thereby providing
substantial opportunities to increase our net revenue and cash flow. The joint
venture intends to acquire the harbor and the property underlying the new
parking structure and the harbor. There can be no assurance that the harbor or
the property on which the garage is to be built will be acquired or that such
facility will be constructed or that the garage will be built on terms
favorable to us or at all.
Under a lease agreement with Lehigh Portland Cement Company, the joint
venture has leased certain property which is integral to the gaming operations
of us and our joint venture partner. The lease places certain restrictions on
the use of the harbor by us and our joint venture partner and requires the
reimbursement of certain costs which may be incurred by Lehigh Cement. The
lease was rent free through December 29, 1997, and, subject to certain
conditions, such as progress toward permits for a new harbor, has been extended
to the earlier of December 21, 2005, or to such time as the joint venture has
obtained requisite regulatory permits and completed construction of its
permanent harbor, with a monthly payment of $125,000. The joint venture
anticipates filing the requisite regulatory permits during 1999. If the
regulatory permits are obtained, the joint venture may be required to construct
a new harbor, berthing and guest facilities. The level of expenditures required
for such new facilities cannot be accurately estimated at this time.
Although Barden Development, Inc. to date has contributed approximately $24
million to us, the Members' Equity Account became negative during the first
quarter of 1998 and continues to be negative as of June 30, 1999. The decline
in the Members' Equity Account is primarily attributed to start-up costs,
operating losses,the disposition of assets previously utilized on the chartered
vessel, and the loss on the redemption of $99.0 million principal amount of the
12 3/4% Senior Secured Notes.
Based upon our anticipated future operations on board the Majestic Star
Casino sessel and capital expenditures, management believes that the available
cash flow from our future operations and certain planned equipment financings,
together with the proceeds from the 10 7/8% Senior Secured Notes and the
anticipated
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line of credit, will be adequate to meet our anticipated future requirements
for working capital, the remaining development obligations to the City of Gary,
and our capital expenditures and scheduled payments of interest and principal
on the 10 7/8% Senior Secured Notes and other permitted indebtedness for 1999.
No assurance can be given, however, that such proceeds and operating cash flow
from the Majestic Star Casino vessel, in light of increased competition, will
be sufficient for such purposes. If necessary and to the extent permitted under
the indenture, we will seek additional financing through borrowings and debt or
equity financing. There can be no assurance that additional financing, if
needed, will be available to us, or that, if available, the financing will be
on terms favorable to us. In addition, there is no assurance that our estimate
of our reasonably anticipated liquidity needs is accurate or that unforeseen
events will not occur, resulting in the need to raise additional funds.
42
<PAGE>
BUSINESS
THE MAJESTIC STAR CASINO, LLC
We own and operate the Majestic Star Casino, the newest and one of the
largest gaming vessels serving the Chicago metropolitan market. We are
conveniently located at Buffington Harbor in Gary, Indiana, approximately 23
miles southeast of downtown Chicago. The Chicago metropolitan market is the
third largest metropolitan area in the United States. In 1998, casinos in this
market generated approximately $1.5 billion of gaming revenue. During the first
six months of 1999, our EBITDA increased 43.5% to approximately $15.1 million
compared to $10.5 million in the same period in 1998.
In October 1997, we replaced a chartered vessel with the current Majestic
Star Casino, a newly constructed 360 foot long vessel with a contemporary
design and a stable V-shaped hull. The casino accommodates approximately 43,000
square feet of gaming space across three expansive decks, which contain 1,410
slot machines and 56 table games. The Majestic Star Casino offers patrons an
exciting gaming environment with a bright and spacious layout, high ceilings,
an atrium spanning two decks, colorful chandeliers and mirrors. Passengers move
freely between the various levels of the casino through escalators, elevators
and stair towers. The Majestic Star Casino also offers its customers on-board
food and beverage facilities. In addition, we opened a VIP lounge on board the
vessel and remodeled a VIP boarding lounge in the dockside pavilion.
BUFFINGTON HARBOR
The Majestic Star Casino operates from the Buffington Harbor gaming complex,
which we share with the Trump Casino. The Buffington Harbor gaming complex
includes a guest pavilion, vessel berths, parking lots and other common area
facilities. Buffington Harbor has the largest concentration of gaming positions
in the Chicago metropolitan market, offering patrons a total of approximately
3,455 gaming positions, which is greater than the number of gaming positions
that exist at any other site in northwest Indiana. This number is also
substantially greater than the number of gaming positions allowed at any
individual Illinois gaming site, which is currently limited by Illinois gaming
laws to 1,200. We believe that we have achieved operating cost savings and
marketing advantages over our competitors as a result of the operation of two
casinos at the same location and the existence of the joint venture.
Buffington Harbor offers two cruising vessel casinos (ours and the Trump
Casino) with a staggered cruising schedule. The Majestic Star Casino conducts
gaming from 8:00 a.m. to 5:00 a.m. daily, seven days per week. Patrons can
begin gaming immediately upon boarding. The Trump Casino conducts gaming from
9:00 a.m. to 5:00 a.m. daily, seven days per week. As a result of these
staggered boarding sessions, the maximum scheduled waiting time for Buffington
Harbor patrons is 30 minutes, compared to a maximum of 90 minutes in all other
northwest Indiana gaming locations. Further, gaming customers in the Chicago
area, Indianapolis, South Bend and Fort Wayne, Indiana, and Kalamazoo and Grand
Rapids, Michigan can conveniently access Buffington Harbor, which is located at
the interchange of U.S. 12 and Indiana State Highway 912, just off of I-80/94
and the Indiana Toll Road.
The Buffington Harbor gaming complex is a two-level, 90,000 square foot
structure containing a 352-seat buffet, a 110-seat steakhouse restaurant,
several bars and lounges, gift shops and areas for staging and ticketing. The
complex features a grand entrance, granite and marble floors, unique metallic
finishes, two large fountains and a variety of lighting effects. The Buffington
Harbor gaming complex is situated on an approximately 100-acre site, containing
approximately 3,000 parking spaces, and offers valet parking and convenient bus
loading and unloading facilities. The Buffington Harbor gaming complex was
developed and constructed by the joint venture.
We currently intend to construct a multi-level covered parking structure
with our joint venture partner. The parking structure is expected to provide
customers with approximately 1,600 covered parking spaces and indoor
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access to the Buffington Harbor gaming complex. Customers currently either park
their automobiles in an approximately 3,000 space flat parking lot or use our
valet parking services. The project is estimated to cost approximately $35.0
million, including approximately $15.0 million for the land. We currently
expect to contribute approximately $3.5 million of capital toward the project.
We believe that the convenience of the new parking structure will attract a
significant number of new customers to Buffington Harbor, thereby providing
substantial opportunities to increase our net revenue and cash flow. The joint
venture intends to acquire the harbor and the property underlying the new
parking structure and the harbor. We cannot assure you that we will be able to
acquire the harbor or the property on which we intend to build the garage, or
that we will be able to build the garage on terms favorable to us or at all.
MARKET OVERVIEW
The Chicago metropolitan area is the third most populated metropolitan area
in the United States. According to demographic sources, there were
approximately nine million adults living in the area in 1998 and the average
household income was approximately $48,200. The population and average
household income of the Chicago metropolitan market are the largest among all
United States riverboat/cruising vessel casino markets. The Chicago
metropolitan market is a relatively young gaming market, as gaming was first
introduced in 1992. This market is primarily served by nine riverboat/cruising
vessel casinos, including our casino, operating under licenses granted by the
States of Illinois and Indiana. These casinos generated 1998 gaming revenue of
approximately $1.5 billion, ranking first among all United States
riverboat/cruising vessel casino markets. Such revenue has increased at a
compound annual rate of approximately 26.1% since 1995. Notwithstanding the
recent growth trends, we believe that the Chicago metropolitan market remains
underserved.
CASINO OPERATIONS
The Majestic Star Casino offers patrons 43,000 square feet of gaming space
across three expansive decks, which contain the following slot machines and
table games:
<TABLE>
<CAPTION>
NUMBER
OF
SLOT MACHINES UNITS
- ------------- ------
<S> <C>
5c.......................... 137
25c......................... 623
50c......................... 110
$1.......................... 481
$5.......................... 50
$25......................... 9
-----
Total Slots............. 1,410
=====
</TABLE>
<TABLE>
<CAPTION>
NUMBER
OF
TABLE GAMES UNITS
- ----------- ------
<S> <C>
Mini Baccarat....................................................... 2
Blackjack........................................................... 34
Caribbean Stud...................................................... 4
Craps............................................................... 4
Roulette............................................................ 4
Specialty Games..................................................... 8
-----
Total Table Games............................................... 56
=====
Total Gaming Positions(a)....................................... 1,802
=====
</TABLE>
- --------
(a) Assumes each table game has seven positions.
Slot machine wagering is the fastest growing and most profitable segment of
our casino, representing approximately 76.4% of gaming revenues in 1998. We
continue to enhance slot machine revenue by modifying our mix of slot machine
types and introducing the latest slot machine models. For example, in 1998 we
introduced nickel slot machines, various poker video and participation games,
including Wheel of Fortune(R) and Jeopardy(R), and in the first quarter of
1999, we introduced Monopoly(R). These participation games provide patrons with
the opportunity to conduct more advanced betting on a single game. As a result,
we have substantially increased revenues with respect to these games compared
to the house average.
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<PAGE>
MARKETING AND PROMOTION
We have established the Club M-Star to increase the frequency of visits by
our existing customers. This program enables us to maintain a comprehensive
database of information about our gaming patrons, including their gaming
levels, duration of play and preferences. We use this information for tracking
purposes and creating a comprehensive direct mail program. As a result, we have
reduced our overall marketing costs and have improved the efficiency of our
marketing expenditures. In addition, we recently opened a VIP lounge on board
the vessel for our higher activity customers, and we remodeled a VIP boarding
lounge in the dockside pavilion. We believe these amenities will differentiate
us from our competitors, who provide only dockside lounges. We have also
introduced a concierge service to assist in providing superior service to our
higher activity gaming patrons.
We continue to use mass media, such as radio, television, newspaper and
billboard advertising, to enhance our brand image and attract new customers. In
this effort, we promote the convenience of two casinos at Buffington Harbor and
major events, such as player parties and promotional giveaways. Once new
patrons visit the Majestic Star Casino, we endeavor to register them in the
Club M-Star. This allows us to expand our database of customers and tailor our
marketing programs accordingly. To further these efforts, in the first quarter
of 1999, we created a player development function with the mission of
attracting and creating marketing programs directed towards higher activity
gaming customers.
As part of our commitment to providing a quality casino entertainment
experience for our patrons, we are dedicated to ensuring a high level of
customer satisfaction and loyalty by providing attentive customer service in a
clean, friendly and relaxed atmosphere. We recognize that consistent quality
and a comfortable atmosphere stem from the collective care and friendliness of
each of our employees. Toward this end, we conduct ongoing training sessions to
emphasize the importance of customer contact and encourage our employees to be
friendly, smile and wish each customer good luck. In addition, we offer
competitive employee benefit programs to recruit and retain friendly,
professional employees.
COMPETITION
Illinois and Indiana state laws currently limit the total number of licenses
issuable in the Chicago metropolitan market to nine. All licenses are currently
in operation, and the number of licenses cannot be increased without
legislative action. Indiana or Illinois could authorize additional gaming
licenses in the future. Legislation has been introduced on numerous occasions
in recent years to provide for land-based casinos in Chicago and to expand
riverboat gaming in Illinois. In May 1999, legislation was passed by the
Illinois House and Senate to relocate an existing but not operating riverboat
gaming license to Cook County, Illinois (excluding the City of Chicago) and to
provide for dockside gaming. During the first quarter of 1999, legislation was
introduced in Indiana to allow certain organizations (primarily VFW posts) to
possess a limited number of electronic gaming devices. To date, no such
legislation has been enacted. We are unable to predict whether any such
legislation, in Illinois, Indiana or elsewhere, will be enacted or whether, if
passed, it would have a material adverse impact on our results of operations or
financial condition.
We compete with the other eight gaming casinos in the Chicago metropolitan
market and, to a lesser extent, with four additional riverboats currently
authorized to operate in southern Indiana. We also compete with gaming
operations on Native American lands, including those located, or to be located,
in Michigan, Wisconsin and potentially northern Indiana. The Saginaw Chippewa
Indian Tribe is currently operating one of the largest Native American gaming
complexes in the United States in Mt. Pleasant, Michigan, approximately 250
miles northeast of Gary, Indiana. In December 1998, the Michigan Senate and
House of Representatives approved four additional Native American compacts,
which have been signed by the Governor of Michigan, that would allow land-based
casinos in Michigan, including southwest Michigan. The opening of land-based
casinos, which generally have a competitive advantage over cruising casinos,
could have an adverse effect on our operating results.
45
<PAGE>
With respect to the State of Michigan, we also expect future competition
from three land-based casinos to be developed in Detroit, Michigan, pursuant to
a November 1996 voter initiative. The MGM Grand currently operates from a
temporary facility and we anticipate that the other two casinos will operate
from temporary facilities shortly.
In addition, we anticipate that competition will increase with the recent
purchase and pending sale of two area casinos to larger and stronger
competitors. Harrah's Entertainment, Inc. has purchased Showboat, Inc.,
including the Showboat Mardi Gras Casino, located in East Chicago, Indiana.
During the first quarter of 1999, Harrah's renamed the East Chicago property to
take advantage of the Harrah's brand name. Harrah's has also announced that it
intends to expand the East Chicago facility and will invest approximately $30.0
million in various land-based developments during the coming year. Also,
Horseshoe Gaming, LLC, has agreed to acquire Empress Entertainment. Empress
Entertainment owns two area riverboat gaming operations: one in Hammond,
Indiana, and one in Joliet, Illinois.
Many of our competitors have greater gaming industry management experience,
financial resources and, in the case of Harrah's East Chicago and Empress
Hammond, covered parking garages. Our joint venture partner also constructed a
300-room hotel for its own use at the Buffington Harbor gaming complex. The
hotel opened in the fourth quarter of 1998.
EMPLOYEES
At June 30, 1999, we employed approximately 1,043 persons, and the joint
venture employed approximately 287 persons. We and the joint venture have
collective bargaining agreements with Local 1 of the Hotel Employees and
Restaurant Employees International Union, covering approximately 79 of our
employees and 84 employees of the joint venture in food and beverage service
positions. These agreements expire in 2001. The joint venture and we also have
collective bargaining agreements with the Operating Engineers Union, covering
approximately six employees of our marine operations department and 17
employees of the joint venture. The agreement with us expires in 2003 and the
agreement with the joint venture expires in 2001. We also have a collective
bargaining agreement with the Seafarers International Union, which covers
approximately 42 employees in the marine operations department. This agreement
expires in 2003.
The joint venture is currently negotiating an amendment to its collective
bargaining agreement with Local 1 of the Hotel Employees and Restaurant
Employees International Union. This agreement would cover approximately 104
additional employees in general facilities and housekeeping positions.
In recruiting personnel, we are obligated, under the terms of an agreement
with the City of Gary, Indiana, to use our best efforts to have an employee
base comprised of 70% racial minorities, 52% females, 67% residents of the City
of Gary, Indiana and 90% residents of Lake County, Indiana.
SEASONALITY
Because of the climate in the Chicago metropolitan area, our operations are
expected to be seasonal, with stronger results expected during the period from
May through September. Accordingly, the results of our operations are expected
to fluctuate from quarter to quarter, and the results for any fiscal quarter
may not be indicative of results for future fiscal quarters.
PROPERTIES
We operate from the Buffington Harbor gaming complex, which we share with
the Trump Casino. The Buffington Harbor gambling complex was developed and
constructed by the BHR Joint Venture. We believe that we have achieved
operating cost savings and marketing advantages over our competitors as a
result of the operation of two casinos at the same location and the existence
of the BHR Joint Venture. We have expended approximately $118.0 million
constructing and equipping the Majestic Star Casino vessel and capitalizing the
46
<PAGE>
BHR Joint Venture. We believe that our vessel facility should meet our
operating needs for the foreseeable future.
The Buffington Harbor gaming complex is located on an approximately 100-acre
site. We believe that we are one of only two locations in the Chicago
metropolitan Market with the capacity to significantly expand our land-based
facilities. In addition to the joint venture property, an affiliate of ours has
entered into discussions with various parties concerning the feasibility of
purchasing additional land adjacent to the BHR Joint Venture property for
future development. We also continually evaluate the acquisition and/or
construction of gaming facilities in new locations.
LEGAL PROCEEDINGS
Various legal proceedings are pending against us. Management considers all
such pending proceedings, primarily personal injury and equal employment
opportunity (EEO) claims, to be incidental to the character of our business.
Management believes that the resolution of these proceedings will not,
individually or in the aggregate, have a material adverse effect on our
financial condition or results of operations.
In addition, on March 27, 1998, a complaint was filed in the Lake County
Superior Court in East Chicago, Indiana, against the joint venture, our joint
venture partner and us. The plaintiff, a former employee, claims to have been
assaulted in the parking lot on June 25, 1997, and is requesting compensatory
damages of $1 million and punitive damages of $10 million. The suit alleges
that our joint venture partner and we failed to provide adequate security to
prevent assaults. We intend to vigorously defend against such suit. However,
the case is in the discovery phase and it is too early to predict its outcome
or the effect, if any, on our financial position or the results of our
operations.
From time to time, we may be involved in routine administrative proceedings
involving alleged violations of certain provisions of the Indiana Riverboat
Gambling Act. Management believes that the outcome of any such proceedings will
not, either individually or in the aggregate, have a material adverse effect on
us or our ability to retain and/or renew any license required under the Indiana
Riverboat Gambling Act for our operations. In March 1998, we agreed to settle
two such proceedings with the payment of $120,000 to the Indiana Gaming
Commission. No such proceedings are pending at this time.
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<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS
We are managed by Barden Development, Inc. Our executive officers are:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<C> <C> <S>
Don H. Barden..... 55 Chairman, President and Chief Executive Officer
Vice President, Chief Operating and Financial
Michael E. Kelly.. 37 Officer
David M. Wolf..... 42 Vice President of Administration
</TABLE>
Don H. Barden has served as our Chairman, President, and Chief Executive
Officer since December 8, 1993 and has served as Chairman and President of
Barden Development, Inc. since November 16, 1993. Mr. Barden is also the
President and Chief Executive Officer of a group of companies he owns and/or
operates. Over the past 30 years, Mr. Barden has successfully developed, owned
and operated many business enterprises in various industries including real
estate development, casino gaming, broadcasting, cable television and
international trade.
Michael E. Kelly has served as our Vice President, Chief Operating and
Financial Officer since January 1, 1999, and has maintained responsibility for
our daily operations since October 17, 1998. From April 1996 through December
31, 1998, Mr. Kelly served as our Vice President and Chief Financial Officer.
Mr. Kelly has also served as a Vice President of Barden Development, Inc. since
April, 1996. From June 1994 to April 1996, Mr. Kelly held various positions
with Fitzgeralds Gaming Corporation, including Vice President of Finance. Mr.
Kelly also was the Senior Director of Operations and Chief Financial Officer of
Fitzgeralds Tunica. From September 1991 to June 1994, Mr. Kelly was Vice
President and Chief Financial Officer of Empress River Casino Corporation and
its affiliates. From 1982 to 1991, Mr. Kelly was employed in various senior
finance and administrative functions by Harrah's Hotel & Casino in New Jersey
and Nevada and the Fitzgeralds Group in Reno and Las Vegas, Nevada.
David M. Wolf has served as our Vice President of Administration since March
1, 1999. Mr. Wolf has responsibility for finance, management information
systems, regulatory affairs, risk management and administration. From February
1997 through February 1999, Mr. Wolf was our Director of Finance. From 1981 to
1997, Mr. Wolf was employed in various senior finance and administrative
positions by Harrahs Hotel and Casino, Trump Plaza Hotel and Casino and
Tropicana Hotel and Casino in Atlantic City, New Jersey.
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<PAGE>
SUMMARY COMPENSATION TABLE
The following table sets forth all compensation earned for services
performed during the three fiscal years in the period ended December 31, 1998
by our Chief Executive Officer and each of our other executive officers.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-----------------------
FISCAL ALL OTHER
NAME AND POSITION YEAR SALARY BONUS COMPENSATION(A)
----------------- ------ -------- ------- ---------------
<S> <C> <C> <C> <C>
Don H. Barden(b)...................... 1998 $275,000 -- $ 1,120
Chairman, President and Chief
Executive Officer 1997 275,000 -- 1,170
1996 180,865 -- 585
Michael E. Kelly(c)................... 1998 $180,000 $45,000 $14,378
Vice President, Chief Operating and
Financial Officer 1997 180,000 45,000 43,417
1996 117,586 -- 42,926
David M. Wolf(d)...................... 1998 $ 94,144 $ 3,462 $ 2,607
Vice President of Administration 1997 84,423 -- 28,240
1996 -- -- --
</TABLE>
- --------
(a) Amounts represent contractual payments under individual employment
agreements. In 1998, we paid life insurance premiums of $1,120, $2,034 and
$632 on behalf of Messrs. Barden, Kelly and Wolf, respectively. We
contributed 401(k) matching funds of $7,313 and $1,975 to Messrs. Kelly and
Wolf. Mr. Kelly was reimbursed $1,402 for non-deductible medical plan
expenditures. Mr. Kelly also received $3,629 for non-deductible medical
plan expenditures related to 1997, paid in 1998. In 1997, we paid life
insurance premiums of $1,170, $1,895 and $526 on behalf of Messrs. Barden,
Kelly and Wolf, respectively. We contributed 401(k) matching funds of
$6,750 to Mr. Kelly. Mr. Kelly was also reimbursed $1,417 for non-
deductible medical plan expenditures. Mr. Kelly also received $1,740 in
lieu of our not having established a 401(k) plan in 1996, $7,615 for unused
vacation time, and $24,000 for non-vested stock options related to a
previous employer. Mr. Wolf received $27,714 for reimbursable relocation
expenses. In 1996, we paid life insurance premiums of $585 and $842 on
behalf of Messrs. Barden and Kelly, respectively. Mr. Kelly received
$24,000 for non-vested stock options related to a previous employer and
$18,341 for reimbursable relocation expenses.
(b) Mr. Barden joined us as Chairman, President and Chief Executive Officer in
December 1993 and has been paid in such capacities beginning in April 1996.
(c) Mr. Kelly joined us as Vice President and Chief Financial Officer in April
1996. Mr. Kelly assumed on an interim basis the duties of Chief Operating
Officer effective October 17, 1998. Effective January 1, 1999, Mr. Kelly
was employed as Vice President, Chief Operating and Financial Officer.
(d) Mr. Wolf joined us as Director of Finance in February 1997. Mr. Wolf was
promoted to Vice President of Administration effective March 1, 1999.
EMPLOYMENT AGREEMENTS
Mr. Barden serves as our Chairman, President and Chief Executive Officer and
currently receives annual compensation of $275,000 as an employee, pursuant to
a letter agreement dated as of April 25, 1996.
Mr. Kelly serves as our Vice President, Chief Operating and Financial
Officer pursuant to a two-year employment agreement effective as of January 1,
1999. Effective January 1, 1999, Mr. Kelly will receive base compensation of
$275,000 per year and can also earn annual incentive compensation based upon
his performance and our performance. In addition to such compensation, Mr.
Kelly is entitled to term life insurance
49
<PAGE>
in an amount equal to four times his base salary and other customary employee
benefits, including participation in our 401(k) plan. Mr. Kelly is also
entitled to additional compensation, upon a change in control, equal to his
base salary and incentive compensation for the remainder of the term of the
agreement, plus 12 months thereafter. Mr. Kelly's employment agreement contains
certain non-competition provisions with a duration of 12 months following
termination of his employment.
Mr. Wolf serves as our Vice President of Administration pursuant to a two-
year employment agreement, effective as of March 1, 1999. Effective, March 1,
1999, Mr. Wolf will receive a base compensation of $125,000 per year and can
also earn annual incentive compensation based upon his performance and our
performance. Mr. Wolf is also entitled to additional compensation, upon a
change in control, equal to his base salary and incentive compensation for the
remainder of the term of the agreement, plus six months thereafter. Mr. Wolf's
employment agreement contains other terms substantially similar to that of Mr.
Kelly's including certain non-competition provisions with a duration of 12
months following termination of his employment.
PRINCIPAL OWNER
We are indirectly wholly owned by Don H. Barden, our Chairman, President and
Chief Executive Officer. Mr. Barden has invested approximately $24.0 million to
design, develop, and construct the Majestic Star Casino and the Buffington
Harbor gaming complex and to make related expenditures. Mr. Barden has also
successfully built, owned and operated numerous businesses in the cable
television, international trade and real estate industries and has owned and
operated several radio stations over the past 30 years.
The following table sets forth the beneficial ownership of the membership
interests in The Majestic Star Casino, LLC as of the date hereof.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF BENEFICIAL OWNER % OWNERSHIP
------------------------------------ -------------
<S> <C>
Don H. Barden............................................... 100.0%(a)
400 Renaissance Center, Suite 2400
Detroit, Michigan 48243
</TABLE>
- --------
(a) Includes the membership interests in The Majestic Star Casino, LLC
beneficially owned directly by Barden Development, Inc. and indirectly by
Barden Development, Inc. and Barden Management, Inc. through Gary Riverboat
Gaming, LLC. Mr. Barden is the beneficial owner of 100% of Barden
Development, Inc., Barden Management, Inc. and Gary Riverboat Gaming, LLC.
CERTAIN RELATIONSHIP AND RELATED TRANSACTION
By December 31, 1995, our company had been capitalized by our members with
$35.0 million of capital contributions, including interest earned thereon.
Effective March 31, 1996, $10.8 million of the contributions of Barden
Development, Inc. was reclassified as indebtedness payable to Barden
Development, Inc., evidenced by the note to Barden Development, Inc.. In
September 1998, we paid $2.0 million of the amount outstanding under the note
to Barden Development, Inc., and repaid the remaining balance of approximately
$8.8 million in May 1999.
Please refer to the discussion of certain of our other agreements set forth
under "Material Agreements."
DESCRIPTION OF CREDIT FACILITY AND INTERCREDITOR AGREEMENT
NEW SENIOR CREDIT FACILITY
Promptly following the exchange offer, we expect to close on a new $20.0
million senior credit facility. Our proposed new senior credit facility will be
secured by substantially all of our current and future assets,
50
<PAGE>
other than certain excluded assets. The lien on the collateral securing the
proposed new credit facility will be senior to the lien on the collateral
securing the Notes. We expect that the credit facility will contain customary
conditions to closing and to borrowing and will contain representations and
warranties customary in other gaming-related financings. We also expect that
the credit facility will contain certain financial covenants and restrictions
on, among other things, indebtedness, investments, distributions and mergers.
There can be no assurance that we will be able to enter into the credit
facility on terms satisfactory to us or at all. The establishment of the senior
credit facility is subject to approval of the Indiana Gaming Commission.
INTERCREDITOR AGREEMENTs
In connection with entering into the new credit facility, we expect the
trustee under the indenture will enter into an intercreditor agreement
substantially in the form of the intercreditor agreement attached as an exhibit
to the indenture with the lender under the new credit facility. We anticipate
that the intercreditor agreement will provide, among other things, that (i) the
lender's lien on the collateral securing the credit facility will be senior to
the lien on the collateral securing the new notes; (ii) during any insolvency
proceedings, the lender and the trustee under the indenture will coordinate
their efforts to give effect to the relative priority of their respective
security interests in the collateral; and (iii) following an Event of Default
(as defined in the intercreditor agreement), all decisions with respect to such
collateral, including the time and method of any disposition thereof, will be
made in accordance with the terms of the intercreditor agreement.
In addition, in connection with entering into any FF&E Financing (as
defined) secured by a Permitted Vessel Lien (as defined), the trustee under the
indenture will be permitted to enter into an intercreditor agreement with the
lender of such FF&E Financing, provided, that, among other things, the
intercreditor agreement does not adversely affect the holders of the notes.
51
<PAGE>
DESCRIPTION OF THE NEW NOTES
GENERAL
You can find the definitions of certain terms used in this description under
the subheading "Certain Definitions."
In addition:
. ""new notes" refers to the registered notes being offered by this
prospectus;
. ""old notes" refers to your old notes that may be exchanged for new notes
in the exchange offer;
. ""Notes'' refers collectively to the new notes and the old notes; and
. ""Issues'' refers to the Majestic Star Casino, LLC and the Majestic Star
Casino Capital Corp.
The old notes were, and the new notes will be, issued pursuant to the
Indenture, dated June 18, 1999 among The Majestic Star Casino, LLC, The
Majestic Star Casino Capital Corp., any future subsidiary guarantors and IBJ
Whitehall Bank & Trust Company as trustee. The form and terms of the new notes
are substantially identical to the form and terms of the old notes, except that
the new notes:
. will be registered under the Securities Act of 1933; and
. will not bear any legends restricting transfer.
The new notes will be issued solely in exchange for an equal principal
amount of old notes. As of the date of this prospectus, $130.0 million
aggregate principal amount of old notes is outstanding.
The following summaries of certain provisions of the indenture are not
complete and are subject to all the provisions of the indenture. Wherever we
refer to particular sections or defined terms used in the indenture, such
sections or defined terms are automatically incorporated into this prospectus.
BRIEF DESCRIPTION OF THE NEW NOTES
The new notes will be:
. general unsecured obligations of the Issuers;
. subordinated in right of payment to all existing and future Senior
Indebtedness of the Issuers;
. effectively subordinated to all secured Indebtedness of the Issuers;
. senior in right of payment to any future Indebtedness of the Issuers that
is specifically subordinated to the new notes; and
. unconditionally guaranteed by any Subsidiary Guarantors.
The new notes will be senior secured obligations of the Issuers and will
rank senior in right of payment to all existing and future subordinated
Indebtedness of the Issuers and equal in right of payment with all existing and
future senior Indebtedness of the Issuers. The Lien on the collateral securing
the Credit Facility will be senior to the Lien on the Collateral securing the
new notes. The new notes will be without recourse to the Members.
The Majestic Star Casino Capital Corp. is a wholly owned subsidiary of The
Majestic Star Casino, LLC and was incorporated solely for the purpose of
serving as a co-issuer of the Notes in order to facilitate the initial offering
and this exchange offer. Capital will not have any operations or assets and
will not have any revenues. As a result, prospective investors should not
expect Capital to participate in servicing the principal, interest, premium or
any other payment obligations on the Notes. See "--Certain Covenants--
Restrictions on Activities of Capital."
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<PAGE>
The Indenture will allow us to designate certain Subsidiaries as
Unrestricted Subsidiaries. Unrestricted Subsidiaries will not be subject to any
of the restrictive covenants set forth in the Indenture.
The new notes will be issued in registered form, without coupons, and in
denominations of $1,000 and integral multiples thereof.
PRINCIPAL, MATURITY AND INTEREST
The Indenture does not limit the aggregate principal amount of notes that
may be issued thereunder and provides that, subject to the covenant in the
Indenture described under "--Certain Covenants--Limitation on Incurrence of
Indebtedness," additional notes may be issued thereunder from time to time,
without the consent of the Holders of previously issued notes, in an aggregate
principal amount to be determined from time to time by the Issuers; provided,
that additional notes may not be issued with original issue discount as
determined under section 1271 et seq. of the Internal Revenue Code of 1986, as
amended (the "Code"). The new notes will mature on July 1, 2006. Interest on
the new notes will be payable semi-annually on July 1 and January 1 of each
year, commencing on January 1, 2000, to Holders of record on the immediately
preceding June 15 and December 15, respectively. The New notes will bear
interest at 10 7/8% per annum from the date of original issuance. Interest on
the New notes will accrue from the most recent date to which interest has been
paid or, if no interest has been paid, from the date of original issuance.
Interest will be computed on the basis of a 360-day year comprised of twelve
30-day months. The New notes will be payable both as to principal and interest
at the office or agency of the Issuers maintained for such purpose within the
City of New York or, at the option of the Issuers, payment of interest may be
made by check mailed to the Holders at their respective addresses set forth in
the register of Holders. Until otherwise designated by the Issuers, the
Issuers' office or agency will be the office of the Trustee maintained for such
purpose. If a payment date is a Legal Holiday, payment may be made at that
place on the next succeeding day that is not a Legal Holiday, and no interest
shall accrue for the intervening period.
REDEMPTION
At the Option of the Company. Except as set forth below, the new notes are
not redeemable at the Issuers' option prior to July 1, 2003. Thereafter, the
New notes will be subject to redemption at the option of the Issuers, in whole
or in part, upon not less than 30 nor more than 60 days' notice, at the
redemption prices (expressed as percentages of principal amount) set forth
below, plus accrued and unpaid interest thereon to the applicable date of
redemption, if redeemed during the 12-month period beginning on July 1 of the
years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2003.......................... 105.438%
2004.......................... 102.719%
2005 and thereafter........... 100.000%
</TABLE>
Notwithstanding the foregoing, at any time or from time to time prior to
July 1, 2002, the Issuers may redeem, at their option, up to 35% of the
aggregate principal amount of the new notes then outstanding at a redemption
price of 110.875% of the principal amount thereof, plus accrued and unpaid
interest thereon through the applicable date of redemption, with the net cash
proceeds of one or more Public Equity Offerings; provided, that (i) such
redemption shall occur within 60 days of the date of closing of such Public
Equity Offering and (ii) at least 65% of the aggregate principal amount of
Notes issued on or after the Issue Date remains outstanding immediately after
giving effect to each such redemption.
The new notes will also be redeemable by the Issuers, in whole or in part,
at any time upon not less than 20 Business Days nor more than 60 days notice
(or such earlier date as may be required by any Governmental Authority) at 100%
of the principal amount thereof, plus accrued and unpaid interest thereon and
Liquidated Damages, if any, to the redemption date, pursuant to a Required
Regulatory Redemption.
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If less than all of the new notes are to be redeemed at any time, selection
of new notes for redemption will be made by the Trustee in compliance with the
requirements of the principal national securities exchange, if any, on which
the new notes are listed, or, if the new notes are not so listed, on a pro rata
basis, by lot or by such method as the Trustee deems to be fair and reasonable;
provided, that Notes of $1,000 or less may not be redeemed in part. Except in
the case of a Required Regulatory Redemption requiring less notice, notice of
redemption will be mailed by first-class mail at least 30 but not more than 60
days before the redemption date to each Holder to be redeemed at such Holder's
registered address. If any new note is to be redeemed in part only, the notice
of redemption that relates to such new notes will state the portion of the
principal amount thereof to be redeemed. A new note in principal amount equal
to the unredeemed portion thereof will be issued in the name of the Holder
thereof upon cancellation of the original new notes. On and after the date of
redemption, interest will cease to accrue on new notes or portions thereof
called for redemption, unless the Issuers default in making such redemption
payment.
Mandatory. The new notes will not be entitled to any mandatory redemption
(except for a Required Regulatory Redemption) or have the benefit of any
sinking fund.
SUBSIDIARY GUARANTORS
The repayment of the new notes will be unconditionally and irrevocably
guaranteed, jointly and severally, by all future Restricted Subsidiaries. On
the Issue Date, the Company will have no Subsidiaries other than Capital (which
is a co-issuer and co-obligor of the Notes). The Indenture will provide that so
long as any Notes remain outstanding, any future Restricted Subsidiary shall
enter into a Subsidiary Guaranty.
If all of the Capital Stock of any Subsidiary Guarantor is sold by the
Company or any of its Subsidiaries to a Person (other than the Company or any
of its Subsidiaries) and the Net Proceeds from such Asset Sale are used in
accordance with the terms of the covenant described under "--Limitation on
Asset Sales," then such Subsidiary Guarantor shall be released and discharged
from all of its Obligations under its Subsidiary Guaranty and the Indenture.
The Obligations of each Subsidiary Guarantor under its Subsidiary Guaranty
will be limited to the maximum amount as will, after giving effect to all other
contingent and fixed liabilities of such Subsidiary Guarantor and after giving
effect to any collections from or payments made by or on behalf of any other
Subsidiary Guarantor in respect of the Obligations of such other Subsidiary
Guarantor under its Subsidiary Guaranty, result in the Obligations of such
Subsidiary Guarantor under its Subsidiary Guaranty not constituting a
fraudulent conveyance or fraudulent transfer under federal or state law or
render a Subsidiary Guarantor insolvent.
SECURITY
The Issuers will assign and pledge, or cause to be assigned and pledged, as
collateral (the "Collateral") to the Trustee, for the benefit of the Trustee
and the Holders, as security for the Issuers' obligations with respect to the
new notes:
. the Majestic Star Casino Vessel;
. the Company's interest in the BHR Joint Venture;
. each members' interest in the Company;
. the Berthing Agreement and substantially all of the other assets of the
Company and any Subsidiary Guarantor, other than the Excluded Assets
(including, without limitation, the Gaming Licenses), and
. the Company's rights to the service mark "Majestic Star Casino."
The security interest in favor of the Trustee and the Holders will be
created in the Collateral pursuant to certain mortgages and security agreements
in favor of the Trustee (collectively, the "Security Agreements").
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The Trustee's security interest in the Collateral will be subordinated to a
lien securing Indebtedness outstanding under the Credit Facility. In connection
with incurring any such Indebtedness, the Trustee will be permitted to enter
into the Intercreditor Agreement, which will be substantially in the form of
the Intercreditor Agreement attached as an exhibit to the Indenture.
The proceeds of any sale of the Collateral following an Event of Default may
not be sufficient to satisfy payments due on the new notes. In addition, the
ability of the Holders to realize upon the Collateral may be limited pursuant
to applicable laws, including gaming, bankruptcy or securities laws.
If an Event of Default occurs and is continuing, the Trustee, on behalf of
the Holders, in addition to any rights or remedies available to it under the
Indenture and the Security Documents, may, subject to the Intercreditor
Agreement, take such action as it deems advisable and as is permitted under the
Security Agreements, to protect and enforce its rights in the Collateral,
including the institution of sale or foreclosure proceedings. The proceeds
received by the Trustee from any such sale or foreclosure will, subject to the
Intercreditor Agreement, be applied by the Trustee first to pay the expenses of
such sale or foreclosure and fees and other amounts then payable to the Trustee
under the Indenture, and thereafter to pay amounts due and payable with respect
to the new notes.
Certain Gaming Law Limitations. The Trustee's ability to foreclose upon the
Collateral will be limited by relevant gaming laws, which generally require
that Persons who own or operate a casino or purchase or sell gaming equipment
hold a valid gaming license or permit and require the approval of the IGC for
any transfer of a gaming license. No Person can hold an owner's license in the
State of Indiana unless the Person is found qualified or suitable by the
relevant Gaming Authorities. In order for the Trustee to be found qualified or
suitable, such Gaming Authorities would have discretionary authority to require
the Trustee and any or all of the Holders to file applications, be investigated
and be found qualified or suitable as an owner or operator of gaming
establishments. The applicant for qualification, a finding of suitability or
licensing must pay an application fee and all costs of such investigation. If
the Trustee is unable or chooses not to qualify, be found suitable, or be
licensed to own, operate or sell such assets, it would have to retain another
entity that could obtain the appropriate license to own, operate or sell such
assets. This licensing process could be lengthy, taking several months at a
minimum. In addition, in any foreclosure sale or subsequent resale by the
Trustee, licensing requirements under the relevant gaming laws may limit the
number of potential bidders and may delay any sale, either of which events
could have an adverse effect on the sale price of such Collateral. Therefore,
the practical value of realizing on the Collateral may, without the appropriate
approvals, be limited.
Certain Bankruptcy Limitations. The right of the Trustee to repossess and
dispose of the Collateral upon the occurrence of an Event of Default is likely
to be significantly impaired by applicable bankruptcy law if a bankruptcy
proceeding were to be commenced by or against the Issuers prior to the Trustee
having repossessed and disposed of the Collateral. Under the Bankruptcy Code, a
secured creditor is prohibited from repossessing its security from a debtor in
a bankruptcy case, or from disposing of security repossessed from such debtor,
without bankruptcy court approval. Moreover, the Bankruptcy Code permits the
debtor in certain circumstances to continue to retain and to use collateral
owned as of the date of the bankruptcy filing (and the proceeds, products,
offspring, rents or profits of such collateral to the extent provided by the
Security Documents and by applicable nonbankruptcy law) even though the debtor
is in default under the applicable debt instruments; provided, that the secured
creditor is given "adequate protection." The meaning of the term "adequate
protection" may vary according to circumstances. In view of the lack of a
precise definition of the term "adequate protection" and the broad
discretionary powers of a bankruptcy court, it is impossible to predict how
long payments under the Notes could be delayed following commencement of a
bankruptcy case, whether or when the Trustee could repossess or dispose of the
Collateral or whether or to what extent Holders would be compensated for any
delay in payment or loss of value of the Collateral through the requirement of
"adequate protection." Furthermore, in the event a bankruptcy court determines
the value of the Collateral is not sufficient to repay all amounts due on the
Notes, the Holders would hold secured claims to the extent of the value of the
Collateral to which the Holders are entitled, and would hold unsecured claims
with respect to such shortfall. Applicable Federal bankruptcy laws do not
permit the payment and/or accrual of post-petition interest,
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costs and attorneys' fees during a debtor's bankruptcy case unless the claims
are oversecured or the debtor is solvent at the time of reorganization. In
addition, if either Issuer becomes the subject of a bankruptcy case, the
bankruptcy court, among other things, may avoid certain transfers made by the
entity that is the subject of the bankruptcy filing, including, without
limitation, transfers held to be fraudulent conveyances or preferences.
Further, certain limitations exist under the Merchant Marine Act of 1936 on
the ability of non-U.S. citizens to realize upon collateral consisting of
vessels documented under the laws of the United States. To the extent that the
holders of the Notes are non-U.S. citizens, such limitation could adversely
affect the ability of the Trustee to complete foreclosure on the Collateral.
Also, the Trustee may be required to foreclose through a federal court
admiralty proceeding. Such a proceeding would entail compliance with notice and
other procedural requirements, and could require posting of a substantial bond
with the U.S. Marshall.
REPURCHASE UPON CHANGE OF CONTROL
Upon the occurrence of a Change of Control, the Issuers will be required to
offer to repurchase all of the new notes then outstanding (the "Change of
Control Offer") at a purchase price equal to 101% of the aggregate principal
amount thereof, plus accrued and unpaid interest thereon and Liquidated Damages
if any, to the date of repurchase (the "Change of Control Payment"). Within 30
days following any Change of Control, the Issuers must mail or cause to be
mailed a notice to each Holder stating, among other things: (i) the purchase
price and the purchase date, which will be no earlier than 30 days nor later
than 45 days from the date such notice is mailed (the "Change of Control
Payment Date"); (ii) that any Holder electing to have new notes purchased
pursuant to a Change of Control Offer will be required to surrender the new
notes, with the form entitled "Option of Holder to Elect Purchase" on the
reverse of the Notes completed, to the paying agent with respect to the new
notes (the "Paying Agent") at the address specified in the notice prior to the
close of business on the third Business Day preceding the Change of Control
Payment Date; and (iii) that the Holder will be entitled to withdraw such
election if the Paying Agent receives, not later than the close of business on
the second Business Day preceding the Change of Control Payment Date, a
telegram, telex, facsimile transmission or letter setting forth the name of the
Holder, the principal amount of new notes delivered for purchase, and a
statement that such Holder is withdrawing his election to have such new notes
purchased.
The Issuers will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of the Notes in connection with a Change of Control. To the extent
that the provisions of any securities laws or regulations conflict with the
"Change of Control" provisions of the Indenture, the Issuers will comply with
the applicable securities laws and regulations and shall not be deemed to have
breached their obligations under the "Change of Control" provisions of the
Indenture by virtue thereof.
On the Change of Control Payment Date, the Issuers will, to the extent
lawful, (i) accept for payment the new notes or portions thereof tendered
pursuant to the Change of Control Offer, (ii) deposit with the Paying Agent an
amount equal to the Change of Control Payment in respect of all new notes or
portions thereof so tendered and not withdrawn, and (iii) deliver or cause to
be delivered to the Trustee the new notes so accepted, together with an
Officers' Certificate stating that the new notes or portions thereof tendered
to the Issuers are accepted for payment. The Paying Agent will promptly mail to
each Holder of new notes so accepted payment in an amount equal to the purchase
price for such new notes, and the Trustee will authenticate and mail (or cause
to be transferred by book entry) to each Holder a new note equal in principal
amount to any unpurchased portion of the Notes surrendered, if any; provided,
that each such new Note will be in the principal amount of $1,000 or an
integral multiple thereof. The Issuers will announce the result of the Change
of Control Offer on or as soon as practicable after the Change of Control
Payment Date.
Except as described above with respect to a Change of Control, the Indenture
does not contain provisions that permit the Holders to require that the Issuers
repurchase or redeem the Notes in the event of a takeover, recapitalization or
similar restructuring.
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There can be no assurance that sufficient funds will be available at the
time of any Change of Control Offer to make required repurchases.
The Issuers will not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set
forth in the Indenture applicable to a Change of Control Offer made by the
Issuers and purchases all Notes validly tendered and not withdrawn under such
Change of Control Offer.
The term "all or substantially all" as used in the definition of Change of
Control has not been interpreted under New York law (which is the governing law
of the Indenture) to represent a specific quantitative test. As a consequence,
in the event the Holders elect to exercise their rights under the Indenture and
the Issuers elect to contest such election, there could be no assurance as to
how a court would interpret the phrase under New York law, which may have the
effect of preventing the Trustee or the Holders from successfully asserting
that a Change of Control has occurred.
CERTAIN COVENANTS
Limitation on Restricted Payments. The Company will not, and will not permit
any of its Restricted Subsidiaries to, directly or indirectly
(i) declare or pay any dividend or make any distribution on account of any
Equity Interests of the Company or any of its Subsidiaries or make any
other payment to any Excluded Person or Affiliate thereof (other than
(A) dividends or distributions payable in Equity Interests (other than
Disqualified Capital Stock) of the Company or (B) amounts payable to
the Company or any Restricted Subsidiary);
(ii) purchase, redeem or otherwise acquire or retire for value any Equity
Interest of the Company, any Subsidiary or any other Affiliate of the
Company (other than any such Equity Interest owned by the Company or
any Restricted Subsidiary);
(iii) make any principal payment on, or purchase, redeem, defease or
otherwise acquire or retire for value any Indebtedness of the Company or
any Subsidiary Guarantor that is subordinated in right of payment to the
Notes or such Subsidiary Guarantor's Subsidiary Guaranty thereof, as the
case may be, prior to any scheduled principal payment, sinking fund
payment or other payment at the stated maturity thereof; or
(iv) make any Restricted Investment
(all such payments and other actions set forth in clauses (i) through (iv)
above being collectively referred to as "Restricted Payments"), unless, at
the time of such Restricted Payment:
(a) no Default or Event of Default has occurred and is continuing or would
occur as a consequence thereof, and
(b) immediately after giving effect to such Restricted Payment on a pro
forma basis, the Company could incur at least $1.00 of additional
Indebtedness under the Interest Coverage Ratio test set forth in the
covenant described under "--Limitation on Incurrence of Indebtedness,"
and
(c) such Restricted Payment (the value of any such payment, if other than
cash, being determined in good faith by the Managers of the Company and
evidenced by a resolution set forth in an Officers' Certificate
delivered to the Trustee), together with the aggregate of all other
Restricted Payments made after the Issue Date (including Restricted
Payments permitted by clauses (i) and (ii) of the next following
paragraph and excluding Restricted Payments permitted by the other
clauses therein), is less than the sum of
(1) 50% of the Consolidated Net Income of the Company for the period
(taken as one accounting period) from the beginning of the first
fiscal quarter commencing immediately after the Issue Date to the
end of the Company's most recently ended fiscal quarter for which
internal financial
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statements are available at the time of such Restricted Payment (or,
if such Consolidated Net Income for such period is a deficit, 100%
of such deficit), plus
(2) 100% of the aggregate net cash proceeds (or of the net cash
proceeds received upon the conversion of non-cash proceeds into
cash) received by the Company from the issuance or sale, other than
to a Subsidiary, of Equity Interests of the Company (other than
Disqualified Capital Stock) after the Issue Date and on or prior to
the time of such Restricted Payment, plus
(3) 100% of the aggregate net cash proceeds (or of the net cash
proceeds received upon the conversion of non-cash proceeds into
cash) received by the Company from the issuance or sale, other than
to a Subsidiary, of any convertible or exchangeable debt security
of the Company that has been converted or exchanged into Equity
Interests of the Company (other than Disqualified Capital Stock)
pursuant to the terms thereof after the Issue Date and on or prior
to the time of such Restricted Payment (including any additional
net proceeds received by the Company upon such conversion or
exchange) plus
(4) the aggregate Return from Unrestricted Subsidiaries after the Issue
Date and on or prior to the time of such Restricted Payment.
The foregoing provisions will not prohibit:
(i) the payment of any dividend within 60 days after the date of
declaration thereof, if at said date of declaration such payment would
not have been prohibited by the provisions of the Indenture;
(ii) the redemption, purchase, retirement or other acquisition of any
Equity Interests of the Company or Indebtedness of the Company or any
Restricted Subsidiary in exchange for, or out of the proceeds of, the
substantially concurrent sale (other than to a Subsidiary) of, other
Equity Interests of the Company (other than Disqualified Capital
Stock);
(iii) so long as clause (a) above is satisfied, with respect to each
taxable year that the Company qualifies as a Flow Through Entity, the
payment of Permitted Tax Distributions; provided, that (A) prior to
any payment of Permitted Tax Distributions the Company provides an
Officers' Certificate and Opinion of Counsel to the effect that the
Company and each Subsidiary in respect of which such distributions
are being made, qualify as Flow Through Entities for Federal income
tax purposes and for the states in respect of which such
distributions are being made and (B) at the time of such
distribution, the most recent audited financial statements of the
Company provided to the Trustee pursuant to the covenant described
under the caption "--Reports," provide that the Company and each such
Subsidiary were treated as Flow Through Entities for the period of
such financial statements;
(iv) the redemption, repurchase or payoff of any Indebtedness of the
Company or a Restricted Subsidiary with proceeds of any Refinancing
Indebtedness permitted to be incurred pursuant to the provision
described under "--Limitation on Incurrence of Indebtedness;"
(v) cash capital contributions, loans or advances to the BHR Joint Venture
that are used by the BHR Joint Venture to make capital expenditures in
the ordinary course of business; provided, that concurrently with such
contribution, loan or advance all other members of the BHR Joint
Venture make cash capital contributions, loans or advances, as the case
may be, on a pro rata basis, based on each member's ownership interest
in the BHR Joint Venture;
(vi) capital contributions to the BHR Joint Venture to pay for harbor
improvements required by the Harbor Lease (or otherwise necessary for
ordinary course operations of the Majestic Star Casino Vessel) and
other improvements ancillary to such harbor improvements;
(vii) Restricted Investments in an aggregate amount not to exceed $10
million to satisfy the Company's off-site development obligation
under the Development Agreement, less any amounts paid by a third-
party on behalf of the Company; and
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(viii) so long as clause (a) above is satisfied, Restricted Payments
required under the Management Agreement as in effect on the Issue
Date; provided, that the Interest Coverage Ratio for the Company's
most recently ended four full fiscal quarters for which internal
financial statements are available immediately preceding the date on
which such payment is made would have been not less than 1.75 to
1.0, determined on a pro forma basis, as if such payment had been
made during such four-quarter period.
Not later than the date of making any Restricted Payment, the Company will
deliver to the Trustee an Officers' Certificate stating that such Restricted
Payment is permitted and setting forth the basis upon which the calculations
required by this covenant were computed, which calculations may be based upon
the Company's latest available financial statements.
Limitation on Incurrence of Indebtedness. The Company will not, and will not
permit any of its Restricted Subsidiaries to, directly or indirectly, (i)
create, incur, issue, assume, guaranty or otherwise become directly or
indirectly liable with respect to, contingently or otherwise (collectively,
"incur"), any Indebtedness (including, without limitation, Acquired Debt) or
(ii) issue any Disqualified Capital Stock; provided, that the Company may incur
Indebtedness (including, without limitation, Acquired Debt) and issue shares of
Disqualified Capital Stock (and a Restricted Subsidiary may incur Acquired
Debt) if (x) no Default or Event of Default shall have occurred and be
continuing at the time of, or would occur after giving effect on a pro forma
basis to such incurrence or issuance, and (y) the Interest Coverage Ratio for
the Company's most recently ended four full fiscal quarters for which internal
financial statements are available immediately preceding the date on which such
additional Indebtedness is incurred or such Disqualified Capital Stock is
issued would have been not less than 2.0 to 1.0, determined on a pro forma
basis (including a pro forma application of the net proceeds therefrom), as if
the additional Indebtedness had been incurred, or the Disqualified Capital
Stock had been issued, as the case may be, at the beginning of such four-
quarter period; provided, that in the case of Indebtedness (other than
Indebtedness outstanding under the Credit Facility, Purchase Money Obligations,
Capital Lease Obligations or Acquired Debt), the Weighted Average Life to
Maturity and final stated maturity of such Indebtedness is equal to or greater
than the Weighted Average Life to Maturity and final stated maturity of the
Notes.
Notwithstanding the foregoing, the foregoing limitations will not prohibit
the incurrence of:
(a) Indebtedness under the Credit Facility in an aggregate principal amount
not to exceed, at any time, the excess of (x) $20.0 million less the
aggregate amount of repayments of indebtedness contemplated by clause
(iii) under the caption "--Limitation on Asset Sale" (the "Permitted
Amount") over (y) the aggregate principal amount of BHR Attributed Debt
then outstanding;
(b) Purchase Money Obligations in an aggregate principal amount not to
exceed, at any time, the product of (i) $2.5 million times (ii) the
number of Casinos owned and operated solely by the Company and its
Restricted Subsidiaries on the date of such incurrence;
(c) FF&E Financing in an aggregate principal amount not to exceed, at any
time, the sum of (i) the principal amount of FF&E Financing outstanding
on the Issue Date and (ii) the product of (x) $5.0 million times (y)
the number of Casinos owned and operated solely by the Company and its
Restricted Subsidiaries on the date of such incurrence;
(d) performance bonds, appeal bonds, surety bonds, insurance obligations or
bonds and other similar bonds or obligations (including Obligations
under letters of credit) incurred in the ordinary course of business;
(e) Hedging Obligations incurred to fix the interest rate on any variable
rate Indebtedness otherwise permitted by the Indenture; provided, that
the notional principal amount of each such Hedging Obligation does not
exceed the principal amount of the Indebtedness to which such Hedging
Obligation relates;
(f) Indebtedness outstanding on the Issue Date, including the Notes
outstanding on the Issue Date;
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(g) Indebtedness incurred by the Company in an aggregate principal amount
not to exceed, at any time, $3.0 million;
(h) any Subsidiary Guaranty of the Notes; and
(i) Indebtedness issued in exchange for, or the proceeds of which are
contemporaneously used to extend, refinance, renew, replace, or refund
(collectively, "Refinance"), Indebtedness incurred pursuant to the
Interest Coverage Ratio test set forth in the immediately preceding
paragraph, clause (f) above or this clause (i) (the "Refinancing
Indebtedness"); provided, that (i) the principal amount of such
Refinancing Indebtedness does not exceed the principal amount of
Indebtedness so Refinanced (including any required premiums and out-of-
pocket expenses reasonably incurred in connection therewith), (ii) the
Refinancing Indebtedness has a final scheduled maturity that equals or
exceeds the final stated maturity, and a Weighted Average Life to
Maturity that is equal to or greater than the Weighted Average Life to
Maturity, of the Indebtedness being Refinanced and (iii) the
Refinancing Indebtedness ranks, in right of payment, no more favorable
to the Notes than the Indebtedness being Refinanced.
Restrictions on BHR Joint Venture. The Company will not permit the BHR Joint
Venture to, directly or indirectly:
(a) incur any Indebtedness or issue any Disqualified Capital Stock;
provided that the BHR Joint Venture may incur:
(i) Indebtedness if immediately after giving effect to such incurrence
on a pro forma basis, the Company could incur at least $1.00 of
additional Indebtedness under the Interest Coverage Ratio Test set
forth in the covenant described under "--Limitation on Incurrence
of Indebtedness;"
(ii) Indebtedness; provided, that after giving effect to the incurrence
of such Indebtedness, the aggregate principal amount of BHR
Attributed Debt does not exceed the Permitted Amount less the
aggregate principal amount of Indebtedness then outstanding under
clause (a) under the caption "--Limitation on Incurrence of
Indebtedness;" and
(iii) Indebtedness incurred to Refinance any Indebtedness incurred
pursuant to clause (i) above or Indebtedness of the BHR Joint
Venture outstanding on the Issue Date;
(b) create, incur, assume or suffer to exist any Lien on any asset of the
BHR Joint Venture, or on any income or profits therefrom, or assign or
convey any right to receive income therefrom, except Permitted Liens;
(c) declare or pay any dividend or make any distribution on account of any
Equity Interests of the BHR Joint Venture, unless such distributions
are made on a pro rata basis to all members of the BHR Joint Venture,
based on each member's ownership interest therein;
(d) purchase, redeem or otherwise acquire or retire for value any Equity
Interest of the BHR Joint Venture (other than any such Equity Interest
owned by the Company or any Restricted Subsidiary); or
(e) transfer, other than in the ordinary course of business, any assets of
the BHR Joint Venture, unless:
(i) the BHR Joint Venture receives consideration at the time of such
transfer not less than the fair market value of the assets subject
to such transfer;
(ii) at least 75% of the consideration for such transfer is in the form
of cash or Cash Equivalents or liabilities of the BHR Joint
Venture that are assumed by the transferee of such assets
(provided, that following such transfer there is no further
recourse to the BHR Joint Venture with respect to such
liabilities); and
(iii) within 270 days of such transfer, the net proceeds thereof are
(A) invested in assets related to the business of the BHR Joint
Venture, (B) applied to permanently repay Indebtedness of the BHR
Joint Venture, or (C) distributed to the members of the BHR Joint
Venture in accordance with paragraph (c) above.
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Limitation on Asset Sales. The Company will not, and will not permit any
Restricted Subsidiary to, make any Asset Sale unless
(i) the Company or such Restricted Subsidiary receives consideration at the
time of such Asset Sale not less than the fair market value of the
assets subject to such Asset Sale;
(ii) at least 75% of the consideration for such Asset Sale is in the form
of cash or Cash Equivalents or liabilities of the Company or any
Restricted Subsidiary (other than liabilities that are by their terms
subordinated to the Notes) that are assumed by the transferee of such
assets (provided, that following such Asset Sale there is no further
recourse to the Company or its Restricted Subsidiaries with respect to
such liabilities); and
(iii) within 270 days of such Asset Sale, the Net Proceeds thereof are (A)
invested in assets related to the business of the Company or its
Restricted Subsidiaries (which, in the case of an Asset Sale of the
Majestic Star Casino Vessel or any replacement Gaming Vessel (a
"Replacement Vessel"), must be a Gaming Vessel having a fair market
value, as determined by an independent appraisal, at least equal to
the fair market value of the Majestic Star Casino Vessel or such
Replacement Vessel immediately preceding such Asset Sale), (B)
applied to repay Indebtedness under Purchase Money Obligations
incurred in connection with the asset so sold, (C) applied to repay
Indebtedness under the Credit Facility and permanently reduce the
commitment thereunder in the amount of the Indebtedness so repaid or
(D) to the extent not used as provided in clauses (A), (B), or (C)
applied to make an offer to purchase Notes as described below (an
"Excess Proceeds Offer"); provided, that the Company will not be
required to make an Excess Proceeds Offer until the amount of Excess
Proceeds is greater than $5,000,000.
The foregoing provisions in (i) or (ii) above shall not apply to an Event of
Loss.
Pending the final application of any Net Proceeds, the Company may
temporarily reduce Indebtedness under the Credit Facility or temporarily invest
such Net Proceeds in Cash Equivalents.
Net Proceeds not invested or applied as set forth in the preceding clauses
(A), (B) or (C) constitute "Excess Proceeds." If the Company elects, or becomes
obligated to make an Excess Proceeds Offer, the Issuers will offer to purchase
Notes having an aggregate principal amount equal to the Excess Proceeds (the
"Purchase Amount"), at a purchase price equal to 100% of the aggregate
principal amount thereof, plus accrued and unpaid interest thereon and
Liquidated Damages, if any, to the purchase date. The Issuers must commence
such Excess Proceeds Offer not later than 30 days after the expiration of the
270 day period following the Asset Sale that produced such Excess Proceeds. If
the aggregate purchase price for the Notes tendered pursuant to the Excess
Proceeds Offer is less than the Excess Proceeds, the Company and its Restricted
Subsidiaries may use the portion of the Excess Proceeds remaining after payment
of such purchase price for general corporate purposes.
The Indenture will provide that each Excess Proceeds Offer will remain open
for a period of 20 Business Days and no longer, unless a longer period is
required by law (the "Excess Proceeds Offer Period"). Promptly after the
termination of the Excess Proceeds Offer Period (the "Excess Proceeds Payment
Date"), the Issuers will purchase and mail or deliver payment for the Purchase
Amount for the Notes or portions thereof tendered, pro rata or by such other
method as may be required by law, or, if less than the Purchase Amount has been
tendered, all Notes tendered pursuant to the Excess Proceeds Offer. The
principal amount of Notes to be purchased pursuant to an Excess Proceeds Offer
may be reduced by the principal amount of Notes acquired by the Issuers through
purchase or redemption (other than pursuant to a Change of Control Offer)
subsequent to the date of the Asset Sale and surrendered to the Trustee for
cancellation.
Any Excess Proceeds Offer will be conducted in compliance with applicable
regulations under the federal securities laws, including Exchange Act Rule 14e-
1. To the extent that the provisions of any securities laws or regulations
conflict with the "Asset Sale" provisions of the Indenture, the Issuers will
comply with the
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applicable securities laws and regulations and shall not be deemed to have
breached its obligations under the "Asset Sale" provisions of the Indenture by
virtue thereof.
The Indenture will provide that the Company will not, and will not permit
any of its Restricted Subsidiaries to, create or suffer to exist or become
effective any restriction that would impair the ability of the Issuers to make
an Excess Proceeds Offer upon an Asset Sale or, if such Excess Proceeds Offer
is made, to pay for the Notes tendered for purchase.
Limitation on Liens. The Company will not, and will not permit any
Restricted Subsidiary to, directly or indirectly, create, incur, assume or
suffer to exist any Lien on any asset (including, without limitation, all real,
tangible or intangible property) of the Company or any Restricted Subsidiary,
whether now owned or hereafter acquired, or on any income or profits therefrom,
or assign or convey any right to receive income therefrom, except Permitted
Liens.
Limitation on Restrictions on Subsidiary Dividends. The Company will not,
and will not permit any Restricted Subsidiary to, directly or indirectly,
create or otherwise cause or suffer to exist or become effective any
encumbrance or restriction on the ability of any Restricted Subsidiary to:
(i) pay dividends or make any other distributions to the Company or any of
its Restricted Subsidiaries (a) on such Restricted Subsidiary's Capital
Stock or (b) with respect to any other interest or participation in, or
measured by, such Restricted Subsidiary's profits, or
(ii) pay any Indebtedness owed to the Company or any of its Restricted
Subsidiaries, or
(iii) make loans or advances to the Company or any of its Restricted
Subsidiaries, or
(iv) transfer any of its assets to the Company or any of its Restricted
Subsidiaries,
except, with respect to clauses (i) through (iv) above, for such encumbrances
or restrictions existing under or by reason of:
(1) any Credit Facility containing dividend or other payment restrictions
that are not more restrictive than those contained in the documents
governing the Original Credit Facility;
(2) the Indenture, the Security Documents and the Notes;
(3) applicable law;
(4) Acquired Debt; provided, that such encumbrances and restrictions are
not applicable to any Person, or the properties or assets of any
Person, other than the Person, or the property or assets of the Person,
so acquired;
(5) customary non-assignment and net worth provisions of any contract,
lease or license entered into in the ordinary course of business;
(6) customary restrictions on the transfer of assets subject to a Permitted
Lien imposed by the holder of such Lien; and
(7) the agreements governing permitted Refinancing Indebtedness; provided,
that such restrictions contained in any agreement governing such
Refinancing Indebtedness are no more restrictive than those contained
in any agreements governing the Indebtedness being refinanced.
Merger, Consolidation or Sale of Assets. Neither Issuer may consolidate or
merge with or into (regardless of whether such Issuer is the surviving
corporation), or sell, assign, transfer, lease, convey or otherwise dispose of
all or substantially all of its properties or assets (determined on a
consolidated basis for the Company and its Restricted Subsidiaries) in one or
more related transactions to, any other Person, unless:
(i) such Issuer is the surviving Person or the Person formed by or
surviving any such consolidation or merger (if other than such Issuer)
or to which such sale, assignment, transfer, lease, conveyance or other
disposition has been made is a corporation organized and existing under
the laws of the United States of America, any state thereof or the
District of Columbia;
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(ii) the Person formed by or surviving any such consolidation or merger (if
other than such Issuer) or the Person to which such sale, assignment,
transfer, lease, conveyance or other disposition has been made assumes
all the Obligations of such Issuer, pursuant to a supplemental
indenture and in a form reasonably satisfactory to the Trustee, under
the Notes, the Indenture, the Security Documents and the Registration
Rights Agreement;
(iii) immediately after giving effect to such transaction on a pro forma
basis, no Default or Event of Default exists;
(iv) such transaction would not result in the loss or suspension or
material impairment of any Gaming License unless a comparable
replacement Gaming License is effective prior to or simultaneously
with such loss, suspension or material impairment; and
(v) such Issuer, or any Person formed by or surviving any such
consolidation or merger, or to which such sale, assignment, transfer,
lease, conveyance or other disposition has been made, (A) has
Consolidated Net Worth (immediately after the transaction but prior to
any purchase accounting adjustments resulting from the transaction)
equal to or greater than the Consolidated Net Worth of such Issuer
immediately preceding the transaction and (B) will be permitted, at the
time of such transaction and after giving pro forma effect thereto as
if such transaction had occurred at the beginning of the applicable
four-quarter period, to incur at least $1.00 of additional Indebtedness
pursuant to the Interest Coverage Ratio test set forth in the covenant
described under "--Limitation on Incurrence of Indebtedness."
In the event of any transaction (other than a lease) described in and
complying with the conditions listed in the immediately preceding paragraph in
which such Issuer is not the surviving Person, such surviving Person or
transferee shall succeed to, and be substituted for, and may exercise every
right and power of, such Issuer under, and such Issuer shall be discharged from
its Obligations under, the Indenture, the Security Agreements, the Notes and
the Registration Rights Agreement.
Limitation on Transactions with Affiliates. The Company will not, and will
not permit any of its Restricted Subsidiaries to, directly or indirectly, sell,
lease, transfer or otherwise dispose of any of its properties or assets to, or
purchase any property or assets from, or enter into any contract, agreement,
understanding, loan, advance or guaranty with, or for the benefit of, any
Affiliate (each of the foregoing, an "Affiliate Transaction"), except for:
(i) Affiliate Transactions that, together with all related Affiliate
Transactions, have an aggregate value of not more than $2,000,000;
provided, that (i) such transactions are conducted in good faith and on
terms that are no less favorable to the Company or the relevant
Restricted Subsidiary than those that would have been obtained in a
comparable transaction at such time by the Company or such Restricted
Subsidiary on an arm's-length basis from a Person that is not an
Affiliate of the Company or such Restricted Subsidiary and (ii) prior
to entering into such transaction the Company shall have delivered to
the Trustee an Officers' Certificate certifying to such effect;
(ii) Affiliate Transactions that, together with all related Affiliate
Transactions, have an aggregate value of not more than $5,000,000;
provided, that (i) a majority of the disinterested Managers determine
that such transactions are conducted in good faith and on terms that
are no less favorable to the Company or the relevant Restricted
Subsidiary than those that would have been obtained in a comparable
transaction at such time by the Company or such Restricted Subsidiary
on an arm's-length basis from a Person that is not an Affiliate of the
Company or such Restricted Subsidiary and (ii) prior to entering into
such transaction the Company shall have delivered to the Trustee an
Officers' Certificate certifying to such effect; or
(iii) Affiliate Transactions for which the Company delivers to the Trustee
an opinion as to the fairness to the Company or such Restricted
Subsidiary from a financial point of view issued by an accounting,
appraisal or investment banking firm of national standing.
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Notwithstanding the foregoing, the following will be deemed not to be
Affiliate Transactions:
(a) Restricted Payments permitted by the provisions of the Indenture
described above under "--Limitations on Restricted Payments;"
(b) payments pursuant to the Berthing Agreement;
(c) the non-exclusive licensing of any service mark of the Company to an
Affiliate or Affiliates of the Company; and
(d) transactions between or among the Company and any Wholly Owned
Subsidiary of the Company.
Restriction on Sale and Issuance of Subsidiary Stock. The Company will not
sell, and will not permit any Restricted Subsidiary to issue or sell, any
Equity Interests (other than directors' qualifying shares) of any Restricted
Subsidiary to any Person other than the Company or a Wholly Owned Subsidiary of
the Company; provided, that the Company and its Restricted Subsidiaries may
sell all (but not less than all) of the Capital Stock of a Restricted
Subsidiary owned by the Company and its Restricted Subsidiaries if the Net
Proceeds from such Asset Sale are used in accordance with the terms of the
covenant described under "--Limitation on Asset Sales."
Rule 144A Information Requirement. The Issuers and the Subsidiary Guarantors
will furnish to the Holders or beneficial holders of Notes, upon their request,
and to prospective purchasers thereof designated by such Holders or beneficial
holders, the information required to be delivered pursuant to Rule 144A(d)(4)
under the Securities Act for so long as is required for an offer or sale of the
Notes to qualify for an exemption under Rule 144A.
Subsidiary Guarantors. The Company will cause each Restricted Subsidiary to
(i) execute and deliver to the Trustee a supplemental indenture in form
reasonably satisfactory to the Trustee, pursuant to which such Restricted
Subsidiary shall unconditionally guarantee all of the Issuers' Obligations
under the Notes and the Indenture on the terms set forth in the Indenture and
(ii) deliver to the Trustee an opinion of counsel that such supplemental
indenture has been duly authorized, executed and delivered by such Restricted
Subsidiary and constitutes a legal, valid, binding and enforceable obligation,
of such Restricted Subsidiary, in each case subject to customary
qualifications. Thereafter, such Restricted Subsidiary shall be a Subsidiary
Guarantor for all purposes of the Indenture.
Additional Collateral. The Company will, and will cause each of the
Subsidiary Guarantors to, grant to the Trustee a security interest in all
Collateral, whether owned on the Issue Date or thereafter acquired, and to
execute and deliver all documents and to take all action necessary or desirable
to perfect and protect such a security interest in favor of the Trustee.
Restrictions on Activities of Capital. Capital may not hold any assets,
become liable for any obligations or engage in any business activities;
provided, that Capital may be a co-obligor of the Notes pursuant to the terms
of the Indenture and as contemplated by the Purchase Agreement executed by the
Issuers and the Initial Purchaser and, as necessary, may engage in any
activities directly related or necessary in connection therewith.
Limitation on Lines of Business. The Company will not, and will not permit
any of its Restricted Subsidiaries or the BHR Joint Venture to, directly or
indirectly engage to any substantial extent in any line or lines of business
activity other than a Related Business.
Reports. Regardless of whether required by the rules and regulations of the
Securities and Exchange Commission (the "Commission"), so long as any Notes are
outstanding, the Issuers will furnish to the Trustee and Holders, within 15
days after either Issuer is or would have been required to file such with the
Commission, (i) all quarterly and annual financial information that would be
required to be contained in a filing with the Commission on Forms 10-Q and 10-K
if either of the Issuers were required to file such Forms, including for each a
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and, with respect to the annual information only, a report thereon
by the Issuers' independent
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certified public accountants and (ii) all information that would be required to
be contained in a filing with the Commission on Form 8-K if either of the
Issuers were required to file such reports. From and after the time either of
the Issuers files a registration statement with the Commission with respect to
the Notes, the Issuers will file such information with the Commission so long
as the Commission will accept such filings.
EVENTS OF DEFAULT AND REMEDIES
Each of the following will constitute an Event of Default under the
Indenture:
(i) default for 30 days in the payment when due of interest on the Notes;
(ii) default in payment of principal (or premium, if any) on the Notes when
due at maturity, redemption, by acceleration or otherwise;
(iii) default in the performance or breach of the covenants in the
Indenture described under "--Repurchase Upon Change of Control," "--
Limitation on Asset Sales," or "--Merger, Consolidation or Sale of
Assets;"
(iv) failure by the Issuers or any Subsidiary Guarantor for 60 days after
notice to comply with any other agreements in the Indenture or the
Notes;
(v) default under (after giving effect to any applicable grace periods or
any extension of any maturity date) any mortgage, indenture or
instrument under which there may be issued or by which there may be
secured or evidenced any Indebtedness for money borrowed by the Issuers
or any Restricted Subsidiary (or the payment of which is guaranteed by
the Issuers or any Restricted Subsidiary), whether such Indebtedness or
guaranty now exists or is created after the Issue Date, if (A) either
(1) such default results from the failure to pay principal of or
interest on such Indebtedness or (2) as a result of such default the
maturity of such Indebtedness has been accelerated, and (B) the
principal amount of such Indebtedness, together with the principal
amount of any other such Indebtedness with respect to which such a
payment default (after the expiration of any applicable grace period or
any extension of the maturity date) has occurred, or the maturity of
which has been so accelerated, exceeds $5,000,000 in the aggregate;
(vi) failure by the Issuers or any Subsidiary to pay final judgments (other
than any judgment as to which a reputable insurance company has
accepted full liability) aggregating in excess of $5,000,000, which
judgments are not discharged, bonded or stayed within 60 days after
their entry;
(vii) the cessation of substantially all gaming operations of the Issuers
for more than 60 days, except as a result of an Event of Loss,
(viii) any revocation, suspension, expiration (without previous or
concurrent renewal) or loss of any Gaming License for more than 60
days;
(ix) any failure to comply with any material agreement or covenant in, or
material provision of, any Security Document; and
(x) certain events of bankruptcy or insolvency with respect to the Issuers
or any of the Subsidiary Guarantors.
Subject to the terms of the Intercreditor Agreement, if any Event of Default
occurs and is continuing, the Trustee or the Holders of at least 25% in
principal amount of the then outstanding Notes may declare by written notice to
the Company and the Trustee all the Notes to be due and payable immediately.
Notwithstanding the foregoing, in the case of an Event of Default arising from
certain events of bankruptcy or insolvency, all outstanding Notes will become
due and payable without further action or notice. Holders may not enforce the
Indenture or the Notes except as provided in the Indenture. Subject to certain
limitations, Holders of a majority in principal amount of the then outstanding
Notes may direct the Trustee in its exercise of any trust or power.
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The Holders of a majority in aggregate principal amount of the Notes then
outstanding, by written notice to the Trustee, may on behalf of the Holders of
all of the Notes (i) waive any existing Default or Event of Default and its
consequences under the Indenture except a continuing Default or Event of
Default in the payment of interest on, or the principal of, the Notes or a
Default or an Event of Default with respect to any covenant or provision which
cannot be modified or amended without the consent of the Holder of each
outstanding Note affected, and/or (ii) rescind an acceleration and its
consequences if the rescission would not conflict with any judgment or decree
if all existing Events of Default (except nonpayment of principal or interest
that has become due solely because of the acceleration) have been cured or
waived.
The Issuers are required, upon becoming aware of any Default or Event of
Default, to deliver to the Trustee a statement specifying such Default or Event
of Default and what action the Issuers are taking or propose to take with
respect thereto.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No director, member, manager, officer, employee, incorporator, stockholder
or controlling person of the Issuers or any Subsidiary Grantor, as such, will
have any liability for any obligations of the Issuers or any Subsidiary Grantor
under the Notes, the Indenture or the Registration Rights Agreement or for any
claim based on, in respect of, or by reason of, such obligations or their
creation. Each Holder by accepting a Note waives and releases all such
liability. The waiver and release will be part of the consideration for
issuance of the Notes and the Subsidiary Guarantees. Such waiver may not be
effective to waive liabilities under the federal securities laws and it is the
view of the Commission that such a waiver is against public policy.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Issuers may, at their option and at any time, elect to have all of their
obligations discharged with respect to the outstanding Notes ("Legal
Defeasance") except for (i) the rights of Holders of outstanding Notes to
receive payments in respect of the principal of, premium, if any, and interest
on such Notes and Liquidated Damages, if any, when such payments are due from
the trust referred to below, (ii) the Issuers' obligations concerning issuing
temporary Notes, registration of Notes, mutilated, destroyed, lost or stolen
Notes and the maintenance of an office or agency for payment and money for
security payments held in trust, (iii) the rights, powers, trusts, duties and
immunities of the Trustee, and the Issuers' obligations in connection therewith
and (iv) the Legal Defeasance provisions of the Indenture.
In addition, the Issuers may, at their option and at any time, elect to have
their obligations released with respect to certain material covenants that are
described herein ("Covenant Defeasance") and thereafter any omission to comply
with such obligations shall not constitute a Default or Event of Default with
respect to the Notes. In the event Covenant Defeasance occurs, certain events
(not including non-payment, bankruptcy, receivership, rehabilitation and
insolvency events) described under "Events of Default" will no longer
constitute an Event of Default with respect to the Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance,
(i) the Issuers must irrevocably deposit with the Trustee, in trust, for
the benefit of the Holders, cash in U.S. dollars, non-callable
Government Securities, or a combination thereof, in such amounts as
will be sufficient, in the opinion of a nationally recognized firm of
independent public accountants, to pay the principal of, premium, if
any, and interest on the outstanding Notes on the stated maturity or on
the applicable redemption date, as the case may be, and the Issuers
must specify whether the Notes are being defeased to maturity or to a
particular redemption date;
(ii) in the case of Legal Defeasance, the Issuers shall have delivered to
the Trustee an Opinion of Counsel confirming that (A) the Issuers have
received from, or there has been published by, the Internal Revenue
Service a ruling or (B) since the Issue Date, there has been a change
in the applicable Federal income tax law, in either case to the effect
that, and based thereon such Opinion of
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Counsel shall confirm that, the Holders will not recognize income, gain
or loss for Federal income tax purposes as a result of such Legal
Defeasance and will be subject to Federal income tax on the same
amounts, in the same manner and at the same times as would have been the
case if such Legal Defeasance had not occurred;
(iii) in the case of Covenant Defeasance, the Issuers shall have delivered
to the Trustee an Opinion of Counsel confirming that the Holders will
not recognize income, gain or loss for Federal income tax purposes as
a result of such Covenant Defeasance and will be subject to Federal
income tax on the same amounts, in the same manner and at the same
times as would have been the case if such Covenant Defeasance had not
occurred;
(iv) no Default or Event of Default shall have occurred and be continuing
on the date of such deposit (other than a Default or Event of Default
resulting from the borrowing of funds to be applied to such deposit);
(v) such Legal Defeasance or Covenant Defeasance will not result in a
breach or violation of, or constitute a default under any material
agreement or instrument (other than the Indenture) to which the Issuers
or any of the Subsidiaries is a party or by which the Issuers or any of
the Subsidiaries is bound;
(vi) the Issuers must deliver to the Trustee an Officers' Certificate
stating that the deposit was not made by the Issuers with the intent
of preferring the Holders over the other creditors of the Issuers with
the intent of defeating, hindering, delaying or defrauding creditors
of the Issuers or others; and
(vii) the Issuers must deliver to the Trustee an Officers' Certificate and
an Opinion of Counsel, each stating, subject to certain factual
assumptions and bankruptcy and insolvency exceptions, that all
conditions precedent provided for in the Indenture relating to the
Legal Defeasance or the Covenant Defeasance have been complied with.
TRANSFER AND EXCHANGE
A Holder may transfer or exchange Notes in accordance with the Indenture.
The Registrar and the Trustee may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents, and the Issuers may
require a Holder to pay any taxes and fees required by law or permitted by the
Indenture. The Issuers will not be required to transfer or exchange any Note
selected for redemption. The Issuers will not be required to transfer or
exchange any Note for a period of 15 days before a selection of Notes to be
redeemed.
The registered holder of a Note will be treated as the owner of it for all
purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the two succeeding paragraphs, the Indenture and the
Notes may be amended or supplemented with the consent of the Holders of at
least a majority in aggregate principal amount of the Notes then outstanding
(including consents obtained in connection with a tender offer or exchange
offer for Notes) and any existing Default or Event of Default or compliance
with any provision of the Indenture or the Notes may be waived with the consent
of the Holders of a majority in aggregate principal amount of the then
outstanding Notes (including consents obtained in connection with a tender
offer or exchange offer for Notes).
Without the consent of each Holder affected, an amendment or waiver may not
(with respect to any Notes held by a non-consenting Holder):
(i) reduce the principal amount of Notes whose Holders must consent to an
amendment, supplement or waiver;
(ii) reduce the principal of, or the premium (including, without
limitation, redemption premium) on, or change the fixed maturity of,
any Note; alter the provisions with respect to the payment on
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redemption of the Notes; or alter the price at which repurchases of the
Notes may be made pursuant to an Excess Proceeds Offer or Change of
Control Offer;
(iii) reduce the rate of or change the time for payment of interest on any
Note;
(iv) waive a Default or Event of Default in the payment of principal of or
premium, if any, or interest on the Notes (except a rescission of
acceleration of the Notes by the Holders of at least a majority in
aggregate principal amount of the Notes and a waiver of the payment
default that resulted from such acceleration);
(v) make any Note payable in money other than that stated in the Notes;
(vi) make any change in the provisions of the Indenture relating to waivers
of past Defaults with respect to, or the rights of Holders to receive,
payments of principal of or interest on the Notes;
(vii) waive a redemption payment with respect to any Note;
(viii) adversely affect the contractual ranking of the Notes or Subsidiary
Guarantees; or
(ix) make any change in the foregoing amendment and waiver provisions.
Notwithstanding the foregoing, without the consent of the Holders, the
Issuers and the Trustee may amend or supplement the Indenture, the Notes and
the Security Documents to cure any ambiguity, defect or inconsistency, to
provide for uncertificated Notes in addition to or in place of certificated
Notes, to provide for the assumption of the Issuers' or the Subsidiary
Guarantors' obligations to Holders in the case of a merger or consolidation, to
make any change that would provide any additional rights or benefits to the
Holders or that does not adversely affect the legal rights of any such Holder
under the Indenture or the Notes, to release any Subsidiary Guaranty permitted
to be released under the terms of the Indenture, or to comply with requirements
of the Commission in order to effect or maintain the qualification of the
Indenture under the Trust Indenture Act.
CONCERNING THE TRUSTEE
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of the Issuers, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any
such claim as security or otherwise. The Trustee will be permitted to engage in
other transactions; provided, that, if the Trustee acquires any conflicting
interest, it must eliminate such conflict within 90 days, apply to the
Commission for permission to continue, or resign.
The Holders of a majority in principal amount of the then outstanding Notes
will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. The Indenture provides that in case an Event of Default
occurs (and is not cured), the Trustee will be required, in the exercise of its
power, to use the degree of care of a prudent person in the conduct of his or
her own affairs. Subject to such provisions, the Trustee will be under no
obligation to exercise any of its rights or powers under the Indenture at the
request of any Holder, unless such Holder shall have offered to the Trustee
security and indemnity satisfactory to it against any loss, liability or
expense.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for a full definition of all such terms, as well as
any other capitalized terms used herein for which no definition is provided.
"Acquired Debt" means Indebtedness of a Person existing at the time such
Person is merged with or into the Company or a Restricted Subsidiary or becomes
a Restricted Subsidiary, other than Indebtedness incurred in connection with,
or in contemplation of, such Person merging with or into the Company or a
Restricted Subsidiary or becoming a Restricted Subsidiary.
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"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, will mean
(a) the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise or (b) beneficial
ownership of 10% or more of the voting securities of such Person.
"Applicable Capital Gain Tax Rate" means a rate equal to the sum of (i) the
highest marginal Federal capital gain tax rate applicable to an individual who
is a citizen of the United States plus (ii) an amount equal to the sum of the
highest marginal state and local capital gain tax rates applicable to an
individual who is a resident of the State of New York, multiplied by a factor
equal to 1 minus the rate described in clause (i) above.
"Applicable Income Tax Rate" means a rate equal to the sum of (i) the
highest marginal Federal income tax rate applicable to an individual who is a
citizen of the United States plus (ii) an amount equal to the sum of the
highest marginal state and local income tax rates applicable to an individual
who is a resident of the State of New York, multiplied by a factor equal to 1
minus the rate described in clause (i) above.
"Asset Sale" means any (i) transfer (as defined), other than in the ordinary
course of business, of any assets of the Company or any Restricted Subsidiary;
(ii) direct or indirect issuance or sale of any Capital Stock of any Restricted
Subsidiary (other than directors' qualifying shares), in each case to any
Person (other than the Company or a Restricted Subsidiary); or (iii) Event of
Loss. For purposes of this definition, (a) any series of transactions that are
part of a common plan shall be deemed a single Asset Sale and (b) the term
"Asset Sale" shall not include (1) any series of transactions that have a fair
market value (or result in gross proceeds) of less than $1 million, until the
aggregate fair market value and gross proceeds of the transactions excluded
from the definition of Asset Sale pursuant to this clause (b)(1) exceed $5
million, or (2) any disposition of all or substantially all of the assets of
the Company that is governed under and complies with the terms of the covenant
described under "--Merger, Consolidation or Sale of Assets."
"Bankruptcy Code" means the United States Bankruptcy Code, codified at 11
U.S.C. (S)101-1330, as amended.
"BDI" means Barden Development, Inc., an Indiana corporation.
"BDI Pledge Agreement" means that certain Pledge Agreement executed by BDI
and Gary Riverboat Gaming, LLC providing for a pledge of the entire membership
interest in the Company held by each of them in favor of the Trustee, for the
ratable benefit of the Holders of the Notes, as the same may be amended in
accordance with the terms thereof and the Indenture.
"beneficial owner" has the meaning attributed to it in Rules 13d-3 and 13d-5
under the Exchange Act (as in effect on the Issue Date), whether or not
applicable, except that a "person" shall be deemed to have "beneficial
ownership" of all shares that any such person has the right to acquire, whether
such right is exercisable immediately or only after the passage of time.
"Berthing Agreement" means the Majestic Berthing Agreement, dated as of
April 23, 1996, by and between the Company and the BHR Joint Venture.
"BHR Attributed Debt" means the product of (i) the aggregate principal
amount of all outstanding Indebtedness incurred pursuant to clause (a)(ii)
under the caption "--Restrictions on BHR Joint Venture" times (ii) the
Company's percentage interest in the BHR Joint Venture; provided that any such
Indebtedness shall cease to be BHR Attributed Debt, as of the first date after
the date such Indebtedness is so incurred on which the Company can incur at
least $1.00 of additional Indebtedness under the Interest Coverage Ratio Test
set forth in the covenant described under the caption "--Limitation or
Incurrence of Indebtedness."
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"BHR Joint Venture" means Buffington Harbor Riverboats, LLC, a Delaware
limited liability company, in which the Company currently owns a 50% membership
interest, and any other Flow Through Entity owned solely by the members of the
BHR Joint Venture.
"BHR Operating Agreement" means the First Amended and Restated Operating
Agreement of the BHR Joint Venture, made as of October 31, 1995, as amended, by
and between Trump Indiana, Inc., a Delaware corporation, and the Company.
"BHR Pledge Agreement" means that certain Pledge Agreement executed by the
Company, providing for a pledge of the Company's entire membership interest in
the BHR Joint Venture in favor of the Trustee, for the ratable benefit of the
Holders of the Notes, as the same may be amended in accordance with the terms
thereof and the Indenture.
"Business Day" means any day other than a Legal Holiday.
"Capital" means The Majestic Star Casino Capital Corp., an Indiana
corporation and a wholly owned subsidiary of the Company.
"Capital Lease Obligation" means, as to any Person, the obligations of such
Person under a lease that are required to be classified and accounted for as
capital lease obligations under GAAP, and the amount of such obligations at any
date shall be the capitalized amount of such obligations at such date,
determined in accordance with GAAP.
"Capital Stock" means, (i) with respect to any Person that is a corporation,
any and all shares, interests, participations, rights or other equivalents
(however designated) of corporate stock, (ii) with respect to a limited
liability company, any and all membership interests, and (iii) with respect to
any other Person, any and all partnership, joint venture or other equity
interests of such Person.
"Cash Equivalent" means (i) any evidence of Indebtedness issued or directly
and fully guaranteed or insured by the United States of America or any agency
or instrumentality thereof (provided that the full faith and credit of the
United States of America is pledged in support thereof); (ii) time deposits and
certificates of deposit and commercial paper or bankers acceptance issued by
the parent corporation of any domestic commercial bank of recognized standing
having combined capital and surplus in excess of $250,000,000 and commercial
paper issued by others rated at least A-2 or the equivalent thereof by Standard
& Poor's Corporation or at least P-2 or the equivalent thereof by Moody's
Investors Service, Inc. and in each case maturing within one year after the
date of acquisition; (iii) investments in money market funds substantially all
of whose assets comprise securities of the type described in clauses (i) and
(ii) above and (iv) repurchase obligations for underlying securities of the
types and with the maturities described above.
"Casino" means a gaming establishment owned by the Company or a Restricted
Subsidiary and containing at least 500 slot machines and 10,000 square feet of
space dedicated to the operation of games of chance.
"Change of Control" means
(i) any merger or consolidation of the Company with or into any Person or
any sale, transfer or other conveyance, whether direct or indirect, of
all or substantially all of the assets of the Company, on a
consolidated basis, in one transaction or a series of related
transactions, if, immediately after giving effect to such
transaction(s), any "person" or "group" (as such terms are used for
purposes of Sections 13(d) and 14(d) of the Exchange Act, whether or
not applicable) (other than an Excluded Person) is or becomes the
"beneficial owner," directly or indirectly, of more than 50% of the
total voting power in the aggregate of the Voting Stock of the
transferee(s) or surviving entity or entities,
(ii) any "person" or "group" (as such terms are used for purposes of
Sections 13(d) and 14(d) of the Exchange Act, whether or not
applicable) (other than an Excluded Person) is or becomes the
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"beneficial owner," directly or indirectly, of more than 50% of the
total voting power in the aggregate of the Voting Stock of the Company,
(iii) during any period of 12 consecutive months after the Issue Date,
individuals who at the beginning of any such 12-month period
constituted the Managers of the Company (together with any new
directors whose election by such Managers or whose nomination for
election by the members of the Company was approved by a vote of a
majority of the directors then still in office who were either
directors at the beginning of such period or whose election or
nomination for election was previously so approved, including new
directors designated in or provided for in an agreement regarding the
merger, consolidation or sale, transfer or other conveyance, of all
or substantially all of the assets of the Company, if such agreement
was approved by a vote of such majority of directors) cease for any
reason to constitute a majority of the Managers of the Company then
in office,
(iv) the Company adopts a plan of liquidation,
(v) the first day on which the Company fails to own 100% of the issued and
outstanding Equity Interests of Capital, or
(vi) the first day on which (A) the Company fails to own at least 45% of
issued and outstanding Equity Interests of the BHR Joint Venture, (B)
any Person owns a greater percentage interest than the Company in the
BHR Joint Venture or (C) any Excluded Person directly or indirectly
owns any interest in the BHR Joint Venture other than the interest
owned by the Company.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" means The Majestic Star Casino, LLC, an Indiana limited liability
company.
"Consolidated Cash Flow" means, with respect to any Person (the referent
Person) for any period,
(a) consolidated income (loss) from operations of such Person and its
subsidiaries for such period, determined in accordance with GAAP, plus
(b) to the extent such amounts are deducted in calculating such income (loss)
from operations of such Person for such period, and without duplication (i)
amortization, depreciation and other non-cash charges (including, without
limitation, amortization of goodwill, deferred financing fees, and other
intangibles but excluding (x) non-cash charges incurred after the Issue
Date that require an accrual of or a reserve for cash charges for any
future period and (y) normally recurring accruals such as reserves against
accounts receivables), and (ii) Pre-Opening Expenses;
provided, that (1) the income from operations of any Person that is not a
Wholly Owned Subsidiary of the referent Person or that is accounted for by the
equity method of accounting will be included only to the extent of the amount
of dividends or distributions paid during such period to the referent Person or
a Wholly Owned Subsidiary of the referent Person, (2) the income from
operations of any Person acquired in a pooling of interests transaction for any
period prior to the date of such acquisition will be excluded, and (3) the
income from operations of any Restricted Subsidiary will not be included to the
extent that declarations of dividends or similar distributions by that
Restricted Subsidiary are not at the time permitted, directly or indirectly, by
operation of the terms of its organizational documents or any agreement,
instrument, judgment, decree, order, statute, rule or governmental regulation
applicable to that Restricted Subsidiary or its owners.
"Consolidated Interest Expense" means, with respect to any Person for any
period, (a) the consolidated interest expense of such Person and its
subsidiaries for such period, whether paid or accrued (including amortization
of original issue discount, noncash interest payment, and the interest
component of Capital Lease Obligations), to the extent such expense was
deducted in computing Consolidated Net Income of such Person for such period
less (b) amortization expense, write-off of deferred financing costs and any
charge related to any premium or penalty paid, in each case accrued during such
period in connection with redeeming or retiring any Indebtedness before its
stated maturity, as determined in accordance with GAAP, to the extent such
expense, cost or charge was included in the calculation made pursuant to clause
(a) above.
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"Consolidated Net Income" means, with respect to any Person (the referent
Person) for any period, the aggregate of the Net Income of such Person and its
subsidiaries for such period, determined on a consolidated basis in accordance
with GAAP; provided, that (i) the Net Income of any Person relating to any
portion of such period that such Person (a) is not a Wholly Owned Subsidiary of
the referent Person or (b) is accounted for by the equity method of accounting
will be included only to the extent of the amount of dividends or distributions
paid to the referent Person or a Wholly Owned Subsidiary of the referent Person
during such portion of such period, (ii) the Net Income of any Person acquired
in a pooling of interests transaction for any period prior to the date of such
acquisition will be excluded, and (iii) the Net Income of any Restricted
Subsidiary will not be included to the extent that declarations of dividends or
similar distributions by that Restricted Subsidiary are not at the time
permitted, directly or indirectly, by operation of the terms of its
organizational documents or any agreement, instrument, judgment, decree, order,
statute, rule or governmental regulation applicable to that Restricted
Subsidiary or its owners.
"Consolidated Net Worth" means, with respect to any Person, the total
stockholders' (or members') equity of such Person determined on a consolidated
basis in accordance with GAAP, adjusted to exclude (to the extent included in
calculating such equity), (i) the amount of any such stockholders' (or
members') equity attributable to Disqualified Capital Stock or treasury stock
of such Person and its consolidated subsidiaries, and (ii) all upward
revaluations and other write-ups in the book value of any asset of such Person
or a consolidated subsidiary of such Person subsequent to the Issue Date, and
(iii) all Investments in subsidiaries of such Person that are not consolidated
subsidiaries and in Persons that are not subsidiaries of such Person.
"Credit Facility" means (a) the credit facility, dated within 45 days of the
Issue Date (the "Original Credit Facility"), between the Company and the lender
thereunder (any related notes, guarantees, collateral documents, instruments
and agreements executed in connection therewith) and (b) any amendment,
modification, supplement, refunding, refinancing or replacement thereof that
(i) has terms and conditions (including with respect to applicable interest
rates and fees) customary for similar facilities extended to borrowers
comparable to the Company, and (ii) does not permit the Company to incur
Indebtedness in an aggregate principal amount at any time outstanding in excess
of $20.0 million.
"Default" means any event that is, or after notice or the passage of time or
both would be, an Event of Default.
"Development Agreement" means the Development Agreement, dated March 26,
1996, by and between the Company and the City of Gary, Indiana.
"Disqualified Capital Stock" means any Equity Interest that (i) either by
its terms (or by the terms of any security into which it is convertible or for
which it is exchangeable) is or upon the happening of an event would be
required to be redeemed or repurchased prior to the final stated maturity of
the Notes or is redeemable at the option of the holder thereof at any time
prior to such final stated maturity, or (ii) is convertible into or
exchangeable at the option of the issuer thereof or any other Person for debt
securities.
"Equity Holder" means (a) with respect to a corporation, each holder of
stock of such corporation, (b) with respect to a limited liability company or
similar entity, each member of such limited liability company or similar
entity, (c) with respect to a partnership, each partner of such partnership and
(d) with respect to any disregarded entity, the owner of such entity.
"Equity Interests" means Capital Stock or warrants, options or other rights
to acquire Capital Stock (but excluding any debt security that is convertible
into, or exchangeable for, Capital Stock).
"Event of Loss" means, with respect to any property or asset, any (i) loss,
destruction or damage of such property or asset or (ii) any condemnation,
seizure or taking, by exercise of the power of eminent domain or otherwise, of
such property or asset, or confiscation or requisition of the use of such
property or asset.
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"Excluded Assets" means (i) cash, deposit accounts and other cash
equivalents; (ii) assets securing Purchase Money Obligations or Capital Lease
Obligations permitted to be incurred under the Indenture; (iii) any agreements,
permits, licenses or the like that cannot be subject to a Lien under the
Security Documents without the consent of third parties, which consent is not
obtainable by the Company; and (iv) all Gaming Licenses; provided, that
Excluded Assets does not include the proceeds of the assets under clauses (ii);
(iii) or (iv) or of any other Collateral to the extent such proceeds do not
constitute Excluded Assets under clause (i) above; without limiting the
foregoing, Excluded Assets shall include gaming equipment subject to such
Purchase Money Obligations or Capital Lease Obligations, whether or not such
gaming equipment is located on or attached to the Majestic Star Casino Vessel.
"Excluded Person" means (i) any employee benefit plan of the Company or any
trustee or similar fiduciary holding Capital Stock of the Company for or
pursuant to the terms of any such plan, (ii) BDI, (iii) Barden Management,
Inc., so long as it is owned by Don H. Barden, (iv) Don H. Barden or his spouse
or an entity controlled by either of them, (v) the estate of Don H. Barden,
(vi) any descendant of Don H. Barden or the spouse of any such descendant,
(vii) the estate of any such descendant or the spouse of any such descendant,
(viii) any trust or other arrangement for the benefit of the spouse of Don H.
Barden or any such descendant or the spouse of any such descendant and (ix) any
charitable organization or trust established by Don H. Barden.
"FF&E" means furniture, fixture and equipment acquired by the Company or a
Restricted Subsidiary in the ordinary course of business for use in the
operation of a Casino.
"FF&E Financing" means Purchase Money Obligations or Capital Lease
Obligations incurred solely to acquire FF&E; provided, that the principal
amount of such Indebtedness does not exceed the cost (including sales and
excise taxes, installation and delivery charges and other direct costs and
expenses) of the FF&E purchased or leased with the proceeds thereof.
"FF&E Lender" means a Person that is not an Affiliate of the Company and is
a lender under FF&E Financing.
"Flow Through Entity" means an entity that (a) for Federal income tax
purposes constitutes (i) an "S corporation" (as defined in Section 1361(a) of
the Code), (ii) a "qualified subchapter S subsidiary" (as defined in Section
1361(b)(3)(B) of the Code), (iii) a "partnership" (within the meaning of
Section 7701(a)(2) of the Code) other than an "publicly traded partnership" (as
defined in Section 7704 of the Code), or (iv) a business entity that is
disregarded as an entity separate from its owner under the Code, the Treasury
Regulations or any published administrative guidance of the Internal Revenue
Service (the entities described in the immediately preceding clauses (i), (ii),
(iii) and (iv), a "Federal Flow Through Entity") and (b) for state and local
jurisdictions in respect of which Permitted Tax Distributions are being made,
is subject to treatment on a basis under applicable state or local income tax
law substantially similar to a Federal Flow Through Entity.
"gaap" means generally accepted accounting principles, as in effect from
time to time, set forth in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board or in
such other statements by such other entity as approved by a significant segment
of the accounting profession, and in the rules and regulations of the
Commission.
"GAAP" means gaap as in effect on the Issue Date.
"Gaming Authorities" means any agency, authority, board, bureau, commission,
department, office or instrumentality of any nature whatsoever of the United
States or foreign government, any state, province or any city or other
political subdivision, whether now or hereafter existing, or any officer or
official thereof, including, without limitation, the IGC and any other agency
with authority to regulate any gaming operation (or proposed gaming operation)
owned, managed or operated by the Company or any of its Subsidiaries.
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"Gaming Licenses" means every material license, material franchise or other
material approval or authorization required to own, lease, operate or otherwise
conduct or manage riverboat, dockside or land-based gaming activities in any
state or jurisdiction in which the Company or any of its Restricted
Subsidiaries conducts business (including, without limitation, all such
licenses granted by the IGC under the Indiana Riverboat Gambling Act, and the
rules and regulations promulgated thereunder), and all applicable liquor
licenses.
"Gaming Vessel" means a water-based casino (i) that is substantially similar
in size and space to the Majestic Star Casino Vessel, (ii) with at least the
same overall qualities and amenities as the Majestic Star Casino Vessel, and
(iii) that is developed, constructed and equipped to be in compliance with all
Federal, state and local laws, including, without limitation, the requirements
of the Indiana Riverboat Gambling Act. In the event the laws of the State of
Indiana change to permit the development and operation of land-based casinos,
the term "Gaming Vessel" shall be deemed to include a land-based casino meeting
the requirements of clauses (i), (ii) and (iii) above.
"Government Securities" means (i) direct obligations of the United States of
America for the timely payment of which its full faith and credit is pledged or
(ii) obligations of a Person controlled or supervised by and acting as an
agency or instrumentality of the United States of America the timely payment of
which is unconditionally guaranteed as a full faith and credit obligation by
the United States of America, which, in either case, are not callable or
redeemable at the option of the issuer thereof, and shall also include a
depository receipt issued by a bank (as defined in Section 3(a)(2) of the
Securities Act), as custodian with respect to any such Government Security or a
specific payment of principal of or interest on any such Government Security
held by such custodian for the account of the holder of such depository
receipt; provided, that (except as required by law) such custodian is not
authorized to make any deduction from the amount payable to the holder of such
depository receipt from any amount received by the custodian in respect of the
Government Security or the specific payment of principal of or interest on the
Government Security evidenced by such depository receipt.
"Governmental Authority" means any agency, authority, board, bureau,
commission, department, office or instrumentality of any nature whatsoever of
the United States or foreign government, any state, province or any city or
other political subdivision or otherwise and whether now or hereafter in
existence, or any officer or official thereof, and any maritime authority.
"guaranty" or "guarantee," used as a noun, means any guaranty (other than by
endorsement of negotiable instruments for collection in the ordinary course of
business), direct or indirect, in any manner (including, without limitation,
letters of credit and reimbursement agreements in respect thereof), of all or
any part of any Indebtedness or other Obligation. "guarantee," used as a verb,
has a correlative meaning.
"Harbor Lease" means the Harbor Lease Agreement, dated as of June 29, 1995,
by and between Trump Indiana, Inc. and Lehigh Portland Cement Company as
assigned by Trump Indiana, Inc. to the BHR Joint Venture pursuant to the
Assignment of Harbor Lease Agreement, dated as of October 31, 1995, by and
between Trump Indiana, Inc. and the BHR Joint Venture.
"Hedging Obligations" means, with respect to any Person, the Obligations of
such Person under (i) interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements and (ii) other agreements or
arrangements designed to protect such Person against fluctuations in interest
rates.
"Holder" means the Person in whose name a Note is registered in the register
of the Notes.
"IGC" means the Indiana Gaming Commission, or any successor Gaming
Authority.
"Indebtedness" of any Person means (without duplication) (i) all liabilities
and obligations, contingent or otherwise, of such Person (A) in respect of
borrowed money (regardless of whether the recourse of the lender is
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to the whole of the assets of such Person or only to a portion thereof), (B)
evidenced by bonds, debentures, notes or other similar instruments, (C)
representing the deferred purchase price of property or services (other than
trade payables on customary terms incurred in the ordinary course of business),
(D) created or arising under any conditional sale or other title retention
agreement with respect to property acquired by such Person (even though the
rights and remedies of the seller or lender under such agreement in the event
of default are limited to repossession or sale of such property), (E)
representing Capital Lease Obligations, (F) under bankers' acceptance and
letter of credit facilities, (G) to purchase, redeem, retire, defease or
otherwise acquire for value any Disqualified Capital Stock, or (H) in respect
of Hedging Obligations; (ii) all Indebtedness of others that is guaranteed by
such Person; and (iii) all Indebtedness of others that is secured by (or for
which the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any Lien on property (including, without
limitation, accounts and contract rights) owned by such Person, even though
such Person has not assumed or become liable for the payment of such
Indebtedness, provided, that the amount of such Indebtedness shall (to the
extent such Person has not assumed or become liable for the payment of such
Indebtedness) be the lesser of (x) the fair market value of such property at
the time of determination and (y) the amount of such Indebtedness. The amount
of Indebtedness of any Person at any date shall be the outstanding balance at
such date of all unconditional obligations as described above and the maximum
liability, upon the occurrence of the contingency giving rise to the
obligation, of any contingent obligations at such date. Notwithstanding the
foregoing, the term Indebtedness shall not include obligations arising from the
honoring by a bank or other financial institution of a check, draft or similar
instrument drawn against insufficient funds in the ordinary course of business,
provided, that such obligation is extinguished within two business days of its
incurrence. The principal amount outstanding of any Indebtedness issued with
original issue discount is the accredited value of such Indebtedness.
"Issuers" means Capital and the Company.
"Interest Coverage Ratio" means, for any period, the ratio of (i)
Consolidated Cash Flow of the Company for such period, to (ii) Consolidated
Interest Expense of the Company for such period. In calculating Interest
Coverage Ratio for any period, pro forma effect shall be given to the
incurrence, assumption, guarantee, repayment, repurchase, redemption or
retirement by the Company or any of its Subsidiaries of any Indebtedness
subsequent to the commencement of the period for which the Interest Coverage
Ratio is being calculated, as if the same had occurred at the beginning of the
applicable period. For purposes of making the computation referred to above,
acquisitions that have been made by the Company or any of its Restricted
Subsidiaries, including all mergers and consolidations, subsequent to the
commencement of such period shall be calculated on a pro forma basis, assuming
that all such acquisitions, mergers and consolidations had occurred on the
first day of such period. Without limiting the foregoing, the financial
information of the Company with respect to any portion of such period that
falls before the Issue Date shall be adjusted to give pro forma effect to the
issuance of the Notes and the application of the proceeds therefrom as if they
had occurred at the beginning of such period.
"Investments" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of loans,
guarantees, advances or capital contributions (excluding (i), payroll
commission, travel and similar advances to officers and employees of such
Person made in the ordinary course of business and (ii) bona fide accounts
receivable arising from the sale of goods or services in the ordinary course of
business consistent with past practice), purchases or other acquisitions for
consideration of Indebtedness, Equity Interests or other securities, and any
other items that are or would be classified as investments on a balance sheet
prepared in accordance with GAAP.
"Issue Date" means the date upon which the Notes are first issued.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in the City of New York or at a place of payment are authorized by
law, regulation or executive order to remain closed.
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"Lien" means any mortgage, lien, pledge, charge, security interest or
encumbrance of any kind, regardless of whether filed, recorded or otherwise
perfected under applicable law (including any conditional sale or other title
retention agreement, any lease in the nature thereof, any option or other
agreement to sell or give a security interest in and any filing of or agreement
to give any financing statement under the Uniform Commercial Code (or
equivalent statutes) of any jurisdiction).
"Majestic Star Casino Vessel" means the Majestic Star riverboat casino
currently operated by the Company.
"Management Agreement" means that certain Management Agreement, dated the
Issue Date, by and between the Company and BDI, pursuant to which the Company
will pay to BDI fees for acting as the Manager of the Company, which fees, for
any fiscal quarter, shall not exceed 5% of Consolidated Cash Flow for the
immediately preceding fiscal quarter.
"Managers" means (i) for so long as the Company is a limited liability
company, the Managers appointed pursuant to the Operating Agreement or (ii)
otherwise, the Board of Directors of the Company.
"Members" means the members of the Company.
"Net Income" means, with respect to any Person for any period, the net
income (loss) of such Person for such period, determined in accordance with
GAAP, reduced by the maximum amount of Permitted Tax Distributions for such
period, excluding (to the extent included in calculating such net income) (i)
any gain or loss, together with any related taxes paid or accrued on such gain
or loss, realized in connection with any Asset Sales and dispositions pursuant
to sale-leaseback transactions, and (ii) any extraordinary gain or loss,
together with any related taxes paid or accrued on such gain or loss.
"Net Proceeds" means the aggregate proceeds received in the form of cash or
Cash Equivalents in respect of any Asset Sale (including issuance or other
payments in an Event of Loss and payments in respect of deferred payment
obligations and any cash or Cash Equivalents received upon the sale or
disposition of any non-cash consideration received in any Asset Sale, in each
case when received), net of
(i) the reasonable and customary direct out-of-pocket costs relating to
such Asset Sale (including, without limitation, legal, accounting and
investment banking fees and sales commissions), other than any such
costs payable to an Affiliate of the Company,
(ii) taxes required to be paid by the Company, any of its Subsidiaries, or
any Equity Holder of the Company (or, in the case of any Company
Equity Holder that is a Flow Through Entity, the Upper Tier Equity
Holder of such Flow Through Entity) in connection with such Asset Sale
in the taxable year that such sale is consummated or in the
immediately succeeding taxable year, the computation of which shall
take into account the reduction in tax liability resulting from any
available operating losses and net operating loss carryovers, tax
credits and tax credit carryforwards, and similar tax attributes,
(iii) amounts required to be applied to the permanent repayment of
Indebtedness in connection with such Asset Sale, and
(iv) appropriate amounts provided as a reserve by the Company or any
Restricted Subsidiary, in accordance with GAAP, against any
liabilities associated with such Asset Sale and retained by the
Company or such Restricted Subsidiary, as the case may be, after such
Asset Sale (including, without limitation, as applicable, pension and
other post-employment benefit liabilities, liabilities related to
environmental matters and liabilities under any indemnification
arising from such Asset Sale).
"Obligation" means any principal, premium, interest, penalty, fee,
indemnification, reimbursement, damage and other obligation and liability
payable under the documentation governing any liability.
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"Officers' Certificate" means a certificate signed on behalf of the Issuers
by two Officers of each of the Company and Capital, in each case, one of whom
must be the President, Chief Operating and Financial Officer, Treasurer,
Controller or a Senior Vice President.
"Opinion of Counsel" means an opinion from legal counsel who is reasonably
acceptable to the Trustee. Such counsel may be an employee of or counsel to the
Company, any Subsidiary of the Company or the Trustee.
"Permitted Investments" means
(i) Investments in the Company or in any Wholly Owned Subsidiary;
(ii) Investments in Cash Equivalents;
(iii) Investments in a Person, if, as a result of such Investment, such
Person (A) becomes a Wholly Owned Subsidiary, or (B) is merged,
consolidated or amalgamated with or into, or transfers or conveys
substantially all of its assets to, or is liquidated into, the
Company or a Wholly Owned Subsidiary;
(iv) Hedging Obligations;
(v) Investments as a result of consideration received in connection with an
Asset Sale made in compliance with the covenant described under the
caption "--Limitation on Asset Sales";
(vi) Investments existing on the Issue Date;
(vii) Investments paid for solely with Capital Stock (other than
Disqualified Capital Stock) of the Company;
(viii) credit extensions to gaming customers in the ordinary course of
business, consistent with industry practice;
(ix) stock, obligations or securities received in settlement of debts
created in the ordinary course of business and owing to the Company in
satisfaction of judgments and
(x) loans or advances to employees of the Company and its Subsidiaries made
in the ordinary course of business in an aggregate amount not to exceed
$500,000 at any one time outstanding.
"Permitted Liens" means:
(i) Liens arising by reason of any judgment, decree or order of any court
for an amount and for a period not resulting in an Event of Default
with respect thereto, so long as such Lien is being contested in good
faith and is adequately bonded, and any appropriate legal proceedings
that may have been duly initiated for the review of such judgment,
decree or order shall not have been finally adversely terminated or the
period within which such proceedings may be initiated shall not have
expired;
(ii) security for the performance of bids, tenders, trade, contracts (other
than contracts for the payment of money) or leases, surety bonds,
performance bonds and other obligations of a like nature incurred in
the ordinary course of business, consistent with industry practice;
(iii) Liens (other than Liens arising under ERISA) for taxes, assessments
or other governmental charges not yet due or that are being contested
in good faith and by appropriate proceedings if adequate reserves
with respect thereto are maintained on the books of the Company in
accordance with gaap;
(iv) Liens of carriers, warehousemen, mechanics, landlords, material men,
repairmen or other like Liens arising by operation of law in the
ordinary course of business consistent with industry practices (other
than Liens arising under ERISA) and Liens on deposits made to obtain
the release of such Liens if (a) the underlying obligations are not
overdue for a period of more than 30 days or (b) such Liens are being
contested in good faith and by appropriate proceedings and adequate
reserves with respect thereto are maintained on the books of the
Company in accordance with gaap;
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(v) easements, rights of way, zoning and similar restrictions and other
similar encumbrances or title defects incurred in the ordinary course
of business, consistent with industry practices that, in the aggregate,
are not substantial in amount, and that do not in any case materially
detract from the value of the property subject thereto (as such
property is used by the Company or a Subsidiary) or interfere with the
ordinary conduct of the business of the Company or any of its
Subsidiaries; provided, that such Liens are not incurred in connection
with any borrowing of money or any commitment to loan any money or to
extend any credit;
(vi) pledges or deposits made in the ordinary course of business in
connection with workers' compensation, unemployment insurance and
other types of social security legislation;
(vii) Liens securing Refinancing Indebtedness incurred in compliance with
the Indenture to refinance Indebtedness secured by Liens, provided,
(a) such Liens do not extend to any additional property or assets;
(b) if the Liens securing the Indebtedness being refinanced were
subordinated to or pari passu with the Liens securing the Notes or
any intercompany loan, as applicable, such new Liens are subordinated
to or pari passu with such Liens to the same extent, and any related
subordination or intercreditor agreement is confirmed; and (c) such
Liens are no more adverse to the interests of Holders than the Liens
replaced or extended thereby;
(viii) Liens that secure Acquired Debt, provided, that such Liens do not
extend to or cover any property or assets other than those of the
Person being acquired and were not put in place in anticipation of such
acquisition;
(ix) Liens that secure Purchase Money Obligations or Capital Lease
Obligations permitted to be incurred under the Indenture; provided
that such Liens (other than Permitted Vessel Liens) do not extend to
or cover any property or assets other than those being acquired or
developed;
(x) Liens securing Obligations under the Indenture, the Notes or the
Security Documents;
(xi) Liens on assets of the Company and the Subsidiaries, and the proceeds
of any or all the foregoing, securing Indebtedness incurred pursuant
to clause (a) under the caption "--Limitation on Incurrence of
Indebtedness";
(xii) with respect to any vessel included in the Collateral, certain
maritime liens, including liens for crew's wages and salvage;
(xiii) leases or subleases granted in the ordinary course of business not
materially interfering with the conduct of the business of the
Company or any of the Restricted Subsidiaries;
(xiv) Liens arising from precautionary Uniform Commercial Code financing
statement filings regarding operating leases entered into by the
Company or any of its Subsidiaries in the ordinary course of
business; and
(xv) Liens on the BHR Joint Venture's rights as lessor under leases, which
Liens are to secure indebtedness of the BHR Joint Venture incurred
solely to finance the development, acquisition or construction of the
assets subject to such leases.
"Permitted Tax Distributions" in respect of the Company and each Subsidiary
that qualifies as a Flow Through Entity shall mean, with respect to any taxable
year, the sum of:
(a) the product of (i) the excess of (A) all items of taxable income or
gain (other than capital gain) allocated by the Company to Equity
Holders for such year over (B) all items of taxable deduction or loss
(other than capital loss) allocated to such Equity Holders by the
Company, for such year and (ii) the Applicable Income Tax Rate, plus
(b) the product of (i) the net capital gain (i.e., net long-term capital
gain over net short-term capital loss), if any, allocated by the
Company to Equity Holders for such year and (ii) the Applicable Capital
Gain Tax Rate, plus
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(c) the product of (i) the net short-term capital gain (i.e., net short-
term capital gain in excess of net long-term capital loss), if any,
allocated by the Company to Equity Holders for such year and (ii) the
Applicable Income Tax Rate, minus
(d) the aggregate Tax Loss Benefit Amount for the Company for such year;
provided, that in no event shall the Applicable Income Tax Rate or the
Applicable Capital Gain Tax Rate exceed the greater of (1) the highest
aggregate applicable effective marginal rate of Federal, state, and local
income to which a corporation doing business in the State of New York would be
subject in the relevant year of determination (as certified to the Trustee by a
nationally recognized tax accounting firm) plus 5%; and (2) 60%. For purposes
of calculating the amount of the Permitted Tax Distributions, the proportionate
part of the items of taxable income, gain, deduction, or loss (including
capital gain or loss) of any Subsidiary that is a Flow Through Entity shall be
included in determining the taxable income, gain, deduction, or loss (including
capital gain or loss) of the Company.
Estimated tax distributions shall be made within fifteen days following
March 31, May 31, August 31, and December 31 based upon an estimate of the
excess of (x) the tax distributions that would be payable for the period
beginning on January 1 of such year and ending on March 31, May 31, August 31,
and December 31 if such period were a taxable year (computed as provided above)
over (y) distributions attributable to all prior periods during such taxable
year.
Prior to making any estimated tax distribution, the Company shall require
each Equity Holder to agree that (a) promptly after the Company and each
Subsidiary file their respective annual tax return, (i) such Equity Holder
shall reimburse the Company to the extent the estimated tax distributions made
to such Equity Holder exceeded the actual Permitted Tax Distributions, as
determined on the basis of such tax returns filed in respect of such taxable
year for that Equity Holder and (ii) the Company shall make a further payment
to such Equity Holder to the extent such estimated tax distributions were less
than the tax distributions actually payable to such Equity Holder with respect
to such taxable year and (b) if the appropriate Federal or state taxing
authority finally determines that the amount of the items of taxable income,
gain, deduction, or loss (including capital gain or loss) of the Company or any
Subsidiary that is treated as a Flow Through Entity for any taxable year or the
aggregate Tax Loss Benefit Amounts carried forward to such taxable year should
be changed or adjusted, then (i) such Equity Holder shall reimburse the Company
to the extent the Permitted Tax Distributions previously made to such Equity
Holder in respect of that taxable year exceeded the Permitted Tax Distributions
with respect to such taxable year taking into account such change or adjustment
for such Equity Holder and (ii) the Company shall make a further payment to
such Equity Holder to the extent the Permitted Tax Distributions previously
paid to such Equity Holder were less than the Permitted Tax Distributions
payable to such Equity Holder with respect to such taxable year taking into
account such change or adjustment.
To the extent that any tax distribution would otherwise be made to any
Equity Holder at a time when an obligation of such Equity Holder to make a
payment to the Company pursuant to the previous paragraph remains outstanding,
the amount of any tax distribution to be made shall be reduced by the amounts
such Equity Holder is obligated to pay the Company.
"Permitted Vessel Lien" means a Lien on the Majestic Star Casino Vessel that
secures FF&E Financing; provided that (a) the FF&E Lender agrees (i) to release
such Lien upon satisfaction of such FF&E Financing, (ii) to release such Lien
upon payment (or promise of payment) to such FF&E Lender of that portion of the
proceeds of the sale of the Majestic Star Casino Vessel attributable to the
related FF&E and (iii) that such Lien is subordinate and inferior in every
respect to the Lien of the Trustee pursuant to the Preferred Ship Mortgage on
the hull and other equipment constituting the Majestic Star Casino Vessel
(other than the related FF&E) and (b) such Lien shall not have an adverse
impact on the Holders.
"Person" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint stock company, trust,
unincorporated organization, government or any agency or political subdivision
thereof, or any other entity.
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"Preferred Ship Mortgage" means the preferred ship mortgage on the Majestic
Star Casino Vessel, dated as of the Issue Date, by and between the Company and
the Trustee.
"Pre-Opening Expenses" means all costs of start-up activities that are
required to be expensed (and are not capitalized) in accordance with SOP 98-5.
"Public Equity Offering" means a bona fide underwritten public offering of
Qualified Capital Stock of the Company, pursuant to a registration statement
filed with and declared effective by the Commission in accordance with the
Securities Act.
"Purchase Money Obligations" means Indebtedness representing, or incurred to
finance (or to Refinance Indebtedness incurred to finance), the cost (i) of
acquiring any assets and (ii) of construction or build-out of facilities
(including Purchase Money Obligations of any other Person at the time such
other Person is merged with or into or is otherwise acquired by the Issuers);
provided, that (x) the principal amount of such Indebtedness does not exceed
80% of such cost, including construction charges, (y) any Lien securing such
Indebtedness does not extend to or cover any other asset or property other than
the asset or property being so acquired, constructed or built and (z) such
Indebtedness is (or the Indebtedness being Refinanced was) incurred, and any
Liens with respect thereto are granted, within 180 days of the acquisition or
commencement of construction or build-out of such property or asset.
"Qualified Capital Stock" means, with respect to any Person, Capital Stock
of such Person other than Disqualified Capital Stock.
"Related Business" means (a) the gaming and hotel businesses conducted by
the Company as of the Issue Date and any and all businesses that in the good
faith judgment of the Managers are materially related businesses or (b) a
business necessary to satisfy the Company's off-site development obligation
under the Development Agreement.
"Required Regulatory Redemption" means a redemption by the Issuers of any
Holder's Notes pursuant to, and in accordance with, any order of any
Governmental Authority with appropriate jurisdiction and authority relating to
a Gaming License, or to the extent necessary in the reasonable, good faith
judgment of the Managers of the Company to prevent the loss, failure to obtain
or material impairment or to secure the reinstatement of, any Gaming License,
where such redemption or acquisition is required because the Holder or
beneficial owner of Notes is required to be found suitable or to otherwise
qualify under any gaming laws and is not found suitable or so qualified within
a reasonable period of time.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Subsidiary" means a Subsidiary other than an Unrestricted
Subsidiary.
"Return from Unrestricted Subsidiaries" means (a) 50% of any dividends or
distributions received by the Company or a Restricted Subsidiary from an
Unrestricted Subsidiary, to the extent that such dividends or distributions
were not otherwise included in Consolidated Net Income of the Company, plus (b)
to the extent not otherwise included in Consolidated Net Income of the Company,
an amount equal to the net reduction in Investments in Unrestricted
Subsidiaries resulting from (i) repayments of the principal of loans or
advances or other transfers of assets to the Company or any Restricted
Subsidiary from Unrestricted Subsidiaries or (ii) the sale or liquidation of
any Unrestricted Subsidiaries, plus (c) to the extent that any Unrestricted
Subsidiary of the Company is designated to be a Restricted Subsidiary, the fair
market value of the Company's Investment in such Subsidiary on the date of such
designation.
"Security Agreement" means that certain Security Agreement to encumber
substantially all of the assets of the Company, including the Company's
interest in the Berthing Agreement, in favor of the Trustee, for the ratable
benefit of the Holders of the Notes, as the same may be amended in accordance
with the terms thereof and the Indenture.
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"Security Documents" means, collectively, the BDI Pledge Agreement, the BHR
Pledge Agreement, the Preferred Ship Mortgage, the Security Agreement, the
Trademark Security Agreement, and any other agreements, instruments, financing
statements or other documents that evidence, set forth or limit the Lien of the
Trustee in the Collateral.
"subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity (including a limited liability company) of
which more than 50% of the total voting power of shares of Voting Stock thereof
is at the time owned or controlled, directly or indirectly, by such Person or
one or more of the other subsidiaries of that Person or a combination thereof
and (ii) any partnership in which such Person or any of its subsidiaries is a
general partner.
"Subsidiary" means any subsidiary of the Company.
"Subsidiary Guarantor" means any Restricted Subsidiary that has executed and
delivered in accordance with this Indenture an unconditional and irrevocable
Guarantee of the Issuers' obligations under the Notes and such Person's
successors and assigns.
"Subsidiary Guaranty" means an unconditional and irrevocable guaranty by a
Subsidiary Guarantor of the Obligations of the Issuers under the Notes and the
Indenture, as set forth in the Indenture, as amended from time to time in
accordance with the terms thereof.
"Tax Loss Benefit Amount" means, with respect to any taxable year, the
amount by which the Permitted Tax Distributions would be reduced were a net
operating loss or net capital loss from a prior taxable year of the Company
ending subsequent to the Issue Date carried forward to such taxable year;
provided, that for such purpose the amount of any such net operating loss or
net capital loss shall be utilized only once and in each case shall be carried
forward to the next succeeding taxable year until so utilized. For purposes of
calculating the Tax Loss Benefit Amount, the proportionate part of the items of
taxable income, gain, deduction, or loss (including capital gain or loss) of
any Subsidiary that is a Flow Through Entity for a taxable year of such
Subsidiary ending subsequent to the Issue Date shall be included in determining
the amount of net operating loss or net capital loss of the Company.
"Trademark Security Agreement" means that certain Trademark Security
Agreement executed by the Company to encumber the "Majestic Star Casino"
service mark in favor of the Trustee, for the ratable benefit of the Holders of
the Notes, as the same may be amended in accordance with the terms thereof and
the Indenture.
"Transfer" means, with respect to any asset, any direct or indirect sale,
assignment, transfer, lease, conveyance, or other disposition (including,
without limitation, by way of merger or consolidation).
"Unrestricted Subsidiary" means any Subsidiary that, at or prior to the time
of determination, shall have been designated by the Managers as an Unrestricted
Subsidiary; provided, that such Subsidiary does not hold any Indebtedness or
Capital Stock of, or any Lien on any assets of, the Company or any Restricted
Subsidiary. If, at any time, any Unrestricted Subsidiary would fail to meet the
foregoing requirements as an Unrestricted Subsidiary, it shall thereafter cease
to be an Unrestricted Subsidiary for purposes of the Indenture and any
Indebtedness of such Subsidiary shall be deemed to be incurred by a Restricted
Subsidiary as of such date. The Managers may at any time designate any
Unrestricted Subsidiary to be a Restricted Subsidiary; provided, that such
designation shall be deemed to be an incurrence of Indebtedness by a Restricted
Subsidiary of any outstanding Indebtedness of such Unrestricted Subsidiary and
such designation shall only be permitted if (i) such Indebtedness is permitted
under the Interest Coverage Ratio test set forth in the covenant described
under the caption "--Certain Covenants--Limitation on Incurrence of
Indebtedness" calculated on a pro forma basis as if such designation had
occurred at the beginning of the four-quarter reference period, and (ii) no
Default or Event of Default would be in existence following such designation.
The Company shall be deemed to make an Investment in each Subsidiary designated
as an Unrestricted Subsidiary immediately following such designation
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in an amount equal to the Investment in such Subsidiary and its subsidiaries
immediately prior to such designation. Any such designation by the Managers
shall be evidenced to the Trustee by filing with the Trustee a certified copy
of the resolution of the Managers giving effect to such designation and an
Officers' Certificate certifying that such designation complies with the
foregoing conditions and is permitted by the covenant described above under the
caption "--Certain Covenants--Limitation on Incurrence of Indebtedness."
"Upper Tier Equity Holder" means, in the case of any Flow Through Entity the
Equity Holder of which is, in turn, a Flow Through Entity, the person that is
ultimately subject to tax on a net income basis on the items of taxable income,
gain, deduction, and loss of the Company and its Subsidiaries that are Flow
Through Entities.
"Voting Stock" means, with respect to any Person, (i) one or more classes of
the Capital Stock of such Person having general voting power to elect at least
a majority of the Board of Directors, managers or trustees of such Person
(regardless of whether at the time Capital Stock of any other class or classes
have or might have voting power by reason of the happening of any contingency)
and (ii) any Capital Stock of such Person convertible or exchangeable without
restriction at the option of the holder thereof into Capital Stock of such
Person described in clause (i) above.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years (rounded to the nearest one-twelfth) obtained
by dividing (i) the then outstanding principal amount of such Indebtedness into
(ii) the total of the product obtained by multiplying (A) the amount of each
then remaining installment, sinking fund, serial maturity or other required
payments of principal, including payment at final maturity, in respect thereof,
by (B) the number of years (calculated to the nearest one-twelfth) that will
elapse between such date and the making of such payment.
"Wholly Owned Subsidiary" of any Person means a subsidiary of such Person
all the Capital Stock of which (other than directors' qualifying shares) is
owned directly or indirectly by such Person; provided, that (i) with respect to
the Company, the term Wholly Owned Subsidiary shall exclude Unrestricted
Subsidiaries and (ii) the BHR Joint Venture will be a Wholly Owned Subsidiary
of the Company so long as (a) the Company owns 90% or more of the outstanding
membership interests in the BHR Joint Venture and (b) the BHR Joint Venture is
a Restricted Subsidiary.
BOOK-ENTRY
The old notes were each registered in book-entry form and are represented by
two notes in fully registered form without interest coupons. These global notes
were deposited with the trustee as custodian for The Depository Trust Company
and registered in the name of DTC or its nominee.
The new notes will be represented by one or more notes in registered, global
form without interest coupons (collectively, the "Global Notes"). The Global
Notes will be deposited with the trustee as custodian for The Depository Trust
Company ("DTC"), in New York, New York, and registered in the name of DTC or
its nominee, in each case for credit to an account of a direct or indirect
participant as described below.
Except as set forth below, the Global Notes may be transferred, in whole and
not in part, only to another nominee of DTC or to a successor of DTC or its
nominee. Beneficial interests in the Global Notes may not be exchanged for
notes in certificated form except in the limited circumstances described below.
See "--Exchange of Book-Entry Notes for Certificated Notes."
DEPOSITORY PROCEDURES
DTC has advised the Issuers that DTC is a limited-purpose trust company
created to hold securities for its participating organizations (collectively,
the "Participants") and to facilitate the clearance and settlement of
transactions in those securities between Participants through electronic book-
entry changes in accounts of
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Participants. The Participants include securities brokers and dealers
(including the Initial Purchasers), banks, trust companies, clearing
corporations and certain other organizations. Access to DTC's system is also
available to other entities such as banks, brokers, dealers and trust companies
that clear through or maintain a custodial relationship with a Participant,
either directly or indirectly (collectively, the "Indirect Participants").
Persons who are not Participants may beneficially own securities held by or on
behalf of DTC only through the Participants or Indirect Participants. The
ownership interest and transfer of ownership interest of each actual purchaser
of each security held by or on behalf of DTC are recorded on the records of the
Participants and Indirect Participants.
DTC has also advised the Issuers that pursuant to procedures established by
it, (i) upon deposit of the Global Notes, DTC will credit the accounts of
Participants designated by the Initial Purchaser with portions of the principal
amount of Global Notes and (ii) ownership of such interests in the Global Notes
will be shown on, and the transfer of ownership thereof will be effected only
through, records maintained by DTC (with respect to Participants) or by
Participants and the Indirect Participants (with respect to other owners of
beneficial interests in the Global Notes).
Investors in the Global Notes may hold their interests therein directly
through DTC, if they are Participants in such system, or indirectly through
organizations that are Participants in such system. All interests in a Global
Note may be subject to the procedures and requirements of DTC.
The laws of some states require that certain persons take physical delivery
in definitive form of securities that they own. Consequently, the ability to
transfer beneficial interest in a Global Note to such persons may be limited to
that extent. Because DTC can act only on behalf of Participants, which in turn
act on behalf of Indirect Participants and certain banks, the ability of a
person having a beneficial interest in a Global Note to pledge such interest to
persons or entities that do not participate in the DTC system, or otherwise
take actions in respect of such interest, may be affected by the lack of a
physical certificate evidencing such interest. For certain other restrictions
on the transferability of the Notes, see "--Exchange of Book-Entry Notes for
Certificated Notes."
EXCEPT AS DESCRIBED BELOW, OWNERS OF INTERESTS IN THE GLOBAL NOTES WILL NOT
HAVE NOTES REGISTERED IN THEIR NAMES, WILL NOT RECEIVE PHYSICAL DELIVERY OF
NOTES IN CERTIFICATED FORM AND WILL NOT BE CONSIDERED THE REGISTERED OWNERS OR
HOLDERS THEREOF UNDER THE INDENTURE FOR ANY PURPOSE.
Payments in respect of the principal, premium, liquidated damages, if any,
and interest on a Global Note registered in the name of DTC or its nominee will
be payable by the Trustee to DTC or its nominee in its capacity as the
registered Holder under the Indenture. Under the terms of the Indenture, the
Issuers and the Trustee will treat the persons in whose names the Notes,
including the Global Notes, are registered as the owners thereof for the
purpose of receiving such payments and for any and all other purposes
whatsoever. Consequently, none of the Issuers, the Trustee or any agent of the
Issuers or the Trustee has or will have any responsibility or liability for (i)
any aspect of DTC's records or any Participant's or Indirect Participant's
records relating to or payments made on account of beneficial ownership
interests in the Global Notes, or for maintaining, supervising or reviewing any
of DTC's records or any Participant's or Indirect Participant's records
relating to the beneficial ownership interests in the Global Notes or (ii) any
other matter relating to the actions and practices of DTC or any of its
Participants or Indirect Participants.
DTC has advised the Issuers that its current practices, upon receipt of any
payment in respect of securities such as the Notes (including principal and
interest), is to credit the accounts of the relevant Participants with the
payment on the payment date, in amounts proportionate to their respective
holdings in principal amount of beneficial interests in the relevant security
such as the Global Notes as shown on the records of DTC. Payments by
Participants and the Indirect Participants to the beneficial owners of Notes
will be governed by standing instructions and customary practices and will not
be the responsibility of DTC, the Trustee or the Issuers. None of the Issuers
or the Trustee will be liable for any delay by DTC or its Participants in
identifying the beneficial
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owners of the Notes, and the Issuers and the Trustee may conclusively rely on
and will be protected in relying on instructions from DTC or its nominee as the
registered owner of the Notes for all purposes.
Interests in the Global Notes will trade in DTC's Same-Day Funds Settlement
System and secondary market trading activity in such interests will, therefore,
settle in immediately available funds, subject in all cases to the rules and
procedures of DTC and its Participants. Transfers between Participants in DTC
will be effected in accordance with DTC's procedures, and will be settled in
same-day funds.
DTC has advised the Issuers that it will take any action permitted to be
taken by a Holder of Notes only at the direction of one or more Participants to
whose account DTC interests in the Global Notes are credited and only in
respect of such portion of the aggregate principal amount of the Notes as to
which such Participant or Participants has or have given direction. However, if
there is an Event of Default under the Notes, DTC reserves the right to
exchange Global Notes for legended Notes in certificated form, and to
distribute such Notes to its Participants.
The information in this section concerning DTC and its book-entry system has
been obtained from sources believed to be reliable, but the Issuers take no
responsibility for the accuracy thereof.
Although DTC has agreed to the foregoing procedures to facilitate transfers
of interests in the Global Notes among Participants in DTC it is under no
obligation to perform or to continue to perform such procedures, and such
procedures may be discontinued at any time. Neither the Initial Purchaser nor
the Trustee will have any responsibility for the performance by DTC or its
Participants or Indirect Participants of their respective obligations under the
rules and procedures governing their operations.
EXCHANGE OF BOOK-ENTRY NOTES FOR CERTIFICATED NOTES
A Global Note is exchangeable for definitive Notes in registered
certificated form if (i) DTC (x) notifies the Issuers that it is unwilling or
unable to continue as depositary for the Global Note and the Issuers thereupon
fail to appoint a successor depositary within 90 days or (y) has ceased to be a
clearing agency registered under the Exchange Act, or (ii) the Issuers, at
their option, notify the Trustee in writing that they elect to cause the
issuance of the Notes in certificated form. In addition, beneficial interests
in a Global Note may be exchanged for certificated Notes upon request but only
upon at least 20 days' prior written notice given to the Trustee by or on
behalf of DTC in accordance with customary procedures. In all cases,
certificated Notes delivered in exchange for any Global Note or beneficial
interest therein will be registered in the names, and issued in any approved
denominations, requested by or on behalf of the depositary (in accordance with
its customary procedures) and will bear the restrictive legend referred to in
"Notice to Investors" unless the Issuers determine otherwise in compliance with
applicable law.
CERTIFICATED NOTES
Subject to certain conditions, any person having a beneficial interest in a
Global Note may, upon request to the Trustee, exchange such beneficial interest
for Notes in certificated form (a "Certificated Note"). Upon any such issuance,
the Trustee is required to register such Certificated Notes in the name of, and
cause the same to be delivered to, such person or persons (or the nominee of
any thereof). All such Certificated Notes would be subject to the legend
requirements described herein under "Notice to Investors." In addition, if (i)
the Issuers notify the Trustee in writing that the DTC (x) is no longer willing
or able to act as a depositary and the Issuers are unable to locate a qualified
successor within 90 days or (y) has ceased to be a clearing agency registered
under the Exchange Act or (ii) the Issuers, at their option, notify the Trustee
in writing that they elect to cause the issuance of Notes in the form of
Certificated Notes under the Indenture, then, upon surrender by the Global Note
Holder of its Global Note, Notes in such form will be issued to each person
that the Global Note Holder and the DTC identify as being the beneficial owner
of the related Notes.
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None of the Issuers or the Trustee will be liable for any delay by the
Global Note Holder or the DTC in identifying the beneficial owners of Notes and
the Trustee may conclusively rely on, and will be protected in relying on,
instructions from the Global Note Holder or the DTC for all purposes.
SAME DAY SETTLEMENT AND PAYMENT
The Indenture will require that payments in respect of the Notes represented
by a Global Note (including principal, premium, if any, interest and liquidated
damages, if any, thereon) be made by wire transfer of immediately available
next day funds to the accounts specified by the Global Note Holder. With
respect to Certificated Notes, the Issuers will make all payments of principal,
premium, if any, interest and liquidated damages, if any, thereon by wire
transfer of immediately available funds to the accounts specified by the
Holders thereof or, if no such account is specified, by mailing a check to each
such Holder's registered address. The Issuers expect that secondary trading in
the Certificated Notes will also be settled in immediately available funds.
MATERIAL AGREEMENTS
OUR OPERATING AGREEMENT
We are a limited liability company organized under Indiana law. Our members
are Barden Development, Inc., which holds an 85% interest, and Gary Riverboat
Gaming, LLC, which holds a 15% interest. Don H. Barden is the sole beneficial
owner of both members.
Our operating agreement provides for certain rights and obligations among us
and our members, including with respect to the appointment of our manager and
restrictions on the transfer of membership units. Pursuant to our operating
agreement, our management is vested in our manager, Barden Development, Inc.
Our manager may resign at any time but may be removed only upon occurrence of
certain events and the vote of our members holding three-fourths of the
membership units not held by affiliates of our manager. If Barden Development,
Inc. ceases to be our manager, Barden Management, Inc. will serve as our
manager. Our operating agreement limits the transfer of our membership
interests. Any transfer of our membership interests is subject to the
discretionary approval of both our manager and the holders of a majority of our
membership interests. Additionally, any transfer must comply with all
applicable laws, including federal and state securities law and the Indiana
Riverboat Gambling Act.
MANAGEMENT AGREEMENT
On June 18, 1999, we entered into a Management Agreement with our manager,
Barden Development, Inc., to provide for, among other things, a management fee
payable by us to Barden Development, Inc. for acting as our manager. The fees
for any fiscal quarter are equal to 5% of our Consolidated Cash Flow (as
defined) for the immediately preceding fiscal quarter and may not be paid if we
are in default under the Indenture governing the Notes or if we do not meet
certain financial ratios as provided in the Indenture.
JOINT VENTURE AGREEMENT
We and our joint venture partner are each 50% members in the joint venture.
The Joint Venture Agreement requires each member to (i) make capital
contributions to the joint venture equal to one-half of the amount required for
the construction of agreed upon improvements and the funding of operations and
(ii) construct the contemplated common amenities in accordance with an agreed
upon budget.
The general affairs of the joint venture are governed by an Operating
Committee. The Operating Committee consists of four representatives, two
appointed by each member, and all four representatives must concur in any
action. If the Operating Committee is not able to agree upon a matter, the
matter is to be referred to a vote of the members. In addition, the members
also must decide on certain fundamental matters as
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specified in the Joint Venture Agreement. Most disputes arising out of the
Joint Venture Agreement that are not resolved by the members are subject to
resolution by arbitration. Excluded from the arbitration process are decisions
relative to changing the common amenities, changes in (or decisions involving
the enforcement of rights under) the Berthing Agreements, and increases in the
budget for the common amenities.
The Joint Venture Agreement establishes a Construction Committee consisting
of two representatives, one appointed by each member. The Construction
Committee is authorized to make decisions relating to routine construction
matters. The Construction Committee can only act upon the approval of both
representatives. If the representatives are not able to agree on a matter, it
is referred to a vote of the Operating Committee.
The Joint Venture Agreement also establishes a subcommittee to the Operating
Committee, consisting of the general managers of each of Majestic Star Casino
and our joint venture partner's gaming operation. This subcommittee is
authorized to make decisions involving the day-to-day operations of the joint
venture and can act only upon the approval of both general managers. If the
general managers are not able to agree on a matter, the matter is referred to
the Operating Committee.
A member loses its right to approve actions of the joint venture during any
period in which the member is in default under the Joint Venture Agreement.
Furthermore, the non-defaulting member may determine, in its sole discretion,
how and when the joint venture will enforce its rights with respect to the
defaulting member.
Events of default under the Joint Venture Agreement include a failure by a
member to make required capital contributions, bankruptcy, an event of default
under the Berthing Agreement, and any other failure of a member to perform its
obligations under the Joint Venture Agreement within 30 days after written
notice of default from the other member. The remedies for any such event of
default include (i) the loss by the member of its voting rights as described
above, and the loss of the voting rights of its representatives on the
construction committee and the operating committee, (ii) if the event of
default continues for 270 days, the non-defaulting member may acquire the
interest of the defaulting member in the joint venture (and its Berthing
Agreement) for $1.0 million, and (iii) other remedies available at law or in
equity. Furthermore, if the event of default involves a failure to make
required capital contributions, the other member may withdraw its capital
contribution, or be entitled to receive interest on its incremental capital
contribution, or require the defaulting member to pay interest in respect of
the capital contributions on which it defaulted.
BERTHING AGREEMENT
We and our joint venture partner each entered into separate berthing
agreements on April 23, 1996 with the joint venture. Each berthing agreement
obligates the joint venture to construct and maintain the common area
improvements (including parking lots, access roads, harbor improvements, other
infrastructure improvements and the pavilion), which are required for each
operator's gaming operations. Each berthing agreement also requires the joint
venture to carry insurance on the common area improvements and to reconstruct
or repair the common area improvements in the event of an insured casualty
(subject to certain dollar limitations as to reconstruction or repairs costing
more than available insurance proceeds).
Under its respective berthing agreement, each operator has the right to dock
its vessel at the mooring barge and the right to use substantially all of the
other common area improvements constructed by the joint venture. Each berthing
agreement also obligates the joint venture to provide specified services to
each of the operators in connection with the common area improvements,
including valet parking, shuttle buses, security, maintenance and food and
beverage services. Each operator is obligated to pay a license fee equal to
one-half of the amount by which the expenses of the joint venture exceed the
revenues of the joint venture.
We and our joint venture partner share equally in the operating expenses
related to the Buffington Harbor gaming complex, except for costs associated
with food and beverage, gift shop and valet operations, which are allocated on
a percentage of use by our and our joint venture partner's casino customers.
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Each berthing agreement imposes certain restrictions on the operations of
the operator, including a limitation on cruising rights so as to avoid
scheduling conflicts between the operators. Each berthing agreement also
provides certain remedies if the operator defaults in its obligations
thereunder, including, among other things, (i) a 100% increase in the license
fee during any period in which an operator has defaulted in the payment of its
license fee for more that 30 days, (ii) a suspension of gaming operations and
other rights if an event of default continues for more than 120 days, and (iii)
a buyout of the operator's rights in the joint venture and the berthing
agreement if an event of default continues for more than 270 days.
HARBOR LEASE AGREEMENT
Under a lease agreement dated June 29, 1995 with Lehigh Portland Cement, the
joint venture leases certain property that is integral to our gaming operations
as well as those of our joint venture partner. The property subject to the
Harbor Lease includes certain property abutting Buffington Harbor and on which
the docking and other support facilities for the Buffington Harbor facility are
located.
The Harbor Lease imposes certain limitations on the use of Buffington Harbor
and certain of its docks by us and our joint venture partner, including
limitations on cruises that would interfere with Lehigh Portland Cement's use
of the harbor or with certain rights Lehigh Portland Cement has granted to
Marblehead Lime Company to use the harbor. The Harbor Lease also requires the
joint venture to reimburse Lehigh Portland Cement for certain increases in its
operational costs caused by the joint venture's use of Buffington Harbor. We do
not believe that any of these limitations or requirements will have a material
adverse effect on our operations in light of the current and anticipated uses
of the docks and Buffington Harbor by Lehigh Portland Cement and Marblehead
Lime Company. No assurance can be given, however, with respect thereto because
neither we nor the joint venture has control over these factors.
The initial term of the Harbor Lease was extended to the earlier of December
31, 2005 or such time as the joint venture has obtained the necessary permits
for and constructed new harbor facilities. Since January 1998, the joint
venture has paid rent of $125,000 per month under the lease, of which we fund
$62,500. Prior to that time, the lease was rent-free. The harbor lease requires
the joint venture or its members to apply for the governmental permits
necessary for construction of, and to construct, a permanent harbor on the
shoreline of Lake Michigan lying immediately to the west of the existing
harbor. Construction of a new harbor will require the joint venture to acquire
permits from the U.S. Army Corps of Engineers, the Coast Guard and the Indiana
Department of Natural Resources, among others. The joint venture intends to
file applications for the permits by the end of 1999.
The joint venture is negotiating the purchase of the harbor and property
adjacent thereto, either directly or through an affiliate of the joint venture
or its members. In such event, the Harbor Lease would be terminated, and the
joint venture would have no further obligations with respect to constructing a
new harbor. We cannot assure you, however, that the harbor and adjacent
property can be purchased on favorable terms or at all or that the joint
venture will not have to fulfill its obligations under the Harbor Lease. If the
joint venture had to fulfill its obligations under the Harbor Lease by
constructing a new harbor, such construction would have a material adverse
effect on our operations and our financial condition.
AGREEMENT WITH CITY OF GARY, INDIANA
The City of Gary entered into a Development Agreement dated as of March 26,
1996, with us requiring us, among other things, to (i) invest $116.0 million in
various on-site and off-site improvements, (ii) pay the City of Gary an amount
equal to 3% of the Majestic Star Casino's adjusted gross receipts, as defined
in the Indiana Riverboat Gambling Act, (iii) obtain the insurance, bonds and/or
letters of credit required by the Indiana Riverboat Gambling Act, (iv) endeavor
to meet certain minority and local employment, union and vendor goals and (v)
pay a default payment in the amount of damages for failure to complete certain
on-site developments, the maximum amount of which is $12.0 million. In
addition, if we fail to complete the $10 million off-site development, the City
of Gary will have the right to obtain the benefits of the bond that was
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issued to the Indiana Gaming Commission. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources."
We have met or accrued a significant portion of the commitments relating to
(i) through (iv) in the preceding paragraph. We have already expended the $12
million for enhancements of our operations at Buffington Harbor and must
receive approval from the City of Gary that our expenditures satisfy that
component of our commitment under the development agreement. It is expected
that the investment of $10 million for off-site development, with particular
project(s) to be agreed to by the City of Gary, will be made by an affiliate of
the Company by December 31, 1999.
REGULATORY MATTERS
INDIANA
In 1993, Indiana enacted legislation permitting certain types of gaming
activity. The Indiana Riverboat Gambling Act authorizes the issuance of up to
11 riverboat gaming licenses on waterways located in Indiana counties which are
contiguous to Lake Michigan, the Ohio River or Patoka Lake. The Indiana
Riverboat Gambling Act strictly regulates the facilities, persons, associations
and practices related to gaming operations, including comprehensive law
enforcement provisions. The Indiana Riverboat Gambling Act vests the Indiana
Gaming Commission with the power and duties of administering, regulating and
enforcing the system of riverboat gaming in Indiana. Its jurisdiction extends
to every person, association, corporation, partnership and trust involved in
riverboat gaming operations in the State of Indiana.
Owner's Licenses
The Indiana Riverboat Gambling Act requires the owner of a riverboat gaming
operation to hold an owner's license issued by the Indiana Gaming Commission.
The Indiana Gaming Commission is authorized to issue 11 owner's licenses
statewide. Each license granted entitles the licensee to own and operate one
riverboat and gaming equipment as part of the gaming operation. A licensee may
own no more than a 10% interest in any other owner's license.
The Indiana Riverboat Gambling Act restricts the granting of the 11 owner's
licenses by location. The 11 licenses must be awarded as follows: (i) two
licenses for riverboats operating from Gary; (ii) one license for a riverboat
operating in Hammond; (iii) one license for a riverboat operating in East
Chicago; (iv) one license for a riverboat operating in any city located in
LaPorte, Porter or Lake counties, not including the above-named cities; (v)
five licenses for riverboats that operate upon the Ohio River from counties
contiguous thereto and with no more than one operating in any county; and (vi)
one license for a riverboat operating on Patoka Lake from either DuBois,
Crawford or Orange Counties. The Indiana Gaming Commission has not considered
applicants for the eleventh license since the Patoka Lake site has been
determined by the U.S. Army Corps of Engineers to be unsuitable for a casino
vessel project.
Each owner's license runs for a period of five years. Thereafter, the
license is subject to renewal on an annual basis upon a determination by the
Indiana Gaming Commission that the licensee continues to be eligible for an
owner's license under the Indiana Riverboat Gambling Act and the rules and
regulations adopted thereunder. All riverboat licensees have a continuing duty
to maintain suitability for licensure and are required to notify the Indiana
Gaming Commission of any material change in the information submitted in its
application or any other matter which would render the licensee ineligible. An
owner's license does not create a property right but is a revocable privilege
contingent upon continuing suitability for licensure. A licensed owner
undergoes a complete investigation every three years to determine that the
owner remains in compliance with the Indiana Riverboat Gambling Act.
Riverboat licensees are subject to extensive reporting requirements. In
addition, the Indiana Gaming Commission has independent investigating powers.
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The Indiana Gaming Commission may revoke, restrict or suspend an owner's
license at any time that the Indiana Gaming Commission determines the licensee
is in violation of the Indiana Riverboat Gambling Act or the rules and
regulations of the Indiana Gaming Commission or if the Indiana Gaming
Commission determines revocation of the license is in the best interest of
Indiana and will protect and enhance the credibility and integrity of riverboat
gambling operations. If the Indiana Gaming Commission determines that a
licensee is in violation of the Indiana Riverboat Gambling Act or the rules and
regulations promulgated by the Indiana Gaming Commission, then the Indiana
Gaming Commission may initiate a disciplinary proceeding to revoke, restrict or
suspend the license or take such other action, including imposition of civil
penalties, that the Indiana Gaming Commission deems necessary. If for any
reason a license is terminated, the assets of the riverboat gambling operation
must be secured and cannot be disposed of without the approval of the Indiana
Gaming Commission and the licensee remains under the jurisdiction of the
Indiana Gaming Commission until all matters related to the license have been
resolved.
A licensed owner may apply for and may hold other licenses that are
necessary for the operation of a riverboat, including licenses to sell
alcoholic beverages, a license to prepare and serve food and any other
necessary license. The Indiana Riverboat Gambling Act also requires that
officers, directors and employees of a gaming operation and suppliers of gaming
equipment, devices, and supplies and certain other suppliers be licensed.
Applicants for licensure must submit comprehensive application and personal
disclosure forms and undergo an exhaustive background investigation prior to
the issuance of a license. The applicant must also disclose the identity of
every shareholder or participant of the applicant and provide specific
information with respect to certain participants holding significant interests
(5% or greater) in the applicant. The Indiana Gaming Commission has the
authority to request specific information on any participant.
A riverboat owner licensee or any other person may not lease, hypothecate,
borrow money against or loan money against an owner's riverboat gaming license.
An ownership interest in an owner's riverboat gaming license may only be
transferred after receiving approval from the Indiana Gaming Commission and
upon compliance with the regulations issued under the Indiana Riverboat
Gambling Act.
Regulation of Gaming Operations
Wagering may not be conducted with money or other negotiable currency. No
person under the age of 21 is permitted to wager, and wagers may only be taken
from a person present on a licensed riverboat.
The Indiana Riverboat Gambling Act does not limit the maximum bet or per
patron loss. Minimum and maximum wagers on games are set by the licensee.
Riverboats operating in Indiana must be at least 150 feet long and have a
valid certificate of inspection from the U.S. Coast Guard to carry at least 500
passengers. Any riverboat that operates on the Ohio River must replicate, as
nearly as possible, historic Indiana steamboat passenger vessels of the
nineteenth century. Riverboats operating on Lake Michigan or Patoka Lake need
not meet this requirement.
Gaming sessions are generally required to be at least two hours and are
limited to a maximum duration of four hours. No gaming may be conducted while
the boat is docked, except (i) for 30-minute time periods at the beginning and
end of each cruise while the passengers are embarking and disembarking (total
gaming time is limited to four hours, however, including the pre- and post-
docking periods); and (ii) when weather, water or traffic conditions prevent
the boat from cruising. The Indiana Gaming Commission may grant extended cruise
hours in its discretion. If the master of the riverboat reasonably determines
and certifies in writing that specific weather, water or traffic conditions
present a danger to the riverboat and the riverboat's passengers and crew, the
riverboat may remain docked and gaming may take place until (i) the master
determines that the conditions have sufficiently diminished for the riverboat
to safely proceed; or (ii) the duration of the authorized excursion has
expired.
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After consultation with the U.S. Army Corps of Engineers, the Indiana Gaming
Commission may determine the available navigable waterways that are suitable
for the operation of riverboats under the Indiana Riverboat Gambling Act. If
the U.S. Army Corps of Engineers rescinds an approval for the operation of
riverboats on a waterway, a license issued under the Indiana Riverboat Gambling
Act becomes void and the holder may not conduct or continue gaming operations.
The Indiana Gaming Commission requires employees working on a riverboat to have
a valid merchant marine document from the U.S. Coast Guard.
The Indiana Riverboat Gambling Act imposes a 20% wagering tax on adjusted
gross receipts from gaming. The tax imposed is to be paid by the licensed owner
to the Indiana Department of State Revenue before the close of the business day
following the day when the wagers are made. The Indiana Riverboat Gambling Act
also requires that licensees pay a $3.00 admission tax for each person admitted
to a gaming excursion without regard to the actual fee, if any, paid by such
person. A riverboat license may be suspended or revoked for failure to pay such
tax. The Indiana Gaming Commission also has promulgated regulations requiring
riverboat owners to reimburse the Indiana Gaming Commission for the costs of
inspectors and agents required to be present during the conduct of gambling
operations. Further, the Indiana Gaming Commission may impose other fees and
assessments. Riverboats are assessed for property tax purposes as real property
and are taxed at rates determined by local taxing authorities. All Indiana
state excise taxes, use taxes and gross retail taxes apply to sales on a
riverboat.
The Indiana Gaming Commission may subject a licensee to fines, suspension or
revocation of its license for any act that is in violation of the Indiana
Riverboat Gambling Act, the regulations of the Indiana Gaming Commission, or
for any other fraudulent act. In addition, the Indiana Gaming Commission may
revoke an owner's license if the licensee has not begun regular riverboat
excursions prior to the end of the twelve month period following receipt of a
license from the Indiana Gaming Commission or if the Indiana Gaming Commission
determines that the revocation of the license is in the best interests of the
State of Indiana. A holder of a gaming license is required to post bond with
the Indiana Gaming Commission in an amount that the Indiana Gaming Commission
determines will adequately reflect the amount that a local community will
expend for infrastructure and other facilities associated with a riverboat
operation.
The Indiana Riverboat Gambling Act places special emphasis upon minority and
women's business enterprise participation in the riverboat industry. Any person
issued a riverboat owner's license must establish goals of expending at least
10% of the total dollar value of the licensee's contracts for goods and
services with minority business enterprises and 5% of the total dollar value of
the licensee's contracts for goods and services with women's business
enterprises.
An institutional investor (as defined in regulations promulgated by the
Indiana Gaming Commission) that acquires a direct or indirect beneficial
ownership interest of 5% or more of any riverboat licensee, through any class
of voting securities of the licensee or a holding company or intermediary
company of the licensee, is required to notify the Indiana Gaming Commission
and to provide additional information, and may be subject to a finding of
suitability. A person, other than an institutional investor, who acquires a
direct or indirect beneficial ownership interest of 5% or more of any riverboat
licensee, through any class of voting securities of the licensee or a holding
company or intermediary company of the licensee, other than an institutional
investor, is required to apply to the Indiana Gaming Commission for a finding
of suitability.
A riverboat owner licensee may not enter into or perform any contract or
transaction in which it transfers or receives consideration which is not
commercially reasonable or which does not reflect the fair market value of the
goods and services rendered or received. All contracts and transactions in
excess of $50,000 must be in writing. All contracts and transactions are
subject to disapproval, cancellation and termination by the Indiana Gaming
Commission if it finds that the contract or transaction does not comply with
the Indiana Riverboat Gambling Act or the regulations thereunder or does not
maintain the integrity of the riverboat gambling industry. A riverboat owner
licensee or an affiliate may not enter into a debt transaction of $1.0 million
or more without the prior approval of the Indiana Gaming Commission. Indiana
Gaming Commission regulations require a licensee or affiliate to conduct due
diligence to ensure that each person with whom the licensee or
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affiliate enters into a debt transaction would be suitable for licensure under
the Indiana Riverboat Gambling Act. The Indiana Gaming Commission has a rule
requiring the reporting of certain currency transactions, which is similar to
that required by Federal authorities.
The Indiana Riverboat Gambling Act prohibits contributions to a candidate
for a state, legislative or local office, or to a candidate's committee, a
regular party committee or a committee organized by a legislative caucus of the
Indiana General Assembly, by the holder of a riverboat owner's license or a
supplier's license, by an officer of the licensee, by a person that holds at
least a 1% interest in the licensee, by an officer of such a person or by a
political action committee of the licensee. The Indiana Gaming Commission has
issued a rule requiring quarterly reporting by the holder of a riverboat
owner's license or a supplier's license or officers of the licensee, officers
of persons that hold at least a 1% interest in the licensee, and of persons who
directly or indirectly own a 1% interest in the licensee.
The Indiana Gaming Commission has adopted a rule which prohibits a
distribution by a riverboat licensee to its partners, shareholders, itself, or
any affiliated entity, if the distribution would impair the financial viability
of the riverboat gaming operation. The Indiana Gaming Commission has adopted a
rule which requires riverboat licensees to maintain, on a quarterly basis, a
cash reserve in the amount of the actual payout for three days. The cash
reserve may include cash in the casino cage, cash in a bank account in Indiana,
or cash equivalents not committed or obligated.
The Governor of Indiana has appointed a Gaming Impact Study Commission
chaired by the Attorney General to review the impact of all forms of gaming in
Indiana and to issue its final report by December 31, 1999.
OTHER NON-GAMING REGULATIONS
We are subject to certain Federal, state and local environmental, safety and
health laws, regulations and ordinances that apply to non-gaming businesses
generally, such as the Clear Air Act, Clean Water Act, Occupational Safety and
Health Act, Resource Conservation Recovery Act and the Comprehensive
Environmental Response, Compensation and Liability Act. We have not made, and
do not anticipate making, material expenditures with respect to these
environmental laws, regulations and ordinances. However, the coverage and
attendant compliance costs associated with these laws, regulations and
ordinances may result in future additional costs to our operations. For
example, in 1990 Congress enacted the Oil Pollution Act to regulate response
actions and liability related to oil spills. In that regard, we are required to
meet certain financial responsibility requirements. We have met these financial
responsibility requirements through insurance and do not believe the costs of
complying with these regulations will be material. We could, however, incur
material liability in the event of a major oil spill that exceeds the insured
amounts. In addition, we may incur material liability if contamination is
discovered on our property, for example during the course of future
development. See "Risk Factors--We are subject to potential exposure to
environmental liabilities."
The Majestic Star Casino must comply with U.S. Coast Guard requirements as
to boat design, on-board facilities, equipment, personnel and safety. Our
vessel must hold a Certificate of Seaworthiness or must be approved by the
American Bureau of Shipping ("ABS") for stabilization and flotation, and may
also be subject to local zoning and building codes. The U.S. Coast Guard
requirements establish design standards, set limits on the operation of the
vessels and require individual licensing of all personnel involved with the
operation of the vessels. Loss of a vessel's Certificate of Seaworthiness or
ABS approval would preclude its use as a floating casino.
All shipboard employees, including those who have nothing to do with the
actual operation of the vessel (such as dealers, waiters, and security
personnel) may be subject to the Jones Act which, among other things, exempts
those employees from state workers' compensation awards.
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SPECIFIC FEDERAL INCOME TAX CONSIDERATIONS
The following discussion summarizes the material federal income tax
considerations of the issuance of the new notes and the exchange offer. This
summary does not discuss all aspects of federal income taxation that may be
relevant to particular holders of new notes, especially in light of a holder's
personal investment circumstances, or to certain types of holders subject to
special treatment under the federal income tax laws (for example, life
insurance companies, tax-exempt organizations and foreign corporations and
individuals who are not citizens or; residents of the United States) and does
not discuss any aspects of state, local or foreign taxation. This discussion is
limited to those holders who will hold the new notes as "capital assets"
(generally, property held for investment) within the meaning of Section 1221 of
the Internal Revenue Code of 1986, as amended (the "Code").
This summary is based upon laws, regulations, rulings and decisions now in
effect and upon proposed regulations, all of which are subject to change,
possibly with retroactive effect, by legislation, administrative action or
judicial decisions.
Exchange Offer. The exchange of old notes for new notes pursuant to the
exchange offer should not be treated as a taxable "exchange" because the new
notes should not be considered to differ materially in kind or extent from the
old notes. Rather, the new notes received by a holder of the old notes should
be treated as a continuation of the old notes. As a result, there should be no
gain or loss to holders exchanging the old notes for the new notes pursuant to
the exchange offer.
Interest. A holder will be required to include in gross income the stated
interest on the old notes or the new notes in accordance with the holder's
method of tax accounting.
Tax Basis. Generally, a holder's tax basis in a note will initially be the
holder's purchase price for the note and will be decreased by the amount of any
principal payments received. If a holder exchanges an old note for a new note
pursuant to the exchange offer, the tax basis of the new note immediately after
such exchange should equal the holder's tax basis in the old note immediately
prior to the exchange.
Sale. The sale, exchange or other disposition of a note (other than pursuant
to the exchange offer) generally will be taxable event. A holder generally will
recognize gain or loss equal to the difference between (1) the amount of cash
plus the fair market value of any property received upon such sale, exchange or
other taxable disposition of a note, other than in respect of accrued interest
on the note, and (2) the holder's adjusted tax basis in such note. Such gain or
loss will be capital gain or loss and would be long-term capital gain or loss
if the notes were held by the holder for the applicable holding period
(currently more than one year) at the time of such sale or other disposition.
The holding period of each new note would include the holding period of the old
note exchange for the new note.
Purchasers of Notes at Other than Original Issuance. The above summary does
not discuss special rules that may affect the treatment of purchasers that
acquire notes other than at original issuance, including those provisions of
the Code relating to the treatment of "market discount" and "acquisition
premium." Any such purchaser should consult its tax advisor as to the
consequences to the purchase of the acquisition, ownership and disposition of
notes.
Backup Withholding. Unless a holder or other payee provides his correct
taxpayer identification number (employer identification number or social
security number) to us, as payor, and certifies that such number is correct
under the federal income tax backup withholding rules, generally 31% of (1) the
interest paid on the notes and (2) the proceeds of sale or other disposition of
the notes must be withheld and remitted to the United States Department of
Treasury. Therefore, each holder should complete and sign the Substitute Form
W-9 so as to provide the information and certification necessary to avoid
certain foreign individuals, are not subject to these backup withholding and
reporting requirements. In order for a foreign individual to qualify as an
exempt
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foreign recipient, that exchanging holder must submit a statement, signed under
penalty of perjury, attesting to that individual's exempt foreign status.
Withholding is not an additional federal income tax. Rather, the federal
income tax liability of a person subject to withholding will be reduced by the
amount of tax withheld. If withholding results in an overpayment of taxes, a
refund may be obtained from the Internal Revenue Service.
The foregoing summary is included for general information only. Each holder
of old notes should consult its tax advisor as to the specific tax consequences
to it of the exchange offer, including the application of and effect of state,
local, foreign and other tax laws.
PLAN OF DISTRIBUTION
Based on interpretations by the Securities and Exchange Commission set forth
in no-action letters issued to third parties in similar transactions, we
believe that the new notes issued in the exchange offer in exchange for the old
notes may be offered for resale, resold and otherwise transferred by holders
without compliance with the registration and prospectus delivery provisions of
the Securities Act of 1933, provided that the new notes are acquired in the
ordinary course of such holders' business and the holders are not engaged in,
and do not intend to engage in, and have no arrangement or understanding with
any person to participate in, a distribution of new notes. This position does
not apply to any holder that is (1) an "affiliate" of ours within the meaning
of Rule 405 under the Securities Act of 1933, (2) a broker-dealer who acquired
notes directly from us or (3) broker-dealers who acquired notes as a result of
market-making or other trading activities. Any broker-dealers ("Participating
Broker-Dealers") receiving new notes in the exchange offer are subject to a
prospectus delivery requirement with respect to resales of the new notes. To
date, the Securities and Exchange Commission has taken the position that
Participating Broker-Dealers may fulfill their prospectus delivery requirements
with respect to transactions involving an exchange of securities such as the
Exchange pursuant to the exchange Offer (other than a resale of any unsold
allotment from the sale to the old notes to the initial purchaser) with this
prospectus.
Each broker-dealer receiving new notes for its own account in the exchange
offer must acknowledge that it will deliver a prospectus in any resale of the
new notes. Participating Broker-Dealers may use this prospectus in reselling
new notes, if the old notes were acquired for their own accounts as a result of
market-making activities or other trading activities. We have agreed that a
Participating Broker-Dealer may use this prospectus in reselling new notes. A
Participating Broker-Dealer intending to use this prospects in the resale of
new notes must notify us that it is a Participating Broker-Dealer. This notice
may be given in the space provided for in the letter of transmittal or may be
delivered to the exchange agent. See "The Exchange Offer-Resales of the New
Notes" for more information.
Each broker-dealer that receives new notes for its own account as a result
of market-making activities or other trading activities in connection with the
exchange offer must acknowledge that it will deliver a prospectus in connection
with any resale of new notes. This prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of new notes received in exchange for old notes where such old
notes were acquired as a result of market-making activities or other trading
activities.
We will receive no proceeds in connection with the exchange offer or any
sale of new notes by broker-dealers. New notes received by broker-dealers for
their own account pursuant to the exchange offer may be sold from time to time
in one or more transactions in over-the-counter market, in negotiated
transactions, through the writing of options on the new notes or a combination
of these methods of resale, at market prices prevailing at the time of resale,
at prices related to the prevailing market prices or at negotiated prices. Any
such resale may be made directly to purchasers or to or through brokers or
dealers that may receive compensation in the form of commissions or concessions
from the broker-dealers or the purchasers of any new
93
<PAGE>
notes. Any broker-dealer that resells new notes that were received by it for
its own account pursuant to the exchange offer and any broker or dealer that
participates in a distribution of new notes may be deemed to be an
"underwriter" within the meaning of the Securities Act of 1933, and any profit
on any resale of new notes and any commissions or concessions received by any
such persons may be deemed to be underwriting compensation under the Securities
Act of 1933. The letter of transmittal states that by acknowledging that it
will deliver, and by delivering, a prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the
Securities Act of 1933.
LEGAL MATTERS
Certain legal matters relating to this offering will be passed upon for the
Company by Dykema Gossett PLLC, Detroit, Michigan and Barnes & Thornburg,
Indianapolis, Indiana.
INDEPENDENT ACCOUNTANTS
The financial statements at December 31, 1998 and 1997 and for each of the
three years in the period ended December 31, 1998 included in this prospectus
have been audited by PricewaterhouseCoopers LLP, independent accountants, as
stated in their report appearing herein.
The financial statements of Buffington Harbor Riverboats, L.L.C. as of
December 31, 1998 and 1997 and for the years ended December 31, 1998, 1997, and
1996 included in this prospectus have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their reports with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts in accounting and auditing in giving said reports.
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
FINANCIAL STATEMENTS OF THE COMPANY
Balance Sheets as of June 30, 1999 (Unaudited) and December 31, 1998..... F-2
Statements of Income (Unaudited) for the three and six months ended June
30, 1999 and 1998....................................................... F-3
Statements of Cash Flows (Unaudited) for the six months ended June 30,
1999 and 1998........................................................... F-4
Notes to Financial Statements............................................ F-5
Report of Independent Accountants........................................ F-7
Balance Sheets as of December 31, 1998 and 1997.......................... F-8
Statements of Income for the years ended December 31, 1998, 1997, and
1996.................................................................... F-9
Statements of Changes in Members' Equity for the years ended December 31,
1998, 1997, and 1996.................................................... F-10
Statements of Cash Flows for the years ended December 31, 1998, 1997, and
1996.................................................................... F-11
Notes to the Financial Statements........................................ F-12
FINANCIAL STATEMENTS OF THE BHR JOINT VENTURE
Report of Independent Public Accountants................................. F-21
Balance Sheets at December 31, 1998 and 1997............................. F-22
Statements of Operations for the years ended December 31, 1998, 1997, and
1996.................................................................... F-23
Statements of Members' Capital for the years ended December 31, 1998,
1997, and 1996.......................................................... F-24
Statements of Cash Flows for the years ended December 31, 1998, 1997, and
1996.................................................................... F-25
Notes to the Financial Statements........................................ F-26
</TABLE>
F-1
<PAGE>
THE MAJESTIC STAR CASINO, LLC
BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1999 1998
------------ ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................ $ 14,301,761 $ 17,295,401
Accounts receivable, less allowance for doubtful
accounts of $38,424 and $148,608, respectively.. 817,801 850,086
Inventories...................................... 51,149 41,948
Prepaid expenses................................. 964,082 984,512
Restricted cash.................................. 7,491,175 --
------------ ------------
Total current assets......................... 23,625,968 19,171,947
------------ ------------
Property, equipment, and vessel improvements, net.. 54,948,784 55,953,220
Other assets:
Deferred financing costs, less accumulated
amortization of $23,810 and $1,544,086,
respectively.................................... 4,984,190 2,657,129
Deferred costs, less accumulated amortization of
$3,441,662 and $2,899,062, respectively......... 2,210,367 2,762,967
Investment in Buffington Harbor Riverboats,
L.L.C........................................... 39,417,907 40,748,887
Other assets and deposits........................ 3,981,712 3,966,710
------------ ------------
Total other assets........................... 50,594,176 50,135,693
------------ ------------
Total assets................................. $129,168,928 $125,260,860
============ ============
LIABILITIES AND MEMBERS' EQUITY
Current liabilities:
Current maturities of long-term debt............. $ 8,193,113 $ 1,945,724
Accounts payable................................. 810,994 428,070
Other accrued liabilities:
Payroll and related............................ 855,023 1,073,801
Interest....................................... 758,504 4,216,422
Other accrued liabilities...................... 4,675,214 3,039,970
Due to Buffington Harbor Riverboats, L.L.C..... 45,230 405,010
------------ ------------
Total current liabilities.................... 15,338,078 11,108,997
Long-term debt, net of current maturities.......... 129,852,979 108,390,332
Note to member..................................... -- 8,759,355
Commitments and contingencies...................... -- --
------------ ------------
Total long-term liabilities.................. 129,852,979 117,149,687
------------ ------------
Total liabilities............................ 145,191,057 128,258,684
------------ ------------
Members' equity:
Members' contributions........................... 24,000,000 24,000,000
Retained earnings (accumulated deficit).......... (40,022,129) (26,997,824)
------------ ------------
Total members' (deficit)..................... (16,022,129) (2,997,824)
------------ ------------
Total liabilities and members' equity........ $129,168,928 $125,260,860
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-2
<PAGE>
THE MAJESTIC STAR CASINO, LLC
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE SIX MONTHS ENDED JUNE
30, 30,
------------------------- -------------------------
1999 1998 1999 1998
------------ ----------- ------------ -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
REVENUES:
Casino................. $ 30,527,215 $27,635,544 $ 59,413,287 $55,219,428
Food and beverage...... 500,081 391,625 967,982 858,141
Other.................. 248,596 254,352 467,999 817,892
------------ ----------- ------------ -----------
Gross revenues....... 31,275,892 28,281,521 60,849,268 56,895,461
less: promotional
allowances......... (76,943) (78,595) (139,291) (210,857)
------------ ----------- ------------ -----------
Net revenues......... 31,198,949 28,202,926 60,709,977 56,684,604
------------ ----------- ------------ -----------
COSTS AND EXPENSES:
Casino................. 5,057,329 4,609,372 10,215,549 9,488,392
Gaming and admission
taxes................. 8,515,879 8,176,607 16,662,969 16,306,860
Food and beverage...... 615,620 578,445 1,236,089 1,176,364
Advertising and
promotion............. 1,810,690 3,216,868 3,318,786 6,128,878
General and
administrative........ 6,196,377 5,612,006 12,379,477 12,138,343
Economic incentive--
City of Gary.......... 941,821 854,241 1,835,392 1,706,517
Depreciation and
amortization.......... 1,971,806 1,901,726 3,914,526 3,832,417
Loss on disposition of
assets................ -- 168,683 -- 903,675
------------ ----------- ------------ -----------
Total costs and
expenses............ 25,109,522 25,117,948 49,562,788 51,681,446
------------ ----------- ------------ -----------
Operating income..... 6,089,427 3,084,978 11,147,189 5,003,158
------------ ----------- ------------ -----------
OTHER INCOME (EXPENSE):
Loss on investment in
Buffington Harbor
Riverboats, L.L.C..... (599,977) (673,986) (1,403,991) (1,600,534)
Interest income........ 201,805 236,683 396,130 459,690
Interest expense....... (3,880,151) (3,810,203) (7,758,023) (7,629,663)
Interest expense to
affiliate............. (68,254) (145,162) (167,454) (290,683)
------------ ----------- ------------ -----------
Total other income
(expense)........... (4,346,577) (4,392,668) (8,933,338) (9,061,190)
------------ ----------- ------------ -----------
Income (loss) before
extraordinary item.. 1,742,850 (1,307,690) 2,213,851 (4,058,032)
EXTRAORDINARY ITEM:
Loss on bond
redemption............ (15,238,156) -- (15,238,156) --
------------ ----------- ------------ -----------
Net (loss)........... $(13,495,306) $(1,307,690) $(13,024,305) $ 4,058,032)
============ =========== ============ ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
THE MAJESTIC STAR CASINO, LLC
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE SIX MONTHS FOR THE SIX MONTHS
ENDED JUNE 30, 1999 ENDED JUNE 30, 1998
------------------- -------------------
(UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss............................. $(13,024,305) $(4,058,032)
Adjustment to reconcile net loss to
net cash provided by operating
activities:
Depreciation....................... 3,071,850 2,956,585
Amortization....................... 842,676 875,832
Loss on investment in Buffington
Harbor Riverboats, L.L.C.......... 1,403,991 1,600,534
Loss on disposal of assets......... -- 903,675
Loss on bond redemption............ 15,238,156 --
Decrease in accounts receivable,
net............................... 32,285 109,466
(Increase) decrease in
inventories....................... (9,201) 2,835
(Increase) decrease in prepaid
expenses.......................... 20,430 (383,953)
Increase in other assets........... (2,597,702) (1,429)
Increase (decrease) in accounts
payable........................... 382,924 (774,742)
Decrease in accrued payroll and
other expenses.................... (218,778) (834,038)
Increase (decrease) in accrued
interest.......................... (3,457,918) 529,758
Increase in other accrued
liabilities....................... 1,278,209 763,142
------------ -----------
Net cash provided by operating
activities...................... 2,962,617 1,689,633
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of property, equipment
and vessel improvements............. (2,067,414) (1,516,194)
Proceeds from sale of slot
equipment........................... -- 481,800
(Increase) decrease in deposits...... (15,000) 609,274
Increase in Letter of Credit
deposit............................. -- (3,624,708)
Investment in Buffington Harbor
Riverboats, L.L.C................... (73,011) (260,369)
Decrease in restricted cash.......... -- 11,904,716
------------ -----------
Net cash provided (used) by
investment activities........... (2,155,425) 7,594,519
CASH FLOWS FROM FINANCING ACTIVITIES
Redemption of 12 3/4% of Senior
Secured Notes....................... (116,005,298) --
Proceeds from issuance of 10 7/8%
Senior Secured Notes................ 127,738,000 --
Increase in restricted cash.......... (7,491,175) --
Payment of Senior Secured Notes
issuance costs...................... (4,241,526) --
Increase in short-term debt.......... 6,000,000 --
Cash paid to reduce short-term debt.. -- (100,694)
Cash paid to reduce long-term debt... (9,800,833) (1,008,164)
Reduction of notes payable........... -- (481,800)
------------ -----------
Net cash (used) by financing
activities...................... (3,800,832) (1,590,658)
Net increase (decrease) in cash and
cash equivalents...................... (2,993,640) 7,693,494
Cash and cash equivalents, beginning of
period................................ 17,295,401 8,083,594
------------ -----------
Cash and cash equivalents, end of
period................................ $ 14,301,761 $15,777,088
============ ===========
INTEREST PAID:
Principal member..................... $ 167,455 $ 145,162
Equipment debt....................... $ 254,360 $ 193,725
Senior Secured Notes--fixed
interest............................ $ 7,844,438 $ 6,693,750
Senior Secured Notes--contingent
interest............................ $ 3,018,090 $ --
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
THE MAJESTIC STAR CASINO, LLC
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1. BASIS OF PRESENTATION
The Majestic Star Casino, LLC (the "Company"), was formed on December 8,
1993, as an Indiana limited liability company, to provide gaming and related
entertainment to the public. The Company commenced gaming operations in the
City of Gary (the "City") at Buffington Harbor, located in Lake County, in the
State of Indiana on June 7, 1996. During the second quarter a wholly-owned
subsidiary, The Majestic Star Capital Corp., was formed to facilitate the
offering of new debt. The Majestic Star Casino Corp. has no assets, liabilities
or operations.
The accompanying unaudited financial statements represent the operations of
The Majestic Star Casino, LLC, as well as its investment in Buffington Harbor
Riverboats, L.L.C., and have been prepared in accordance with generally
accepted accounting principles for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they
do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the
opinion of management, all adjustments (which include normal recurring
adjustments) considered necessary for a fair presentation of the results for
the interim periods have been made. The results for the three and six months
ended June 30, 1999, are not necessarily indicative of results to be expected
for the full fiscal year. The financial statements should be read in
conjunction with the financial statements and notes thereto included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1998.
NOTE 2. INVESTMENT IN BUFFINGTON HARBOR RIVERBOATS, L.L.C. ("BHR")
On October 31, 1995, the Company and Trump Indiana, Inc. (the "Joint Venture
Partner") entered into the First Amended and Restated Operating Agreement of
BHR for the purpose of acquiring and developing certain facilities for the
gaming operations in the City ("BHR Property"). BHR is responsible for the
management, development and operation of the BHR Property. The Company and the
Joint Venture Partner have each entered into an agreement with BHR (the
"Berthing Agreement") to use BHR Property for their respective gaming
operations and have committed to pay cash operating losses of BHR as additional
berthing fees. The Company and the Joint Venture Partner share equally in the
operating expenses relating to the BHR Property, except for costs associated
with food and beverage and gift shop, which are allocated on a percentage of
use by the casino customers of the Company and the Joint Venture Partner.
The following represents selected financial information of BHR:
BUFFINGTON HARBOR RIVERBOATS, L.L.C.
STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE SIX MONTHS ENDED JUNE
30, 30,
------------------------ ------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Gross revenue........... $ 4,930,317 $ 5,085,419 $ 9,529,650 $ 9,900,523
Operating income
(loss)................. $ 294,811 $ (131,557) $ 180,101 $ (243,231)
Net (loss).............. $(1,199,952) $(1,347,933) $(2,807,982) $(3,201,069)
</TABLE>
NOTE 3. DEBT REFINANCING
During the quarter ended June 30, 1999, the Company refinanced a substantial
portion of its long-term debt. $99 million of the 12 3/4% Senior Secured Notes
were redeemed and $130 million of 10 7/8% Senior Secured Notes were issued.
$7,491,000 of cash has been restricted for the payment of principal, premium
and interest related to the $6 million principal amount of unredeemed 12 3/4%
Senior Secured Notes.
F-5
<PAGE>
THE MAJESTIC STAR CASINO, LLC
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
NOTE 4. EXTRAORDINARY ITEM -- LOSS ON BOND REDEMPTION
In connection with the Company's refinancing of its long-term debt, the
Company charged $15,238,000 to results of operations, representing premium paid
and unamortized deferred financing expenses. The charge was recorded as an
extraordinary item.
NOTE 5. COMMITMENTS AND CONTINGENCIES
Legal Proceedings
On March 27, 1998, a complaint was filed in the Lake County Superior Court
in East Chicago, Indiana, against BHR, the Joint Venture Partner and the
Company. The plaintiff, a former employee of the Company, claims to have been
assaulted in the BHR parking lot on June 25, 1997, and is requesting
compensatory and punitive damages totaling approximately $11.0 million. The
suit alleges that the Joint Venture Partner and the Company failed to provide
adequate security to prevent assaults. The Company intends to vigorously defend
against such suit. However, the case is in the discovery phase and it is too
early to predict the outcome of such suit and the effect, if any on the
Company's financial position and results of operations.
Harbor Lease
Under a lease agreement with Lehigh Portland Cement Company ("Lehigh
Cement"), BHR has leased certain property which is integral to the gaming
operations of the Joint Venture Partner and the Company. The lease places
certain restrictions on the use of the harbor by the Joint Venture Partners,
requires the reimbursement of certain costs which may be incurred by Lehigh
Cement and requires BHR to pursue permitting of and building of a new harbor.
The lease was rent free through December 29, 1997, and subject to certain
conditions, primarily continuing progress toward permitting of and then
building of a new harbor, the lease has been extended until the earlier of
December 31, 2005, or the completion of a new harbor. Starting in January 1998,
under the lease, the BHR Joint Venture pays rent of $125,000 per month. A new
harbor may require new guest facilities. The level of expenditures required for
such new facilities cannot be accurately estimated at this time.
Indiana Gaming Regulations
The ownership and operation of riverboat gaming operations in Indiana are
subject to strict state regulation under the Riverboat Gambling Act ("Act") and
the administrative rules promulgated thereunder. The Indiana Gaming Commission
("IGC") is empowered to administer, regulate and enforce the system of
riverboat gaming established under the Act and has jurisdiction and supervision
over all riverboat gaming operations in Indiana, as well as all persons on
riverboats where gaming operations are conducted. The IGC is empowered to
regulate a wide variety of gaming and nongaming related activities, including
the licensing of supplies to, and employees at, riverboat gaming operations and
to approve the form of entity qualifiers and intermediary and holding
companies. Indiana is a new jurisdiction and the emerging regulatory framework
is not yet complete. The IGC has adopted certain final rules and has published
others in proposed or draft form which are proceeding through the review and
final adoption process. The IGC has broad rulemaking power, and it is
impossible to predict what effect, if any, the amendment of existing rules or
the finalization of currently new rules might have on the Company's operations.
F-6
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Members of
The Majestic Star Casino, LLC:
In our opinion, the accompanying balance sheets and the related statements
of income, changes in members' equity, and cash flows present fairly, in all
material respects, the financial position of The Majestic Star Casino, LLC (the
"Company") at December 31, 1998 and 1997, and the results of its operations and
its cash flows for each of the three years in the period ended December 31,
1998, in conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for the
opinion expressed above.
/s/ PricewaterhouseCoopers LLP
-------------------------------------
PRICEWATERHOUSECOOPERS LLP
Chicago, Illinois
February 22, 1999
F-7
<PAGE>
THE MAJESTIC STAR CASINO, LLC
BALANCE SHEETS
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-------------------------------
1998 1997
------------ ------------
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents............................ $ 17,295,401 $ 8,083,594
Accounts receivable, less allowance for doubtful
accounts of $148,608 and $370,000, respectively... 850,086 879,887
Inventories........................................ 41,948 33,717
Prepaid expenses................................... 984,512 995,887
------------ ------------
Total current assets........................... 19,171,947 9,993,085
------------ ------------
Property, equipment, and vessel improvements, net.... 55,953,220 61,206,890
Other Assets:
Deferred financing costs, less accumulated
amortization of $1,544,086 and $947,941,
respectively...................................... 2,657,129 3,150,149
Deferred costs, less accumulated amortization of
$2,889,062 and $1,802,683, respectively........... 2,762,967 3,990,587
Investment in Buffington Harbor Riverboats,
L.L.C............................................. 40,748,887 43,541,985
Other assets and deposits.......................... 3,966,710 974,551
Restricted cash.................................... -- 11,904,716
------------ ------------
Total other assets............................. 50,135,693 63,561,988
------------ ------------
Total Assets................................... $125,260,860 $134,761,963
============ ============
LIABILITIES AND MEMBERS' EQUITY
Current Liabilities:
Current maturities of long-term debt............... $ 1,945,724 $ 1,889,427
Short-term debt.................................... -- 100,696
Accounts payable................................... 428,070 1,519,235
Other accrued liabilities:
Payroll and related.............................. 1,073,801 1,453,789
Interest......................................... 4,216,422 3,076,512
Other accrued liabilities........................ 3,039,970 2,939,877
Due to Buffington Harbor Riverboats, L.L.C....... 405,010 719,058
------------ ------------
Total current liabilities...................... 11,108,997 11,698,594
Long-term debt, net of current maturities............ 108,390,332 110,828,515
Note to member....................................... 8,759,355 10,759,355
Commitments and contingencies........................ -- --
------------ ------------
Total long-term liabilities.................... 117,149,687 121,587,870
------------ ------------
Total Liabilities.............................. 128,258,684 133,286,464
------------ ------------
Members' Equity:
Members' contributions............................. 24,000,000 24,000,000
Retained earnings (Accumulated deficit)............ (26,997,824) (22,524,501)
------------ ------------
Total members' equity.......................... (2,997,824) 1,475,499
------------ ------------
Total Liabilities and Members' Equity.......... $125,260,860 $134,761,963
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements
F-8
<PAGE>
THE MAJESTIC STAR CASINO, LLC
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
----------------------------------------
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
Revenues:
Casino.............................. $111,480,624 $ 92,304,580 $ 52,788,009
Food and beverage.................. 1,643,470 1,559,071 808,567
Other.............................. 1,476,549 848,604 636,071
------------ ------------ ------------
Gross Revenues.................... 114,600,643 94,712,255 54,232,647
------------ ------------ ------------
less promotional allowances....... (337,410) (169,306) (12,088)
------------ ------------ ------------
Net Revenues..................... 114,263,233 94,542,949 54,220,559
Costs and Expenses:
Casino.............................. 18,853,387 16,758,049 9,256,597
Gaming and admission taxes.......... 32,722,100 26,956,027 15,537,905
Food and beverage................... 2,390,282 1,937,290 1,128,868
Advertising and promotion........... 10,155,661 12,708,722 4,563,096
General and administrative.......... 24,222,202 22,229,511 12,289,291
Economic incentive-City of Gary..... 3,455,705 2,789,461 1,586,351
Depreciation and amortization....... 7,820,276 7,700,345 5,319,682
Loss on disposition of assets....... 958,425 1,602,815 --
Pre-opening costs................... -- 1,253,758 4,586,879
------------ ------------ ------------
Total costs and expenses......... 100,578,038 93,935,978 54,268,669
------------ ------------ ------------
Operating income (loss)............. 13,685,195 606,971 (48,110)
Other Income (Expense):
Loss on investment in Buffington
Harbor
Riverboats, L.L.C................... (3,167,459) (3,447,944) (2,439,581)
Interest income..................... 860,240 1,831,187 2,198,929
Interest expense.................... (15,325,869) (12,260,715) (8,246,565)
Interest expense to affiliate........ (525,430) (616,691) (351,277)
Total other income (expense)..... (18,158,518) (14,494,163) (8,838,494)
------------ ------------ ------------
Net Income (Loss)................ $ (4,473,323) $(13,887,192) $ (8,886,604)
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-9
<PAGE>
THE MAJESTIC STAR CASINO, LLC
STATEMENTS OF CHANGES IN MEMBERS' EQUITY
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31, 1998, 1997, AND 1996
RETAINED EARNINGS
---------------------------------------
TOTAL
CAPITAL (ACCUMULATED MEMBERS'
CONTRIBUTIONS DEFICIT) EQUITY
------------- ------------ -----------
<S> <C> <C> <C>
Balance, December 31, 1995............ $34,759,355 $ 249,295 $35,008,650
Conversion of capital contribution
to debt............................ (10,759,355) -- (10,759,355)
Net loss............................ -- (8,886,604) (8,886,604)
----------- ------------ -----------
Balance, December 31, 1996............ 24,000,000 (8,637,309) 15,362,691
Net loss............................ -- (13,887,192) (13,887,192)
----------- ------------ -----------
Balance, December 31, 1997............ 24,000,000 (22,524,501) 1,475,499
Net loss............................ -- (4,473,323) (4,473,323)
----------- ------------ -----------
Balance, December 31, 1998............ $24,000,000 $(26,997,824) $(2,997,824)
=========== ============ ===========
</TABLE>
The accompanying notes are an integral part of these financial
statements.
F-10
<PAGE>
THE MAJESTIC STAR CASINO, LLC
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
---------------------------------------
1998 1997 1996
----------- ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss............................. $(4,473,323) $(13,887,192) $ (8,886,604)
Adjustment to reconcile net loss to
net cash provided by operating
activities:
Depreciation....................... 5,949,639 5,764,612 2,815,104
Amortization....................... 1,870,637 1,935,733 2,504,578
Deferred expenses.................. -- -- 234,796
Loss on investment in Buffington
Harbor Riverboats, LLC............ 3,167,459 3,447,944 2,439,581
Loss on disposal of chartered
vessel improvements............... 958,425 1,602,815 --
(Increase) decrease in accounts
receivable, net................... 29,801 (322,071) (557,816)
Increase in inventories............ (8,231) (9,066) (24,651)
(Increase) decrease in prepaid
expenses.......................... 11,375 173,981 (1,169,868)
(Increase) decrease in other
assets............................ 36,683 (224,128) (310,722)
Increase (decrease) in accounts
payable........................... (1,091,165) 975,081 424,581
Increase (decrease) in accrued
payroll and other expenses........ (379,988) 860,297 593,492
Increase in accrued interest....... 1,139,910 607,814 2,468,698
Increase (decrease) in other
accrued liabilities............... (249,589) 1,270,264 2,323,270
----------- ------------ ------------
Net cash provided by operating
activities...................... 6,961,633 2,196,084 2,854,439
----------- ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of property, equipment
and vessel improvements............. (2,099,921) (39,641,158) (20,241,855)
Sale of slot equipment............... 427,050 -- --
Sale of telephone equipment.......... 16,000 -- --
Licensing and local initiative
expenditures........................ -- -- (2,747,000)
(Increase) decrease in Chartered
Vessel deposit...................... 609,274 1,108,264 (1,717,538)
Decrease in letter of credit
deposit............................. (3,600,000) -- --
Investment in Buffington Harbor
Riverboats, LLC..................... (374,363) (2,043,076) (25,563,415)
(Increase) decrease in restricted
cash................................ 11,904,716 39,784,138 (51,688,854)
----------- ------------ ------------
Net cash (used) provided by
investment activities........... 6,882,756 (791,832) (101,958,662)
----------- ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds of loan from Member......... -- -- 18,097,299
Proceeds from issuance of 12.75%
Senior Secured Notes................ -- -- 105,000,000
Cash paid to reduce short-term debt.. (100,696) (108,336) (18,097,299)
Cash paid to reduce long-term debt... (1,954,836) (2,148,321) (1,290,860)
Reduction of notes payable........... (427,050) -- --
Payment of loan to member............ (2,000,000) -- --
Cash paid for financing charges...... (150,000) -- --
Payment of Senior Secured Notes
issuance costs...................... -- -- (4,115,307)
----------- ------------ ------------
Net cash (used) provided by
financing activities............ (4,632,582) (2,256,657) 99,593,833
----------- ------------ ------------
Net increase (decrease) in cash and
cash equivalents.................... 9,211,807 (852,405) 489,610
Cash and cash equivalents, beginning
of period........................... 8,083,594 8,935,999 8,446,389
----------- ------------ ------------
Cash and cash equivalents, end of
period.............................. $17,295,401 $ 8,035,594 $ 8,935,999
=========== ============ ============
Interest paid:
Principal Member................... $ 525,429 $ 616,691 $ 351,277
Equipment Debt..................... $ 747,060 $ 577,386 $ 382,231
Senior Secured Notes............... $13,387,500 $ 13,387,500 $ 6,433,438
</TABLE>
Supplemental noncash operating and financing activities of the Company
include the following: During 1997, the Company refinanced existing equipment
debt of $3,805,070, and obtained additional financing of $4,275,750 for
additional equipment. On March 31, 1996, contributions totaling $10,759,355
were converted from Members' Equity to long-term debt. During 1996 the Company
obtained financing of $6,623,205.
The accompanying notes are an integral part of these financial statements.
F-11
<PAGE>
THE MAJESTIC STAR CASINO, LLC
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
1. BASIS OF PRESENTATION:
The Majestic Star Casino, LLC (the "Company") was formed on December 8,
1993, as an Indiana limited liability company ("LLC"), to provide gaming and
related entertainment to the public. The Company commenced gaming operations in
the City of Gary (the "City") at Buffington Harbor, located in Lake County, in
the State of Indiana on June 7, 1996.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Cash and Cash Equivalents
The Company considers cash equivalents to include short-term investments
with original maturities of ninety days or less. At December 31, 1998 and 1997,
the Company had bank deposits in excess of federally insured limits by
approximately $11,683,000 and $3,076,000, respectively.
Inventories
Inventories, which consist of food, beverage, and promotional items are
recorded at the lower of cost or market, cost being determined principally on a
first in, first out basis. The estimated cost of normal operating quantities
(base stock) of uniforms has been recorded as an asset and is not being
depreciated. Costs of base stock replacements are expensed as incurred. Other
assets in the accompanying balance sheets include $366,710 and $365,281 of base
stock inventories at December 31, 1998 and 1997, respectively.
Property and Equipment
Property and equipment are stated at cost. Depreciation and amortization are
computed utilizing the straight line method over the estimated useful lives of
the assets. Costs of major improvements are capitalized; costs of normal
repairs and maintenance are charged to expense as incurred. Gains or losses on
disposal are recognized when incurred.
On October 27, 1997 the Chartered Vessel was replaced with the Permanent
Vessel. The Company wrote-off approximately $755,000 and $1,600,000 of assets
previously utilized on the Chartered Vessel, in 1998 and 1997, respectively.
The Company also wrote off approximately $204,000 of slot machines disposed of
in 1998.
Capitalized Interest
The Company capitalizes interest costs associated with debt incurred in
connection with major construction projects. When no debt is specifically
identified as being incurred in connection with such construction projects, the
Company capitalizes interest on amounts expended on the project at the
Company's average cost of borrowed money.
Interest expense capitalized for the construction of the new riverboat
casino (the "Permanent Vessel") was $2,530,000, of this amount, $2,317,000 and
$213,000 was capitalized during 1997 and 1996, respectively.
Organizational Costs
Costs incurred in connection with the formation of the limited liability
company have been capitalized and were initially being amortized over a period
of five years. The Company, in accordance with the Statement of Position 98-5,
Reporting on the Costs of Start-Up Activities, wrote off the remaining balance
of organization costs during the fourth quarter of 1998.
F-12
<PAGE>
THE MAJESTIC STAR CASINO, LLC
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Deferred Financing Costs
Deferred financing costs represent agent's commission, closing costs and
professional fees incurred in connection with the Senior Secured Notes. Such
costs are being amortized over the seven year term of the notes.
Deferred Costs and Preopening Costs
Development obligation payments to the City and licensing costs represent
direct costs associated with the development of the riverboat casino, and were
deferred until operations commenced on June 7, 1996. These costs are currently
being amortized over five years, the life of the gaming license. Costs of
approximately $1,254,000 associated with the transition from the Chartered
Vessel to the Permanent Vessel in October 1997 and pre-opening costs of
approximately $4,587,000 in 1996 were charged to operations in the years ended
1997 and 1996, respectively.
Investment in Buffington Harbor Riverboats, L.L.C.
The Company accounts for its 50 percent interest in Buffington Harbor
Riverboats, L.L.C. ("BHR") under the equity method, whereby the initial
investments are recorded at cost and then adjusted for the Company's share of
BHR's net income or loss on distributions.
Restricted Cash
Cash and investments of approximately $11,905,000 at December 31, 1997
represent amounts designated as a completion reserve in 1997 for the
construction of the Permanent Vessel. The funds were invested primarily in
securities of the U. S. Government and its agencies, with original maturities
less than 180 days and were held in collateral accounts pursuant to
disbursement agreements of the Senior Secured Notes.
At December 31, 1998 no cash and investments were designated for future cash
requirements.
Casino Revenue
Casino revenue is the net win from gaming activities, which is the
difference between gaming wins and losses.
Promotional Allowances
Operating revenues include the retail value of food and other services,
which were provided to customers without charge. The corresponding charges have
been deducted from revenue in the accompanying statements of income as
promotional allowances in the determination of net operating revenues. The
estimated costs of providing the complimentary services are charged to the
casino department and are as follows:
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- -------
<S> <C> <C> <C>
Food............................................ $292,904 $160,293 $12,088
Retail.......................................... $ 44,506 $ 9,013 $ 0
</TABLE>
Federal Income Taxes
The Company has elected status as a partnership under the Internal Revenue
Code. Under this election, income of the Company is taxed directly to the
members and, accordingly, there is no provision for federal income taxes.
F-13
<PAGE>
THE MAJESTIC STAR CASINO, LLC
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Long-Lived Assets
The Company, in 1995, adopted the provisions of Statement of Financial
Accounting Standard No. 121, "Accounting for the Impairment of Long-Lived
Assets" ("SFAS No. 121"). SFAS No. 121 requires, among other things, that an
entity review its long-lived and certain related intangibles for impairment
whenever changes in circumstances indicate that the carrying amount of an asset
may not be fully recoverable. Impairment of long-lived assets exists, if, at a
minimum the future expected cash flows (undiscounted and without interest
charges) from an entity's operation are less than the carrying value of these
assets. As a result of its review, the Company does not believe that any
impairment exists in the recoverability of its long-lived assets.
Fair Value of Financial Instruments
The Company believes, based upon current information, that the carrying
value of the Company's cash and cash equivalents, restricted cash, accounts
receivable and accounts payable approximates fair value because of the short
term maturity of those instruments. The Company estimates the fair value of its
long-term debt and notes payable approximates their carrying value based on
quotations received from investment bankers or because interest rates on the
debt approximate market rates.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the period. Actual results could differ from those estimates.
Reclassifications
Certain reclassifications have been made to the prior year balance sheet to
conform with the current year presentation.
3. CERTIFICATE OF SUITABILITY
On December 9, 1994, the Indiana Gaming Commission (the "Commission")
awarded the Company one of two certificates (the "Certificate") for a riverboat
owner's license for a riverboat casino to be docked in the City. Having
complied with certain statutory and regulatory requirements and other
conditions of the Commission, the Company received a five year riverboat
owner's license on June 3, 1996.
The second certificate was issued to Trump Indiana, Inc. ("Trump"). The
Company and Trump jointly developed and operate a docking location from which
the entities are conducting their respective riverboat gaming operations in the
City.
4. CITY OF GARY, INDIANA DEVELOPMENT OBLIGATION
On September 7, 1995, the Company and the City entered into an agreement for
the purpose of summarizing procedures regarding the acquisition of a certain
parcel of land in accordance with the Certificate. The Company paid the city
$250,000 under the terms of this agreement.
On September 29, 1995, the Company, Trump and the City entered into an
agreement. In accordance with this agreement, the Company paid the City
$5,000,000. As of December 31, 1996, $5,250,000 of deferred costs
F-14
<PAGE>
THE MAJESTIC STAR CASINO, LLC
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
represents the Company's development obligation to the City, which is being
amortized over 5 years, the life of the gaming license.
As of March 26, 1996, the City and the Company entered into a development
agreement which supersedes the September 7, 1995 agreement between the City and
the Company. The development agreement ("Development Agreement") requires the
Company, among other things, (1) to invest $116 million in various on-site
improvements over the next five years, (2) pay the City an economic incentive
equal to 3% of the Company's adjusted gross receipts, as defined by the
Riverboat Gambling Act and (3) pay a default payment in the amount of damages
for failure to complete certain on-site developments, which amount is capped at
$12 million.
The Company has met or accrued a significant portion of these commitments.
The two principal components of the remaining portion of the Company's
commitment are as follows: (1) $10 million for off-site development in the City
by 1998/1999 with the particular project(s) to be agreed to by the City; and
(2) $12 million (all of which has been expended through December 31, 1998, with
the exact amount to be agreed upon by the City and the Company) to be expended
over the five years following the June 1996 opening of the casino for
enhancements to the Company's operations at Buffington Harbor and/or BHR's
facilities.
5. PROPERTY AND EQUIPMENT
Property and equipment at December 31, 1998 and 1997 consist of the
following:
<TABLE>
<CAPTION>
ESTIMATED
SERVICE
LIFE
1998 1997 (YEARS)
------------ ----------- ---------
<S> <C> <C> <C>
Vessel............................. $ 43,312,617 $43,409,051 30
Buildings and improvements......... 63,407 49,507 5
Furniture, fixtures and equipment.. 22,683,450 22,691,072 5
------------ -----------
Total Property and equipment... 66,059,474 66,149,630
Less accumulated depreciation and
amortization...................... (10,106,254) (4,942,740)
------------ -----------
Total Property and equipment,
net........................... $ 55,953,220 $61,206,890
============ ===========
</TABLE>
Substantially all property and equipment are pledged as collateral on long-
term debt. See Note 8.
6. INVESTMENT IN BUFFINGTON HARBOR RIVERBOATS, L.L.C.
On October 31, 1995, the Company and Trump entered into the First Amended
and Restated Operating Agreement of BHR for the purpose of acquiring and
developing certain facilities for the gaming operations in the City ("BHR
Property"). BHR is responsible for the management, development and operation of
the BHR Property. The Company and Trump have each entered into an agreement
with BHR (the "Berthing Agreement") to use BHR Property for their respective
gaming operations and have committed to pay cash operating losses of BHR as
additional berthing fees. The Company and BHR share equally in the operating
expenses relating to the BHR Property, except for costs associated with food
and beverage, and valet operations, which are allocated on a percentage of use
by the casino customers of the Company and the joint venture partner.
F-15
<PAGE>
THE MAJESTIC STAR CASINO, LLC
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The following represents selected financial information of BHR:
BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31, 1998 DECEMBER 31, 1997
----------------- -----------------
<S> <C> <C>
Cash and cash equivalents........... $ 177,685 $ 129,509
Current assets...................... 1,947,456 2,246,364
Property, equipment, and
construction in progress, net...... 84,507,760 89,946,185
Other assets........................ 267,717 509,279
----------- -----------
Total assets........................ $86,722,933 $92,701,828
=========== ===========
Current liabilities................. 2,725,170 2,760,693
Total liabilities................... 5,225,159 5,617,858
Member's equity--The Majestic Star
Casino, LLC........................ 40,748,887 43,541,985
Total members' equity-- ............ 81,497,774 87,083,970
STATEMENTS OF INCOME
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
-----------------------------------
1998 1999
----------------- -----------------
<S> <C> <C>
Gross revenue....................... $18,647,686 $19,685,841
Operating income (loss)............. (6,352,146) (6,931,944)
Net income (loss)................... (6,334,926) (6,913,682)
</TABLE>
Promotional allowances provided to the Company's gaming patrons at BHR
facilities totaled approximately $567,000 in 1998 and $646,000 in 1997, and are
characterized in the Company's financial statements as an expense of the
casino. BHR invoices the Company monthly for these promotional allowances at
cost which approximates the retail value of the promotional allowances.
At December 31, 1998, 1997, and 1996, the Company's income statements
reflect approximately $7,001,000, $7,134,000, and $4,314,000 in vessel berthing
fee's and promotional allowances payable to BHR of which $6,873,000,
$6,415,000, and $3,487,000 was paid in 1998, 1997, and 1996, respectively.
7. CHARTER AGREEMENT
On August 17, 1995, the Company entered into a Charter Agreement
("Agreement") with New Yorker Acquisition Corporation ("Owner") and President
Casino, Inc. for the purpose of leasing the Owner's casino gaming vessel
together, with all improvements, furniture, fixtures and equipment.
The Agreement became effective on May 3, 1996 and expired on May 10, 1998.
The terms of the Agreement, required the Company to pay the Owner $125,000 plus
5% use tax monthly for the first 24 months. The Company was also required to
pay the cost of any repairs which are necessary to bring the Chartered Vessel
into the condition required on redelivery under the lease agreement. As
required by the Agreement, the Company in 1995 placed a security deposit in
escrow with a financial institution. The amount in escrow including accrued
interest was approximately $609,000 and $1,700,000 as of December 31, 1997 and
1996, respectively. The security deposit was refundable pursuant to the terms
of the escrow agreement.
On March 30, 1998, the Company executed an amendment to the August 17, 1995
Charter Agreement whereby New Yorker Acquisition Corporation, the lessor,
accepted re-delivery of the Chartered Vessel
F-16
<PAGE>
THE MAJESTIC STAR CASINO, LLC
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
effective March 1, 1998, "as-is, where-is" at Erie, Pennsylvania from the
Company. The Company agreed to release to New Yorker Acquisition Corporation a
$500,000 escrow account with accrued interest thereon, free and clear of any
claims in lieu of restoring the Chartered Vessel back to its original
condition. The Company during the year ended December 31, 1998 wrote-off assets
previously utilized on the Chartered Vessel that had a net book value of
approximately $755,000. As of March 1, 1998, all obligations of the Company and
New Yorker Acquisition Corporation have been fully satisfied and the parties
have no further obligations under the original charter agreement. The total
amount of expenses associated with the lease and subsequent termination of the
charter vessel lease agreement included in the Company's Statements of Income
was approximately $755,000, $1,537,000 and $879,000 for 1998, 1997 and 1996,
respectively.
8. LONG-TERM DEBT
Long-term debt at December 31, 1998 and 1997 is as follows:
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
Senior secured notes payable; collateralized
by a first priority lien on substantially
all of the assets of the Company, due in
semi-annual installments of interest at
12.75% together with contingent interest
payable on May 15 and November 15; with a
final payment of principal and interest due
on May 15, 2003. (See Note 10).............. $105,000,000 $105,000,000
Contracts payable including related use
taxes; collateralized by gaming equipment;
due in aggregate monthly installments
(principal and interest) of approximately
$220,000, with varying maturity dates
through September 2001.(1).................. 5,336,056 7,717,942
------------ ------------
Total long-term debt......................... 110,336,056 112,717,942
Less current portion(1)...................... (1,945,724) (1,889,427)
------------ ------------
Long-term portion............................ $108,390,332 $110,828,515
============ ============
</TABLE>
The scheduled maturities of long-term debt are as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, MATURITIES
------------------------ ------------
<S> <C>
1999......................................................... $ 1,945,724
2000......................................................... 2,412,618
2001......................................................... 977,714
2002......................................................... --
Thereafter................................................... 105,000,000
------------
Total...................................................... $110,336,056
============
</TABLE>
- --------
(1) At December 31, 1998 deferred long term and current portion of equipment
debt includes accrued use taxes payable of approximately $110,083 and
approximately $65,408, respectively. At December 31, 1997 deferred long
term and current portion of equipment debt includes accrued use taxes
payable of approximately $175,492 and approximately $65,408, respectively.
F-17
<PAGE>
THE MAJESTIC STAR CASINO, LLC
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Senior Secured Notes
On May 22, 1996, the Company completed a private offering of $105,000,000 of
Senior Secured Notes due May 15, 2003. These notes were exchanged in November,
1996 by the Senior Exchange Secured Notes, which are registered under the
Securities Exchange Act of 1933, but which notes are otherwise substantially
identical in all material respects to the privately placed notes.
The Senior Secured Notes bear interest at a fixed rate of 12.75% per annum
payable May 15 and November 15 each year, commencing November 15, 1996.
Contingent interest is payable on the Senior Secured Notes, on each such
interest payment date, in an aggregate amount equal to 5.0% of the Company's
Consolidated Cash Flow, as defined in the Indenture between the Company and IBJ
Schroder Bank & Trust Company, as Trustee, dated May 22, 1996 (the
"Indenture"), for the six month period ending on March 31 or September 30
(each, a "Semiannual Period") most recently completed prior to such interest
payment date, based on maximum of $60.0 million of the Company's Consolidated
Cash Flow during any two consecutive Semiannual Periods; provided that no
contingent interest shall be payable with respect to any period prior to the
first day of the operation of the Majestic Star Casino, as defined in the
Indenture. Under certain circumstances, the Company, at its option, may defer
payment of all or any installment of contingent interest. At December 31, 1998
and 1997, accrued contingent interest payable was approximately $2,442,000 and
$1,253,000, respectively.
The Senior Secured Notes are collateralized by, among other things (i) a
pledge of the Company's 50% membership interest in BHR, (ii) a collateral
assignment of the Company's interest in the Berthing Agreement, (iii) a pledge
of all funds in the collateral accounts into which the proceeds from the Senior
Secured Notes were deposited pending their use and (iv) upon delivery of the
Permanent Vessel to the Company, a duly perfected first preferred ship mortgage
on such Permanent Vessel.
The Indenture contains covenants, which among other things, restrict the
Company's ability to (i) make certain distributions and payments, (ii) incur
additional indebtedness, (iii) enter into transactions with affiliates, (iv)
sell assets or stock, and (v) merge, consolidate or transfer substantially all
of its assets.
Equipment Financing
At December 31, 1998 and 1997, approximately $5.2 million and $7.5 million,
respectively, of equipment financing, excluding accrued use taxes of
approximately $175,000 and $241,000, was outstanding of which $1.9 million
represents current maturities of long-term debt. At December 31, 1998, $2.6
million of this debt carries an interest rate of 11.5%, $2.0 million carries an
interest rate of 10.75%, and $607,000 carries an interest rate of 10.93%. The
debt is collateralized by certain gaming equipment and the remaining balance
will be repaid in varying monthly principal and interest payments of
approximately $220,000.
9. NOTE TO MEMBER
At December 31, 1998 and 1997, approximately $8.8 million and $10.8 million
was owed to a member of the Company. This note carries a floating interest rate
equal to the applicable federal short term note, as set forth in Section
1274(d) of the Internal Revenue Code of 1986 (4.2%, 5.5% and 5.6%, at December
31, 1998, 1997 and 1996, respectively) and could not be repaid, under the
Indenture, until the completion of the Permanent Vessel, which is complete.
This note resulted from the conversion of members' contributions into debt on
March 31, 1996. During January 1998, the proceeds from the Senior Secured Notes
reserved to repay the note were reclassified from restricted cash to operating
cash as the funds held in escrow were not required to complete the Permanent
Vessel.
F-18
<PAGE>
THE MAJESTIC STAR CASINO, LLC
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
During September 1998, $2.0 million was repaid to a member of the Company,
BDI. The note is a demand note and there is no guaranty that the note due to
BDI will be repaid in 1999.
10. PROFIT SHARING PLAN
The Company contributes to a defined contribution plan which provides for
contributions in accordance with the plan document. The plan is available to
all employees with at least one year of service. The Company contributes a
matching contribution up to a maximum of 3% of an employee's salary limited to
a specified dollar amount as stated in the plan document. The Company's
contributions to the plan amounted to $272,000 and $288,000 during 1998 and
1997, respectively.
11. COMMITMENTS AND CONTINGENCIES
Letter of Credit/Surety Bond
In May 1996, the Company arranged for a $12.5 million five year surety bond
(the "Bond") to be issued to the Commission. The Bond's primary purpose is to
provide collateral for completion of the Company's off-site development
obligations under the Development Agreement. In 1996 to support the Company's
obligations to the bonding company, the Company obtained a $3.5 million letter
of credit from a bank to benefit the bonding company. The letter of credit was
renewed in both 1997 and 1998. The beneficial owner of the Company (the
"Owner") guaranteed the Company's obligations to the bonding company under the
Bond and to the bank under the $3.5 million letter of credit. During May 1998,
the Company replaced the Owner's financial guarantee by depositing $3.6 million
with the bank to guarantee the letter of credit to benefit the bonding company.
If the Owner is required to make payments to the bonding company as a result of
the guaranty, the Company will be obligated to reimburse the Owner for any such
payments.
Legal Proceedings
On January 15, 1998, the Company filed a petition for "Correction of an
Error" and on January 20, 1998, filed an appeal to the March 1, 1997, property
tax assessment of the Chartered Vessel. The Company believes it was not given
proper notice of the 1997 property tax assessment in accordance with the
general assessment provisions of the property tax law and the Company further
believes the assessment of approximately $1.2 million was incorrectly
calculated. The tax is payable in semiannual installments due in May and
November 1998. Both semiannual installments totaling approximately $560,000 in
the aggregate have been paid. The amount paid was based upon an estimate
provided to the Company by legal counsel.
On March 27, 1998, a complaint was filed in the Lake County Superior Court
in East Chicago, Indiana, against BHR, Trump Indiana, Inc., (the "Joint Venture
Partner") and the Company. The plaintiff, a former employee of the Company,
claims to have been assaulted in the BHR parking lot on June 25, 1997 and is
requesting compensatory and punitive damages totaling approximately $11
million. The suit alleges that the Joint Venture Partner and the Company failed
to provide adequate security to prevent assaults. The Company intends to
vigorously defend against such suit. However, it is too early to determine the
outcome of such suit and the effect, if any on the Company's financial position
and results of operations.
From time to time, the Company may be involved in routine administrative
proceedings involving alleged violations of certain provisions of the Riverboat
Gambling Act. Management believes that the outcome of any such proceedings will
not, either individually or in the aggregate, have a material adverse effect on
the Company or its ability to retain and/or renew any license required under
the Riverboat Gambling Act for the Company's operations.
F-19
<PAGE>
THE MAJESTIC STAR CASINO, LLC
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
In March 1998, the Company agreed to settle two such proceedings with the
payment of $120,000 to the IGC. No such proceedings are pending at this time.
Harbor Lease
Under a lease agreement assumed by BHR, from the Joint Venture Partner with
Lehigh Portland Cement Company ("Lehigh Cement"), BHR has leased certain
property which is integral to the gaming operations of the Joint Venture
Partner and the Company. The lease places certain restrictions on the use of
the harbor by the joint venture partners, requires the reimbursement of certain
costs which may be incurred by Lehigh Cement and requires BHR to pursue
permitting of and building of a new harbor. The lease was rent free through
December 29, 1997 and subject to certain conditions, primarily continuing
progress toward permitting of and then building of a new harbor, the lease will
extend beyond December 29, 1997 until the earlier of December 31, 2005 or the
completion of a new harbor. The BHR Joint Venture will be required to pay
$125,000 per month beginning January 1998. A new harbor may require new guest
facilities. The level of expenditures required for such new facilities cannot
be accurately estimated at this time.
Indiana Gaming Regulations
The ownership and operation of riverboat gaming operations in Indiana are
subject to strict state regulation under the Riverboat Gambling Act ("Act") and
the administrative rules promulgated thereunder. The Indiana Gaming Commission
("IGC") is empowered to administer, regulate and enforce the system of
riverboat gaming established under the Act and has jurisdiction and supervision
over all riverboat gaming operations in Indiana, as well as all persons on
riverboats where gaming operations are conducted. The IGC is empowered to
regulate a wide variety of gaming and nongaming related activities, including
the licensing of supplies to, and employees at, riverboat gaming operations and
to approve the form of entity qualifiers and intermediary and holding
companies. Indiana is a new jurisdiction and the emerging regulatory framework
is not yet complete. The IGC has adopted certain final rules and has published
others in proposed or draft form which are proceeding through the review and
final adoption process. The IGC has broad rulemaking power, and it is
impossible to predict what effect, if any, the amendment of existing rules or
the finalization of currently new rules might have on the operations.
F-20
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Members of
Buffington Harbor Riverboats, L.L.C.:
We have audited the accompanying balance sheets of Buffington Harbor
Riverboats, L.L.C. (a Delaware limited liability company) as of December 31,
1998 and 1997, and the related statements of operations, members' capital and
cash flows for the years December 31, 1998, 1997, and 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Buffington Harbor
Riverboats, L.L.C. as of December 31, 1998 and 1997, and the results of its
operations and its cash flows for the years ended December 31, 1998, 1997, and
1996 in conformity with generally accepted accounting principles.
/s/ Arthur Andersen LLP
-------------------------------------
ARTHUR ANDERSEN LLP
Roseland, New Jersey
January 29, 1999
F-21
<PAGE>
BUFFINGTON HARBOR RIVERBOATS, L.L.C.
BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash................................................. $ 177,685 $ 129,509
Trade receivables.................................... 67,730 11,119
Due from members' (Note 2)........................... 1,361,375 1,666,509
Inventory............................................ 261,750 339,066
Prepaid expenses and other current assets............ 78,916 100,161
----------- -----------
Total current assets............................... 1,947,456 2,246,364
PROPERTY, PLANT AND EQUIPMENT, NET (Notes 2 and 3)..... 84,507,760 89,946,185
OTHER ASSETS........................................... 267,717 509,279
----------- -----------
Total assets....................................... $86,722,933 $92,701,828
=========== ===========
LIABILITIES AND MEMBERS' CAPITAL
CURRENT LIABILITIES:
Accounts payable..................................... $ 1,263,411 $ 2,095,812
Accrued expense...................................... 1,461,759 664,881
----------- -----------
Total current liabilities.......................... 2,725,170 2,760,693
DEFERRED RENT (Note 4)................................. 2,499,989 2,857,165
COMMITMENTS AND CONTINGENCIES (Note 4)................. -- --
MEMBERS' CAPITAL....................................... 81,497,774 87,083,970
----------- -----------
Total liabilities and member's capital............. $86,722,933 $92,701,828
=========== ===========
</TABLE>
The accompanying notes to financial statements are an integral part of these
financial statements.
F-22
<PAGE>
BUFFINGTON HARBOR RIVERBOATS, L.L.C.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
-------------------------------------
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
REVENUES
Food and beverage..................... $ 4,076,256 $ 5,541,672 $ 3,576,492
Other (Note 2)........................ 14,571,430 14,144,169 9,187,968
----------- ----------- -----------
Net revenues........................ 18,647,686 19,685,841 12,764,460
----------- ----------- -----------
COSTS AND EXPENSES
Food and beverage..................... 3,532,120 4,553,964 2,894,437
General and administrative............ 15,331,318 15,776,782 9,768,871
Depreciation.......................... 5,945,672 5,821,765 3,039,708
Other................................. 190,722 465,274 328,046
Preopening expenses................... -- -- 1,871,590
----------- ----------- -----------
Total costs and expenses............ 24,999,832 26,617,785 17,902,652
----------- ----------- -----------
Loss from operations................ (6,352,146) (6,931,944) (5,138,192)
INTEREST INCOME, net.................... 17,220 18,262 203,047
----------- ----------- -----------
Net loss............................ $(6,334,926) $(6,913,682) $(4,935,145)
=========== =========== ===========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-23
<PAGE>
BUFFINGTON HARBOR RIVERBOATS, L.L.C.
STATEMENTS OF MEMBERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997, AND 1996
<TABLE>
<CAPTION>
RETAINED
MEMBER EARNINGS
CONTRIBUTIONS (DEFICIT) TOTAL
------------- ------------ -----------
<S> <C> <C> <C>
Balance, December 31, 1995............ $43,646,036 $ 73,781 $43,719,817
Capital contribution made by Trump
Indiana, Inc....................... 25,563,415 0 25,563,415
Capital contribution made by The
Majestic Star Casino, LLC.......... 25,563,415 0 25,563,415
Net loss.......................... 0 (4,935,145) (4,935,145)
----------- ------------ -----------
Balance, December 31, 1996............ $94,772,866 $ (4,861,364) $89,911,502
Capital contribution made by Trump
Indiana, Inc....................... 2,043,075 0 2,043,075
Capital contribution made by The
Majestic Star Casino, LLC.......... 2,043,075 0 2,043,075
Net loss.......................... 0 (6,913,682) (6,913,682)
----------- ------------ -----------
Balance, December 31, 1997............ $98,859,016 $(11,775,046) $87,083,970
Capital contribution made by Trump
Indiana, Inc....................... 374,365 0 374,365
Capital contribution made by The
Majestic Star Casino, LLC.......... 374,365 0 374,365
Net loss.......................... 0 (6,334,926) (6,334,926)
----------- ------------ -----------
Balance, December 31, 1998............ $99,607,746 $(18,109,972) $81,497,774
=========== ============ ===========
</TABLE>
The accompanying notes to financial statements are an integral part of these
financial statements.
F-24
<PAGE>
BUFFINGTON HARBOR RIVERBOATS, L.L.C.
STATEMENTS OF MEMBERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997, AND 1996
<TABLE>
<CAPTION>
1998 1997 1996
----------- ----------- ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss............................. $(6,334,926) $(6,913,682) $ (4,935,145)
Adjustment to reconcile net loss to
net cash flows provided by (used in)
operating activities
Depreciation....................... 5,945,672 5,821,765 3,039,708
Deferred rent...................... (357,176) 1,142,856 1,714,309
Deferred income.................... -- (400,000) 400,000
Changes in operating assets and
liabilities.......................
Decrease (increase) in accounts
receivable........................ (56,611) 4,145 (15,264)
Decrease (increase) in due from
members'.......................... 305,134 261,881 (1,928,390)
Decrease (increase) in inventory... 77,316 14,900 (353,966)
Increase in prepaid expenses and
other current assets.............. 21,245 (8,599) (91,562)
Increase in other assets........... 241,562 (253,898) (255,381)
Increase (decrease) in accounts
payable........................... (832,401) 1,014,495 (1,859,328)
Increase in accrued expenses....... 796,878 204,739 460,142
----------- ----------- ------------
Net cash flows provided by (used
in) operating activities........ (193,307) 888,602 (3,824,877)
----------- ----------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and
equipment, net...................... (507,247) (4,913,623) (61,290,442)
----------- ----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Contributed capital.................. 748,730 4,086,150 51,126,830
----------- -----------
Net increase (decrease) in cash.. 48,176 61,129 (13,988,489)
CASH BEGINNING OF PERIOD............... 129,509 68,380 14,056,869
----------- ----------- ------------
CASH END OF PERIOD..................... $ 177,685 $ 129,509 $ 68,380
=========== =========== ============
</TABLE>
The accompanying notes to financial statements are an integral part of these
financial statements.
F-25
<PAGE>
BUFFINGTON HARBOR RIVERBOATS, L.L.C.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1998
1. ORGANIZATION AND OPERATIONS:
Trump Indiana, Inc. ("Trump Indiana") and The Majestic Star Casino, LLC
("Barden"), the two holders of certificates of suitability for the Gary,
Indiana riverboat casinos, formed Buffington Harbor Riverboats, L.L.C. ("BHR")
on September 27, 1995 and have entered into an agreement (the "BHR Agreement")
relating to the joint ownership, development and operation of all common land
based and waterside operations in support of the Trump Indiana and Barden
riverboat casinos. Under the BHR Agreement, BHR acquired property and
constructed common roadways, utilities and other infrastructure improvements on
BHR's property.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Revenue Recognition
Under the terms of the BHR Agreement, all expenditures requiring a cash
outlay by BHR are billed to Trump Indiana and Barden at cost. Accordingly, BHR
records as expenses the cost of providing such services and records as other
revenues the amounts billed to Trump Indiana and Barden.
Property, Plant and Equipment
Property, plant and equipment is carried at cost. Property and equipment is
depreciated on the straight-line method using rates based on the following
useful lives:
<TABLE>
<S> <C>
Land improvements............................................. 15 years
Buildings..................................................... 40 years
Building improvements......................................... 5-10 years
Harbor improvements........................................... 10-15 years
Furniture, fixtures and equipment............................. 5 years
</TABLE>
Income Taxes
BHR makes no provision (benefit) for income taxes since taxable income
(loss) is allocated to the members for inclusion in their respective income tax
returns.
Long-Lived Assets
BHR accounts for long-lived assets under the provisions of Statement of
Financial Accounting Standard No. 121, "Accounting for the Impairment of Long-
Lived Assets" ("SAS No. 121"). SAS No. 121 requires, among other things, that
an entity review its long-lived assets and certain related intangibles for
impairment whenever changes in circumstances indicate that the carrying amount
of an asset may not be fully recoverable. BHR does not believe that any such
changes have occurred.
F-26
<PAGE>
BUFFINGTON HARBOR RIVERBOATS, L.L.C.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Reclassifications
Certain reclassifications have been made to the prior year financial
statements to conform with the current year presentation.
3. PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment is comprised of the following:
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Land and land improvements...................... $35,353,824 $35,091,770
Building and building improvements.............. 40,224,143 40,199,358
Harbor improvements............................. 17,076,591 16,921,393
Furniture, fixtures and equipment............... 6,660,348 6,595,138
----------- -----------
99,314,906 98,807,659
Less: Accumulated depreciation.................. (14,807,146) (8,861,474)
----------- -----------
Total property, plant and equipment, net........ $84,507,760 $89,946,185
=========== ===========
</TABLE>
4. COMMITMENTS AND CONTINGENCIES:
Indiana Gaming Regulations
The ownership and operation of riverboat gaming operations in Indiana are
subject to state regulation under the Riverboat Gambling Act ("Act") and the
administrative rules promulgated thereunder. The Indiana Gaming Commission
("IGC") is empowered to administer, regulate and enforce the system of
riverboat gaming established under the Act and has jurisdiction and supervision
over all riverboat gaming operations in Indiana, as well as all persons on
riverboats where gaming operations are conducted. The IGC is empowered to
regulate a wide variety of gaming and nongaming related activities, including
the licensing of suppliers to, and employees at, riverboat gaming operations
and to approve the form of ownership and financial structure of not only
riverboat owner and supplier licensees, but also their entity qualifiers and
intermediary and holding companies. The IGC has broad rulemaking power, and it
is impossible to predict what effect, if any, the amendment of existing rules
or the finalization of currently new rules might have on the operations of BHR,
Trump Indiana and Barden.
Leases
Under a lease agreement assumed by BHR from Trump Indiana with Lehigh
Portland Cement Co. ("Lehigh Cement"), BHR has leased certain property, which
is integral to the gaming operations of Trump Indiana and Barden. The lease
places certain restrictions on the use of the harbor by riverboats of Barden
and Trump Indiana, requires the reimbursement of certain costs which may be
incurred by Lehigh Cement, and requires BHR to pursue the permitting and
construction of a new harbor. The lease was rent free through December 29, 1997
and subject to certain conditions, primarily continuing progress toward
permitting and construction of a new harbor, the lease will extend until the
earlier of December 31, 2005 or the completion of a new harbor. Subsequent to
the original 30-month term and beginning January, 1998 BHR is required to make
payments of $125,000 per month for the remainder of the lease term. As of
December 31, 1998 and 1997, BHR has recorded deferred rent expense of
$2,499,989 and $2,857,165, respectively. The level of expenditures necessary to
construct a new harbor cannot be accurately estimated at this time. BHR also
has office equipment and vehicle leases. Rental expense of noncancellable
operating leases was $1,481,194 and $1,502,239 for 1998, and 1997,
respectively.
F-27
<PAGE>
BUFFINGTON HARBOR RIVERBOATS, L.L.C.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Minimum rental commitments under noncancelable operating leases are as
follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
-----------------------
<S> <C>
1999......................................................... $ 1,813,942
2000......................................................... 1,804,476
2001......................................................... 1,662,646
2002......................................................... 1,500,000
2003......................................................... 1,500,000
Thereafter................................................... 3,000,000
-----------
$11,281,064
===========
</TABLE>
F-28
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
$130,000,000
[LOGO OF MAJESTIC STAR CASINO]
10 7/8% SENIOR SECURED NOTES
DUE 2006
----------------
PROSPECTUS
----------------
, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Majestic Star Casino, LLC (the "Company") is an Indiana limited
liability company and is managed by Barden Development, Inc. (the "Manager").
Section 5 of the Company's Third Amended and Restated Operating Agreement (the
"Operating Agreement") provides that the Manager will not be liable to the
Company or to any member for any loss or damage arising out of the management
of the Company, or any other activities in its capacity as a Manager, unless
caused by the Manager's (a) receipt of a financial benefit to which it is not
entitled, (b) assenting to a distribution in violation of the Operating
Agreement or the Indiana Limited Liability Company Act, (c) commission of a
crime, or (d) material violations of the Operating Agreement that are both
knowing and willful. Further, the Operating Agreement generally provides that
the Company will indemnify the Manager (and its agents and employees) from all
loss or damage incurred by them in connection with the Company, unless such
loss or damage is caused by such person's gross negligence or bad faith. (To
the extent that such indemnification provisions purport to include
indemnification for liabilities arising under the securities laws, in the
opinion of the Securities and Exchange Commission, such indemnification is
contrary to public policy and is therefore unenforceable.)
The Manager of the Company is an Indiana corporation. Chapter 37 of the
Indiana Business Corporation Law (the "IBCL") sets forth the conditions and
limitations governing the indemnification of officers, directors and other
persons.
The IBCL provides for indemnification of directors and officers acting in
good faith and in a manner they reasonably believe to be in or not opposed to
the best interest of the Company (and, with respect to a criminal proceeding,
if they have reasonable cause to believe their conduct to be lawful or they
have no reasonable cause to believe their conduct to be unlawful) against
liability incurred in a proceeding in which they are a party. The IBCL requires
indemnification for reasonable expenses to the extent that a director or
officer is successful, on the merits or otherwise, in defending against any
such proceeding and otherwise requires in general that the indemnification
provided for above to be made on a determination (a) by a majority vote of a
quorum of the board of directors who were not parties to such proceeding, (b)
if such quorum cannot be obtained, by the majority vote of a committee duly
designated by the board of directors (in which designation directors who are
parties may participate), consisting solely of 2 or more directors not at the
time parties to the proceeding, (c) by legal counsel selected by the board of
directors or such committee, (d) by the full board, if a quorum cannot be
obtained or a committee cannot be designated or (e) by the shareholders, but
shares owned by or voted under the control of directors who are at the time
parties to the proceeding may not be voted on such determination. In certain
circumstances, the IBCL further permits advances to cover such expenses before
a final determination that indemnification is permissible, upon receipt of a
written affirmation by the directors or officers of their good faith belief
that they have met the applicable standard of conduct set forth in the IBCL,
receipt of a written undertaking by or on behalf of the directors or officers
to repay such amounts unless it shall ultimately be determined that they are
entitled to indemnification and a determination that the facts then known to
those making the advance would not preclude indemnification.
Indemnification under the IBCL is not exclusive of other rights to
indemnification to which a person may be entitled under a company's articles of
incorporation, bylaws, or a contractual agreement. Reference is made to Article
IX of the Company's Amended Bylaws which provide for indemnification of
directors and officers of the Company and authorizes the board of directors to
extend such indemnity to others to the full extent permitted by the aforesaid
sections of the IBCL.
The IBCL permits the Company to purchase insurance on behalf of its
directors and officers against liabilities arising out of their positions with
the Company whether or not such liabilities would be within the indemnification
provisions of the IBCL. The Company carries no such insurance.
II-1
<PAGE>
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S> <C>
1.1* Purchase Agreement, dated as of June 15, 1999, by and
among The Majestic Star Casino, LLC, The Majestic Star
Casino Capital Corp., and Jefferies & Company, Inc.
3.1** Amended and Restated Articles of Organization of The
Majestic Star Casino, LLC, filed as Exhibit 3.1 to the
Company's Registration Statement, No. 333-06489, and
incorporated herein by reference.
3.2** Third Amended and Restated Operating Agreement of The
Majestic Star Casino, LLC dated as of March 29, 1996,
filed as Exhibit 3.2 to the Company's Registration
Statement, No. 333-06489, and incorporated herein by
reference.
3.3* First Amendment of Third Amended and Restated Operating
Agreement of The Majestic Star Casino, LLC, dated as of
June 18, 1999
3.4* Articles of Incorproation of The Majestic Star Casino
Capital Corp.
3.5* Bylaws of The Majestic Star Casino Capital Corp.
4.1** Indenture, dated as of May 22, 1996, by and between The
Majestic Star Casino, LLC and IBJ Shroder Bank & Trust
Company, as Trustee, with respect to the 12 3/4% Senior
Secured Notes due 2003, filed as Exhibit 4.2 to our
Registration Statement NO. 333-06489 and incorporated
herein by reference.
4.2* First Supplemental Indenture, dated as of June 18, 1999,
by and between The Majestic Star Casino, LLC and IBJ
Whitehall Bank & Trust Company, as Trustee, with respect
to the 12 3/4% Senior Secured Notes due 2003
4.3* Indenture, dated as of June 18, 1999, by and among The
Majestic Star Casino, LLC, The Majestic Star Casino
Capital Corp., and IBJ Whitehall Bank & Trust Company, as
Trustee, with respect to the 10 7/8% Senior Secured Notes
due 2006.
4.4* Security Agreement, dated as of June 18, 1999, by and
between The Majestic Star Casino, LLC and IBJ Whitehall
Bank & Trust Company
4.5* Trademark Security Agreement, dated as of June 18, 1999,
by and between The Majestic Star Casino, LLC and IBJ
Whitehall Bank & Trust Company
4.6* Preferred Ship Mortgage, dated as of June 18, 1999, made
by The Majestic Star Casino, LLC in favor of IBJ Whitehall
Bank & Trust Company
4.7* Pledge Agreement, dated as of June 18, 1999, by and
between The Majestic Star Casino, LLC and IBJ Whitehall
Bank & Trust Company
4.8* Pledge Agreement, dated as of June 18, 1999, by and among
Barden Development, Inc., Gary Riverboat Gaming, LLC, and
IBJ Whitehall Bank & Trust Company
4.9* Registration Rights Agreement, dated as of June 18, 1999,
by and among The Majestic Star Casino, LLC, The Majestic
Star Casino Capital Corp., and Jefferies & Company, Inc.
5.1* Opinion of Dykema Gossett PLLC
10.1** Employment Letter Agreement dated as of April 25, 1996 by
and between the Company and Don H. Barden, filed as
Exhibit 10.1 to our Registration Statement, No. 333-06489,
and incorporated herein by reference.
</TABLE>
II-2
<PAGE>
<TABLE>
<C> <S> <C>
10.2** Employment Letter Agreement effective as of April 22, 1996
by and between the Company, and Michael E. Kelly, filed as
Exhibit 10.4 to our Registration Statement, No. 333-06489,
and incorporated herein by reference.
10.3** Berthing Agreement, dated as of April 23, 1996. between
the Company and Buffington Harbor Riverboats, LLC, filed
as Exhibit 10.5 to our Registration Statement, No. 333-
06489, and incorporated herein by reference.
10.4** First Amended and Restated Operating Agreement of
Buffington harbor Riverboats, LLC, made as of October 31,
1995, by and between Trump Indiana, Inc. and the Company,
as amended to date, filed as Exhibit 10.6 to our
Registration Statement, No. 333-06489, and incorporated
herein by reference.
10.5** Development Agreement, dated March 26, 1996, by and
between the Company and the City of Gary, Indiana, filed
as Exhibit 10.8 to our Registration Statement, No. 333-
06489, and incorporated herein by reference.
10.6** Harbor Lease Agreement, dated June 29, 1995, by and
between Trump Indiana, Inc. and Lehigh Portland Cement
Company, as assigned by Trump Indiana, Inc. to Buffington
Harbor Riverboats, LLC pursuant to the Assignment
Agreement dated as of October 31, 1995, by and between
Trump Indiana, Inc. and Buffington Harbor Riverboats,
L.L.C., filed as Exhibit 10.9 to our Registration
Statement, No. 333-06489, and incorporated herein by
reference.
10.7** Equipment Financing Agreement dated May 5, 1996 by and
between the Company and International Gaming Technology,
filed as Exhibit 10.11 to our Registration Statement, No.
333-06489, and incorporated herein by reference.
10.8** Master Surety Agreement by and between the Company and
United States Fidelity and Guaranty Company, filed as
Exhibit 10.11 to our Registration Statement, No. 333-
06489, and incorporated herein by reference.
10.9** Standby Letter of Credit Application and Reimbursement and
Security Agreement, filed as Exhibit 10.12 to our
Registration Statement, No. 333-06489, and incorporated
herein by reference.
10.10** Equipment Financing Agreement dated September 15, 1997 by
and between the Company and PDS Financial Corporation,
filed as Exhibit 10.15 to our Report on Form 10-K for the
period ended December 31, 1997.
10.11** Equipment Financing Agreement dated October 27, 1997 by
and between the Company and PDS Financial Corporation,
filed as Exhibit 10.1 to our Report on Form 10-K for the
period ended December 31, 1997.
10.12** Employment Letter Agreement effective as of January 1,
1999 by and between the Company and Michael E. Kelly,
filed as Exhibit 10.17 to our Registration Statement, No.
333-06489, and incorporated herein by reference.
12.1* Computation of Ratio of Earnings to Fixed Changes.
</TABLE>
II-3
<PAGE>
<TABLE>
<C> <S> <C>
21.1* Subsidiaries of the Registrants.
23.1* Consent of PricewaterhouseCoopers LLP.
23.2* Consent of Arthur Andersen LLP.
23.3* Consent of Dykema Gossett PLLC (contained in their opinion
filed as Exhibit 5.1).
23.4* Power of Attorney (included on Signature page to this
Registration Statement).
25.1* Form T-1 Statement of Eligibility under the Trust
Indenture Act of 1939 of IBJ Whitehall Bank & Trust
Company.
99.1* Form of Letter of Transmittal.
99.2* Form of Notice of Guaranteed Delivery.
</TABLE>
- --------
* Filed herewith.
** Previously filed.
(b) Financial Statement Schedules
All Schedules are omitted as the required information is inapplicable or
not present in amounts sufficient to require submission of the schedule, or
because the informaion is presented in the consolidated financial statements or
related notes.
ITEM 22. UNDERTAKINGS.
Each of the undersigned registrants hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high and of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20% change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in the
effective registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering, thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of
the offering.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrants pursuant to the foregoing provisions or otherwise,
II-4
<PAGE>
the registrants have been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrants of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrants will, unless
in the opinion of their counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
The undersigned registrants hereby undertake to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through
the date of responding to the request.
The undersigned registrants hereby undertake to supply by means of a post-
effective amendment all information concerning a transaction, and the company
being acquired involved therein, that was not the subject of and included in
the registration statement when it became effective.
II-5
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, EACH REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF DETROIT, STATE OF
MICHIGAN, ON AUGUST 12, 1999.
The Majestic Star Casino, LLC
By: Barden Development, Inc. The
Manager
/s/ Don H. Barden
By: _________________________________
Don H. Barden
President and Chief Executive
Officer
The Majestic Star Casino Capital
Corp.
/s/ Don H. Barden
By: _________________________________
Don H. Barden
President and Chief Executive
Officer
POWER OF ATTORNEY
KNOW ALL PERSONS THESE PRESENTS, THAT EACH PERSON WHOSE SIGNATURE APPEARS
BELOW CONSTITUTES AND APPOINTS MICHAEL E. KELLY, HIS TRUE AND LAWFUL ATTORNEY-
IN-FACT AND AGENT, WITH FULL POWER OF SUBSTITUTION AND RESUBSTITUTION FOR HIM
AND IN HIS NAME, PLACE AND STEAD, IN ANY AND ALL CAPACITIES, TO SIGN ANY AND
ALL AMENDMENTS (INCLUDING POST-EFFECTIVE AMENDMENTS) TO THIS REGISTRATION
STATEMENT, AND TO FILE THE SAME, WITH EXHIBITS THERETO AND OTHER DOCUMENTS IN
CONNECTION THEREWITH, WITH THE SECURITIES AND EXCHANGE COMMISSION, GRANTING
UNTO SUCH ATTORNEY-IN-FACT AND AGENT FULL POWER AND AUTHORITY TO DO AND PERFORM
EACH AND EVERY ACT AND THING REQUISITE AND NECESSARY TO BE DONE IN AND ABOUT
THE PREMISES, AS FULLY TO ALL INTENTS AND PURPOSES AS HE MIGHT OR COULD DO IN
PERSON, HEREBY RATIFYING AND CONFIRMING ALL THAT SUCH ATTORNEY-IN-FACT AND
AGENT, OR HIS SUBSTITUTES, MAY LAWFULLY DO OR CAUSE TO BE DONE BY VIRTUE
HEREOF.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES INDICATED ON 1999.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
/s/ Don H. Barden (Principal Executive Officer)
___________________________________________
Don H. Barden
/s/ Michael E. Kelly (Principal Financial and Accounting
___________________________________________ Officer)
Michael E. Kelly
</TABLE>
II-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S> <C>
1.1* Purchase Agreement, dated as of June 15, 1999, by and
among The Majestic Star Casino, LLC, The Majestic Star
Casino Capital Corp., and Jefferies & Company, Inc.
3.1** Amended and Restated Articles of Organization of The
Majestic Star Casino, LLC, filed as Exhibit 3.1 to the
Company's Registration Statement, No. 333-06489, and
incorporated herein by reference.
3.2** Third Amended and Restated Operating Agreement of The
Majestic Star Casino, LLC dated as of March 29, 1996,
filed as Exhibit 3.2 to the Company's Registration
Statement, No. 333-06489, and incorporated herein by
reference.
3.3* First Amendment of Third Amended and Restated Operating
Agreement of The Majestic Star Casino, LLC, dated as of
June 18, 1999
3.4* Articles of Incorproation of The Majestic Star Casino
Capital Corp.
3.5* Bylaws of The Majestic Star Casino Capital Corp.
4.1** Indenture, dated as of May 22, 1996, by and between The
Majestic Star Casino, LLC and IBJ Shroder Bank & Trust
Company, as Trustee, with respect to the 12 3/4% Senior
Secured Notes due 2003, filed as Exhibit 4.2 to our
Registration Statement NO. 333-06489 and incorporated
herein by reference.
4.2* First Supplemental Indenture, dated as of June 18, 1999,
by and between The Majestic Star Casino, LLC and IBJ
Whitehall Bank & Trust Company, as Trustee, with respect
to the 12 3/4% Senior Secured Notes due 2003
4.3* Indenture, dated as of June 18, 1999, by and among The
Majestic Star Casino, LLC, The Majestic Star Casino
Capital Corp., and IBJ Whitehall Bank & Trust Company, as
Trustee, with respect to the 10 7/8% Senior Secured Notes
due 2006.
4.4* Security Agreement, dated as of June 18, 1999, by and
between The Majestic Star Casino, LLC and IBJ Whitehall
Bank & Trust Company
4.5* Trademark Security Agreement, dated as of June 18, 1999,
by and between The Majestic Star Casino, LLC and IBJ
Whitehall Bank & Trust Company
4.6* Preferred Ship Mortgage, dated as of June 18, 1999, made
by The Majestic Star Casino, LLC in favor of IBJ Whitehall
Bank & Trust Company
4.7* Pledge Agreement, dated as of June 18, 1999, by and
between The Majestic Star Casino, LLC and IBJ Whitehall
Bank & Trust Company
4.8* Pledge Agreement, dated as of June 18, 1999, by and among
Barden Development, Inc., Gary Riverboat Gaming, LLC, and
IBJ Whitehall Bank & Trust Company
4.9* Registration Rights Agreement, dated as of June 18, 1999,
by and among The Majestic Star Casino, LLC, The Majestic
Star Casino Capital Corp., and Jefferies & Company, Inc.
5.1* Opinion of Dykema Gossett PLLC
10.1** Employment Letter Agreement dated as of April 25, 1996 by
and between the Company and Don H. Barden, filed as
Exhibit 10.1 to our Registration Statement, No. 333-06489,
and incorporated herein by reference.
</TABLE>
1
<PAGE>
<TABLE>
<C> <S> <C>
10.2** Employment Letter Agreement effective as of April 22, 1996
by and between the Company, and Michael E. Kelly, filed as
Exhibit 10.4 to our Registration Statement, No. 333-06489,
and incorporated herein by reference.
10.3** Berthing Agreement, dated as of April 23, 1996. between
the Company and Buffington Harbor Riverboats, LLC, filed
as Exhibit 10.5 to our Registration Statement, No. 333-
06489, and incorporated herein by reference.
10.4** First Amended and Restated Operating Agreement of
Buffington harbor Riverboats, LLC, made as of October 31,
1995, by and between Trump Indiana, Inc. and the Company,
as amended to date, filed as Exhibit 10.6 to our
Registration Statement, No. 333-06489, and incorporated
herein by reference.
10.5** Development Agreement, dated March 26, 1996, by and
between the Company and the City of Gary, Indiana, filed
as Exhibit 10.8 to our Registration Statement, No. 333-
06489, and incorporated herein by reference.
10.6** Harbor Lease Agreement, dated June 29, 1995, by and
between Trump Indiana, Inc. and Lehigh Portland Cement
Company, as assigned by Trump Indiana, Inc. to Buffington
Harbor Riverboats, LLC pursuant to the Assignment
Agreement dated as of October 31, 1995, by and between
Trump Indiana, Inc. and Buffington Harbor Riverboats,
L.L.C., filed as Exhibit 10.9 to our Registration
Statement, No. 333-06489, and incorporated herein by
reference.
10.7** Equipment Financing Agreement dated May 5, 1996 by and
between the Company and International Gaming Technology,
filed as Exhibit 10.11 to our Registration Statement, No.
333-06489, and incorporated herein by reference.
10.8** Master Surety Agreement by and between the Company and
United States Fidelity and Guaranty Company, filed as
Exhibit 10.11 to our Registration Statement, No. 333-
06489, and incorporated herein by reference.
10.9** Standby Letter of Credit Application and Reimbursement and
Security Agreement, filed as Exhibit 10.12 to our
Registration Statement, No. 333-06489, and incorporated
herein by reference.
10.10** Equipment Financing Agreement dated September 15, 1997 by
and between the Company and PDS Financial Corporation,
filed as Exhibit 10.15 to our Report on Form 10-K for the
period ended December 31, 1997.
10.11** Equipment Financing Agreement dated October 27, 1997 by
and between the Company and PDS Financial Corporation,
filed as Exhibit 10.1 to our Report on Form 10-K for the
period ended December 31, 1997.
10.12** Employment Letter Agreement effective as of January 1,
1999 by and between the Company and Michael E. Kelly,
filed as Exhibit 10.17 to our Registration Statement, No.
333-06489, and incorporated herein by reference.
12.1* Computation of Ratio of Earnings to Fixed Changes.
</TABLE>
2
<PAGE>
<TABLE>
<C> <S> <C>
21.1* Subsidiaries of the Registrants.
23.1* Consent of PricewaterhouseCoopers LLP.
23.2* Consent of Arthur Andersen LLP.
23.3* Consent of Dykema Gossett PLLC (contained in their opinion
filed as Exhibit 5.1).
23.4* Power of Attorney (included on Signature page to this
Registration Statement).
25.1* Form T-1 Statement of Eligibility under the Trust
Indenture Act of 1939 of IBJ Whitehall Bank & Trust
Company.
99.1* Form of Letter of Transmittal.
99.2* Form of Notice of Guaranteed Delivery.
</TABLE>
- --------
* Filed herewith.
** Previously filed.
3
<PAGE>
EXHIBIT 1.1
THE MAJESTIC STAR CASINO, LLC
The Majestic Star Casino Capital Corp.
$130,000,000 10 7/8% Senior Secured Notes due 2006
PURCHASE AGREEMENT
------------------
June 15, 1999
JEFFERIES & COMPANY, INC.
11100 Santa Monica Boulevard
10th Floor
Los Angeles, California 90025
Ladies and Gentlemen:
The Majestic Star Casino, LLC, an Indiana limited liability company
(the "Company"), and The Majestic Star Casino Capital Corp., an Indiana
corporation ("Capital" and, together with the Company, the "Issuers"), hereby
agree with you as follows:
1. Issuance of Securities. The Issuers propose to issue and sell to
Jefferies & Company, Inc. (the "Initial Purchaser"), and the Initial Purchaser
proposes to purchase $130,000,000 aggregate principal amount of the Issuers'
10 7/8% Senior Secured Notes due 2006, Series A (the "Series A Notes"). The
Series A Notes will be issued pursuant to an indenture (the "Indenture"), to be
dated as of June 18, 1999, by and among the Issuers, any future subsidiary
guarantors party thereto (the "Guarantors"), and IBJ Whitehall Bank & Trust
Company, as trustee (the "Trustee"). The Guarantors will unconditionally
guarantee the obligations under the Notes (defined below) and the Indenture
(collectively, the "Guaranty"). The obligations under the Notes and the Guaranty
will be secured by security interests in or pledges of (the "Security
Interests") certain assets (the "Collateral") of the Issuers, Barden
Development, Inc. ("BDI"), Gary Riverboat Gaming, LLC ("Gary") and certain of
the Issuers' respective future subsidiaries (collectively, the "Grantors"), as
set forth in the Offering Circular (defined below).
The Series A Notes will be offered and sold to the Initial Purchaser
pursuant to an exemption from the registration requirements under the Securities
Act of 1933, as amended (the "Act"). The Issuers have prepared a preliminary
offering circular, dated June 1, 1999 (the "Preliminary Offering Circular"), and
a final offering circular, dated June 15, 1999 (the "Offering Circular"),
relating to the offer and sale of the Series A Notes (the "Offering").
<PAGE>
Upon original issuance thereof, and until such time as the same is no
longer required under the applicable requirements of the Act, the Series A Notes
shall bear the following legend:
This security has not been registered under the Securities Act of
1933, as amended (the "Securities Act"), or any state securities laws.
Neither this security nor any interest or participation herein may be
reoffered, sold, assigned, transferred, pledged, encumbered or
otherwise disposed of in the absence of such registration or unless
such transaction is exempt from, or not subject to, registration.
The holder of this security by its acceptance hereof agrees to offer,
sell or otherwise transfer such security, prior to the date that is
two years (or such other period that may hereafter be provided under
Rule 144(k) as permitting resales of restricted securities by non-
affiliates without restriction) after the later of the original issue
date of this security and the last date on which the Issuers or any
affiliate of the Issuers was the owner of this security (or any
predecessor of such security) only (a) to the Issuers, (b) pursuant to
a registration statement which has been declared effective under the
Securities Act, (c) for so long as the securities are eligible for
resale pursuant to Rule 144A under the Securities Act, to a person it
reasonably believes is a "qualified institutional buyer" as defined in
Rule 144A under the Securities Act that purchases for its own account
or for the account of a qualified institutional buyer to whom notice
is given that the transfer is being made in reliance on Rule 144A, (d)
to an institutional "accredited investor" within the meaning of
subparagraph (a)(1), (2), (3) or (7) of Rule 501 under the Securities
Act that is acquiring the security for its own account, or for the
account of such an institutional "accredited investor," for investment
purposes and not with a view to, or for offer or sale in connection
with, any distribution in violation of the Securities Act or (e)
pursuant to another available exemption from the registration
requirements of the Securities Act, subject to the Issuers' and the
Trustee's right prior to any such offer, sale or transfer pursuant to
clauses (d) or (e) to require the delivery of an opinion of counsel,
certification and/or other information satisfactory to each of them,
and in each of the foregoing cases, a certificate of transfer in the
form appearing on the other side of this security is completed and
delivered by the transferor to the Trustee.
2. Agreements to Sell and Purchase. On the basis of the
representations, warranties and agreements contained herein, and subject to the
terms and conditions hereof, the Issuers shall issue and sell to the Initial
Purchaser (and, in order to induce the Initial Purchaser to purchase the Notes,
the Grantors shall grant the Security Interests), and the Initial Purchaser
shall purchase from the Issuers $130,000,000 aggregate principal amount of
Series A Notes. The purchase price for the Series A Notes shall be 95.385% of
the principal amount thereof.
2
<PAGE>
3. Terms of Offering. The Initial Purchaser has advised the Issuers
that the Initial Purchaser will make offers to sell (the "Exempt Resales") the
Series A Notes purchased by the Initial Purchaser hereunder on the terms set
forth in the Offering Circular, as amended or supplemented, solely to (a)
persons whom the Initial Purchaser reasonably believes to be "qualified
institutional buyers" as defined in Rule 144A under the Act ("QIBs") and (b) a
limited number of institutional "accredited investors," as defined in Rule
501(a)(1), (2), (3) or (7) under the Act ("Accredited Investors" and, together
with QIBs, "Eligible Initial Purchasers").
Holders of the Series A Notes (including subsequent transferees) will
have the registration rights set forth in the registration rights agreement (the
"Registration Rights Agreement"), to be executed on and dated as of the Closing
Date (as defined below). Pursuant to the Registration Rights Agreement, the
Issuers will agree, among other things, to file with the Securities and Exchange
Commission (the "Commission") (a) a registration statement under the Act (the
"Exchange Offer Registration Statement") relating to, among other things, the
10 7/8% Senior Secured Notes due 2006, Series B, of the Issuers (the "Series B
Notes" and, together with the Series A Notes, each with the Guaranty endorsed
thereon, if any, the "Notes"), identical in all material respects to the Series
A Notes (except that the Series B Notes shall have been registered pursuant to
such registration statement) to be offered in exchange for the Series A Notes
(such offer to exchange being referred to as the "Registered Exchange Offer"),
and/or (b) under certain circumstances, a shelf registration statement pursuant
to Rule 415 under the Act (the "Shelf Registration Statement") relating to the
resale by certain holders of the Series A Notes.
On the Closing Date, the Grantors will enter into certain security and
pledge agreements, mortgages and certain other documents (collectively, the
"Security Documents") that will provide for the grant of the Security Interests
in the Collateral to the Trustee, as collateral agent (in such capacity, the
"Collateral Agent"), for the benefit of the holders of the Notes. The Security
Interests will secure the payment and performance when due of all of the
obligations of the Issuers, the Guarantors and the Grantors under the Indenture,
the Notes and the Security Documents.
In connection with the offering of the Series A Notes contemplated
hereby, the Company is offering to purchase (the "Tender Offer") any and all of
its outstanding 12 3/4% Senior Secured Notes due 2003 with Contingent Interest
(the "Old Notes") and soliciting consents (the "Consent Solicitation") to the
adoption of certain amendments (the "Amendments") to the indenture governing the
Old Notes (the "Old Notes Indenture"), each as more fully described in the
documents and instruments related thereto (the "Consent Solicitation
Documents"). In the event that any of the Old Notes are not repurchased in the
Tender Offer, the Company will defease such Old Notes pursuant to the terms of
the Old Notes Indenture (the "Defeasance").
This Agreement, the Indenture, the Registration Rights Agreement, the
Security Documents, the Notes, the Consent Solicitation Documents and all other
documents or instruments executed by the Issuers in connection with the
transactions contemplated hereby and thereby are referred to herein as the
"Documents." The transactions contemplated by the Documents, including without
limitation the Offering and the application of the use of the proceeds therefrom
as described
3
<PAGE>
in the Offering Circular, the Tender Offer, the Amendments, the Consent
Solicitation and the Defeasance are collectively referred to herein as the
"Transactions."
4. Delivery and Payment. Delivery to the Initial Purchaser of and
payment for the Series A Notes shall be made at a Closing (the "Closing") to be
held at 10:00 a.m., New York City time, on June 18, 1999 (the "Closing Date") at
the offices of Skadden, Arps, Slate, Meagher & Flom LLP, 919 Third Avenue, New
York, New York 10022-3897. The Closing Date and the location of delivery of and
the form of payment for the Series A Notes may be varied by agreement between
the Initial Purchaser and the Issuers.
The Issuers shall deliver to the Initial Purchaser one or more
certificates representing the Series A Notes (the "Global Securities"), each in
definitive form, registered in the name of Cede & Co., as nominee of The
Depository Trust Company ("DTC"), or such other names as the Initial Purchaser
may request upon at least one business day's notice to the Issuers, in an amount
corresponding to the aggregate principal amount of the Series A Notes sold
pursuant to Exempt Resales to QIBs and to Accredited Investors, respectively, in
each case against payment by the Initial Purchaser of the purchase price
therefor by immediately available Federal funds bank wire transfer to such bank
account as the Issuers shall designate to the Initial Purchaser at least two
business days prior to the Closing.
The Global Securities in definitive form shall be made available to
the Initial Purchaser for inspection at the New York offices of Skadden, Arps,
Slate, Meagher & Flom LLP, 919 Third Avenue, New York, New York 10022-3897 (or
such other place as shall be acceptable to the Initial Purchaser) not later than
9:30 a.m. one business day immediately preceding the Closing Date.
5. Agreements of the Issuers. The Issuers, jointly and severally,
hereby agree:
(a) To (i) advise the Initial Purchaser promptly after obtaining
knowledge (and, if requested by the Initial Purchaser, confirm such advice
in writing) of (A) the issuance by any state securities commission of any
stop order suspending the qualification or exemption from qualification of
any of the Notes for offer or sale in any jurisdiction, or the initiation
of any proceeding for such purpose by any state securities commission or
other regulatory authority, or (B) the happening of any event that makes
any statement of a material fact made in the Offering Circular untrue or
that requires the making of any additions to or changes in the Offering
Circular in order to make the statements therein, in the light of the
circumstances under which they are made, not misleading, (ii) use their
best efforts to prevent the issuance of any stop order or order suspending
the qualification or exemption from qualification of any of the Notes under
any state securities or Blue Sky laws, and (iii) if at any time any state
securities commission or other regulatory authority shall issue an order
suspending the qualification or exemption from qualification of any of the
Notes under any such laws, use their best efforts to obtain the withdrawal
or lifting of such order at the earliest possible time.
4
<PAGE>
(b) To (i) furnish the Initial Purchaser, without charge, as
many copies of the Offering Circular, and any amendments or supplements
thereto, as the Initial Purchaser may reasonably request, and (ii) promptly
prepare, upon the Initial Purchaser's request, any amendment or supplement
to the Offering Circular that the Initial Purchaser deems may be necessary
in connection with Exempt Resales (and the Issuers hereby consent to the
use of the Preliminary Offering Circular and the Offering Circular, and any
amendments and supplements thereto, by the Initial Purchaser in connection
with Exempt Resales).
(c) Not to amend or supplement the Offering Circular prior to
the Closing Date unless the Initial Purchaser shall previously have been
advised thereof and shall not have objected thereto within three business
days after being furnished a copy thereof.
(d) At any time prior to the completion of the resale by the
Initial Purchaser of the Notes, (i) if any event shall occur as a result of
which, in the reasonable judgment of the Issuers or the Initial Purchaser,
it becomes necessary or advisable to amend or supplement the Offering
Circular in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, or if it is
necessary to amend or supplement the Offering Circular to comply with
Applicable Law (as defined below), forthwith to prepare an appropriate
amendment or supplement to the Offering Circular (in form and substance
satisfactory to the Initial Purchaser) so that (A) as so amended or
supplemented, the Offering Circular will not include an untrue statement of
material fact or omit to state a material fact necessary in order to make
the statements therein, in the light of the circumstances under which they
were made, not misleading, and (B) the Offering Circular will comply with
Applicable Law, and (ii) if it becomes necessary or advisable to amend or
supplement the Offering Circular so that the Offering Circular will contain
all of the information specified in, and meet the requirements of, Rule
144A(d)(4) of the Act, forthwith to prepare an appropriate amendment or
supplement to the Offering Circular (in form and substance satisfactory to
the Initial Purchaser) so that the Offering Circular, as so amended or
supplemented, will contain the information specified in, and meet the
requirements of, such Rule.
(e) To cooperate with the Initial Purchaser and the Initial
Purchaser's counsel in connection with the qualification of the Notes under
the securities or Blue Sky laws of such jurisdictions as the Initial
Purchaser may request and continue such qualification in effect so long as
reasonably required for Exempt Resales; provided, that the Issuers shall
not be required in connection therewith to file any general consent to
service of process or to qualify as a foreign corporation in any
jurisdiction where it is not now so qualified or to subject itself to
taxation in respect of doing business in any jurisdiction in which it is
not otherwise so subject.
(f) Whether or not any of the Transactions are consummated or
this Agreement is terminated, to pay (i) all costs, expenses, fees and
taxes incident to and in
5
<PAGE>
connection with: (A) the preparation, printing and distribution of the
Preliminary Offering Circular and the Offering Circular and all amendments
and supplements thereto (including, without limitation, financial
statements and exhibits), and all preliminary and final Blue Sky memoranda
and all other agreements, memoranda, correspondence and other documents
prepared and delivered in connection herewith, (B) the printing, processing
and distribution (including, without limitation, word processing and
duplication costs) and delivery of, and performance under, each of the
Documents, (C) the issuance and delivery of the Notes, including the fees
of the Trustee and the cost of its personnel, (D) the qualification of the
Notes for offer and sale under the securities or Blue Sky laws of the
several states (including, without limitation, the reasonable fees and
disbursements of the Initial Purchaser's counsel relating to such
registration or qualification), (E) furnishing such copies of the
Preliminary Offering Circular and the Offering Circular, and all amendments
and supplements thereto, as may reasonably be requested for use by the
Initial Purchaser, and (F) the preparation of the Notes, (ii) all fees and
expenses of the counsel and accountants of the Issuers, (iii) all expenses
and listing fees in connection with the application for quotation of the
Notes in the National Association of Securities Dealers, Inc. ("NASD")
Automated Quotation System -PORTAL ("PORTAL"), (iv) all fees and expenses
(including fees and expenses of counsel) of the Issuers in connection with
approval of the Notes by DTC for "book-entry" transfer, (v) all fees
charged by rating agencies in connection with the rating of the Notes and
(vi) all fees and expenses (including reasonable fees and expenses of
counsel) incurred by the Initial Purchaser in connection with the
preparation, negotiation and execution of the Documents and the
consummation of the Transactions.
(g) To use the proceeds from the sale of the Series A Notes in
the manner described in the Offering Circular under the caption "Use of
Proceeds." Without limiting the foregoing, concurrently with the
consummation of the Offering, the Company shall deposit sufficient proceeds
to defease the Old Notes pursuant to Section 8.04 of the Old Notes
Indenture.
(h) To the extent it may lawfully do so, not to insist upon,
plead, or in any manner whatsoever claim or take the benefit or advantage
of, any usury or other similar laws, wherever enacted, now or at any time
hereafter in force, that would prohibit or forgive the payment of all or
any portion of the principal of or interest on the Notes, or that may
affect the covenants or the performance of the Indenture (and, to the
extent it may lawfully do so, each Issuer hereby expressly waives all
benefit or advantage of any such law, and covenants that it shall not, by
resort to any such law, hinder, delay or impede the execution of any power
granted to the Trustee in the Indenture or the Collateral Agent in the
Security Documents but shall suffer and permit the execution of every such
power as though no such law had been enacted).
(i) To do and perform all things required to be done and
performed under the Documents prior to and after the Closing Date
(including, without limitation, all things necessary or advisable to obtain
on the Closing Date all termination statements, mortgage
6
<PAGE>
releases and other documents necessary to terminate the Liens (as defined
in the Indenture) securing Indebtedness (as defined in the Indenture) that
is being repaid with the net proceeds of the Offering or that is being
defeased pursuant to the Defeasance).
(j) Not to, and to ensure that no affiliate (as defined in Rule
501(b) of the Act) of either of the Issuers will, sell, offer for sale or
solicit offers to buy or otherwise negotiate in respect of any "security"
(as defined in the Act) that would be integrated with the sale of the
Series A Notes in a manner that would require the registration under the
Act of the sale to the Initial Purchaser or to the Eligible Initial
Purchasers of the Series A Notes.
(k) For so long as any of the Notes remain outstanding, during
any period in which either of the Issuers is not subject to Section 13 or
15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), to make available, upon request, to any owner of the Notes in
connection with any sale thereof and any prospective Eligible Initial
Purchasers of such Notes from such owner, the information required by Rule
144A(d)(4) under the Act.
(l) To comply with the representation letter of the Issuers to
DTC relating to the approval of the Notes by DTC for "book entry" transfer.
(m) To use their best efforts to effect the inclusion of the
Notes in PORTAL.
(n) For so long as the Notes are outstanding, and whether or not
required to do so by the rules and regulations of the Commission, (i) to
furnish to the Trustee and deliver or cause to be delivered to the holders
of the Notes and the Initial Purchaser (A) all quarterly and annual
financial information that would be required to be contained in a filing
with the Commission on Forms 10-Q and 10-K if the Company were required to
file such Forms, including for each, a "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and, with
respect to the annual information only, a report thereon by the Company's
independent certified public accountants, and (B) all reports that would be
required to be filed with the Commission on Form 8-K if the Company were
required to file such reports, and (ii) from and after the time the
Exchange Offer Registration Statement or the Shelf Registration Statement
(or such other registration statement with respect to the Notes) is filed
with the Commission, to file such information with the Commission so long
as the Commission will accept such filings.
(o) Except in connection with the Registered Exchange Offer or
the filing of the Shelf Registration Statement, not to, and not to
authorize or permit any person acting on their behalf to, (i) distribute
any offering material in connection with the offer and sale of the Notes
other than the Preliminary Offering Circular and the Offering Circular and
any amendments and supplements to the Offering Circular prepared in
compliance with Section 5(d) hereof, or (ii) solicit any offer to buy or
offer to sell the Notes by means of any form of general solicitation or
general advertising (including, without limitation, as such terms are
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used in Regulation D under the Act) or in any manner involving a public
offering within the meaning of Section 4(2) of the Act.
(p) Not to, directly or indirectly, without the prior consent of
the Initial Purchaser, offer, sell, grant any option to purchase, or
otherwise dispose (or announce any offer, sale, grant of any option to
purchase or other disposition) of any debt securities of either of the
Issuers for a period of six months after the date of the Offering Circular,
except as contemplated by the Registration Rights Agreement; provided, that
the foregoing will not apply to borrowings from financial institutions or
to the issuance of debt securities to the seller of assets or businesses
acquired by the Company as part of the purchase price therefor, in each
case only to the extent not prohibited by the Indenture.
(q) At any time prior to the completion of the resale by the
Initial Purchaser of the Notes, to notify the Initial Purchaser promptly in
writing if either of the Issuers or any of their Affiliates becomes a party
in interest or a disqualified person with respect to any employee benefit
plan. The terms "ERISA," "Affiliates," "party in interest," "disqualified
person" and "employee benefit plan" shall have the meanings as set forth in
Section 6(cc) hereof.
6. Representations and Warranties of the Issuers. Each of the
Issuers, jointly and severally, represents and warrants to the Initial Purchaser
that:
(a) The Preliminary Offering Circular as of its date did not,
and each of the Offering Circular and the Consent Solicitation Documents,
as of its date does not and as of the Closing Date will not, and each
supplement or amendment thereto as of its date will not, contain any untrue
statement of a material fact or omit to state any material fact (except, in
the case of the Preliminary Offering Circular, for pricing terms and other
financial terms intentionally left blank) necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. The foregoing representation and warranty made in
this Section 6(a) shall not apply to any statements or omissions made in
reliance on and in conformity with information relating to the Initial
Purchaser furnished in writing to the Issuers by the Initial Purchaser
specifically for inclusion in the Preliminary Offering Circular or the
Offering Circular. The parties hereto acknowledge that for purposes of
this Agreement (including Section 8 hereof) the only information furnished
in writing to the Issuers by the Initial Purchaser specifically for
inclusion in the Preliminary Offering Circular or the Offering Circular is
the information set forth (i) on the cover page of the Offering Circular
with respect to the price of the offering and (ii) under the caption "Plan
of Distribution" in the Preliminary Offering Circular and the Offering
Circular in the third paragraph (except for the third sentence), the sixth
and seventh sentences of the fourth paragraph, and the fifth paragraph. No
injunction or order has been issued that either (i) asserts that any of the
Transactions is subject to the registration requirements of the Act, or
(ii) would prevent or suspend the issuance or sale of the Notes or the use
of the Preliminary Offering Circular, the Offering Circular, or any
amendment or supplement thereto, in any
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jurisdiction. Each of the Preliminary Offering Circular and the Offering
Circular, as of their respective dates contained, and the Offering
Circular, as amended or supplemented, as of the Closing Date will meet the
requirements of, Rule 144A(d)(4) under the Act. Except as adequately
disclosed in the Offering Circular, there are no related party transactions
that would be required to be disclosed in the Offering Circular if the
Offering Circular were a prospectus included in a registration statement on
Form S-1 filed under the Act.
(b) Other than the Old Notes, there are no securities of either
of the Issuers registered under the Exchange Act or listed on a national
securities exchange registered under Section 6 of the Exchange Act or
quoted in a United States automated inter-dealer quotation system. The
Series A Notes are eligible for resale pursuant to Rule 144A.
(c) Each of the Issuers and Buffington Harbor Riverboats, L.L.C.,
a Delaware limited liability company ("BHR"), (i) has been duly organized,
is validly existing and is in good standing under the laws of its
jurisdiction of organization, (ii) has all requisite power and authority to
carry on its business and to own, lease and operate its properties and
assets as described in the Offering Circular, and (iii) is duly qualified
or licensed to do business and is in good standing as a foreign limited
liability company or corporation, as the case may be, authorized to do
business in each jurisdiction in which the nature of such businesses or the
ownership or leasing of such properties requires such qualification, except
where the failure to be so qualified could not, singly or in the aggregate,
have a material adverse effect on (A) the properties, business, operations,
earnings, assets, liabilities or condition (financial or otherwise) of the
Issuers, taken as a whole, (B) the ability of either of the Issuers to
perform its obligations under any of the Documents, (C) the enforceability
of any of the Security Documents or the attachment, perfection or priority
of any of the Security Interests intended to be created thereby in any
portion of the Collateral or (D) the validity of any of the Documents or
the consummation of any of the Transactions (each, a "Material Adverse
Effect").
(d) Immediately following the Closing, (i) the Company will have
no direct or indirect subsidiaries other than Capital, (ii) Capital will
have no direct or indirect subsidiaries, and (iii) the Company will own,
free and clear of all Liens other than Permitted Liens (as defined in the
Indenture), a 50% membership interest in BHR. Except as adequately
disclosed in the Offering Circular, there are no outstanding (A) securities
convertible into or exchangeable for any capital stock of Capital or any
membership interests of either of the Company or BHR, (B) options, warrants
or other rights to purchase or subscribe for any capital stock of Capital
or any membership interests of either of the Company or BHR or securities
convertible into or exchangeable for any capital stock of Capital or any
membership interests of either of the Company or BHR, or (C) contracts,
commitments, agreements, understandings, arrangements, calls or claims of
any kind relating to the issuance of any capital stock of Capital or any
membership interests of either of the Company or BHR, any such convertible
or exchangeable securities or any such options, warrants or rights. Except
as set forth above and as adequately disclosed in the Offering
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Circular, immediately following the Closing, none of the Issuers or BHR
will directly or indirectly own any capital stock or other equity interest
in any person.
(e) All of the outstanding shares of capital stock or membership
interests, as the case may be, of each of the Issuers and BHR have been
duly authorized and validly issued, are fully paid and nonassessable, and
were not issued in violation of, and are not subject to, any preemptive or
similar rights. All of the outstanding shares of capital stock of Capital
are owned directly by the Company, free and clear of all Liens other than
Permitted Liens. The table under the caption "Capitalization" in the
Offering Circular (including the footnotes thereto) sets forth, as of its
date, (i) the capitalization of the Company and (ii) the pro forma as
adjusted capitalization of the Company after giving effect to the
Transactions and the repayment of the note to Barden Development, Inc.
Immediately following the Closing, except as set forth in such table,
neither of the Issuers will have any liabilities, absolute, accrued,
contingent or otherwise other than (A) liabilities that are reflected in
the Financial Statements (defined below), or (B) liabilities incurred
subsequent to March 31, 1999 in the ordinary course of business, consistent
with past practice, that could not, singly or in the aggregate, reasonably
be expected to have a Material Adverse Effect.
(f) Except for this Agreement and the Registration Rights
Agreement, and as adequately disclosed in the Offering Circular, neither of
the Issuers has entered into any agreement (i) to register any of its
securities under the Act, or (ii) to purchase or offer to purchase any
securities of either of the Issuers or any of their respective affiliates.
(g) Each of the Issuers has all requisite power and authority to
enter into, deliver and perform its obligations under the Documents to
which it is a party and to consummate the Transactions contemplated
thereby. Each of the Documents has been duly and validly authorized by
each of the Issuers that is or will be a party thereto, and this Agreement
is, and, when executed and delivered on the Closing Date, each other
Document will be, a valid and binding obligation of each of the Issuers
that is or will be a party thereto, enforceable in accordance with its
terms, except to the extent that (i) enforceability thereof may be subject
to bankruptcy, insolvency or similar laws affecting creditors' rights
generally and (ii) any rights of acceleration and the availability of
equitable remedies may be subject to general principles of equity. When
executed and delivered, each of the Documents will conform to the
description thereof in the Offering Circular. On the Closing Date, the
Indenture will conform to the requirements of the Trust Indenture Act of
1939, as amended (the "TIA"), applicable to an indenture that is required
to be qualified under the TIA.
(h) The Series A Notes have been duly and validly authorized by
each of the Issuers for issuance and sale to the Initial Purchaser pursuant
to this Agreement and, when executed and authenticated in accordance with
the terms of the Indenture and delivered to and paid for by the Initial
Purchaser in accordance with the terms hereof, will be valid and binding
obligations of each of the Issuers, enforceable against each of the Issuers
in accordance with their terms, except to the extent that (i)
enforceability thereof may be subject
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to bankruptcy, insolvency or similar laws affecting creditors' rights
generally and (ii) any rights of acceleration and the availability of
equitable remedies may be subject to general principles of equity. The
Series B Notes have been duly and validly authorized by each of the Issuers
and, when executed, authenticated and delivered in accordance with the
terms of the Indenture and the Registration Rights Agreement, will be valid
and binding obligations of each of the Issuers, enforceable against each of
the Issuers in accordance with their terms, except to the extent that (i)
enforceability thereof may be subject to bankruptcy, insolvency or similar
laws affecting creditors' rights generally and (ii) any rights of
acceleration and the availability of equitable remedies may be subject to
general principles of equity. The Notes rank and will rank on a parity with
all senior indebtedness of each of the Issuers that is outstanding on the
date hereof or that may be incurred hereafter, and senior to all other
indebtedness of each of the Issuers that is outstanding on the date hereof
or that may be incurred hereafter.
(i) The Company is not in violation of its certificate of
formation or operating agreement (the "Company Charter Documents"), Capital
is not in violation of its charter or by-laws (the "Capital Charter
Documents"), and BHR is not in violation of its certificate of formation or
operating agreement (the "BHR Charter Documents" and, together with the
Company Charter Documents and the Capital Charter Documents, the "Charter
Documents"). None of the Company, Capital or BHR is (i) in violation of any
Federal, state, local or foreign statute, law (including, without
limitation, common law and the Riverboat Gambling Act of the State of
Indiana, including the rules and regulations promulgated thereunder) or
ordinance, or any judgment, decree, rule, regulation or order
(collectively, "Applicable Law") of any government, governmental or
regulatory agency or body (including, without limitation, the Indiana
Gaming Commission (the "IGC")), court, arbitrator or self-regulatory
organization, domestic or foreign (each, a "Governmental Authority"), or
(ii) in breach of or default under any bond, debenture, note or other
evidence of indebtedness, indenture, mortgage, deed of trust, lease or any
other agreement or instrument to which any of them is a party or by which
any of them or their respective property is bound (collectively,
"Applicable Agreements"), other than breaches or defaults that could not,
singly or in the aggregate, reasonably be expected to have a Material
Adverse Effect. Other than as adequately disclosed in Offering Circular,
there exists no condition that, with the passage of time or otherwise,
would constitute (i) a violation of such Charter Documents or Applicable
Laws or (ii) a breach of or default under any Applicable Agreement or (iii)
result in the imposition of any penalty or the acceleration of any
indebtedness, other than breaches, penalties or defaults that could not,
singly or in the aggregate, result in a Material Adverse Effect. All
Applicable Agreements are in full force and effect and are valid and
binding obligations, and no default has occurred or is continuing
thereunder, other than such defaults that could not, singly or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
(j) Neither the execution, delivery or performance of the
Documents nor the consummation of the Transactions shall conflict with,
violate, constitute a breach of or a
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default (with the passage of time or otherwise) under, require the consent
of any person (other than consents already obtained) under, result in the
imposition of a Lien on any assets of any of the Issuers or BHR (except
pursuant to the Documents), or result in an acceleration of indebtedness
under or pursuant to (i) the Charter Documents, (ii) any Applicable
Agreement, other than such breaches, violations or defaults that could not,
singly or in the aggregate, reasonably be expected to have a Material
Adverse Effect, or (iii) any Applicable Law. After giving effect to the
Transactions, no Default or Event of Default (each, as defined in the
Indenture) will exist.
(k) No permit, certificate, authorization, approval, consent,
license or order of, or filing, registration, declaration or qualification
with, any Governmental Authority (collectively, "Permits") and no approval
or consent of any other person, is required in connection with, or as a
condition to, the execution, delivery or performance of any of the
Documents or the consummation of any of the Transactions, other than such
Permits (i) as have been made or obtained on or prior to the Closing Date,
(ii) as are not required to be made or obtained on or prior to the Closing
Date that will be made or obtained when required, or (iii) the failure of
which to make or obtain could not, singly or in the aggregate, reasonably
be expected to have a Material Adverse Effect.
(l) Except as adequately disclosed in the Offering Circular,
there is no action, claim, suit, demand, hearing, notice of violation or
deficiency, or proceeding, domestic or foreign (collectively,
"Proceedings"), pending or, to the knowledge of the Issuers, threatened,
that either (i) seeks to restrain, enjoin, prevent the consummation of, or
otherwise challenge any of the Documents or any of the Transactions, or
(ii) could, singly or in the aggregate, reasonably be expected to have a
Material Adverse Effect. None of the Issuers or BHR is subject to any
judgment, order, decree, rule or regulation of any Governmental Authority
that could, singly or in the aggregate, have a Material Adverse Effect.
(m) Each of the Company, Capital and BHR and each of their
respective directors, members, managers, officers, employees and agents
(collectively, the "Regulated Persons") has, and is in compliance with the
terms and conditions of, all Permits (including, without limitation,
Permits with respect to engaging in gaming operations) necessary or
advisable to own, lease and operate the properties and to conduct the
businesses described in the Offering Circular other than those the failure
of which to have could not, singly or in the aggregate, reasonably be
expected to have a Material Adverse Effect. All such Permits are valid and
in full force and effect. No event has occurred which allows, or after
notice or lapse of time would allow, the imposition of any material
penalty, revocation or termination by the issuer thereof or which results,
or after notice or lapse of time would result, in any material impairment
of the rights of the holder of any such Permits. None of the Company,
Capital or BHR has reason to believe that any issuer is considering
limiting, conditioning, suspending, modifying, revoking or not renewing any
such Permit.
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(n) To the best knowledge of the Issuers, (i) no Governmental
Authority is investigating any Regulated Person (other than normal reviews
by the IGC incident to the gaming activities of the Company), and (ii)
there is no basis for the IGC to deny the renewal of the current Permits
held by any of them.
(o) Immediately following the Closing, the Company (i) will have
good and marketable title, free and clear of all Liens (other than
Permitted Liens), to all property and assets described in the Offering
Circular as being owned by it, and (ii) will enjoy peaceful and undisturbed
possession under all leases to which it is a party as lessee.
(p) The assets of each of the Company and BHR include all of the
assets and properties material to the conduct of the businesses of either
of them as currently conducted, and such assets are in working condition,
except where the failure of such assets to be in working condition could
not, singly or in the aggregate, have a Material Adverse Effect. Capital
has no assets.
(q) Each of the Company and BHR maintains reasonably adequate
insurance covering its properties, operations, personnel and businesses
against such losses and risks in accordance with customary industry
practice. All such insurance is outstanding and duly in force.
(r) Upon execution and delivery of the Security Documents and
the issuance of the Notes, the Security Documents will create, in favor of
the Collateral Agent, for the benefit of the holders of the Notes, a legal,
valid and enforceable Lien on, and security interest in, all of the right,
title and interest of the Grantors in the Collateral and the proceeds
thereof and, upon the completion of the filings, deliveries or recordings
required by the Security Documents, the Collateral Agent will have a fully
perfected, first priority Lien on, and security interest in, the
Collateral, subject to no Liens other than Permitted Liens.
(s) All material tax returns required to be filed by each of the
Issuers and by BHR in any jurisdiction (including foreign jurisdictions)
have been filed and all such returns are true, complete and correct in all
material respects, and all material taxes, assessments, fees and other
charges (including, without limitation, withholding taxes, penalties and
interest) due or claimed to be due from each of the Issuers or from BHR
have been paid, other than those being contested in good faith by
appropriate proceedings, or those that are currently payable without
penalty or interest and, in each case, for which an adequate reserve or
accrual has been established on the books and records of each of the
Issuers or BHR, as the case may be, in accordance with GAAP (as defined
below). There are no proposed tax assessments against either of the
Issuers or against BHR that could, singly or in the aggregate, have a
Material Adverse Effect. The charges, accruals and reserves on the books
and records of each of the Issuers and of BHR, as the case may be, in
respect of any material tax liability for any tax periods not finally
determined are adequate to meet any assessments of tax for any such period.
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(t) The Company owns, or is licensed under, and has the right to
use, all patents, patent rights, licenses, inventions, copyrights, know-how
(including trade secrets and other unpatented and/or unpatentable
proprietary or confidential information, systems or procedures),
trademarks, service marks and trade names (collectively, "Intellectual
Property") currently used in, or necessary for the conduct of, its
businesses, free and clear of all Liens, other than Permitted Liens. No
claims have been asserted by any person challenging the use of any such
Intellectual Property by either of the Issuers or questioning the validity
or effectiveness of any license or agreement related thereto, and the
Company has no knowledge of any material infringement by it of the
Intellectual Property rights of any other person.
(u) The Company maintains a system of internal accounting
controls sufficient to provide reasonable assurance that (i) material
transactions are executed in accordance with management's general or
specific authorization, (ii) material transactions are recorded as
necessary to permit preparation of financial statements in conformity with
generally accepted accounting principles of the United States, consistently
applied ("GAAP"), and to maintain asset accountability, (iii) access to
assets is permitted only in accordance with management's general or
specific authorization, and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate
action is taken with respect to any material differences.
(v) The audited financial statements and related notes of the
Company contained in the Offering Circular (the "Audited Financial
Statements") and the unaudited financial statements and related notes of
the Company contained in the Offering Circular (the "Interim Financial
Statements" and, together with the Audited Financial Statements, the
"Financial Statements") present fairly the financial position, results of
operations and cash flows of the Company as of the respective dates and for
the respective periods to which they apply, and have been prepared in
accordance with GAAP and the requirements of Regulation S-X that would be
applicable if the Offering Circular were a prospectus included in a
registration statement on Form S-1 filed under the Act. The summary
historical financial data included in the Offering Circular have been
prepared on a basis consistent with that of the Financial Statements and
present fairly the financial position and results of operations of the
Company as of the respective dates and for the respective periods
indicated. All other financial, statistical, and market and industry-
related data included in the Offering Circular are fairly and accurately
presented and are based on or derived from sources the Issuers believe to
be reliable and accurate. PricewaterhouseCoopers LLP are independent
public accountants with respect to the Company.
(w) Subsequent to the respective dates as of which information
is given in the Offering Circular, except as adequately disclosed in the
Offering Circular, (i) neither Issuer has incurred any liabilities, direct
or contingent, that are material, singly or in the aggregate, to either of
them, or has entered into any material transactions not in the ordinary
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course of business, (ii) there has not been any decrease in the capital
stock or membership interests, as the case may be, or any increase in long-
term indebtedness or any material increase in short-term indebtedness of
either of the Issuers, or any payment of or declaration to pay any
dividends or any other distribution with respect to either of the Issuers,
and (iii) there has not been any material adverse change in the properties,
business, operations, assets, liabilities or condition (financial or
otherwise) of the Issuers taken as a whole or of BHR (each of clauses (i),
(ii) and (iii), a "Material Adverse Change").
(x) No "nationally recognized statistical rating organization"
as such term is defined for purposes of Rule 436(g)(2) under the Act (i)
has imposed (or has informed either of the Issuers that it is considering
imposing) any condition (financial or otherwise) on the Issuers' retaining
any rating assigned to any securities of either of the Issuers, or (ii) has
indicated to either of the Issuers that it is considering (A) the
downgrading, suspension, or withdrawal of, or any review for a possible
change that does not indicate the direction of the possible change in, any
rating so assigned, or (B) any change in the outlook for any rating of any
securities of either of the Issuers.
(y) All indebtedness represented by the Series A Notes is being
incurred in good faith. On the Closing Date (after giving effect to the
Transactions), the Company will be solvent, and will have on the Closing
Date (after giving effect to the Transactions) sufficient capital for
carrying on its business and will be on the Closing Date (after giving
effect to the Transactions) able to pay its debts as they mature.
(z) Neither of the Issuers nor anyone acting on their behalf
has (i) taken, directly or indirectly, any action designed to cause or to
result in, or that has constituted or which might reasonably be expected to
constitute, the stabilization or manipulation of the price of the Notes or
to facilitate the sale or resale of any of the Notes, (ii) sold, bid for,
purchased, or paid anyone any compensation for soliciting purchases of, any
of the Notes, or (iii) except as adequately disclosed in the Offering
Circular, paid or agreed to pay to any person any compensation for
soliciting another to purchase any other securities of either of the
Issuers.
(aa) Without limiting clause (k) above, no registration under
the Act, and no qualification of the Indenture under the TIA is required
for the sale of the Series A Notes to the Initial Purchaser as contemplated
hereby or for the Exempt Resales, assuming (i) that the purchasers in the
Exempt Resales are Eligible Initial Purchasers, (ii) the accuracy of the
Initial Purchaser's representations contained herein regarding the absence
of general solicitation in connection with the sale of the Series A Notes
to the Initial Purchaser and in the Exempt Resales, and (iii) the accuracy
of the representations made by each Accredited Investor who purchases the
Series A Notes pursuant to an Exempt Resale as set forth in the letters of
representation in the form of Annex A to the Offering Circular. No form of
general solicitation or general advertising was used by either of the
Issuers or any of their respective affiliates or any of their respective
representatives in connection with the offer and sale of
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any of the Series A Notes or in connection with Exempt Resales. No
securities of the same class as any of the Notes have been offered, issued
or sold by either of the Issuers or any of their respective affiliates
within the six-month period immediately prior to the date hereof.
(bb) Without limiting clause (k) above, no registration under
the Act, or filing under the Exchange Act, or the TIA is required in
connection with the commencement or consummation of the Tender Offer,
Consent Solicitation, Amendments or Defeasance.
(cc) Except for the Company's 401(k) plan, neither of the
Issuers nor any of their respective "Affiliates" is a "party in interest"
or a "disqualified person" with respect to any employee benefit plans. No
condition exists or event or transaction has occurred in connection with
any employee benefit plan that could result in either of the Issuers or any
such "Affiliate" incurring any liability, fine or penalty that could,
singly or in the aggregate, have a Material Adverse Effect. Neither of the
Issuers nor any trade or business under common control with the Issuers
(for purposes of Section 414(c) of the Code) maintains any employee pension
benefit plan that is subject to Title IV of the Employee Retirement Income
Act of 1974, as amended, or the rules and regulations promulgated
thereunder ("ERISA").
The terms "employee benefit plan," "employee pension benefit
plan," and "party in interest" shall have the meanings assigned to such
terms in Section 3 of ERISA. The term "Affiliate" shall have the meaning
assigned to such term in Section 407(d)(7) of ERISA, and the term
"disqualified person" shall have the meaning assigned to such term in
section 4975 of the Internal Revenue Code of 1986, as amended, or the
rules, regulations and published interpretations promulgated thereunder
(the "Code").
(dd) None of the Transactions will violate or result in a
violation of Section 7 of the Exchange Act (including, without limitation,
Regulation T (12 C.F.R. Part 220), Regulation U (12 C.F.R. Part 221) or
Regulation X (12 C.F.R. Part 224) of the Board of Governors of the Federal
Reserve System). Neither of the Issuers is subject to regulation, or
shall become subject to regulation upon the consummation of the
Transactions, under the Investment Company Act of 1940, as amended, and the
rules and regulations and interpretations promulgated thereunder, the
Public Utility Holding Company Act of 1935, as amended, the Commodity
Exchange Act or any Federal or state statute or regulation limiting its
ability to incur or assume indebtedness for borrowed money.
(ee) Neither of the Issuers is under any obligation to pay any
broker's fee or commission in connection with the Transactions (other than
commissions and fees to the Initial Purchaser as set forth in the Offering
Circular).
(ff) Neither of the Issuers nor BHR is engaged in any unfair
labor practice. Except as adequately disclosed in the Offering Circular,
there is (i) no unfair labor practice complaint or other proceeding pending
or, to the knowledge of the Issuers or BHR, threatened against either of
the Issuers or BHR before the National Labor Relations Board
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or any state, local or foreign labor relations board or any industrial
tribunal, and no material grievance or arbitration proceeding arising out
of or under any collective bargaining agreement is so pending or, to the
knowledge of the Issuers or BHR, threatened, (ii) no strike, labor dispute,
slowdown or stoppage pending or, to the knowledge of the Issuers or BHR,
threatened against either of the Issuers or BHR, and (iii) no union
representation question existing with respect to the employees of either of
the Issuers or BHR, and, to the knowledge of the Issuers or BHR, no union
organizing activities are taking place that, could, singly or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
(gg) Except as disclosed in the Offering Circular and except as
would not, singly or in the aggregate, reasonably be expected to have a
Material Adverse Effect, (i) the Issuers and BHR are in compliance with all
applicable Environmental Laws, (ii) the Issuers and BHR have made all
filings and provided all notices required under all Environmental Laws,
have all Permits required under all Environmental Laws and are in
compliance with all their requirements, (iii) there is no Environmental
Claim pending or, to the knowledge of the Issuers or BHR, threatened under
any Environmental Law against either of the Issuers or BHR or any person or
entity for whom the Issuers or BHR may be liable by law or contract, (iv)
no Lien has been recorded under any Environmental Law with respect to any
assets, facility or property owned, operated, leased or controlled by
either of the Issuers or BHR, (v) neither of the Issuers nor BHR has
received notice that it has been identified as a potentially responsible
party under the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended ("CERCLA") or any comparable state law,
(vi) no property or facility of the Issuer or BHR is listed or proposed for
listing on the National Priorities List under CERCLA or listed in the
Comprehensive Environmental Response, Compensation, Liability Information
System List promulgated pursuant to CERCLA, or on any comparable list
maintained by any state or local governmental authority and (vii) there are
no past, present or, to the knowledge of the Issuers or BHR, foreseeable
actions, activities, conditions, events, incidents or circumstances that
could form the basis for any Environmental Claim in the future.
"Environmental Law" means any Applicable Laws relating to
pollution or protection of the environmental or health or safety or any
chemical, material or substance that is subject to regulation thereunder.
"Environmental Claims" means any and all administra tive, regulatory or
judicial actions, suits, demands, demand letters, claims, notices of
responsibility, information requests, Liens, communications and notices of
noncompliance or violation, investigations or Proceedings relating in any
way to any Environmental Law.
(hh) No representation or warranty made by either of the Issuers
in any of the Documents was or will be, when made, inaccurate, untrue or
incorrect in any material respect. Each certificate signed by any officer
of either of the Issuers and delivered to the Initial Purchaser or counsel
for the Initial Purchaser in connection with the Transactions shall
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be deemed to be a representation and warranty by each Issuer to the Initial
Purchaser as to the matters covered thereby.
7. Representations and Warranties of the Initial Purchaser. The
Initial Purchaser represents and warrants that:
(a) It is a QIB.
(b) It (i) is not acquiring the Series A Notes with a view to
any distribution thereof that would violate the Act or the securities laws
of any state of the United States or any other applicable jurisdiction, and
(ii) will be soliciting offers for the Series A Notes only from, and will
be reoffering and reselling the Series A Notes only to (A) persons in the
United States whom it reasonably believes to be QIBs in reliance on the
exemption from the registration requirements of the Act provided by Rule
144A or (B) a limited number of Accredited Investors that execute and
deliver to each of the Issuers and the Initial Purchaser a letter
containing certain representations and agreements in the form attached as
Annex A to the Offering Circular.
(c) No form of general solicitation or general advertising in
violation of the Act has been or will be used by the Initial Purchaser or
any of its representatives in connection with the offer and sale of any of
the Series A Notes.
(d) In connection with the Exempt Resales, it will solicit
offers to buy the Series A Notes only from, and will offer and sell the
Series A Notes only to, Eligible Initial Purchasers who, in purchasing such
Series A Notes, will be deemed to have represented and agreed (i) if such
Eligible Initial Purchasers are QIBs, that they are purchasing the Series A
Notes for their own accounts or accounts with respect to which they
exercise sole investment discretion and that they or such accounts are
QIBs, (ii) that such Series A Notes will not have been registered under the
Act and may be resold, pledged or otherwise transferred, prior to the date
that is two years (or such other period that may hereafter be provided
under Rule 144(k) as permitting resales of restricted securities by non-
affiliates without restriction) after the later of the original issue date
of the Series A Notes and the last date on which either of the Issuers or
any of their respective affiliates was the owner of the Series A Notes only
(A) to the Issuers, (B) pursuant to a registration statement which has been
declared effective under the Act, (C) for so long as the Series A Notes are
eligible for resale pursuant to Rule 144A under the Act, to a person who
the seller reasonably believes is a QIB that purchases for its own account
or the account of a QIB to whom notice is given that the transfer is being
made in reliance on Rule 144A, (D) to an institutional "accredited
investor" within the meaning of Subparagraph (a)(1), (2), (3) or (7) of
Rule 501 under the Act that is acquiring the Series A Notes for its own
account or the account of such an institutional "accredited investor," for
investment purposes and not with a view to, or for offer or sale in
connection with, any distribution in violation of the Act or (E) pursuant
to another available exemption from the registration requirements of the
Act, and (iii) that the holder will, and each
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subsequent holder is required to, notify any purchaser from it of the
security evidenced thereby of the resale restrictions set forth in (ii)
above.
(e) It has all requisite power and authority to enter into,
deliver and perform its obligations under this Agreement and the
Registration Rights Agreement and each of this Agreement and the
Registration Rights Agreement has been duly and validly authorized by it.
8. Indemnification of the Initial Purchaser.
(a) Each of the Issuers shall, jointly and severally, without
limitation as to time, indemnify and hold harmless the Initial Purchaser
and each person, if any, who controls (within the meaning of Section 15 of
the Act or Section 20(a) of the Exchange Act) the Initial Purchaser (any of
such persons being hereinafter referred to as a "controlling person"), and
the respective officers, directors, partners, employees, representatives
and agents of the Initial Purchaser and any such controlling person
(collectively, the "Purchaser Indemnified Parties"), to the fullest extent
lawful, from and against any and all losses, claims, damages, liabilities,
costs (including, without limitation, costs of preparation and reasonable
attorneys' fees) and expenses (including, without limitation, costs and
expenses incurred in connection with investigating, preparing, pursuing or
defending against any of the foregoing) (collectively, "Losses"), as
incurred, directly or indirectly caused by, related to, based upon, arising
out of or in connection with (i) any untrue statement or alleged untrue
statement of a material fact contained in the Preliminary Offering Circular
or the Offering Circular (or any amendment or supplement thereto), or any
omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading, or (ii)
any act, omission, transaction or event contemplated by the Documents;
provided, that the Issuers shall not be liable to any Purchaser Indemnified
Party for any Losses that (x) result solely from an untrue statement of a
material fact contained in, or the omission of a material fact from, any
Preliminary Offering Circular, which untrue statement or omission was
completely corrected in the Offering Circular (as then amended or
supplemented) if it shall have been determined by a court of competent
jurisdiction by final and nonappealable judgment that (1) such Purchaser
Indemnified Party sold the Notes to the person alleging such Loss and
failed to send or give, at or prior to the written confirmation of such
sale, a copy of the Offering Circular (as then amended or supplemented), if
required by law to have so delivered it, and (2) the Issuers had previously
furnished copies thereof to such Purchaser Indemnified Party within a
reasonable amount of time prior to such sale or such confirmation, and (3)
the corrected Offering Circular, if delivered, would have been a complete
defense against the person asserting such Loss; (y) arise solely from the
gross negligence or willful misconduct of such Purchaser Indemnified Party;
or (y) are based on an untrue statement or omission or alleged untrue
statement or omission made in reliance on and in conformity with
information relating to the Initial Purchaser furnished in writing to the
Issuers by the Initial Purchaser specifically for inclusion in the
Preliminary Offering Circular
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or the Offering Circular. The parties hereto agree that the only
information furnished in writing to the Issuers by the Initial Purchaser
specifically for inclusion in the Preliminary Offering Circular or the
Offering Circular is set forth in Section 6(a) hereof. The Issuers shall
notify the Initial Purchaser promptly of the institution, threat or
assertion of any Proceeding of which either of the Issuers is aware in
connection with the matters addressed by this Agreement which involves
either of the Issuers or any of the Purchaser Indemnified Parties.
(b) If any Proceeding shall be brought or asserted against any
person entitled to indemnification hereunder (an "Indemnified Party"), such
Indemnified Party shall give prompt written notice to the indemnifying
party; provided, that the failure to so notify the indemnifying parties
shall not relieve the indemnifying parties from any obligation or liability
except to the extent (but only to the extent) that it shall be finally
determined by a court of competent jurisdiction (which determination is not
subject to appeal) that the indemnifying party has been prejudiced
materially by such failure.
Neither of the Issuers shall consent to entry of any judgment in
or enter into any settlement of any pending or threatened Proceeding in
respect of which indemnification or contribution may be sought hereunder
(whether or not any Indemnified Party is a party thereto) unless such
judgment or settlement includes, as an unconditional term thereof, the
giving by the claimant or plaintiff to each Indemnified Party of a release,
in form and substance satisfactory to the Initial Purchaser, from all
Losses that may arise from such Proceeding or the subject matter thereof
(whether or not any Indemnified Party is a party thereto).
(c) The Initial Purchaser agrees to indemnify and hold harmless
each of the Issuers and each person, if any, who controls (within the
meaning of Section 15 of the Act or Section 20(a) of the Exchange Act)
either of the Issuers (any of such persons being hereinafter referred to as
a "controlling person"), and the respective members, managers, officers,
directors, partners, employees, representatives and agents of the Issuers
and any such controlling person to the same extent as the foregoing
indemnity from the Issuer to each of the Purchaser Indemnified Parties, but
only with respect to Losses that are caused by an untrue statement or
omission or alleged untrue statement or omission made in reliance on and in
conformity with information relating to the Initial Purchaser furnished in
writing to the Issuers by the Initial Purchaser specifically for inclusion
in the Preliminary Offering Circular or the Offering Circular. The parties
hereto agree that the only information furnished in writing to the Issuers
by the Initial Purchaser specifically for inclusion in the Preliminary
Offering Circular or the Offering Circular is set forth in Section 6(a)
hereof.
(d) If the indemnification provided for in this Section 8 is
unavailable to an Indemnified Party or is insufficient to hold such
Indemnified Party harmless for any Losses in respect of which this Section
8 would otherwise apply by its terms (other than by reason of exceptions
provided in this Section 8), then the Issuers, in lieu of indemnifying such
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<PAGE>
Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such Losses (i) in such proportion as is
appropriate to reflect the relative benefits received by the Issuers, on
the one hand, and the Initial Purchaser, on the other hand, from the
Offering, or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to
reflect not only the relative benefits referred to in clause (i) above but
also the relative fault of the Issuers, on the one hand, and the Initial
Purchaser, on the other hand, in connection with the actions, statements or
omissions that resulted in such Losses, as well as any other relevant
equitable considerations. The relative benefits received by the Issuers, on
the one hand, and the Initial Purchaser, on the other hand, shall be deemed
to be in the same proportion as the total net proceeds from the Offering
(before deducting expenses) received by the Issuers, and the total
discounts and commissions received by the Initial Purchaser, bear to the
total price of the Series A Notes in Exempt Resales in each case as set
forth in the table on the cover page of the Offering Circular. The
relative fault of the Issuers, on the one hand, and the Initial Purchaser,
on the other hand, shall be determined by reference to, among other things,
whether any untrue or alleged untrue statement of a material fact or
omission or alleged omission to state a material fact relates to
information supplied by the Issuers, on the one hand, or the Initial
Purchaser, on the other hand, and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement
or omission. The amount paid or payable by an Indemnified Party as a
result of any Losses shall be deemed to include any legal or other fees or
expenses incurred by such party in connection with any Proceeding, to the
extent such party would have been indemnified for such fees or expenses if
the indemnifica tion provided for in this Section 8 was available to such
party.
Each party hereto agrees that it would not be just and equitable
if contribution pursuant to this Section 8(d) were determined by pro rata
allocation or by any other method of allocation that does not take account
of the equitable considerations referred to in the immediately preceding
paragraph. Notwithstanding the provisions of this Section 8(d), the Initial
Purchaser shall not be required to contribute, in the aggregate, any amount
in excess of the amount by which the total discounts and commissions
received by the Initial Purchaser with respect to the Series A Notes
purchased by it exceeds the amount of any damages that the Initial
Purchaser has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the
Act) shall be entitled to contribution from any person who was not guilty
of such fraudulent misrepresentation.
(e) The indemnity and contribution agreements contained in this
Section 8 are in addition to any liability that the Issuers or the Initial
Purchaser may otherwise have to the Indemnified Parties.
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9. Conditions.
(a) The obligations of the Initial Purchaser to purchase the
Series A Notes under this Agreement are subject to the satisfaction or
waiver of each of the following conditions:
(i) All the representations and warranties of each of
the Issuers in each of the Documents to which it is a party shall be true
and correct in all material respects (other than representations and
warranties with a materiality qualifier, which shall be true and correct as
written) at and as of the Closing Date after giving effect to the
Transactions with the same force and effect as if made on and as of such
date. On or prior to the Closing Date, each of the Issuers and, to the
knowledge of the Issuers, each other party to the Documents (other than the
Initial Purchaser) shall have performed or complied in all material
respects with all of the agreements and satisfied in all material respects
all conditions on their respective parts to be performed, complied with or
satisfied pursuant to the Documents.
(ii) The Offering Circular shall have been printed and
copies made available to the Initial Purchaser not later than 12:00 noon,
New York City time, on the first business day following the date of this
Agreement or at such later date and time as the Initial Purchaser may
approve.
(iii) No injunction, restraining order or order of any
nature by a Governmental Authority shall have been issued as of the Closing
Date that would prevent or interfere with the consummation of any of the
Transactions; and no stop order suspending the qualification or exemption
from qualification of any of the Series A Notes in any jurisdiction shall
have been issued and no Proceeding for that purpose shall have been
commenced or be pending or contemplated.
(iv) No Applicable Law shall have been enacted,
adopted or issued that would, as of the Closing Date, prevent the
consummation of any of the Transactions. No Proceeding shall be pending or
threatened other than Proceedings that (A) if adversely determined could
not, singly or in the aggregate, adversely affect the issuance or
marketabil ity of the Series A Notes, and (B) could not, singly or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
(v) Since the date as of which information is given
in the Offering Circular, there shall not have been any Material Adverse
Change.
(vi) The Notes shall have (A) been designated PORTAL
securities in accordance with the rules and regulations adopted by the NASD
relating to trading in the
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PORTAL market, and (B) received a rating of "B" and "B2" from Standard &
Poor's Corporation and Moody's Investors Services, Inc., respectively.
(vii) As of the Closing Date, (i) there shall not have
occurred any downgrading, suspension or withdrawal of, nor shall any notice
have been given of any potential or intended downgrading, suspension or
withdrawal of, or of any review (or of any potential or intended review)
for a possible change that does not indicate the direction of the possible
change in, any rating of any securities of either of the Issuers
(including, without limitation, the placing of any of the foregoing ratings
on credit watch with negative or developing implications or under review
with an uncertain direction) by any "nationally recognized statistical
rating organization" as such term is defined for purposes of Rule 436(g)(2)
under the Act, (ii) there shall not have occurred any change, nor shall any
notice have been given of any potential or intended change, in the outlook
for any rating of any securities of either of the Issuers by any such
rating organization and (iii) no such rating organization shall have given
notice that it has assigned (or is considering assigning) a lower rating to
the Notes than that on which the Notes were marketed.
(viii) The Initial Purchaser shall have received on the
Closing Date (A) certificates dated the Closing Date, signed by (1) the
Chief Executive Officer, and (2) the principal financial or accounting
officer of each of the Issuers, on behalf of such Issuer, confirming the
matters set forth in paragraphs (i), (iii), (iv), (v), (vii) and (xiii) of
this Section 9(a), (B) a certificate, dated the Closing Date, signed by the
(1) Chief Executive Officer and (2) the principal financial or accounting
officer of each of the Issuers, on behalf of such Issuer stating that the
industry, statistical and market-related data included in the Offering
Circular has been reviewed by such persons and, to the best knowledge of
such persons, subject to the risks and limitations described in the
Preliminary Offering Circular and the Offering Circular, is true and
accurate in all material respects and is based on or derived from sources
which the Issuers believe to be reliable and accurate, which certificate
shall be in form and substance satisfactory to counsel for the Initial
Purchasers, (C) a certificate, dated the Closing Date, signed by the
Secretary of each of the Issuers, BDI and Gary, certifying such matters as
the Initial Purchaser may reasonably request, and (D) a certificate of
solvency, dated the Closing Date, signed by the principal financial or
accounting officer of the Company substantially in the form previously
approved by the Initial Purchaser.
(ix) The Initial Purchaser shall have received:
(A) the opinions (in form and substance satisfactory to
the Initial Purchaser and counsel to the Initial Purchaser) of Dykema
Gossett PLLC, special counsel to the Issuers, dated the Closing Date,
in the form of Exhibit A hereto;
(B) the opinions (in form and substance satisfactory to
the Initial Purchaser and counsel to the Initial Purchaser) of Barnes
& Thornburg, special
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Indiana counsel to the Issuers, dated the Closing Date, in the form of
Exhibit B-1 hereto, and Butzel Long, special admiralty counsel to the
Issuers, dated the Closing Date, in the form of Exhibit B-2 hereto;
(C) reliance letters from each counsel or special
counsel to the Issuers (in form and substance satisfactory to the
Initial Purchaser and counsel to the Initial Purchaser), dated the
Closing Date, permitting the Initial Purchaser to rely on all other
opinions rendered by such counsel in connection with any of the
Transactions; and
(D) an opinion, dated the Closing Date, of Skadden,
Arps, Slate, Meagher & Flom LLP, in form and substance reasonably
satisfactory to the Initial Purchaser covering such matters as are
customarily covered in such opinions.
(x) The Initial Purchaser shall have received from
PricewaterhouseCoopers LLP, independent public accountants, with respect to
the Issuers, (A) a customary comfort letter, dated the date of the
Offering Circular, in form and substance reasonably satisfactory to the
Initial Purchaser, with respect to the financial statements and certain
financial information contained in the Offering Circular, and (B) a
customary comfort letter, dated the Closing Date, in form and substance
reasonably satisfactory to the Initial Purchaser, to the effect that
PricewaterhouseCoopers LLP reaffirms the statements made in its letter
furnished pursuant to clause (A), except that the specified date referred
to shall be a date not more than five days prior to the Closing Date.
(xi) The Documents shall have been executed and
delivered by all parties thereto and the Initial Purchaser shall have
received a fully executed original of each Document.
(xii) The Initial Purchaser shall have received copies
of all opinions, certificates, letters and other documents delivered under
or in connection with the Transactions.
(xiii) Each of the Transactions shall have been
consummated on terms that conform to the description thereof in the
Offering Circular. The terms of each Document shall conform in all material
respects to the description thereof in the Offering Circular.
(xiv) The Initial Purchaser shall have received copies
of duly executed payoff letters, UCC-3 termination statements, mortgage
releases and other collateral releases and terminations, each in form and
substance satisfactory to the Initial Purchaser evidencing, as the case may
be, (A) the Defeasance, (B) the repurchase of the Old Notes pursuant to the
Tender Offer, (C) the termination of each agreement and instrument relating
to any indebtedness secured by the Collateral and (D) the release of each
item of
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Collateral securing such indebtedness and the termination of all
Liens created thereunder, and each such payoff letter, release and
termination shall be in full force and effect.
(xv) The Issuers shall have furnished to the Initial
Purchaser the Security Documents duly executed by the respective Grantors
party thereto, together with:
(A) proper financing statements, each in the form to be
filed on the Closing Date under the UCC of all jurisdictions that may
be deemed necessary or desirable in order to perfect the Liens created
by the Security Documents, covering the Collateral and naming the
Collateral Agent as secured party, which financing statements shall be
so filed on the Closing Date;
(B) contemplated requests for information, listing all
effective financing statements filed as of the date thereof in the
jurisdictions referred to in the prior subparagraph that name either
of the Issuers, BDI or Gary as debtor, together with copies of such
financing statements (none of which shall cover the Collateral
described in the Security Documents, except to the extent such
Collateral secures the obligations under the Old Notes and such
Collateral is released in connection herewith and evidence thereof is
delivered pursuant to paragraph (xiv) above);
(C) reasonable evidence that all other actions
necessary or desirable to perfect and protect the Liens created by the
Security Documents have been taken;
(D) the Preferred Ship Mortgage (as defined in the
Indenture), duly executed by the Company, together with:
(1) evidence that counterparts of the Preferred Ship
Mortgage are in a form to be recorded on the Closing Date with
the United States Coast Guard National Vessel Documentation
Center, New Orleans, Louisiana Detachment (which counterparts
shall be so recorded on the Closing Date), in order to create a
valid first preferred mortgage under the Ship Mortgage Act on the
Majestic Star Casino Vessel (as defined in the Indenture) in
favor of the Collateral Agent and the holders of the Notes and
that all filing and recording taxes and fees have been paid;
(2) such evidence that all other action that the
Collateral Agent may deem necessary or desirable in order to
create a valid first preferred mortgage on the Majestic Star
Casino Vessel has been taken; and
(3) such evidence of the insurance required by the terms
of the Preferred Ship Mortgage.
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(xvi) Counsel to the Initial Purchaser shall have been
furnished with such documents as they may reasonably require for the
purpose of enabling them to review or pass upon the matters referred to in
this Section 9 and in order to evidence the accuracy, completeness or
satisfaction in all material respects of any of the representations,
warranties or conditions herein contained.
(b) The obligation of each of the Issuers to sell the Series A
Notes under this Agreement is subject to the satisfaction or waiver of each
of the following conditions:
(i) The Initial Purchaser shall have delivered
payment to the Issuers for the Series A Notes pursuant to Sections 2 and 4
of this Agreement and shall have complied with all other obligations and
agreements required to be complied with by it hereunder on or prior to the
Closing Date.
(ii) All of the representations and warranties of the
Initial Purchaser in this Agreement shall be true and correct in all
material respects at and as of the Closing Date, with the same force and
effect as if made on and as of such date.
(iii) No injunction, restraining order or order of any
nature by a Governmental Authority shall have been issued as of the Closing
Date that would prevent or interfere with the issuance and sale of the
Series A Notes; and no stop order suspending the qualification or exemption
from qualification of any of the Series A Notes in any jurisdiction shall
have been issued and no Proceeding for that purpose shall have been
commenced or be pending or contemplated as of the Closing Date.
10. Termination. The Initial Purchaser may terminate this Agreement
at any time prior to the Closing Date by written notice to the Issuers if any of
the following has occurred:
(a) since the date as of which information is given in the
Offering Circular, any material adverse effect or development involving a
prospective adverse effect on the properties, business, prospects,
operations, earnings, assets, liabilities or condition (financial or
otherwise), of either of the Issuers, whether or not arising in the
ordinary course of business, that could, in Initial Purchaser's judgment,
(i) make it impracticable or inadvisable to proceed with the offering or
delivery of the Series A Notes on the terms and in the manner contemplated
in the Offering Circular, or (ii) materially impair the investment quality
of any of the Notes;
(b) the failure of either of the Issuers to satisfy the
conditions contained in Section 9(a) hereof on or prior to the third
business day following the date of this Agreement;
(c) any outbreak or escalation of hostilities or other national
or international calamity or crisis or material adverse change in economic
conditions in or the financial markets of the United States or elsewhere,
if the effect of such outbreak, escalation, calamity,
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<PAGE>
crisis or material adverse change in the economic conditions in or in the
financial markets of the United States or elsewhere could make it, in the
Initial Purchaser's judgment, impracticable or inadvisable to market or
proceed with the offering or delivery of the Series A Notes on the terms
and in the manner contemplated in the Offering Circular or to enforce
contracts for the sale of any of the Series A Notes;
(d) the suspension or limitation of trading generally in
securities on the New York Stock Exchange, the American Stock Exchange or
the NASDAQ National Market or any setting of limitations on prices for
securities on any such exchange or NASDAQ National Market;
(e) the enactment, publication, decree or other promulgation
after the date hereof of any Applicable Law that in the Initial Purchaser's
opinion materially and adversely affects, or could materially and adversely
affect, the properties, business, prospects, operations, earnings, assets,
liabilities or condition (financial or otherwise) of either of the Issuers;
(f) any securities of either of the Issuers shall have been
downgraded or placed on any "watch list" for possible downgrading by any
"nationally recognized statistical rating organization", as such term is
defined for purposes of Rule 431(g)(2) under the Act; or
(g) the declaration of a banking moratorium by any Governmental
Authority; or the taking of any action by any Governmental Authority after
the date hereof in respect of its monetary or fiscal affairs that in the
Initial Purchaser's opinion could have a material adverse effect on the
financial markets in the United States or elsewhere.
The indemnities and contribution and expense reimbursement provisions
and other agreements, representations and warranties of each of the Issuers set
forth in or made pursuant to this Agreement shall remain operative and in full
force and effect, and will survive, regardless of (i) any investigation, or
statement as to the results thereof, made by or on behalf of the Initial
Purchaser, (ii) acceptance of the Notes, and payment for them hereunder, and
(iii) any termination of this Agreement. Without limiting the foregoing,
notwithstanding any termination of this Agreement, the Issuers shall be jointly
and severally liable (i) for all expenses that they have agreed to pay pursuant
to Section 5(f) hereof, and (ii) pursuant to Section 8 hereof.
11. Miscellaneous.
(a) Notices given pursuant to any provision of this Agreement
shall be addressed as follows: (i) if to the Issuers, One Buffington
Harbor Dr., Gary, Indiana 46406-3000, Attention: Michael Kelly, Chief
Operating and Financial Officer, with a copy to Dykema Gossett, PLLC, 400
Renaissance Center, Detroit, Michigan 48243, Attention: Frank K. Zinn, Esq.
and (ii) if to the Initial Purchaser, 11100 Santa Monica Boulevard, 10th
Floor,
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Los Angeles, California 90025, Attention: Jerry M. Gluck, Esq.,
with a copy to Skadden, Arps, Slate, Meagher & Flom LLP, 300 South Grand
Avenue, Suite 3400, Los Angeles, California 90071, Attention: Michael A.
Woronoff (provided, that any notice pursuant to Section 8 hereof will be
mailed, delivered, telegraphed or telecopied and confirmed to the party to
be notified and its counsel), or in any case to such other address as the
person to be notified may have requested in writing.
(b) This Agreement has been and is made solely for the benefit
of and shall be binding upon each of the Issuers, the Initial Purchaser
and, to the extent provided in Section 8 hereof, the controlling persons
officers, directors, partners, employees, representa tives and agents
referred to in Section 8, and their respective heirs, executors,
administrators, successors and assigns, all as and to the extent provided
in this Agreement, and no other person shall acquire or have any right
under or by virtue of this Agreement. The term "successors and assigns"
shall not include a purchaser of any of the Series A Notes from the Initial
Purchaser merely because of such purchase. Notwithstanding the foregoing,
it is expressly understood and agreed that each purchaser who purchases
Series A Notes from the Initial Purchaser is intended to be a beneficiary
of the Issuers' covenants contained in the Registration Rights Agreement to
the same extent as if the Notes were sold and those covenants were made
directly to such purchaser by each of the Issuers, and each such purchaser
shall have the right to take action against each of the Issuers to enforce,
and obtain damages for any breach of, those covenants.
(c) This Agreement shall be construed and interpreted, and the
rights of the parties shall be determined in accordance with the laws of
the State of New York. Each party hereto consents specifically to the
jurisdiction of the federal courts of the United States sitting in the
Southern District of New York, or if such federal court declines to
exercise jurisdiction over any action filed pursuant to this Agreement, the
courts of the State of New York sitting in the County of New York, and any
court to which an appeal may be taken in connection with any action filed
pursuant to this Agreement, for the purposes of all legal proceedings
arising out of or relating to this Agreement. In connection with the
foregoing consent, each party irrevocably waives, to the fullest extent
permitted by law, any objection which it may now or hereafter have to the
court's exercise of personal jurisdiction over each party to this Agreement
or the laying of venue of any such proceeding brought in such a court and
any claim that any such proceeding brought in such a court has been brought
in an inconvenient forum. Each party further irrevocably waives its right
to a trial by jury and consents that service of process may be effected in
any manner permitted under the laws of the State of New York.
(d) This Agreement may be signed in various counterparts which
together shall constitute one and the same instrument.
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(e) The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(f) If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the
parties hereto shall use their best efforts to find and employ an
alternative means to achieve the same or substantially the same result as
that contemplated by such term, provision, covenant or restriction. It is
hereby stipulated and declared to be the intention of the parties that they
would have executed the remaining terms, provisions, covenants and
restrictions without including any of such that may be hereafter declared
invalid, illegal, void or unenforceable.
(g) This Agreement may be amended, modified or supplemented, and
waivers or consents to departures from the provisions hereof may be given,
provided that the same are in writing and signed by each of the signatories
hereto.
29
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Please confirm that the foregoing correctly sets forth the agreement
between the Issuers and the Initial Purchaser.
Very truly yours,
THE MAJESTIC STAR CASINO, LLC
By: Barden Development, Inc., its manager
By: /s/ Don H. Barden
-------------------------------------------
Name: Don H. Barden
Title: President
THE MAJESTIC STAR CASINO CAPITAL CORP.
By: /s/ Don H. Barden
-------------------------------------------
Name: Don H. Barden
Title: President
Accepted and Agreed to:
JEFFERIES & COMPANY, INC.
By: /s/ Brent Stevens
-------------------------
Name: Brent Stevens
Title: Managing Director
30
<PAGE>
EXHIBIT 3.3
THE MAJESTIC STAR CASINO, LLC
First Amendment Of Third Amended And Restated Operating Agreement
THIS AMENDMENT is executed by BARDEN DEVELOPMENT, INC., an Indiana corporation
("Barden"), and GARY RIVERBOAT GAMING, LLC, an Indiana limited liability
company.
WHEREAS Barden and Gary are the sole members, and Barden is the sole manager, of
The Majestic Star Casino, LLC, an Indiana limited liability company (the
"Company").
WHEREAS the Company is currently governed by the Company's Third Amended And
Restated Operating Agreement of March 29, 1996 (the "Agreement").
NOW, THEREFORE, the parties hereto, acting in accordance with Section 13.1 of
the Agreement, hereby wish to amend the Agreement as set forth herein.
1. Subsection 5.3(i) of the Agreement is hereby amended to include a fifth
Clause thereof, which newly introduced Clause shall (a) immediately follow
Clause 5.3(i)(iv), (b) be identified as Clause 5.3(i)(v), and (c) read in its
entirety as follows:
(v) such payment is a management fee (and/or expense reimbursement)
owing to the Manager in accordance with Section 5.5.
2. Section 5.5 of the Agreement is hereby amended, and, as so amended, is
restated in its entirety to read as follows:
5.5 Compensation. The Manager and/or its Affiliates shall be entitled
to (a) reasonable compensation for their services to the Company in
managing the affairs thereof, and (b) reimbursement for any
out-of-pocket expenses incurred by them on the Company's behalf.
Neither the terms nor the amount of any such management fees shall be
subject to the approval of the Majority Interest or any other Members.
3. Except to the extent recited in this Amendment, the Operating Agreement shall
be unchanged and each existing provision thereof shall be unamended.
4. This Amendment (a) shall be governed by and interpreted and enforced
according to Indiana law, and (b) shall be binding upon and inure to the benefit
of and be enforceable by the Company, its members and manager, and their
respective successors and permitted assigns.
THE PARTIES HERETO have executed this Amendment on this 18th day of June, 1999.
GARY RIVERBOAT GAMING, LLC BARDEN DEVELOPMENT, INC.
By: BARDEN MANAGEMENT, INC, Manager
By: /s/ Michael E. Kelly
By: /s/ Michelle R. Sherman --------------------------------
----------------------------------- Michael E. Kelly, Vice President
Michelle R. Sherman, Vice President
<PAGE>
EXHIBIT 3.4
ARTICLES OF INCORPORATION SUE ANNE GLORY
State Form 4159 (R10 / 8-95) SECRETARY OF STATE
Approved by State Board of Accounts 1995 CORPORATIONS DIVISION
302 W. Washington St., Rm. E018
Indianapolis, IN 46204
Telephone (317) 232-6576
Indiana Code 23-1-21-2
FILING FEE $90.00
ARTICLES OF INCORPORATION
The undersigned desiring to form a corporation (hereinafter referred to as
"Corporation") pursuant to the provisions of:
X Indiana Business Corporation Law Indiana Professional Corporation Act
--- --- 1988, Indiana Code
23-1.4-1-1 et seq.
As amended, executes the following (Professional corporations
Articles of Incorporation: must include Certificate of
Registration
ARTICLE I - NAME AND PRINCIPAL OFFICE
Name of Corporation (the name must contain the word "Corporation",
"Incorporated," "Limited," "Company" or an abbreviation thereof.)
The Majestic Star Casino Capital Corp.
Principal Office: The post office address of the principal office of the
Corporation is:
Post office address City State Zip Code
400 Renaissance Center Detroit MI 48243-1668
Suite 2400
ARTICLE II - REGISTERED OFFICE AND AGENT
Registered Agent: The name and street address of the Corporation's Registered
Agent and Registered Office for service of process are:
Name of Registered Agent
CT Corporation System
Address of Registered Office
(street or building) City Zip Code
One North Capitol Avenue Indianapolis Indiana 46204
ARTICLE III - AUTHORIZED SHARES
<PAGE>
(the name(s) and address(es) of the incorporators of the corporation)
NAME NUMBER AND STREET CITY STATE ZIP CODE
OR BUILDING
Michelle R. Sherman 400 Renaissance Center, Detroit MI 48243-1668
Suite 2400
In Witness Whereof, the undersigned being all the incorporators of said
Corporation execute these Articles of Incorporation and verify, subject to
penalties of perjury, that the statements contained herein are true, this
10th day of May, 1999.
Signature Printed Name
/s/ Michelle R. Sherman Michelle R. Sherman
This instrument was prepared by: (name)
Janice M. Thieleman, c/o Dykema Gossett PLLC
Address Zip Code
400 Renaissance Center, Detroit, Michigan 48243-1668
INDIANA - 921 - 10/9/96
<PAGE>
EXHIBIT 3.5
B Y L A W S
Of
THE MAJESTIC STAR CASINO CAPITAL CORP.
June 18, 1999
<PAGE>
TABLE OF CONTENTS
page
----
I. OFFICES
1.01 Principal Office 1
1.02 Other Offices 1
II. PURPOSES; SEAL
2.01 Purposes 1
2.02 Seal 1
III. CAPITAL STOCK
3.01 Issuance of Shares 1
3.02 Certificates for Shares 1
3.03 Transfer of Shares 2
3.04 Registered Shareholders 2
3.05 Lost or Destroyed Certificates 2
IV. SHAREHOLDERS AND MEETINGS OF SHAREHOLDERS
4.01 Place of Meetings 2
4.02 Annual Meeting 2
4.03 Special Meetings 2
4.04 Notice of Meetings; Notice of Shareholder Proposals 3
4.05 Record Dates 3
4.06 List of Shareholders 4
4.07 Quorum 4
4.08 Proxies 4
4.09 Voting 4
4.10 Participation via Communications Equipment 5
4.11 Conduct of Meeting 5
4.12 Action Without a Meeting 5
V. DIRECTORS AND MEETINGS OF DIRECTORS
5.01 Number and Eligibility 6
5.02 Election, Resignation and Removal 6
5.03 Vacancies 6
5.04 Annual Meeting 6
5.05 Regular and Special Meetings 6
5.06 Notices 7
5.07 Quorum and Voting 7
5.08 Participation via Communications Equipment 7
5.09 Committees 7
5.10 Dissents 7
5.11 Compensation 8
5.12 Action Without a Meeting 8
<PAGE>
VI. NOTICES AND WAIVERS OF NOTICE
6.01 Notices 8
6.02 Waiver of Notice 8
VII. OFFICERS
7.01 Number 9
7.02 Term of Office, Resignation and Removal 9
7.03 Vacancies 9
7.04 Authority 9
VIII. DUTIES OF OFFICERS
8.01 Chairman of the Board 10
8.02 President 10
8.03 Vice Presidents 10
8.04 Secretary 10
8.05 Controller 10
8.06 Assistant Secretaries and Controllers 10
IX. SPECIAL CORPORATE ACTS
9.01 Orders for Payment of Money 11
9.02 Contracts and Conveyances 11
X. BOOKS AND RECORDS
10.01 Maintenance of Books and Records 11
10.02 Reliance on Books and Records 11
XI. INDEMNIFICATION
11.01 Non-Derivative Actions 12
11.02 Derivative Actions 12
11.03 Expenses of Successful Defense 13
11.04 Definitions 13
11.05 Contract Right; Limitation on Indemnity 13
11.06 Determination that Indemnification is Proper 13
11.07 Authorization of Payment 14
11.08 Proportionate Indemnity 15
11.09 Expense Advance 15
11.10 Non-Exclusivity of Rights 15
11.11 Indemnification of Employees and Agents of the Corporation 15
11.12 Former Directors and Officers 16
11.13 Insurance 16
11.14 Changes in Indiana Law 16
11.15 Amendment or Repeal of Article XI 16
XII. AMENDMENTS
12.01 Amendments 16
<PAGE>
BYLAWS
of
THE MAJESTIC STAR CASINO CAPITAL CORP.
June 16, 1999
ARTICLE I
Offices
1.01 Principal Office. The principal office of the corporation shall be at
such place within the State of Indiana as the Board of Directors shall determine
from time to time.
1.02 Other Offices. The corporation also may have offices at such other
places as the Board of Directors from time to time determines or the business of
the corporation requires.
ARTICLE II
Purpose; Seal
2.01 Purposes. The purpose or purposes for which the corporation is formed
is to engage in any activity within the purposes for which corporations may be
formed under the laws of Indiana.
2.02 Seal. The corporation may, but is not required to, have a seal in
such form as the Board of Directors may from time to time determine. The seal
may be used by causing it or a facsimile to be impressed, affixed, reproduced or
otherwise.
ARTICLE III
Capital Stock
3.01 Issuance of Shares. The shares of capital stock of the corporation
shall be issued in such amounts, at such times, for such consideration and on
such terms and conditions as the Board shall deem advisable, subject to the
Articles of Incorporation and any requirements of the laws of the State of
Indiana.
3.02 Certificates for Shares. The shares of the corporation shall be
represented by certificates signed by the Chairman of the Board, President or a
Vice President and also may be signed by the Controller, Assistant Controller,
Secretary or Assistant Secretary of the corporation, and may be sealed with the
seal of the corporation or a facsimile thereof. A certificate representing
shares shall state upon its face that the corporation is formed under the laws
of the State of Indiana, the name of the person to whom it is issued, the number
and class of shares, and the designation of
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the series, if any, which the certificate represents, and such other provisions
as may be required by the laws of the State of Indiana.
3.03 Transfer of Shares. The shares of the capital stock of the
corporation are transferable only on the books of the corporation upon surrender
of the certificate therefor, properly endorsed for transfer, and the
presentation of such evidences of ownership and validity of the assignment as
the corporation may require.
3.04 Registered Shareholders. The corporation shall be entitled to treat
the person in whose name any share of stock is registered as the owner thereof
for purposes of dividends and other distributions in the course of business, or
in the course of recapitalization, merger, plan of share exchange,
reorganization, sale of assets, liquidation or otherwise and for the purpose of
votes, approvals and consents by shareholders, and for the purpose of notices to
shareholders, and for all other purposes whatever, and shall not be bound to
recognize any equitable or other claim to or interest in such shares on the part
of any other person, whether or not the corporation shall have notice thereof,
save as expressly required by the laws of the State of Indiana.
3.05 Lost or Destroyed Certificates. Upon the presentation to the
corporation of a proper affidavit attesting the loss, destruction or mutilation
of any certificate or certificates for shares of stock of the corporation, the
Board of Directors shall direct the issuance of a new certificate or
certificates to replace the certificates so alleged to be lost, destroyed or
mutilated. The Board of Directors may require as a condition precedent to the
issuance of new certificates a bond or agreement of indemnity, in such form and
amount and with such sureties, or without sureties, as the Board of Directors
may direct or approve.
ARTICLE IV
Shareholders and Meetings of Shareholders
4.01 Place of Meetings. All meetings of shareholders shall be held at the
principal office of the corporation or at such other place as shall be
determined by the Board of Directors and stated in the notice of meeting.
4.02 Annual Meeting. The annual meeting of the shareholders of the
corporation shall be held in the fourth calendar month after the end of the
corporation's fiscal year, or at such other date as the Board of Directors shall
determine from time to time, and shall be held at such place and time of day as
shall be determined by the Board of Directors from time to time. Directors
shall be elected at each annual meeting and such other business transacted as
may come before the meeting.
4.03 Special Meetings. Special meetings of shareholders may be called by
the Board of Directors, the Chairman of the Board (if such office is filled) or
the President and shall be called by the President or Secretary at the written
request of shareholders holding a majority of the shares of
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stock of the corporation outstanding and entitled to vote. The request shall
state the purpose or purposes for which the meeting is to be called.
4.04 Notice of Meetings; Notice of Shareholder Proposal.
(a) Notice of Meetings. Except as otherwise provided by statute,
written notice of the time, place and purposes of a meeting of shareholders
shall be given not less than ten (10) nor more than sixty (60) days before the
date of the meeting to each shareholder of record entitled to vote at the
meeting, either personally or by mailing such notice to his last address as it
appears on the books of the corporation. No notice need be given of an
adjourned meeting of the shareholders provided the time and place to which such
meeting is adjourned are announced at the meeting at which the adjournment is
taken and at the adjourned meeting only such business is transacted as might
have been transacted at the original meeting. However, if after the adjournment
a new record date is fixed for the adjourned meeting a notice of the adjourned
meeting shall be given to each shareholder of record on the new record date
entitled to notice as provided in this Bylaw.
(b) Notice of Shareholder Proposal. The notice described above in
Section 4.04(a) shall include a notice of proposals from shareholders that are
proper subjects for shareholder action and are intended to be presented by
shareholders who have so notified the corporation in accordance with this
Section 4.04(b). A shareholder may cause the corporation to include a notice of
shareholder proposal in a notice described above in Section 4.04(a) by giving
timely written notice to the Secretary of the corporation at the principal
executive offices of the corporation. To be timely, a proposed form of notice
of shareholder proposal must be delivered or mailed and received by the
Secretary of the corporation as follows: (i) with respect to an annual meeting
of shareholders pursuant to Section 4.02 of this Article IV, not less than 120
days prior to the date set for the annual meeting in accordance with Section
4.02; and (b) with respect to a meeting which is a special meeting pursuant to
Section 4.03 of this Article IV, not less than five (5) business days after the
earlier of (A) the announcement by the corporation of the intention to call a
special meeting, or (B) if no such announcement is made, the date that notice of
such meeting special meeting is given personally or is mailed by the corporation
pursuant to Section 4.04(a) of this Article IV, in which event, the corporation
shall promptly provide or mail a revised notice of such special meeting that
includes the shareholder's proposal if it qualifies for inclusion therein as set
forth in this Section 4.04. A shareholder's notice to the Secretary of the
corporation shall set forth, as to each matter the shareholder proposes to bring
before such meeting, (x) a brief description of the business to be brought
before the meeting, (y) the name and address, as they appear on the
corporation's books, of the shareholder(s) proposing the business, and (z) any
material interest of such shareholder(s) in such business. All determinations
under this Section 4.04 as to qualification, timeliness, and the like, shall be
made by the board of directors, which determinations shall be conclusive. This
Section 4.04(b) shall be of no force and effect during any time when the
corporation has a class of securities registered under Section 12 of the
Securities Exchange Act of 1934, as amended (or any successor thereto).
3
<PAGE>
4.05 Record Dates. The Board of Directors may fix in advance a date as the
record date for the purpose of determining shareholders entitled to notice of
and to vote at a meeting of shareholders or an adjournment thereof, or to
express consent or to dissent from a proposal without a meeting, or for the
purpose of determining shareholders entitled to receive payment of a dividend or
allotment of a right, or for the purpose of any other action. The date fixed
shall not be more than sixty (60) nor less than ten (10) days before the date of
the meeting, nor more than sixty (60) days before any other action. In such
case only such shareholders as shall be shareholders of record on the date so
fixed shall be entitled to notice of and to vote at such meeting or adjournment
thereof, or to express consent or to dissent from such proposal, or to receive
payment of such dividend or to receive such allotment of rights, or to
participate in any other action, as the case may be, notwithstanding any
transfer of any stock on the books of the corporation, or otherwise, after any
such record date. Nothing in this Bylaw shall affect the rights of a
shareholder and his transferee or transferor as between themselves.
4.06 List of Shareholders. The Secretary of the corporation or the agent
of the corporation having charge of the stock transfer records for shares of the
corporation shall make and certify a complete list of the shareholders entitled
to vote at a shareholders' meeting or any adjournment thereof. The list: shall
be arranged alphabetically within each class and series, with the address of,
and the number of shares held by, each shareholder; shall be produced at the
time and place of the meeting; shall be subject to inspection by any shareholder
during the whole time of the meeting; and shall be prima facie evidence as to
who are the shareholders entitled to examine the list or vote at the meeting.
4.07 Quorum. Unless a greater or lesser quorum is required by the laws of
the State of Indiana, the shareholders present at a meeting in person or by
proxy who, as of the record date for such meeting, were holders of a majority of
the outstanding shares of the corporation entitled to vote at the meeting shall
constitute a quorum at the meeting. Whether or not a quorum is present, a
meeting of shareholders may be adjourned by a vote of a majority of the shares
present in person or by proxy. When the holders of a class or series of shares
are entitled to vote separately on an item of business, this Bylaw applies in
determining the presence of a quorum of such class or series for transaction of
such item of business.
4.08 Proxies. A shareholder entitled to vote at a meeting of shareholders
or to express consent or dissent without a meeting may authorize other persons
to act for the shareholder by proxy. A proxy shall be signed by the shareholder
or the shareholder's authorized agent or representative and shall not be valid
after the expiration of three years from its date unless otherwise provided in
the proxy. A proxy is revocable at the pleasure of the shareholder executing it
except as otherwise provided by the laws of the State of Indiana.
4.09 Voting. Each outstanding share is entitled to one vote on each matter
submitted to a vote, unless otherwise provided in the Articles of Incorporation.
Votes may be cast orally or in writing, but if more than 25 shareholders of
record are entitled to vote, then votes shall be cast in writing signed by the
shareholder or the shareholder's proxy. When an action, other than the election
4
<PAGE>
of directors, is to be taken by the vote of the shareholders, it shall be
authorized by a majority of the votes cast by the holders of shares entitled to
vote thereon, unless a greater plurality is required by the Articles of
Incorporation or by the laws of the State of Indiana. Except as otherwise
provided by the Articles of Incorporation, directors shall be elected by a
plurality of the votes cast at any election.
4.10 Participation via Communications Equipment. A shareholder may
participate in a meeting of shareholders by means of conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can communicate with each other if all participants are advised of
the communications equipment and the names of the participants in the conference
are divulged to all participants. Participation in a meeting in this manner
constitutes presence in person at the meeting.
4.11 Conduct of Meeting. At each meeting of shareholders, a chair shall
preside. In the absence of a specific selection by the board of directors, the
chair shall be the Chairman of the Board as provided in Section 8.01 of these
Bylaws. The chair shall determine the order of business and shall have the
authority to establish rules for the conduct of the meeting which are fair to
shareholders. The chair of the meeting shall announce at the meeting when the
polls close for each matter voted upon. If no announcement is made, the polls
shall be deemed to have closed upon the final adjournment of the meeting. After
the polls close, no ballots, proxies or votes, nor any revocations or changes
thereto may be accepted.
4.12 Action Without a Meeting.
(a) Unanimous Consent. Except as may be provided otherwise in the
Articles of Incorporation, any action required or permitted by Indiana law to be
taken at an annual or special meeting of shareholders may be taken without a
meeting, without prior notice and without a vote, if before or after the action
all the shareholders entitled to vote consent in writing.
(b) Less than Unanimous Consent. Except as may be provided otherwise
in the Articles of Incorporation, any action required or permitted by Indiana
law to be taken at an annual or special meeting of shareholders may be taken
without a meeting, without prior notice and without a vote, if a consent in
writing, setting forth the action so taken, is signed by the holders of
outstanding stock having not less than the minimum number of votes that would be
necessary to authorize or take the action at a meeting at which all shares
entitled to vote thereon were present and voted. The written consents shall
bear the date of signature of each shareholder who signs the consent. No
written consents shall be effective to take the corporate action referred to
unless, within 60 days after the record date for determining shareholders
entitled to express consent to or dissent from a proposal without a meeting,
written consents dated not more than ten (10) days before the record date and
signed by a sufficient number of shareholders to take the action are delivered
to the corporation. Delivery shall be to the corporation's registered office,
its principal place of business, or an officer or agent of the corporation
having custody of the minutes of the proceedings of its shareholders. Delivery
made to a corporation's registered office shall be by hand or by certified or
5
<PAGE>
registered mail, return receipt requested. Prompt notice of the taking of the
corporate action without a meeting by less than unanimous written consent shall
be given to shareholders would have been entitled to notice of the shareholder
meeting if the action had been taken at a meeting and who have not consented in
writing.
ARTICLE V
Directors
5.01 Number and Eligibility. The business and affairs of the corporation
shall be managed by a Board comprised of not less than one (1) nor more than
seven (7) directors as shall be determined from time to time by the Board of
Directors and/or by the shareholders. The directors need not be residents of
Indiana or shareholders of the corporation.
5.02 Election, Resignation and Removal. Directors shall be elected at each
annual meeting of the shareholders, each to hold office until the next annual
meeting of shareholders and until the director's successor is elected and
qualified, or until the director's resignation or removal. A director may
resign by written notice to the corporation. The resignation is effective upon
its receipt by the corporation or a subsequent time as set forth in the notice
of resignation. Except as otherwise provided in the Articles of Incorporation,
a director or the entire Board of Directors may be removed, with or without
cause, by vote of the holders of a majority of the shares entitled to vote at an
election of directors.
5.03 Vacancies. Vacancies in the Board of Directors occurring by reason of
death, resignation, removal, increase in the number of directors or otherwise
shall be filled by the affirmative vote of a majority of the remaining directors
though less than a quorum of the Board of Directors, unless filled by proper
action of the shareholders of the corporation. Each person so elected shall be
a director for a term of office continuing only until the next election of
directors by the shareholders. A vacancy that will occur at a specific date, by
reason of a resignation effective at a later date or otherwise, may be filled
before the vacancy occurs, but the newly elected director may not take office
until the vacancy occurs.
5.04 Annual Meeting. The Board of Directors shall meet each year
immediately after the annual meeting of the shareholders, or within three (3)
days of such time excluding Sundays and legal holidays if such later time is
deemed advisable, at the place where such meeting of the shareholders has been
held or such other place as the Board may determine, for the purpose of election
of officers and consideration of such business that may properly be brought
before the meeting; provided, that if less than a majority of the directors
appear for an annual meeting of the Board of Directors the holding of such
annual meeting shall not be required and the matters which might have been taken
up therein may be taken up at any later special or annual meeting, or by consent
resolution.
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5.05 Regular and Special Meetings. Regular meetings of the Board of
Directors may be held at such times and places as the majority of the directors
may from time to time determine at a prior meeting or as shall be directed or
approved by the vote or written consent of all the directors. Special meetings
of the Board may be called by the Chairman of the Board (if such office is
filled) or the President and shall be called by the President or Secretary upon
the written request of any two directors.
5.06 Notices. No notice shall be required for annual or regular meetings
of the Board or for adjourned meetings, whether regular or special. Three (3)
days' written notice shall be given for special meetings of the Board, and such
notice shall state the time, place and purpose or purposes of the meeting.
5.07 Quorum and Voting. A majority of the Board of Directors then in
office, or of the members of a committee thereof, constitutes a quorum for the
transaction of business. The vote of a majority of the directors present at any
meeting at which there is a quorum shall be the acts of the Board or of a
committee, except as a larger vote may be required by the laws of the State of
Indiana or by the Articles of Incorporation.
5.08 Participation via Communications Equipment. A member of the Board or
of a committee designated by the Board may participate in a meeting by means of
conference telephone or similar communications equipment by means of which all
persons participating in the meeting can communicate with each other.
Participation in a meeting in this manner constitutes presence in person at the
meeting.
5.09 Committees.
(a) Executive Committee. The Board of Directors may, by resolution
passed by a majority of the whole Board, appoint three or more members of the
Board as an executive committee to exercise all powers and authorities of the
Board in management of the business and affairs of the corporation, except that
the committee shall not have power or authority to: (i) amend the Articles of
Incorporation; (ii) adopt an agreement of merger or consolidation; (iii)
recommend to shareholders the sale, lease or exchange of all or substantially
all of the corporation's property and assets; (iv) recommend to shareholders a
dissolution of the corporation or revocation of a dissolution; (v) amend these
Bylaws; (vi) fill vacancies in the Board; or (vii) unless expressly authorized
by the Board, declare a dividend or authorize the issuance of stock.
(b) Other Committees. The Board of Directors from time to time may,
by like resolution, appoint such other committees of one or more directors to
have such authority as shall be specified by the Board in the resolution making
such appointments. The Board of Directors may designate one or more directors
as alternate members of any committee who may replace an absent or disqualified
member at any meeting thereof.
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5.10 Dissents. A director who is present at a meeting of the Board of
Directors, or a committee thereof of which the director is a member, at which
action on a corporate matter is taken is presumed to have concurred in that
action unless the director's dissent is entered in the minutes of the meeting or
unless the director files a written dissent to the action with the person acting
as secretary of the meeting before the adjournment thereof or shall forward such
dissent by registered mail to the Secretary of the corporation promptly after
the adjournment of the meeting. Such right to dissent does not apply to a
director who voted in favor of such action. A director who is absent from a
meeting of the Board, or a committee thereof of which the director is a member,
at which any such action is taken is presumed to have concurred in the action
unless the director files a written dissent with the Secretary of the
corporation within a reasonable time after the director has knowledge of the
action.
5.11 Compensation. The Board of Directors, by affirmative vote of a
majority of directors in office and irrespective of any personal interest of any
of them, may establish reasonable compensation of directors for services to the
corporation as directors or officers.
5.12 Action Without a Meeting -- Unanimous Consent. Except as may be
provided otherwise in the Articles of Incorporation, action required or
permitted to be taken under authorization voted at any meeting of the board of
directors or a committee of the board may be taken without a meeting, if, before
or after the action, all members of the board then in office or of the
committee, as the case may be, consent to the action in writing. The written
consents shall be filed with the minutes of the proceedings of the board or
committee. The consent has the same effect as a vote of the board or committee
for all purposes.
ARTICLE VI
Notices and Waivers of Notice
6.01 Notices. All notices of meetings required to be given to
shareholders, directors or any committee of directors may be given by mail
(registered, certified or other first class mail, with postage pre-paid),
overnight carrier, telecopy, telegram, computer transmission, radiogram,
cablegram or other similar form of communication, addressed to any shareholder,
director or committee member at his last address as it appears on the books of
the corporation. The corporation shall have no duty to change the written
address of any shareholder, director or committee member unless the secretary of
the corporation receives written notice of such address change. Such notice
shall be deemed to have been duly given as follows: (a) if physically
delivered, at the time of delivery; (b) if telephonically transmitted by
facsimile transmission, at the time of such transmission, if such transmission
is confirmed by delivery by certified or registered United States Mail (with
first class postage pre-paid) or guaranteed overnight delivery; (c) if
transmitted via e-mail, at the time of such transmission, if such transmission
is confirmed by delivery by certified or registered United States Mail (with
first class postage pre-paid) or guaranteed overnight delivery; (d) five (5)
business days after having been deposited in the United States Mail, as
certified or registered mail (with return receipt requested and with first class
postage pre-paid), or (e) one (1) business day after having been
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transmitted to a third party providing delivery services in the ordinary course
of business which guarantees delivery on the next business day after such
transmittal (e.g., via Federal Express).
6.02 Waiver of Notice. Notice of the time, place and purpose of any
meeting of shareholders, directors or committee of directors may be waived by
telecopy, telegram, radiogram, cablegram or other writing, either before or
after the meeting, or in such other manner as may be permitted by the laws of
the State of Indiana. Attendance of a person at any meeting of shareholders, in
person or by proxy, or at any meeting of directors or of a committee of
directors, constitutes a waiver of notice of the meeting except as follows:
(a) In the case of a shareholder, unless the shareholder at the
beginning of the meeting objects to holding the meeting or transacting business
at the meeting, or unless with respect to consideration of a particular matter
at the meeting that is not within the purpose or purposes described in the
meeting notice, the shareholder objects to considering the matter when it is
presented.
(b) In the case of a director, unless he or she at the beginning of
the meeting, or upon his or her arrival, objects to the meeting or the
transacting of business at the meeting and does not thereafter vote for or
assent to any action taken at the meeting.
ARTICLE VII
Officers
7.01 Number. The Board of Directors shall elect or appoint a President, a
Secretary and a Controller, and may select a Chairman of the Board, and one or
more Vice Presidents, Assistant Secretaries or Assistant Controllers. Any two
or more of the above offices, except those of President and Vice President, may
be held by the same person. No officer shall execute, acknowledge or verify an
instrument in more than one capacity if the instrument is required by law, the
Articles of Incorporation or these Bylaws to be executed, acknowledged, or
verified by one or more officers.
7.02 Term of Office, Resignation and Removal. An officer shall hold office
for the term for which he is elected or appointed and until his successor is
elected or appointed and qualified, or until his resignation or removal. An
officer may resign by written notice to the corporation. The resignation is
effective upon its receipt by the corporation or at a subsequent time specified
in the notice of resignation. An officer may be removed by the Board with or
without cause. The removal of an officer shall be without prejudice to his
contract rights, if any. The election or appointment of an officer does not of
itself create contract rights.
7.03 Vacancies. The Board of Directors may fill any vacancies in any
office occurring for whatever reason.
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7.04 Authority. All officers, employees and agents of the corporation
shall have such authority and perform such duties in the conduct and management
of the business and affairs of the corporation as may be designated by the Board
of Directors and these Bylaws.
ARTICLE VIII
Dutices of Officers
8.01 Chairman of the Board. The Chairman of the Board, if such office is
filled, shall preside at all meetings of the shareholders (in accordance with
Section 4.11 hereof) and of the Board of Directors at which the Chairman is
present and shall perform such other duties as the Board of Directors may from
time to time prescribe.
8.02 President. The President shall be the chief executive officer of the
corporation. The President shall see that all orders and resolutions of the
Board are carried into effect and shall have the general powers of supervision
and management usually vested in the chief executive officer of a corporation,
including the authority to vote all securities of other corporations and
business organizations which are held by the corporation. In the absence or
disability of the Chairman of the Board, or if that office has not been filled,
the President also shall perform the duties and execute the powers of the
Chairman of the Board as set forth in these Bylaws.
8.03 Vice Presidents. The Vice Presidents, in the order designated by the
Board of Directors or, lacking such designation, in the order of their
seniority, shall, in the absence or disability of the President, perform the
duties and exercise the powers of the President and shall perform such other
duties as the Board of Directors or the President may from time to time
prescribe.
8.04 Secretary. The Secretary shall attend all meetings of the Board of
Directors and of shareholders and shall record all votes and minutes of all
proceedings in a book to be kept for that purpose, shall give or cause to be
given notice of all meetings of the shareholders and of the Board of Directors,
and shall keep in safe custody the seal of the corporation and, when authorized
by the Board, affix the same to any instrument requiring it, and when so affixed
it shall be attested by the signature of the Secretary, or by the signature of
the Controller or an Assistant Secretary. The Secretary may delegate any of the
duties, powers and authorities of the Secretary to one or more Assistant
Secretaries, unless such delegation is disapproved by the Board.
8.05 Controller. The Controller shall have the custody of the corporate
funds and securities; shall keep full and accurate accounts of receipts and
disbursements in books of the corporation; and shall deposit all moneys and
other valuable effects in the name and to the credit of the corporation in such
depositories as may be designated by the Board of Directors. The Controller
shall render to the President and directors, whenever they may require it, an
account of his or her transactions as Controller and of the financial condition
of the corporation. The Controller may delegate any of his or her duties,
powers and authorities to one or more Assistant Controllers unless such
delegation is disapproved by the Board of Directors.
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8.06 Assistant Secretaries and Controllers. The Assistant Secretaries, in
order of their seniority, shall perform the duties and exercise the powers and
authorities of the Secretary in the event that the Secretary is absent, disabled
or otherwise unavailable. The Assistant Controllers, in the order of their
seniority, shall perform the duties and exercise the powers and authorities of
the Controller in the event that the Controller is absent, disabled or otherwise
unavailable. The Assistant Secretaries and Assistant Controllers shall also
perform such duties as may be delegated to them by the Secretary and Controller,
respectively, and also such duties as the Board of Directors and/or the
President may prescribe from time to time.
ARTICLE IX
Special Corporate Acts
9.01 Orders for Payment of Money. All checks, drafts, notes, bonds, bills
of exchange and orders for payment of money of the corporation shall be signed
by such officer or officers or such other person or persons as the Board of
Directors may from time to time designate.
9.02 Contracts and Conveyances. The Board of Directors of the corporation
may in any instance designate the officer and/or agent who shall have authority
to execute any contract, conveyance, mortgage or other instrument on behalf of
the corporation, or may ratify or confirm any execution. When the execution of
any instrument has been authorized without specification of the executing
officers or agents, the Chairman of the Board, the President or any Vice
President, and the Secretary or Assistant Secretary or Controller or Assistant
Controller, may execute the same in the name and on behalf of this corporation
and may affix the corporate seal thereto.
ARTICLE X
Books and Records
10.01 Maintenance of Books and Records. The proper officers and agents
of the corporation shall keep and maintain such books, records and accounts of
the corporation's business and affairs, minutes of the proceedings of its
shareholders, Board and committees, if any, and such stock ledgers and lists of
shareholders, as the Board of Directors shall deem advisable, and as shall be
required by the laws of the State of Indiana and other states or jurisdictions
empowered to impose such requirements. Books, records and minutes may be kept
within or without the State of Indiana in a place which the Board shall
determine.
10.02 Reliance on Books and Records. In discharging his or her duties,
a director or an officer of the corporation, when acting in good faith, may rely
upon information, opinions, reports, or statements, including financial
statements and other financial data, if prepared or presented by any of the
following:
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(a) One or more directors, officers, or employees of the corporation,
or of a business organization under joint control or common control, whom the
director or officer reasonably believes to be reliable and competent in the
matters presented.
(b) Legal counsel, public accountants, engineers, or other persons as
to matters the director or officer reasonably believes are within the person's
professional or expert competence.
(c) A committee of the board of which he or she is not a member if the
director or officer reasonably believes the committee merits confidence.
A director or officer is not entitled to rely on the information set forth above
if he or she has knowledge concerning the matter in question that makes reliance
otherwise permitted unwarranted.
ARTICLE XI
Indemnification
11.01 Non-Derivative Actions. Subject to all of the other provisions
of this Article XI, the corporation shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative and whether formal or informal (other than an action by or in the
right of the corporation) by reason of the fact that the person is or was a
director or officer of the corporation, or, while serving as a director or
officer of the corporation, is or was serving at the request of the corporation
as a director, officer, partner, trustee, employee, or agent of another foreign
or domestic corporation, partnership, joint venture, trust or other enterprise,
whether for profit or not, against expenses (including actual and reasonable
attorneys' fees), judgments, penalties, fines, and amounts paid in settlement
actually and reasonably incurred by him or her in connection with such action,
suit or proceeding if the person acted in good faith and in a manner the person
reasonably believed to be in or not opposed to the best interests of the
corporation or its shareholders, and, with respect to any criminal action or
proceeding, if the person had no reasonable cause to believe his or her conduct
was unlawful. The termination of any action, suit or proceeding by judgment,
order, settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the person did not
act in good faith and in a manner which the person reasonably believed to be in
or not opposed to the best interests of the corporation or its shareholders,
and, with respect to any criminal action or proceeding, had reasonable cause to
believe that his or her conduct was unlawful.
11.02 Derivative Actions. Subject to all of the provisions of this
Article XI, the corporation shall indemnify any person who was or is a party to
or is threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the corporation to procure a judgment in
its favor by reason of the fact that the person is or was a director or officer
of the corporation, or, while serving as a director or officer of the
corporation, is or was serving at the request of the corporation as a director,
officer, partner, trustee, employee, or agent of another
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foreign or domestic corporation, partnership, joint venture, trust or other
enterprise, whether for profit or not, against expenses (including attorneys'
fees) and amounts paid in settlement actually and reasonably incurred by the
person in connection with such action or suit if the person acted in good faith
and in a manner the person reasonably believed to be in or not opposed to the
best interests of the corporation or its shareholders. However,
indemnification shall not be made for any claim, issue or matter in which such
person has been found liable to the corporation unless and only to the extent
that the court in which such action or suit was brought has determined upon
application that, despite the adjudication of liability but in view of all
circumstances of the case, such person is fairly and reasonably entitled to
indemnification for the reasonable expenses incurred.
11.03 Expenses of Successful Defense. To the extent that a person has
been successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in Section 11.01 or 11.02 of these Bylaws, or in defense
of any claim, issue or matter in the action, suit or proceeding, the person
shall be indemnified against actual and reasonable expenses (including
attorneys' fees) incurred by such person in connection with the action, suit or
proceeding and any action, suit or proceeding brought to enforce the mandatory
indemnification provided by this Section 11.03.
11.04 Definitions. For the purposes of Sections 11.01 and 11.02, "other
enterprises" shall include employee benefit plans; "fines" shall include any
excise taxes assessed on a person with respect to an employee benefit plan; and
"serving at the request of the corporation" shall include any service as a
director, officer, employee, or agent of the corporation which imposes duties
on, or involves services by, the director or officer with respect to an employee
benefit plan, its participants or beneficiaries; and a person who acted in good
faith and in a manner the person reasonably believed to be in the interest of
the participants and beneficiaries of an employee benefit plan shall be
considered to have acted in a manner "not opposed to the best interests of the
corporation or its shareholders" as referred to in Sections 11.01 and 11.02.
11.05 Contract Right; Limitation on Indemnity. The right to
indemnification conferred in this Article XI shall be a contract right, and
shall apply to services of a director or officer as an employee or agent of the
corporation as well as in such person's capacity as a director or officer.
Except as provided in Section 11.03 of these Bylaws, the corporation shall have
no obligations under this Article XI to indemnify any person in connection with
any proceeding, or part thereof, initiated by such person without authorization
by the Board of Directors.
11.06 Determination That Indemnification is Proper. Any indemnification
under Section 11.01 or 11.02 of these Bylaws (unless ordered by a court) shall
be made by the corporation only as authorized in the specific case upon a
determination that indemnification of the person is proper in the circumstances
because the person has met the applicable standard of conduct set forth in
Section 11.01 or 11.02, whichever is applicable, and upon an evaluation of the
reasonableness of expenses and amount paid in settlement. Such determination and
evaluation shall be made in any of the following ways:
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(a) By a majority vote of a quorum of the Board consisting of
directors who are not parties or threatened to be made parties to such action,
suit or proceeding.
(b) If the quorum described in clause (a) above is not obtainable,
then by a majority vote of a committee of directors duly designated by the Board
of Directors and consisting solely of two or more directors who are not at the
time parties or threatened to be made parties to the action, suit or proceeding.
(c) By independent legal counsel in a written opinion, which counsel
shall be selected in one of the following ways: (i) by the board or its
committee in the manner prescribed in subparagraph (a) or (b), or (ii) if a
quorum of the board cannot be obtained under subparagraph (a) and a committee
cannot be designated under subparagraph (b), by the board.
(d) By the shareholders, but shares held by directors or officers who
are parties or threatened to be made parties to the action, suit or proceeding
may not be voted.
(e) By all independent directors who are not parties or threatened to
be made parties to the action, suit, or proceeding.
11.07 Authorizations of Payment.
(a) Authorizations of payment under Sections 11.01 and 11.02 shall be
made in any of the following ways:
(i) By the Board of Directors:
(A) if there are two or more directors who are not parties
or threatened to be made parties to the action, suit or proceeding, by
a majority vote of all such directors (a majority of whom shall for
this purpose constitute a quorum)or by a majority of the members of a
committee of two or more directors who are not parties or threatened
to be made parties to the action, suit or proceeding; or
(B) if the corporation has one or more independent directors
who are not parties or threatened to be made parties to the action,
suit or proceeding, by a majority vote of all such directors (a
majority of whom shall for this purpose constitute a quorum); or
(C) if there are no independent directors and fewer than two
directors who are not parties or threatened to be made parties to the
action, suit or proceeding, by the vote necessary for action by the
board in accordance with Section 5.07, in which authorization all
directors may participate; or
(ii) By the shareholders, but shares held by directors, officers,
employees,
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or agents who are parties or threatened to be made parties to
the action, suit, or proceeding may not be voted on the authorization.
(b) To the extent that the Articles of Incorporation include a
provision eliminating or limiting the liability of a director pursuant to
Indiana statute(s), the corporation may indemnify a director for the expenses
and liabilities described below without a determination that the director has
met the standard of conduct set forth in Sections 11.01 and 11.02, but no
indemnification may be made (except to the extent expressly authorized in
Indiana statutory provisions), if the director (i) received a financial benefit
to which he or she was not entitled, (ii) intentionally inflicted harm on the
corporation or its shareholders, (iii) intentionally violated criminal law. In
connection with an action or suit by or in the right of the corporation, as
described in Section 11.02, indemnification under this Section 11.07(b) may be
for expenses, including attorneys' fees, actually and reasonably incurred. In
connection with an action, suit or proceeding other than one by or in the right
of the corporation, as described in Section 11.01, indemnification under this
Section 11.07(b) may be for expenses, including attorneys' fees, actually and
reasonably incurred, and for judgments, penalties, fines, and amounts paid in
settlement actually and reasonably incurred.
11.08 Proportionate Indemnity. If a person is entitled to
indemnification under Section 11.01 or 11.02 of these Bylaws for a portion of
expenses, including attorneys' fees, judgments, penalties, fines, and amounts
paid in settlement, but not for the total amount thereof, the corporation shall
indemnify the person for the portion of the expenses, judgments, penalties,
fines, or amounts paid in settlement for which the person is entitled to be
indemnified.
11.09 Expense Advance. The corporation may pay or reimburse the
reasonable expenses incurred by a person referred to in Sections 11.01 or 11.02
of these Bylaws who is a party or threatened to be made a party to an action,
suit, or proceeding in advance of final disposition of the proceeding if both of
the following apply: (a) the person furnishes the corporation a written
affirmation of his or her good faith belief that he or she has met the
applicable standard of conduct set forth in Sections 11.01 or 11.02; and (b) the
person furnishes the corporation a written undertaking executed personally, or
on his or her belief, to repay the advance if it is ultimately determined that
he or she did not meet the standard of conduct. Determinations and evaluations
under this Section 11.09 shall be made as specified in Section 11.06 and
authorizations shall be made in the manner specified in Section 11.07. A
provision in the Articles of Incorporation, these Bylaws, a resolution by the
board or the shareholders, or an agreement making indemnification mandatory
shall also make advancement of expenses mandatory unless the provision
specifically provides otherwise.
11.10 Non-Exclusivity of Rights. The indemnification or advancement of
expenses provided under this Article XI is not exclusive of other rights to
which a person seeking indemnification or advancement of expenses may be
entitled under a contractual arrangement with the corporation. However, the
total amount of expenses advanced or indemnified from all sources combined shall
not exceed the amount of actual expenses incurred by the person seeking
indemnification or advancement of expenses.
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11.11 Indemnification of Employees and Agents of the Corporation. The
corporation may, to the extent authorized from time to time by the Board of
Directors, grant rights to indemnification and to the advancement of expenses to
any employee or agent of the corporation to the fullest extent of the provisions
of this Article XI with respect to the indemnification and advancement of
expenses of directors and officers of the corporation.
11.12 Former Directors and Officers. The indemnification provided in
this Article XI continues as to a person who has ceased to be a director or
officer and shall inure to the benefit of the heirs, executors and
administrators of such person.
11.13 Insurance. The corporation may purchase and maintain insurance
on behalf of any person who is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, partner, trustee, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against any liability
asserted against the person and incurred by him or her in any such capacity or
arising out of his or her status as such, whether or not the corporation would
have power to indemnify the person against such liability under these Bylaws or
the laws of the State of Indiana.
11.14 Changes in Indiana Law. In the event of any change of the
Indiana statutory provisions applicable to the corporation relating to the
subject matter of Article XI of these Bylaws, then the indemnification to which
any person shall be entitled hereunder shall be determined by such changed
provisions, but only to the extent that any such change permits the corporation
to provide broader indemnification rights than such provisions permitted the
corporation to provide prior to any such change. Subject to Section 11.15, the
Board of Directors is authorized to amend these Bylaws to conform to any such
changed statutory provisions.
11.15 Amendment or Repeal of Article XI. No amendment or repeal of
this Article XI shall apply to or have any effect on any director or officer of
the corporation for or with respect to any acts or omissions of such director
occurring prior to such amendment or repeal.
ARTICLE XII
Amendments
12.01 Amendments. Unless otherwise provided herein, the Bylaws of the
corporation may be amended, altered or repealed, in whole or in part, by the
shareholders or by the Board of Directors.
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EXHIBIT 4.2
FIRST SUPPLEMENTAL INDENTURE
This First Supplemental Indenture, dated as of June 18, 1999 (the
"Supplemental Indenture"), is made by and between The Majestic Star Casino, LLC
(the "Company") and IBJ Whitehall Bank & Trust Company (formerly IBJ Schroder
Bank & Trust Company) (the "Trustee").
BACKGROUND
A. The Company and the Trustee are parties to that certain Indenture,
dated May 22, 1996 (the "Indenture").
B. Section 9.02 of the Indenture provides, among other things, that,
except as otherwise provided in the Indenture, upon the request of the Company
accompanied by a resolution of the Board of Managers of the Company (such terms
and all other capitalized terms used and not defined herein shall have the
meanings assigned to such terms in the Indenture), the Company and the Trustee
may amend or supplement the Indenture with the consent of the Holders of at
least a majority in principal amount of the Notes then outstanding.
C. The Company has offered to purchase all of the outstanding Notes
upon the terms and subject to the conditions set forth in the Offer to Purchase
and Solicitation of Consents, dated May 14, 1999, and the accompanying Letter of
Transmittal, as the same may be further amended, supplemented or modified (the
"Offer").
D. The Offer is conditioned upon, among other things, the execution of
this Supplemental Indenture implementing the Proposed Amendments (as defined in
the Offer) following the receipt of the Requisite Consents (as defined in the
Offer), and the Company has received and delivered to the Trustee the Requisite
Consents.
E. The Manager of the Company has duly authorized this Supplemental
Indenture.
AGREEMENTS
NOW THEREFORE, the parties hereto hereby agree as follows:
1. Amendments to the Indenture. Pursuant to the terms of the Offer and
having received the consent of the Holders of a majority in principal amount of
the outstanding Notes as required by the Indenture, the Indenture is hereby
amended to delete the following sections in their entirety and, in the case of
each such section, insert in lieu thereof the phrase ["Intentionally Omitted"];
and any and all references to such sections, any and all obligations thereunder
and any event of default related solely to the following sections are hereby
deleted throughout the Indenture; and such sections and references shall be of
no further force or effect; and all definitions in the Indenture that are used
exclusively in the sections and clauses deleted pursuant to this Section 1 are
hereby deleted:
(a) Section 4.02 of the Indenture "Maintenance of Office or Agency";
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(b) Section 4.03 of the Indenture "Reports";
(c) Section 4.04 of the Indenture "Compliance Certificate";
(d) Section 4.05 of the Indenture "Taxes";
(e) Section 4.07 of the Indenture "Restricted Payments";
(f) Section 4.08 of the Indenture "Restrictions on Joint
Venture";
(g) Section 4.09 of the Indenture "Limitations on Incurrence of
Indebtedness and Issuance of Disqualified Capital Stock";
(h) Section 4.10 of the Indenture "Asset Sales";
(i) Section 4.11 of the Indenture "Event of Loss";
(j) Section 4.12 of the Indenture "Transactions with
Affiliates";
(k) Section 4.13 of the Indenture "Liens";
(l) Section 4.14 of the Indenture "Line of Business";
(m) Section 4.15 of the Indenture "Corporate Existence";
(n) Section 4.17 of the Indenture "Registration Rights";
(o) Section 4.18 of the Indenture "Use of Proceeds";
(p) Section 4.19 of the Indenture "Cash Collateral and
Disbursement Agreement";
(q) Section 4.20 of the Indenture "Gaming Licenses";
(r) Section 4.21 of the Indenture "Construction";
(s) Section 4.22 of the Indenture "Maintenance of Insurance";
(t) Section 4.23 of the Indenture "Limitation on Status as
Investment Company";
(u) Section 4.24 of the Indenture "Collateral Documents";
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(v) Section 4.25 of the Indenture "Further Assurances";
(w) Section 4.26 of the Indenture "Dividend and Other Payment
Restrictions Affecting Subsidiaries";
(x) Section 4.27 of the Indenture "Restrictions on Leasing and
Dedication of Property";
(y) Section 4.28 of the Indenture "Uncompleted Project Offer";
(z) Section 4.29 of the Indenture "Uncompleted Vessel Offer";
(aa) Section 4.30 of the Indenture "Additional Subsidiaries";
(bb) Section 4.31 of the Indenture "Ratings".
2. Effect on Indenture.
(a) On and after the effective date of this Supplemental
Indenture, each reference in the Indenture to "this Indenture," "hereunder,"
"hereof" or "herein" and other similar references shall mean and be a reference
to the Indenture as supplemented by this Supplemental Indenture, unless the
context otherwise requires.
(b) Except as specifically amended above, the Indenture shall
remain in full force and effect and is hereby ratified and confirmed.
3. Governing Law. This Supplemental Indenture shall be governed by and
construed in accordance with the laws of the State of New York, as applied to
contracts made and performed within the State of New York, without regard to the
principles of conflicts of law.
4. Headings. The headings of sections of this Supplemental Indenture
have been inserted for convenience of reference only, are not to be considered a
part hereof, and shall in no way modify or restrict any of the terms of
provisions hereof.
5. Counterpart Originals. The parties may sign any number of copies of
this Supplemental Indenture. Each signed copy shall be an original, but all of
them together represent the same agreement.
6. Effective Date. This Supplemental Indenture shall become effective
as of the date hereof, but shall become operative on and after the Company has
delivered to the Trustee an Officers' Certificate accepting the Notes tendered
pursuant to the Offer.
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7. Trust Indenture Act. If any provision of this Supplemental Indenture
limits, qualifies or conflicts with another provision of this Supplemental
Indenture or of the Indenture that is required to be included by the Trust
Indenture Act of 1939, as amended (the "TIA"), as in force on the date hereof,
the provisions required by the TIA shall control.
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed and attested, all as of the date first written
above.
THE MAJESTIC STAR CASINO, LLC
BY: BARDEN DEVELOPMENT, INC.
By: /s/ Don H. Barden
---------------------------
IBJ WHITEHALL BANK & TRUST COMPANY,
as Trustee
By: /s/ Stephen S. Giurlando
----------------------------
4
<PAGE>
EXHIBIT 4.3
THE MAJESTIC STAR CASINO, LLC
THE MAJESTIC STAR CASINO CAPITAL CORP.
as issuers
and the Guarantors referred to herein
10 7/8% Senior Secured Notes due 2006
_________________________________________
INDENTURE
Dated as of June 18, 1999
_________________________________________
IBJ WHITEHALL BANK & TRUST COMPANY,
Trustee
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TABLE OF CONTENTS
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ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE............................................... 1
Section 1.1. Definitions.............................................................................. 1
Section 1.2. Other Definitions........................................................................ 28
Section 1.3. Incorporation by Reference of Trust Indenture Act........................................ 29
Section 1.4. Rules of Construction.................................................................... 30
ARTICLE 2 THE NOTES................................................................................ 30
Section 2.1. Form and Dating.......................................................................... 30
Section 2.2. Execution and Authentication............................................................. 31
Section 2.3. Registrar, Paying Agent and Depositary................................................... 32
Section 2.4. Paying Agent to Hold Money in Trust...................................................... 33
Section 2.5. Holder Lists............................................................................. 33
Section 2.6. Transfer and Exchange.................................................................... 33
Section 2.7. Replacement Notes........................................................................ 38
Section 2.8. Outstanding Notes........................................................................ 39
Section 2.9. Treasury Notes........................................................................... 39
Section 2.10. Temporary Notes.......................................................................... 39
Section 2.11. Cancellation............................................................................. 40
Section 2.12. Defaulted Interest....................................................................... 40
Section 2.13. Legends.................................................................................. 41
Section 2.14. Deposit of Moneys........................................................................ 42
ARTICLE 3 REDEMPTION............................................................................... 42
Section 3.1. Notices to Trustee....................................................................... 42
Section 3.2. Selection of Notes to Be Redeemed........................................................ 42
Section 3.3. Notice of Redemption..................................................................... 43
Section 3.4. Effect of Notice of Redemption........................................................... 44
Section 3.5. Deposit of Redemption Price.............................................................. 44
Section 3.6. Notes Redeemed in Part................................................................... 45
Section 3.7. Optional Redemption...................................................................... 45
Section 3.8. Required Regulatory Redemption........................................................... 45
ARTICLE 4 COVENANTS................................................................................ 46
Section 4.1. Payment of Notes......................................................................... 46
Section 4.2. Maintenance of Office or Agency.......................................................... 46
Section 4.3. Reports.................................................................................. 47
Section 4.4. Compliance Certificate................................................................... 48
Section 4.5. Taxes.................................................................................... 49
Section 4.6. Stay, Extension and Usury Laws........................................................... 49
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Section 4.7. Limitation on Restricted Payments.................................................... 50
Section 4.8. Limitation on Restrictions on Subsidiary Dividends................................... 53
Section 4.9. Limitation on Incurrence of Indebtedness............................................. 54
Section 4.10. Limitation on Asset Sales............................................................ 56
Section 4.11. Limitation on Transactions With Affiliates........................................... 60
Section 4.12. Limitation on Liens.................................................................. 61
Section 4.13. Existence............................................................................ 62
Section 4.14. Repurchase Upon a Change of Control.................................................. 62
Section 4.15. Maintenance of Properties............................................................ 64
Section 4.16. Maintenance of Insurance............................................................. 65
Section 4.17. Restrictions on Sale and Issuance of Subsidiary Stock................................ 65
Section 4.18. Line of Business..................................................................... 65
Section 4.19. Restrictions on BHR Joint Venture.................................................... 65
Section 4.20. Restrictions on Activities of Capital................................................ 67
ARTICLE 5 SUCCESSORS........................................................................... 67
Section 5.1. When the Company May Merge, etc...................................................... 67
Section 5.2. Successor Substituted................................................................ 69
ARTICLE 6 DEFAULTS AND REMEDIES................................................................ 69
Section 6.1. Events of Default.................................................................... 69
Section 6.2. Acceleration......................................................................... 71
Section 6.3. Other Remedies....................................................................... 72
Section 6.4. Waiver of Past Defaults.............................................................. 72
Section 6.5. Control by Majority.................................................................. 73
Section 6.6. Limitation on Suits.................................................................. 73
Section 6.7. Rights of Holders to Receive Payment................................................. 74
Section 6.8. Collection Suit by Trustee........................................................... 74
Section 6.9. Trustee May File Proofs of Claim..................................................... 74
Section 6.10. Priorities........................................................................... 75
Section 6.11. Undertaking for Costs................................................................ 75
ARTICLE 7 TRUSTEE.............................................................................. 76
Section 7.1. Duties of Trustee.................................................................... 76
Section 7.2. Rights of Trustee.................................................................... 77
Section 7.3. Individual Rights of Trustee......................................................... 78
Section 7.4. Trustee's Disclaimer................................................................. 78
Section 7.5. Notice of Defaults................................................................... 79
Section 7.6. Reports by Trustee to Holders........................................................ 79
Section 7.7. Compensation and Indemnity........................................................... 80
Section 7.8. Replacement of Trustee............................................................... 81
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Section 7.9. Successor Trustee by Merger, etc......................................................... 83
Section 7.10. Eligibility; Disqualification............................................................ 83
Section 7.11. Preferential Collection of Claims Against Issuers........................................ 83
ARTICLE 8 DISCHARGE; LEGAL DEFEASANCE AND COVENANT DEFEASANCE...................................... 84
Section 8.1. Discharge; Option to Effect Legal Defeasance or Covenant Defeasance...................... 84
Section 8.2. Legal Defeasance and Discharge........................................................... 84
Section 8.3. Covenant Defeasance...................................................................... 85
Section 8.4. Conditions to Legal Defeasance or Covenant Defeasance.................................... 85
Section 8.5. Deposited Cash and U.S. Government Obligations to be Held in Trust; Other Miscellaneous
Provisions............................................................................... 87
Section 8.6. Repayment to the Issuers................................................................. 87
Section 8.7. Reinstatement............................................................................ 88
ARTICLE 9 AMENDMENTS............................................................................... 89
Section 9.1. Without Consent of Holders............................................................... 89
Section 9.2. With Consent of Holders.................................................................. 90
Section 9.3. Compliance with Trust Indenture Act...................................................... 91
Section 9.4. Revocation and Effect of Consents........................................................ 91
Section 9.5. Notation on or Exchange of Notes......................................................... 92
Section 9.6. Trustee to Sign Amendments, etc.......................................................... 92
ARTICLE 10 COLLATERAL AND SECURITY AND GUARANTY..................................................... 92
Section 10.1. Collateral Documents..................................................................... 92
Section 10.2. Opinions................................................................................. 93
Section 10.3. Release of Collateral.................................................................... 94
Section 10.4. Certificates of the Issuers.............................................................. 95
Section 10.5. Authorization of Actions to be Taken by the Trustee Under the Security Documents......... 95
Section 10.6. Authorization of Receipt of Funds by the Trustee Under the Security Documents............ 96
Section 10.7. Guaranty................................................................................. 96
Section 10.8. Execution and Delivery of Guaranty....................................................... 98
Section 10.9. Limitation on Guarantor's Liability...................................................... 98
Section 10.10. Rights under the Guaranty................................................................ 99
Section 10.11. Primary Obligations...................................................................... 99
Section 10.12. Guarantee by Subsidiary.................................................................. 100
Section 10.13. Release of Guarantors.................................................................... 100
Section 10.14. Gaming Law Considerations................................................................ 101
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ARTICLE 11 MISCELLANEOUS............................................................................ 102
Section 11.1. Trust Indenture Act Controls............................................................. 102
Section 11.2. Notices.................................................................................. 102
Section 11.3. Communication by Holders with Other Holders.............................................. 104
Section 11.4. Certificate and Opinion as to Conditions Precedent....................................... 104
Section 11.5. Statements Required in Certificate or Opinion............................................ 104
Section 11.6. Rules by Trustee and Agents.............................................................. 105
Section 11.7. Legal Holidays........................................................................... 105
Section 11.8. No Recourse Against Others............................................................... 105
Section 11.9. Governing Law............................................................................ 105
Section 11.10. No Adverse Interpretation of Other Agreements............................................ 106
Section 11.11. Successors............................................................................... 107
Section 11.12. Severability............................................................................. 107
Section 11.13. Counterpart Originals.................................................................... 107
Section 11.14. Table of Contents, Headings, etc......................................................... 107
EXHIBIT A - FORM OF NOTE............................................................................. A-1
EXHIBIT B - CERTIFICATE OF TRANSFEROR................................................................ B-1
EXHIBIT C - FORM OF GUARANTY......................................................................... C-1
EXHIBIT D - FORM OF INTERCREDITOR AGREEMENT.......................................................... D-1
EXHIBIT E - FORM OF PREFERRED SHIP MORTGAGE.......................................................... E-1
EXHIBIT F - FORM OF SECURITY AGREEMENT............................................................... F-1
EXHIBIT G - FORM OF BDI PLEDGE AGREEMENT............................................................. G-1
EXHIBIT H - FORM OF BHR PLEDGE AGREEMENT............................................................. H-1
EXHIBIT I - FORM OF TRADEMARK SECURITY AGREEMENT..................................................... I-1
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INDENTURE, dated as of June 18, 1999, among The Majestic Star Casino,
LLC, an Indiana limited liability company, The Majestic Star Casino Capital
Corp., an Indiana corporation, the Guarantors (as defined) named herein and IBJ
Whitehall Bank & Trust Company, a New York banking corporation, as trustee.
The Issuers (as defined) and the Trustee (as defined) agree as follows
for the benefit of each other and for the equal and ratable benefit of the
Holders (as defined) of the Issuers 10 7/8% Senior Secured Notes due 2006.
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
Section 1.1 Definitions.
----------- -----------
"Acquired Debt" means Indebtedness of a Person existing at the time
such Person is merged with or into the Company or a Restricted Subsidiary or
becomes a Restricted Subsidiary, other than Indebtedness incurred in connection
with, or in contemplation of, such Person merging with or into the Company or a
Restricted Subsidiary or becoming a Restricted Subsidiary.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
(a) the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise or (b) beneficial
ownership of 10% or more of the voting securities of such Person.
"Agent" means any Registrar, Paying Agent or co-registrar.
"Applicable Capital Gain Tax Rate" means a rate equal to the sum of
(i) the highest marginal Federal capital gain tax rate applicable to an
individual who is a citizen of the United States plus (ii) an amount equal to
the sum of the highest marginal state and local capital gain tax rates
applicable to an individual who is a
<PAGE>
resident of the State of New York, multiplied by a factor equal to 1 minus the
rate described in clause (i) above.
"Applicable Income Tax Rate" means a rate equal to the sum of (i) the
highest marginal Federal income tax rate applicable to an individual who is a
citizen of the United States plus (ii) an amount equal to the sum of the highest
marginal state and local income tax rates applicable to an individual who is a
resident of the State of New York, multiplied by a factor equal to 1 minus the
rate described in clause (i) above.
"Asset Sale" means any (i) transfer (as defined), other than in the
ordinary course of business, of any assets of the Company or any Restricted
Subsidiary; (ii) direct or indirect issuance or sale of any Capital Stock of
any Restricted Subsidiary (other than directors' qualifying shares), in each
case to any Person (other than the Company or a Restricted Subsidiary); or
(iii) Event of Loss. For purposes of this definition, (a) any series of
transactions that are part of a common plan shall be deemed a single Asset Sale
and (b) the term "Asset Sale" shall not include (1) any series of transactions
that have a fair market value (or result in gross proceeds) of less than $1
million, until the aggregate fair market value and gross proceeds of the
transactions excluded from the definition of Asset Sale pursuant to this clause
(b)(1) exceed $5 million, or (2) any disposition of all or substantially all of
the assets of the Company that is governed under and complies with Article 5
hereof.
"Bankruptcy Code" means the United States Bankruptcy Code, codified at
11 U.S.C. (S)101-1330, as amended.
"Bankruptcy Law" means title 11, U.S. Code or any similar Federal,
state or foreign law for the relief of debtors.
"BDI" means Barden Development, Inc., an Indiana corporation.
"BDI Pledge Agreement" means that certain Pledge Agreement executed by
BDI and Gary Riverboat Gaming, LLC, providing for a pledge of the entire
membership interest in the Company held by each of them in favor of the Trustee,
for the ratable benefit of the Holders of the Notes, as the same may be amended
in accordance with the terms thereof and this Indenture.
2
<PAGE>
"beneficial owner" has the meaning attributed to it in Rules 13d-3 and
13d-5 under the Exchange Act (as in effect on the Issue Date), whether or not
applicable, except that a "person" shall be deemed to have "beneficial
ownership" of all shares that any such person has the right to acquire, whether
such right is exercisable immediately or only after the passage of time.
"Berthing Agreement" means the Majestic Berthing Agreement, dated as
of April 23, 1996, by and between the Company and the BHR Joint Venture.
"BHR Attributed Debt" means the product of (i) the aggregate principal
amount of all outstanding Indebtedness incurred pursuant to Section 4.19(a)(ii)
hereof times (ii) the Company's percentage interest in the BHR Joint Venture;
provided that any such Indebtedness shall cease to be BHR Attributed Debt, as of
the first date after the date such Indebtedness is so incurred on which the
Company can incur at least $1.00 of additional Indebtedness under the Interest
Coverage Ratio Test set forth in Section 4.9 hereof.
"BHR Joint Venture" means Buffington Harbor Riverboats, LLC, a
Delaware limited liability company, in which the Company currently owns a 50%
membership interest, and any other Flow Through Entity owned solely by the
members of the BHR Joint Venture.
"BHR Operating Agreement" means the First Amended and Restated
Operating Agreement of the BHR Joint Venture, made as of October 31, 1995, as
amended, by and between Trump Indiana, Inc., a Delaware corporation, and the
Company.
"BHR Pledge Agreement" means that certain Pledge Agreement executed by
the Company, providing for a pledge of the Company's entire member ship
interest in the BHR Joint Venture in favor of the Trustee, for the ratable
benefit of the Holders of the Notes, as the same may be amended in accordance
with the terms thereof and this Indenture.
"Board of Directors" means the board of directors or any duly
constituted committee of any corporation or of a corporate general partner of a
partnership and any similar body empowered to direct the affairs of any other
entity.
"Business Day" means any day other than a Legal Holiday.
3
<PAGE>
"Capital" means The Majestic Star Casino Capital Corp., an Indiana
corporation and a wholly owned subsidiary of the Company, until a successor
replaces such Person in accordance with the terms of this Indenture, and
thereafter means such successor.
"Capital Lease Obligation" means, as to any Person, the obligations of
such Person under a lease that are required to be classified and accounted for
as capital lease obligations under GAAP, and the amount of such obligations at
any date shall be the capitalized amount of such obligations at such date,
determined in accordance with GAAP.
"Capital Stock" means, (i) with respect to any Person that is a
corporation, any and all shares, interests, participations, rights or other
equivalents (however designated) of corporate stock, (ii) with respect to a
limited liability company, any and all membership interests, and (iii) with
respect to any other Person, any and all partnership, joint venture or other
equity interests of such Person.
"Cash Equivalent" means (i) any evidence of Indebtedness issued or
directly and fully guaranteed or insured by the United States of America or any
agency or instrumentality thereof (provided that the full faith and credit of
the United States of America is pledged in support thereof); (ii) time deposits
and certificates of deposit and commercial paper or bankers acceptance issued by
the parent corporation of any domestic commercial bank of recognized standing
having combined capital and surplus in excess of $250,000,000 and commercial
paper issued by others rated at least A-2 or the equivalent thereof by Standard
& Poor's Corporation or at least P-2 or the equivalent thereof by Moody's
Investors Service, Inc. and in each case maturing within one year after the date
of acquisition; (iii) investments in money market funds substantially all of
whose assets comprise securities of the type described in clauses (i) and (ii)
above and (iv) repurchase obligations for underlying securities of the types and
with the maturities described above.
"Casino" means a gaming establishment owned by the Company or a
Restricted Subsidiary and containing at least 500 slot machines and 10,000
square feet of space dedicated to the operation of games of chance.
"Change of Control" means
(i) any merger or consolidation of the Company with or into any Person or
any sale, transfer or other conveyance, whether direct or indirect,
of
4
<PAGE>
all or substantially all of the assets of the Company, on a
consolidated basis, in one transaction or a series of related
transactions, if, immediately after giving effect to such
transaction(s), any "person" or "group" (as such terms are used for
purposes of Sections 13(d) and 14(d) of the Exchange Act, whether or
not applicable) (other than an Excluded Person) is or becomes the
"beneficial owner," directly or indirectly, of more than 50% of the
total voting power in the aggregate of the Voting Stock of the
transferee(s) or surviving entity or entities,
(ii) any "person" or "group" (as such terms are used for purposes of
Sections 13(d) and 14(d) of the Exchange Act, whether or not
applicable) (other than an Excluded Person) is or becomes the
"beneficial owner," directly or indirectly, of more than 50% of the
total voting power in the aggregate of the Voting Stock of the
Company,
(iii) during any period of 12 consecutive months after the Issue Date,
individuals who at the beginning of any such 12-month period
constituted the Managers of the Company (together with any new
directors whose election by such Managers or whose nomination for
election by the members of the Company was approved by a vote of a
majority of the directors then still in office who were either
directors at the beginning of such period or whose election or
nomination for election was previously so approved, including new
directors designated in or provided for in an agreement regarding the
merger, consolidation or sale, transfer or other conveyance, of all
or substantially all of the assets of the Company, if such agreement
was approved by a vote of such majority of directors) cease for any
reason to constitute a majority of the Managers of the Company then
in office,
(iv) the Company adopts a plan of liquidation,
(v) the first day on which the Company fails to own 100% of the issued
and outstanding Equity Interests of Capital, or
(vi) the first day on which (A) the Company fails to own at least 45% of
issued and outstanding Equity Interests of the BHR Joint Venture, (B)
5
<PAGE>
any Person owns a greater percentage interest than the Company in the
BHR Joint Venture or (C) any Excluded Person directly or indirectly
owns any interest in the BHR Joint Venture other than the interest
owned by the Company.
"Code" means the Internal Revenue Code of 1986, as amended.
"Collateral" means any assets of the Issuers or any Subsidiary
defined as "Collateral" in any of the Security Documents and assets from time to
time on which a Lien exists as security for any of the Obligations hereunder or
under the Notes, the Security Documents or the Registration Rights Agreement;
provided, that in no event shall Collateral include Excluded Assets.
"Commission" means the Securities and Exchange Commission, as from
time to time constituted, created under the Exchange Act, or if at any time
after the execution of this Indenture such Commission is not existing and
performing the duties now assigned to it under the TIA, then the body performing
such duties at such time.
"Company" means The Majestic Star Casino, LLC, an Indiana limited
liability company, until a successor replaces such Person in accordance with the
terms of this Indenture, and thereafter means such successor.
"Company Order" means a written request or order signed in the name
of each of the Issuers by the Chairman, President or Senior Vice President of
each of the Company and Capital, and by the Treasurer, an Assistant Treasurer,
the Secretary or an Assistant Secretary of each and delivered to the Trustee.
"Consolidated Cash Flow" means, with respect to any Person (the
referent Person) for any period,
(a) consolidated income (loss) from operations of such Person and its
subsidiaries for such period, determined in accordance with GAAP,
plus
(b) to the extent such amounts are deducted in calculating such income
(loss) from operations of such Person for such period, and without
duplication (i) amortization, depreciation and other non-cash charges
(including, without limitation, amortization of goodwill, deferred
6
<PAGE>
financing fees, and other intangibles but excluding (x) non-cash
charges incurred after the Issue Date that require an accrual of or a
reserve for cash charges for any future period and (y) normally recur
ring accruals such as reserves against accounts receivables), and
(ii) Pre-Opening Expenses;
provided, that (1) the income from operations of any Person that is not a Wholly
Owned Subsidiary of the referent Person or that is accounted for by the equity
method of accounting will be included only to the extent of the amount of
dividends or distributions paid during such period to the referent Person or a
Wholly Owned Subsidiary of the referent Person, (2) the income from operations
of any Person acquired in a pooling of interests transaction for any period
prior to the date of such acquisition will be excluded, and (3) the income from
operations of any Restricted Subsidiary will not be included to the extent that
declarations of dividends or similar distributions by that Restricted Subsidiary
are not at the time permitted, directly or indirectly, by operation of the terms
of its organizational documents or any agreement, instrument, judgment,
decree, order, statute, rule or governmental regulation applicable to that
Restricted Subsidiary or its owners.
"Consolidated Interest Expense" means, with respect to any Person for
any period, (a) the consolidated interest expense of such Person and its
subsidiaries for such period, whether paid or accrued (including amortization
of original issue discount, noncash interest payment, and the interest component
of Capital Lease Obligations), to the extent such expense was deducted in
computing Consolidated Net Income of such Person for such period less (b)
amortization expense, write-off of deferred financing costs and any charge
related to any premium or penalty paid, in each case accrued during such period
in connection with redeeming or retiring any Indebtedness before its stated
maturity, as determined in accordance with GAAP, to the extent such expense,
cost or charge was included in the calculation made pursuant to clause (a)
above.
"Consolidated Net Income" means, with respect to any Person (the
referent Person) for any period, the aggregate of the Net Income of such Person
and its subsidiaries for such period, determined on a consolidated basis in
accordance with GAAP; provided, that (i) the Net Income of any Person relating
to any portion of such period that such Person (a) is not a Wholly Owned
Subsidiary of the referent Person or (b) is accounted for by the equity method
of accounting will be included only to the extent of the amount of dividends or
distributions paid to the referent Person or a Wholly Owned Subsidiary of the
referent Person during such portion of
7
<PAGE>
such period, (ii) the Net Income of any Person acquired in a pooling of
interests transaction for any period prior to the date of such acquisition will
be excluded, and (iii) the Net Income of any Restricted Subsidiary will not be
included to the extent that declarations of dividends or similar distributions
by that Restricted Subsidiary are not at the time permitted, directly or
indirectly, by operation of the terms of its organizational documents or any
agreement, instrument, judgment, decree, order, statute, rule or governmental
regulation applicable to that Restricted Subsidiary or its owners.
"Consolidated Net Worth" means, with respect to any Person, the total
stockholders' (or members') equity of such Person determined on a consolidated
basis in accordance with GAAP, adjusted to exclude (to the extent included in
calculating such equity), (i) the amount of any such stockholders' (or members')
equity attributable to Disqualified Capital Stock or treasury stock of such
Person and its consolidated subsidiaries, and (ii) all upward revaluations and
other write-ups in the book value of any asset of such Person or a consolidated
subsidiary of such Person subsequent to the Issue Date, and (iii) all
Investments in subsidiaries of such Person that are not consolidated
subsidiaries and in Persons that are not subsidiaries of such Person.
"Corporate Trust Office" shall be at the address of the Trustee
specified in Section 11.2 or such other address as the Trustee may specify by
notice to the Issuers.
"Credit Facility" means (a) the credit facility, dated within 45 days
of the Issue Date (the "Original Credit Facility"), between the Company and the
Lender (and any related notes, guarantees, collateral documents, instruments and
agreements executed in connection therewith) and (b) any amendment,
modification, supplement, refunding, refinancing or replacement thereof that
(i) has terms and conditions (including with respect to applicable interest
rates and fees) customary for similar facilities extended to borrowers
comparable to the Company, and (ii) does not permit the Company to incur
Indebtedness in an aggregate principal amount at any time outstanding in excess
of $20.0 million. Any amendment, modification, supplement, refunding,
refinancing or replacement of the Credit Facility will be deemed to have terms
and conditions (including with respect to applicable interest rates and fees)
customary for similar facilities extended to borrowers comparable to the Company
if the Board of Directors of the Company, pursuant to a duly adopted resolution,
makes a good faith determination to that effect.
8
<PAGE>
"Custodian" means any receiver, trustee, assignee, liquidator or
similar official under any Bankruptcy Law.
"Default" means any event that is, or after notice or the passage of
time or both would be, an Event of Default.
"Definitive Notes" means Notes that are in the form of the Notes
attached hereto as Exhibit A, that do not include the information called for by
footnotes 1 and 3 thereof.
"Depositary" means the Person specified in Section 2.3 hereof as the
Depositary with respect to the Notes issuable in global form, until a successor
shall have been appointed and become such pursuant to the applicable provision
of this Indenture, and, thereafter, "Depositary" shall mean or include such
successor.
"Development Agreement" means the Development Agreement, dated March
26, 1996, by and between the Company and the City of Gary, Indiana.
"Disqualified Capital Stock" means any Equity Interest that (i) either
by its terms (or by the terms of any security into which it is convertible or
for which it is exchangeable) is or upon the happening of an event would be
required to be redeemed or repurchased prior to the final stated maturity of the
Notes or is redeem able at the option of the holder thereof at any time prior
to such final stated maturity, or (ii) is convertible into or exchangeable at
the option of the issuer thereof or any other Person for debt securities.
"DTC" means The Depository Trust Company.
"Equity Holder" means (a) with respect to a corporation, each holder
of stock of such corporation, (b) with respect to a limited liability company or
similar entity, each member of such limited liability company or similar entity,
(c) with respect to a partnership, each partner of such partnership and (d) with
respect to any disregarded entity, the owner of such entity.
"Equity Interests" means Capital Stock or warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
9
<PAGE>
"Event of Loss" means, with respect to any property or asset, any (i)
loss, destruction or damage of such property or asset or (ii) any condemnation,
seizure or taking, by exercise of the power of eminent domain or otherwise, of
such property or asset, or confiscation or requisition of the use of such
property or asset.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Offer" means the offer that may be made by the Issuers
pursuant to the Registration Rights Agreement to exchange Series B Notes for
Series A Notes.
"Excluded Assets" means (i) cash, deposit accounts and other cash
equivalents; (ii) assets securing Purchase Money Obligations or Capital Lease
Obligations permitted to be incurred under this Indenture; (iii) any agreements,
permits, licenses or the like that cannot be subject to a Lien under the
Security Documents without the consent of third parties, which consent is not
obtainable by the Company; and (iv) all Gaming Licenses; provided, that Excluded
Assets does not include the proceeds of the assets under clauses (ii); (iii) or
(iv) or of any other Collateral to the extent such proceeds do not constitute
Excluded Assets under clause (i) above; without limiting the foregoing, Excluded
Assets shall include gaming equipment subject to such Purchase Money Obligations
or Capital Lease Obligations, whether or not such gaming equipment is located
on or attached to the Majestic Star Casino Vessel.
"Excluded Person" means (i) any employee benefit plan of the Company
or any trustee or similar fiduciary holding Capital Stock of the Company for or
pursuant to the terms of any such plan, (ii) BDI, (iii) Barden Management, Inc.,
so long as it is owned by Don H. Barden, (iv) Don H. Barden or his spouse or an
entity controlled by either of them, (v) the estate of Don H. Barden, (vi) any
descendant of Don H. Barden or the spouse of any such descendant, (vii) the
estate of any such descendant or the spouse of any such descendant, (viii) any
trust or other arrangement for the benefit of the spouse of Don H. Barden or any
such descendant or the spouse of any such descendant and (ix) any charitable
organization or trust established by Don H. Barden.
"FF&E" means furniture, fixture and equipment acquired by the Company
or a Restricted Subsidiary in the ordinary course of business for use in the
operation of a Casino.
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"FF&E Financing" means Purchase Money Obligations or Capital Lease
Obligations incurred solely to acquire FF&E; provided, that the principal amount
of such Indebtedness does not exceed the cost (including sales and excise taxes,
installation and delivery charges and other direct costs and expenses) of the
FF&E purchased or leased with the proceeds thereof.
"FF&E Lender" means a Person that is not an Affiliate of the Company
and is a lender under FF&E Financing.
"Flow Through Entity" means an entity that (a) for Federal income tax
purposes constitutes (i) an "S corporation" (as defined in Section 1361(a) of
the Code), (ii) a "qualified subchapter S subsidiary" (as defined in Section
1361(b)(3)(B) of the Code), (iii) a "partnership" (within the meaning of Section
7701(a)(2) of the Code) other than an "publicly traded partnership" (as defined
in Section 7704 of the Code), or (iv) a business entity that is disregarded as
an entity separate from its owner under the Code, the Treasury Regulations or
any published administrative guidance of the Internal Revenue Service (the
entities described in the immediately preceding clauses (i), (ii), (iii) and
(iv), a "Federal Flow Through Entity") and (b) for state and local jurisdictions
in respect of which Permitted Tax Distributions are being made, is subject to
treatment on a basis under applicable state or local income tax law
substantially similar to a Federal Flow Through Entity.
"gaap" means generally accepted accounting principles, as in effect
from time to time, set forth in the opinions and pronouncements of the
Accounting Principles Board of the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial Accounting
Standards Board or in such other statements by such other entity as approved by
a significant segment of the accounting profession, and in the rules and
regulations of the Commission.
"GAAP" means gaap as in effect on the Issue Date.
"Gaming Authorities" means any agency, authority, board, bureau,
commission, department, office or instrumentality of any nature whatsoever of
the United States or foreign government, any state, province or any city or
other political subdivision, whether now or hereafter existing, or any officer
or official thereof, including, without limitation, the IGC and any other agency
with authority to regulate any gaming operation (or proposed gaming operation)
owned, managed or operated by the Company or any of its Subsidiaries.
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"Gaming Licenses" means every material license, material franchise or
other material approval or authorization required to own, lease, operate or
other wise conduct or manage riverboat, dockside or land-based gaming
activities in any state or jurisdiction in which the Company or any of its
Restricted Subsidiaries conducts business (including, without limitation, all
such licenses granted by the IGC under the Indiana Riverboat Gambling Act, and
the rules and regulations promulgated thereunder), and all applicable liquor
licenses.
"Gaming Vessel" means a water-based casino (i) that is substantially
similar in size and space to the Majestic Star Casino Vessel, (ii) with at least
the same overall qualities and amenities as the Majestic Star Casino Vessel, and
(iii) that is developed, constructed and equipped to be in compliance with all
Federal, state and local laws, including, without limitation, the requirements
of the Indiana Riverboat Gambling Act. In the event the laws of the State of
Indiana change to permit the development and operation of land-based casinos,
the term "Gaming Vessel" shall be deemed to include a land-based casino meeting
the requirements of clauses (i), (ii) and (iii) above.
"Global Note" means any Note that contains the paragraph referred to
in footnote 1 and the additional schedule referred to in footnote 3 in the form
of the Note attached hereto as Exhibit A.
"Government Securities" means (i) direct obligations of the United
States of America for the timely payment of which its full faith and credit is
pledged or (ii) obligations of a Person controlled or supervised by and acting
as an agency or instrumentality of the United States of America the timely
payment of which is unconditionally guaranteed as a full faith and credit
obligation by the United States of America, which, in either case, are not
callable or redeemable at the option of the issuer thereof, and shall also
include a depository receipt issued by a bank (as defined in Section 3(a)(2) of
the Securities Act), as custodian with respect to any such Government Security
or a specific payment of principal of or interest on any such Government
Security held by such custodian for the account of the holder of such depository
receipt; provided, that (except as required by law) such custodian is not
authorized to make any deduction from the amount payable to the holder of such
depository receipt from any amount received by the custodian in respect of the
Government Security or the specific payment of principal of or interest on the
Government Security evidenced by such depository receipt.
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"Governmental Authority" means any agency, authority, board, bureau,
commission, department, office or instrumentality of any nature whatsoever of
the United States or foreign government, any state, province or any city or
other political subdivision or otherwise and whether now or hereafter in
existence, or any officer or official thereof, and any maritime authority.
"Guarantor" means any Restricted Subsidiary that has executed and
delivered in accordance with this Indenture an unconditional and irrevocable
Guarantee of the Issuers' obligations under the Notes and such Person's
successors and assigns.
"guaranty" or "guarantee," used as a noun, means any guaranty (other
than by endorsement of negotiable instruments for collection in the ordinary
course of business), direct or indirect, in any manner (including, without
limitation, letters of credit and reimbursement agreements in respect thereof),
of all or any part of any Indebtedness or other Obligation. "guarantee," used
as a verb, has a correlative meaning.
"Harbor Lease" means the Harbor Lease Agreement, dated as of June 29,
1995, by and between Trump Indiana, Inc. and Lehigh Portland Cement Company as
assigned by Trump Indiana, Inc. to the BHR Joint Venture pursuant to the
Assignment of Harbor Lease Agreement, dated as of October 31, 1995, by and
between Trump Indiana, Inc. and the BHR Joint Venture.
"Hedging Obligations" means, with respect to any Person, the
Obligations of such Person under (i) interest rate swap agreements, interest
rate cap agreements and interest rate collar agreements and (ii) other
agreements or arrangements designed to protect such Person against
fluctuations in interest rates.
"Holder" means the Person in whose name a Note is registered in the
register of the Notes.
"IGC" means the Indiana Gaming Commission, or any successor Gaming
Authority.
"Indebtedness" of any Person means (without duplication) (i) all
liabilities and obligations, contingent or otherwise, of such Person (A) in
respect of borrowed money (regardless of whether the recourse of the lender is
to the whole of the assets of such Person or only to a portion thereof), (B)
evidenced by bonds,
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debentures, notes or other similar instruments, (C) representing the deferred
purchase price of property or services (other than trade payables on customary
terms incurred in the ordinary course of business), (D) created or arising under
any conditional sale or other title retention agreement with respect to property
acquired by such Person (even though the rights and remedies of the seller or
lender under such agreement in the event of default are limited to repossession
or sale of such property), (E) representing Capital Lease Obligations, (F) under
bankers' acceptance and letter of credit facilities, (G) to purchase, redeem,
retire, defease or otherwise acquire for value any Disqualified Capital Stock,
or (H) in respect of Hedging Obligations; (ii) all Indebtedness of others that
is guaranteed by such Person; and (iii) all Indebted ness of others that is
secured by (or for which the holder of such Indebtedness has an existing right,
contingent or otherwise, to be secured by) any Lien on property (including,
without limitation, accounts and contract rights) owned by such Person, even
though such Person has not assumed or become liable for the payment of such
Indebtedness, provided, that the amount of such Indebtedness shall (to the
extent such Person has not assumed or become liable for the payment of such
Indebtedness) be the lesser of (x) the fair market value of such property at the
time of determination and (y) the amount of such Indebtedness. The amount of
Indebtedness of any Person at any date shall be the outstanding balance at such
date of all unconditional obligations as described above and the maximum
liability, upon the occurrence of the contingency giving rise to the obligation,
of any contingent obligations at such date. Notwithstanding the foregoing, the
term Indebtedness shall not include obligations arising from the honoring by a
bank or other financial institution of a check, draft or similar instrument
drawn against insufficient funds in the ordinary course of business, provided,
that such obligation is extinguished within two business days of its incurrence.
The principal amount outstanding of any Indebtedness issued with original issue
discount is the accreted value of such Indebtedness.
"Indenture" means this Indenture as amended or supplemented from time
to time.
"Initial Purchaser" means Jefferies & Company, Inc.
"Intercreditor Agreement" means that certain Intercreditor Agreement
among the Trustee and one or more Lenders, substantially in the form attached
hereto as Exhibit D, which may be entered into after the Issue Date in
accordance with Section 7.1(7) hereof, including any amended or supplemented
agreement or
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any replacement or substitute agreement, in each case substantially in the form
of Exhibit D attached hereto.
"Interest Coverage Ratio" means, for any period, the ratio of (i)
Consolidated Cash Flow of the Company for such period, to (ii) Consolidated
Interest Expense of the Company for such period. In calculating Interest
Coverage Ratio for any period, pro forma effect shall be given to the
incurrence, assumption, guarantee, repayment, repurchase, redemption or
retirement by the Company or any of its Subsidiaries of any Indebtedness
subsequent to the commencement of the period for which the Interest Coverage
Ratio is being calculated, as if the same had occurred at the beginning of the
applicable period. For purposes of making the computation referred to above,
acquisitions that have been made by the Company or any of its Restricted
Subsidiaries, including all mergers and consolidations, subsequent to the
commencement of such period shall be calculated on a pro forma basis, assuming
that all such acquisitions, mergers and consolidations had occurred on the first
day of such period. Without limiting the foregoing, the financial information
of the Company with respect to any portion of such period that falls before the
Issue Date shall be adjusted to give pro forma effect to the issuance of the
Notes and the application of the proceeds therefrom as if they had occurred at
the beginning of such period.
"Investments" means, with respect to any Person, all investments by
such Person in other Persons (including Affiliates) in the forms of loans,
guarantees, advances or capital contributions (excluding (i), payroll
commission, travel and similar advances to officers and employees of such Person
made in the ordinary course of business and (ii) bona fide accounts receivable
arising from the sale of goods or services in the ordinary course of business
consistent with past practice), purchases or other acquisitions for
consideration of Indebtedness, Equity Interests or other securities, and any
other items that are or would be classified as investments on a balance sheet
prepared in accordance with GAAP.
"Issue Date" means the date upon which the Notes are first issued.
"Issuers" means Capital and the Company.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in the City of New York or at a place of payment are authorized by
law, regulation or executive order to remain closed.
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"Lender" means a Person that is not an Affiliate of the Company and is
a lender under the Credit Facility.
"Lien" means any mortgage, lien, pledge, charge, security interest or
encumbrance of any kind, regardless of whether filed, recorded or otherwise
perfected under applicable law (including any conditional sale or other title
retention agreement, any lease in the nature thereof, any option or other
agreement to sell or give a security interest in and any filing of or agreement
to give any financing statement under the Uniform Commercial Code (or equivalent
statutes) of any jurisdiction).
"Liquidated Damages" has the meaning set out in the Registration
Rights Agreement.
"Majestic Star Casino Vessel" means the Majestic Star riverboat casino
currently operated by the Company.
"Management Agreement" means that certain Management Agreement, dated
the Issue Date, by and between the Company and BDI, pursuant to which the
Company will pay to BDI fees for acting as the Manager of the Company, which
fees, for any fiscal quarter, shall not exceed 5% of Consolidated Cash Flow for
the immediately preceding fiscal quarter.
"Managers" means (i) for so long as the Company is a limited liability
company, the Managers appointed pursuant to the Operating Agreement or (ii)
otherwise, the Board of Directors of the Company.
"Members" means the members of the Company.
"Net Income" means, with respect to any Person for any period, the net
income (loss) of such Person for such period, determined in accordance with
GAAP, reduced by the maximum amount of Permitted Tax Distributions for such
period, excluding (to the extent included in calculating such net income) (i)
any gain or loss, together with any related taxes paid or accrued on such gain
or loss, realized in connection with any Asset Sales and dispositions pursuant
to sale-leaseback transactions, and (ii) any extraordinary gain or loss,
together with any related taxes paid or accrued on such gain or loss.
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"Net Proceeds" means the aggregate proceeds received in the form of
cash or Cash Equivalents in respect of any Asset Sale (including issuance or
other payments in an Event of Loss and payments in respect of deferred payment
obligations and any cash or Cash Equivalents received upon the sale or
disposition of any non-cash consideration received in any Asset Sale, in each
case when received), net of
(i) the reasonable and customary direct out-of-pocket costs relating to
such Asset Sale (including, without limitation, legal, accounting and
investment banking fees and sales commissions), other than any such
costs payable to an Affiliate of the Company,
(ii) taxes required to be paid by the Company, any of its Subsidiaries, or
any Equity Holder of the Company (or, in the case of any Company
Equity Holder that is a Flow Through Entity, the Upper Tier Equity
Holder of such Flow Through Entity) in connection with such Asset
Sale in the taxable year that such sale is consummated or in the
immediately succeeding taxable year, the computation of which shall
take into account the reduction in tax liability resulting from any
available operating losses and net operating loss carryovers, tax
credits and tax credit carryforwards, and similar tax attributes,
(iii) amounts required to be applied to the permanent repayment of
Indebtedness in connection with such Asset Sale, and
(iv) appropriate amounts provided as a reserve by the Company or any
Restricted Subsidiary, in accordance with GAAP, against any
liabilities associated with such Asset Sale and retained by the
Company or such Restricted Subsidiary, as the case may be, after such
Asset Sale (including, without limitation, as applicable, pension and
other post-employment benefit liabilities, liabilities related to
environmental matters and liabilities under any indemnification
arising from such Asset Sale).
"Notes" means, collectively, the Series A Notes and the Series B
Notes.
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"Obligation" means any principal, premium, interest, penalty, fee,
indemnification, reimbursement, damage and other obligation and liability
payable under the documentation governing any liability.
"Officers" means the Chairman of the Board, the President, the Chief
Operating and Financial Officer, the Treasurer, any Assistant Treasurer,
Controller, Secretary, any Assistant Secretary or any Senior Vice President of
the Issuers.
"Officers' Certificate" means a certificate signed on behalf of the
Issuers by two Officers of each of the Company and Capital, in each case, one of
whom must be the President, Chief Operating and Financial Officer, Treasurer,
Controller or a Senior Vice President.
"Opinion of Counsel" means an opinion from legal counsel who is
reasonably acceptable to the Trustee. Such counsel may be an employee of or
counsel to the Company, any Subsidiary of the Company or the Trustee.
"Permitted Investments" means:
(i) Investments in the Company or in any Wholly Owned Subsidiary;
(ii) Investments in Cash Equivalents;
(iii) Investments in a Person, if, as a result of such Investment, such
Person (A) becomes a Wholly Owned Subsidiary, or (B) is merged,
consolidated or amalgamated with or into, or transfers or conveys
substantially all of its assets to, or is liquidated into, the
Company or a Wholly Owned Subsidiary;
(iv) Hedging Obligations;
(v) Investments as a result of consideration received in connection with
an Asset Sale made in compliance with Section 4.10 hereof;
(vi) Investments existing on the Issue Date;
(vii) Investments paid for solely with Capital Stock (other than
Disqualified Capital Stock) of the Company;
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(viii) credit extensions to gaming customers in the ordinary course of
business, consistent with industry practice;
(ix) stock, obligations or securities received in settlement of debts
created in the ordinary course of business and owing to the Company
in satisfaction of judgments and
(x) loans or advances to employees of the Company and its Subsidiaries
made in the ordinary course of business in an aggregate amount not
to exceed $500,000 at any one time outstanding.
"Permitted Liens" means:
(i) Liens arising by reason of any judgment, decree or order of any
court for an amount and for a period not resulting in an Event of
Default with respect thereto, so long as such Lien is being
contested in good faith and is adequately bonded, and any
appropriate legal proceedings that may have been duly initiated for
the review of such judgment, decree or order shall not have been
finally adversely terminated or the period within which such
proceedings may be initiated shall not have expired;
(ii) security for the performance of bids, tenders, trade, contracts
(other than contracts for the payment of money) or leases, surety
bonds, performance bonds and other obligations of a like nature
incurred in the ordinary course of business, consistent with
industry practice;
(iii) Liens (other than Liens arising under ERISA) for taxes, assessments
or other governmental charges not yet due or that are being
contested in good faith and by appropriate proceedings if adequate
reserves with respect thereto are maintained on the books of the
Company in accordance with gaap;
(iv) Liens of carriers, warehousemen, mechanics, landlords, material
men, repairmen or other like Liens arising by operation of law in
the ordinary course of business consistent with industry practices
(other than Liens arising under ERISA) and Liens on deposits made
to obtain the release of such Liens if (a) the underlying
obligations are not overdue for a period of more than 30 days or
(b) such Liens are
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being contested in good faith and by appropriate proceedings and
adequate reserves with respect thereto are maintained on the books
of the Company in accordance with gaap;
(v) easements, rights of way, zoning and similar restrictions and other
similar encumbrances or title defects incurred in the ordinary
course of business, consistent with industry practices that, in the
aggregate, are not substantial in amount, and that do not in any
case materially detract from the value of the property subject
thereto (as such property is used by the Company or a Subsidiary)
or interfere with the ordinary conduct of the business of the
Company or any of its Subsidiaries; provided, that such Liens are
not incurred in connection with any borrowing of money or any
commitment to loan any money or to extend any credit;
(vi) pledges or deposits made in the ordinary course of business in
connection with workers' compensation, unemployment insurance and
other types of social security legislation;
(vii) Liens securing Refinancing Indebtedness incurred in compliance with
this Indenture to refinance Indebtedness secured by Liens,
provided, (a) such Liens do not extend to any additional property
or assets; (b) if the Liens securing the Indebtedness being
refinanced were subordinated to or pari passu with the Liens
securing the Notes or any intercompany loan, as applicable, such
new Liens are subordinated to or pari passu with such Liens to the
same extent, and any related subordination or intercreditor
agreement is confirmed; and (c) such Liens are no more adverse to
the interests of Holders than the Liens replaced or extended
thereby;
(viii) Liens that secure Acquired Debt, provided, that such Liens do not
extend to or cover any property or assets other than those of the
Person being acquired and were not put in place in anticipation of
such acquisition;
(ix) Liens that secure Purchase Money Obligations or Capital Lease
Obligations permitted to be incurred under this Indenture; provided
that such Liens (other than Permitted Vessel Liens) do not extend
to
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or cover any property or assets other than those being acquired or
developed;
(x) Liens securing Obligations under this Indenture, the Notes or the
Security Documents;
(xi) Liens on assets of the Company and the Subsidiaries, and the
proceeds of any or all the foregoing, securing Indebtedness
incurred pursuant to Section 4.9(a) hereof;
(xii) with respect to any vessel included in the Collateral, certain
maritime liens, including liens for crew's wages and salvage;
(xiii) leases or subleases granted in the ordinary course of business not
materially interfering with the conduct of the business of the
Company or any of the Restricted Subsidiaries;
(xiv) Liens arising from precautionary Uniform Commercial Code financing
statement filings regarding operating leases entered into by the
Company or any of its Subsidiaries in the ordinary course of
business; and
(xv) Liens on the BHR Joint Venture's rights as lessor under leases,
which Liens are to secure indebtedness of the BHR Joint Venture
incurred solely to finance the development, acquisition or
construction of the assets subject to such leases.
"Permitted Tax Distributions" in respect of the Company and each
Subsidiary that qualifies as a Flow Through Entity shall mean, with respect to
any taxable year, the sum of:
(a) the product of (i) the excess of (A) all items of taxable income or
gain (other than capital gain) allocated by the Company to Equity
Holders for such year over (B) all items of taxable deduction or
loss (other than capital loss) allocated to such Equity Holders by
the Company, for such year and (ii) the Applicable Income Tax Rate,
plus
(b) the product of (i) the net capital gain (i.e., net long-term
capital gain over net short-term capital loss), if any, allocated
by the Company to
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Equity Holders for such year and (ii) the Applicable Capital Gain
Tax Rate, plus
(c) the product of (i) the net short-term capital gain (i.e., net
short-term capital gain in excess of net long-term capital loss),
if any, allocated by the Company to Equity Holders for such year
and (ii) the Applicable Income Tax Rate, minus
(d) the aggregate Tax Loss Benefit Amount for the Company for such
year;
provided, that in no event shall the Applicable Income Tax Rate or the
Applicable Capital Gain Tax Rate exceed the greater of (1) the highest aggregate
applicable effective marginal rate of Federal, state, and local income to which
a corporation doing business in the State of New York would be subject in the
relevant year of determination (as certified to the Trustee by a nationally
recognized tax accounting firm) plus 5%; and (2) 60%. For purposes of
calculating the amount of the Permitted Tax Distributions, the proportionate
part of the items of taxable income, gain, deduction, or loss (including capital
gain or loss) of any Subsidiary that is a Flow Through Entity shall be included
in determining the taxable income, gain, deduction, or loss (including capital
gain or loss) of the Company.
Estimated tax distributions shall be made within fifteen days
following March 31, May 31, August 31, and December 31 based upon an estimate of
the excess of (x) the tax distributions that would be payable for the period
beginning on January 1 of such year and ending on March 31, May 31, August 31,
and December 31 if such period were a taxable year (computed as provided above)
over (y) distributions attributable to all prior periods during such taxable
year.
Prior to making any estimated tax distribution, the Company shall
require each Equity Holder to agree that (a) promptly after the Company and each
Subsidiary file their respective annual tax return, (i) such Equity Holder shall
reimburse the Company to the extent the estimated tax distributions made to such
Equity Holder exceeded the actual Permitted Tax Distributions, as determined on
the basis of such tax returns filed in respect of such taxable year for that
Equity Holder and (ii) the Company shall make a further payment to such Equity
Holder to the extent such estimated tax distributions were less than the tax
distributions actually payable to such Equity Holder with respect to such
taxable year and (b) if the appropriate Federal or state taxing authority
finally determines that the amount of the
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items of taxable income, gain, deduction, or loss (including capital gain or
loss) of the Company or any Subsidiary that is treated as a Flow Through Entity
for any taxable year or the aggregate Tax Loss Benefit Amounts carried forward
to such taxable year should be changed or adjusted, then (i) such Equity Holder
shall reimburse the Company to the extent the Permitted Tax Distributions
previously made to such Equity Holder in respect of that taxable year exceeded
the Permitted Tax Distributions with respect to such taxable year taking into
account such change or adjustment for such Equity Holder and (ii) the Company
shall make a further payment to such Equity Holder to the extent the Permitted
Tax Distributions previously paid to such Equity Holder were less than the
Permitted Tax Distributions payable to such Equity Holder with respect to such
taxable year taking into account such change or adjustment.
To the extent that any tax distribution would otherwise be made to any
Equity Holder at a time when an obligation of such Equity Holder to make a
payment to the Company pursuant to the previous paragraph remains outstanding,
the amount of any tax distribution to be made shall be reduced by the amounts
such Equity Holder is obligated to pay the Company.
"Person" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint stock company, trust,
unincorporated organization, government or any agency or political subdivision
thereof, or any other entity.
"Permitted Vessel Lien" means a Lien on the Majestic Star Casino
Vessel that secures FF&E Financing; provided that (a) the FF&E Lender agrees (i)
--------
to release such Lien upon satisfaction of such FF&E Financing, (ii) to release
such Lien upon payment (or promise of payment) to such FF&E Lender of that
portion of the proceeds of the sale of the Majestic Star Casino Vessel
attributable to the related FF&E and (iii) that such Lien is subordinate and
inferior in every respect to the Lien of the Trustee pursuant to the Preferred
Ship Mortgage on the hull and other equipment constituting the Majestic Star
Casino Vessel (other than the related FF&E) and (b) such Lien shall not have an
adverse impact on the Holders.
"Preferred Ship Mortgage" means the preferred ship mortgage on the
Majestic Star Casino Vessel, dated as of the Issue Date, by and between the
Company and the Trustee.
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"Pre-Opening Expenses" means all costs of start-up activities that are
required to be expensed (and are not capitalized) in accordance with SOP 98-5.
"Public Equity Offering" means a bona fide underwritten public
offering of Qualified Capital Stock of the Company, pursuant to a registration
statement filed with and declared effective by the Commission in accordance with
the Securities Act.
"Purchase Money Obligations" means Indebtedness representing, or
incurred to finance (or to Refinance Indebtedness incurred to finance), the cost
(i) of acquiring any assets and (ii) of construction or build-out of facilities
(including Purchase Money Obligations of any other Person at the time such other
Person is merged with or into or is otherwise acquired by the Issuers);
provided, that (x) the principal amount of such Indebtedness does not exceed 80%
of such cost, including construction charges, (y) any Lien securing such
Indebtedness does not extend to or cover any other asset or property other than
the asset or property being so acquired, constructed or built and (z) such
Indebtedness is (or the Indebtedness being Refinanced was) incurred, and any
Liens with respect thereto are granted, within 180 days of the acquisition or
commencement of construction or build-out of such property or asset.
"QIB" means a "qualified institutional buyer" as defined in Rule 144A.
"Qualified Capital Stock" means, with respect to any Person, Capital
Stock of such Person other than Disqualified Capital Stock.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of the Issue Date, by and among the Issuers and the Initial
Purchaser as such agreement may be amended, modified or supplemented from time
to time.
"Related Business" means (a) the gaming and hotel businesses conducted
by the Company as of the Issue Date and any and all businesses that in the good
faith judgment of the Managers are materially related businesses or (b) a
business necessary to satisfy the Company's off-site development obligation
under the Development Agreement.
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"Required Regulatory Redemption" means a redemption by the Issuers of
any Holder's Notes pursuant to, and in accordance with, any order of any
Governmental Authority with appropriate jurisdiction and authority relating to a
Gaming License, or to the extent necessary in the reasonable, good faith
judgment of the Managers of the Company to prevent the loss, failure to obtain
or material impairment or to secure the reinstatement of, any Gaming License,
where such redemption or acquisition is required because the Holder or
beneficial owner of Notes is required to be found suitable or to otherwise
qualify under any gaming laws and is not found suitable or so qualified within a
reasonable period of time.
"Responsible Officer" when used with respect to the Trustee, means any
officer within the corporate trust department of the Trustee located at the
Corporate Trust Office (or any successor group of the Trustee) or any other
officer of the Trustee customarily performing functions similar to those
performed by any of the designated officers, and also means, with respect to a
particular corporate trust matter, any other officer to whom such matter is
referred because of his knowledge of and familiarity with the particular
subject.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Securities" means Notes that bear or are required to bear
the legends set forth in Exhibit A hereto.
"Restricted Subsidiary" means a Subsidiary other than an Unrestricted
Subsidiary.
"Return from Unrestricted Subsidiaries" means (a) 50% of any dividends
or distributions received by the Company or a Restricted Subsidiary from an
Unrestricted Subsidiary, to the extent that such dividends or distributions were
not otherwise included in Consolidated Net Income of the Company, plus (b) to
the extent not otherwise included in Consolidated Net Income of the Company, an
amount equal to the net reduction in Investments in Unrestricted Subsidiaries
resulting from (i) repayments of the principal of loans or advances or other
transfers of assets to the Company or any Restricted Subsidiary from
Unrestricted Subsidiaries or (ii) the sale or liquidation of any Unrestricted
Subsidiaries, plus (c) to the extent that any Unrestricted Subsidiary of the
Company is designated to be a Restricted Subsidiary, the fair market value of
the Company's Investment in such Subsidiary on the date of such designation.
25
<PAGE>
"Rule 144A" means Rule 144A under the Securities Act, as such Rule may
be amended from time to time, or under any similar rule or regulation hereafter
adopted by the Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Security Agreement" means that certain Security Agreement to encumber
substantially all of the assets of the Company, including the Company's interest
in the Berthing Agreement, in favor of the Trustee, for the ratable benefit of
the Holders of the Notes, as the same may be amended in accordance with the
terms thereof and this Indenture.
"Security Documents" means, collectively, the BDI Pledge Agreement,
the BHR Pledge Agreement, the Preferred Ship Mortgage, the Security Agreement,
the Trademark Security Agreement, and any other agreements, instruments,
financing statements or other documents that evidence, set forth or limit the
Lien of the Trustee in the Collateral.
"Series A Notes" means the Issuers' 10 7/8% Series A Senior Notes due
2006, as authenticated and issued under this Indenture.
"Series B Notes" means the Issuers' 10 7/8% Series B Senior Notes due
2006, as authenticated and issued under this Indenture.
"subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity (including a limited liability company) of
which more than 50% of the total voting power of shares of Voting Stock thereof
is at the time owned or controlled, directly or indirectly, by such Person or
one or more of the other subsidiaries of that Person or a combination thereof
and (ii) any partnership in which such Person or any of its subsidiaries is a
general partner.
"Subsidiary" means any subsidiary of the Company.
"Tax Loss Benefit Amount" means, with respect to any taxable year, the
amount by which the Permitted Tax Distributions would be reduced were a net
operating loss or net capital loss from a prior taxable year of the Company
ending subsequent to the Issue Date carried forward to such taxable year;
provided, that for such purpose the amount of any such net operating loss or net
capital loss shall be utilized only once and in each case shall be carried
forward to the next succeeding
26
<PAGE>
taxable year until so utilized. For purposes of calculating the Tax Loss Benefit
Amount, the proportionate part of the items of taxable income, gain, deduction,
or loss (including capital gain or loss) of any Subsidiary that is a Flow
Through Entity for a taxable year of such Subsidiary ending subsequent to the
Issue Date shall be included in determining the amount of net operating loss or
net capital loss of the Company.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. (SS) 77aaa-
77bbbb), as amended, as in effect on the date hereof until such time as this
Indenture is qualified under the TIA, and thereafter as in effect on the date on
which this Indenture is qualified under the TIA.
"Trademark Security Agreement" means that certain Trademark Security
Agreement executed by the Company to encumber the "Majestic Star Casino" service
mark in favor of the Trustee, for the ratable benefit of the Holders of the
Notes, as the same may be amended in accordance with the terms thereof and this
Indenture.
"transfer" means, with respect to any asset, any direct or indirect
sale, assignment, transfer, lease, conveyance, or other disposition (including,
without limitation, by way of merger or consolidation).
"Trustee" means IBJ Whitehall Bank & Trust Company, a New York banking
corporation, until a successor replaces it in accordance with the applicable
provisions of this Indenture and thereafter means the successor serving
hereunder.
"Unrestricted Subsidiary" means any Subsidiary that, at or prior to
the time of determination, shall have been designated by the Managers as an
Unrestricted Subsidiary; provided, that such Subsidiary does not hold any
Indebtedness or Capital Stock of, or any Lien on any assets of, the Company or
any Restricted Subsidiary. If, at any time, any Unrestricted Subsidiary would
fail to meet the foregoing requirements as an Unrestricted Subsidiary, it
shall thereafter cease to be an Unrestricted Subsidiary for purposes of this
Indenture and any Indebtedness of such Subsidiary shall be deemed to be incurred
by a Restricted Subsidiary as of such date. The Managers may at any time
designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided,
that such designation shall be deemed to be an incurrence of Indebtedness by a
Restricted Subsidiary of any outstanding Indebtedness of such Unrestricted
Subsidiary and such designation shall only be permitted if (i) such Indebtedness
is permitted under the Interest Coverage Ratio test
27
<PAGE>
set forth in Section 4.9 hereof calculated on a pro forma basis as if such
designation had occurred at the beginning of the four-quarter reference period,
and (ii) no Default or Event of Default would be in existence following such
designation. The Company shall be deemed to make an Investment in each
Subsidiary designated as an Unrestricted Subsidiary immediately following such
designation in an amount equal to the Investment in such Subsidiary and its
subsidiaries immediately prior to such designation. Any such designation by the
Managers shall be evidenced to the Trustee by filing with the Trustee a
certified copy of the resolution of the Managers giving effect to such
designation and an Officers' Certificate certifying that such designation
complies with the foregoing conditions and is permitted by Section 4.9 hereof.
"Upper Tier Equity Holder" means, in the case of any Flow Through
Entity the Equity Holder of which is, in turn, a Flow Through Entity, the person
that is ultimately subject to tax on a net income basis on the items of taxable
income, gain, deduction, and loss of the Company and its Subsidiaries that are
Flow Through Entities.
"U.S. Government Obligations" means direct obligations of the United
States of America, or any agency or instrumentality thereof for the payment of
which the full faith and credit of the United States of America is pledged.
"Voting Stock" means, with respect to any Person, (i) one or more
classes of the Capital Stock of such Person having general voting power to elect
at least a majority of the Board of Directors, managers or trustees of such
Person (regardless of whether at the time Capital Stock of any other class or
classes have or might have voting power by reason of the happening of any
contingency) and (ii) any Capital Stock of such Person convertible or
exchangeable without restriction at the option of the holder thereof into
Capital Stock of such Person described in clause (i) above.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years (rounded to the nearest one-
twelfth) obtained by dividing (i) the then outstanding principal amount of such
Indebtedness into (ii) the total of the product obtained by multiplying (A) the
amount of each then remaining installment, sinking fund, serial maturity or
other required payments of principal, including payment at final maturity, in
respect thereof, by (B) the number of years (calculated to the nearest one-
twelfth) that will elapse between such date and the making of such payment.
28
<PAGE>
"Wholly Owned Subsidiary" of any Person means a subsidiary of such
Person all the Capital Stock of which (other than directors' qualifying shares)
is owned directly or indirectly by such Person; provided, that (i) with respect
to the Company, the term Wholly Owned Subsidiary shall exclude Unrestricted
Subsidiaries, and (ii) the BHR Joint Venture will be a Wholly Owned Subsidiary
of the Company so long as (a) the Company owns 90% or more of the outstanding
membership interests in the BHR Joint Venture and (b) the BHR Joint Venture is
a Restricted Subsidiary.
Section 1.2. Other Definitions.
- ----------- -----------------
Defined in
Term Section
---- ----------
"Affiliate Transaction"................ 4.11
"Change of Control Offer".............. 4.14
"Change of Control Payment"............ 4.14
"Change of Control Payment Date"....... 4.14
"Definitive Notes"..................... 2.1
"Event of Default"..................... 6.1
"Excess Proceeds"...................... 4.10
"Excess Proceeds Offer"................ 4.10
"Excess Proceeds Offer Period"......... 4.10
"Excess Proceeds Payment Date"......... 4.10
"Gaming Laws".......................... 10.14
"Global Notes"......................... 2.1
"Guaranty"............................. 10.7
"Hedging Obligations".................. 4.9(b)
"Paying Agent"......................... 2.3
"Purchase Amount"...................... 4.10
"Purchase Money Indebtedness".......... 4.9(b)
"Refinance"............................ 4.9(i)
"Refinancing Indebtedness"............. 4.9(i)
"Registrar"............................ 2.3
"Regulatory Redemption"................ 3.8
"Regulatory Redemption Offer Price".... 3.8
"Restricted Payments".................. 4.7
29
<PAGE>
Section 1.3. Incorporation by Reference of Trust Indenture Act.
- ----------- -------------------------------------------------
Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following
meanings:
"indenture securities" means the Notes;
--------------------
"indenture security holder" means a Holder of a Note;
-------------------------
"indenture to be qualified" means this Indenture;
-------------------------
"indenture trustee" or "institutional trustee" means the Trustee;
----------------- ---------------------
"obligor" on the Notes means the Issuers, the Guarantors and any successor
-------
obligor upon the Notes.
All other terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute, or defined by Commission rule under
the TIA have the meanings so assigned to them.
Section 1.4. Rules of Construction.
- ----------- ---------------------
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning assigned to
it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the plural include
the singular;
(5) provisions apply to successive events and transactions;
30
<PAGE>
(6) "herein," "hereof" and other words of similar import refer to this
Indenture as a whole and not to any particular Article, Section or other
subdivision, and the terms "Article," "Section," "Exhibit" and "Schedule,"
unless otherwise specified or indicated by the context in which used, mean the
corresponding Article or Section of, or the corresponding Exhibit or Schedule
to, this Indenture; and
(7) references to agreements and other instruments include subsequent
amendments, supplements and waivers to such agreements or instruments but only
to the extent not prohibited by this Indenture.
ARTICLE 2
THE NOTES
Section 2.1. Form and Dating.
- ----------- ---------------
The Notes and the Trustee's certificate of authentication shall be
substantially in the form of Exhibit A attached hereto, the terms of which are
incorporated in and made a part of this Indenture. Each Note shall include the
Guaranty executed by each of the Guarantors in the form of Exhibit C attached
hereto, the terms of which are incorporated into and made a part of this
Indenture. The Notes may have notations, legends or endorsements required by
law, stock exchange rule, agreements to which the Issuers are subject or usage.
Each Note shall be dated the date of its authentication. The Notes shall be
issued in denominations of $1,000 and integral multiples thereof.
The Notes will be issued (i) in global form (the "Global Notes"),
------------
substantially in the form of Exhibit A attached hereto (including the text
referred to in footnotes 1 and 3 thereto) and (ii) under certain circumstances,
in definitive form (the "Definitive Notes"), substantially in the form of
----------------
Exhibit A attached hereto (excluding the text referred to in footnotes 1 and 3
thereto). Each Global Note shall represent the aggregate amount of outstanding
Notes from time to time endorsed thereon; provided, that the aggregate amount of
--------
outstanding Notes represented thereby may from time to time be reduced or
increased, as appropriate, to reflect exchanges and redemptions. Any
endorsement of a Global Note to reflect the amount of any increase or decrease
in the amount of outstanding Notes represented thereby shall be made by the
Trustee, in accordance with instructions given by the Holder thereof as required
by Section 2.6 hereof.
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<PAGE>
Section 2.2. Execution and Authentication.
- ----------- ----------------------------
Two Officers of each of the Issuers shall sign the Notes for the
Issuers by manual or facsimile signature. If an Officer whose signature is on a
Note no longer holds that office at the time the Note is authenticated, the Note
shall nevertheless be valid.
A Note shall not be valid until authenticated by the manual signature
of the Trustee. The signature of the Trustee shall be conclusive evidence that
the Note has been authenticated under this Indenture. The form of Trustee's
certificate of authentication to be borne by the Notes shall be substantially as
set forth in Exhibit A attached hereto.
The Trustee shall, upon a Company Order, authenticate for original
issue Notes in any aggregate principal amount. The aggregate principal amount
of Notes that may be authenticated and delivered under this Indenture is
unlimited. Subject to Section 4.9 hereof, additional Notes may be issued
hereunder from time to time, without the consent of the Holders of previously
issued Notes, in an aggregate principal amount to be determined from time to
time by the Issuers; provided, that additional Notes may not be issued with
--------
original issue discount as determined under section 1271 et seq. of the Code.
-- ---
The Trustee may appoint an authenticating agent acceptable to the
Issuers to authenticate Notes. Unless limited by the terms of such appointment,
an authenticating agent may authenticate Notes whenever the Trustee may do so.
Each reference in this Indenture to authenticating by the Trustee includes
authenticating by such agent. An authenticating agent has the same rights as an
Agent to deal with the Issuers or an Affiliate of the Issuers.
The Issuers, the Trustee and any agent of the Issuers or the Trustee
may treat the Person in whose name any Note is registered as the owner of such
Note for the purpose of receiving payment of principal of and (subject to the
provisions of this Indenture and the Notes with respect to record dates)
interest on such Note and for all other purposes whatsoever, whether or not such
Note is overdue, and neither the Issuers, the Trustee nor any agent of the
Issuers or the Trustee shall be affected by notice to the contrary.
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<PAGE>
Section 2.3. Registrar, Paying Agent and Depositary.
----------- --------------------------------------
The Issuers shall maintain (i) an office or agency where Notes may be
presented for registration of transfer or for exchange ("Registrar") and (ii) an
---------
office or agency where Notes may be presented for payment ("Paying Agent"). The
------------
Issuers initially appoint the Trustee as Registrar and Paying Agent. The
Registrar shall keep a register of the Notes and of their transfer and exchange.
The Issuers may appoint one or more co-registrars and one or more additional
paying agents. The term "Registrar" includes any co-registrar and the term
"Paying Agent" includes any additional paying agent. The Issuers may change any
Paying Agent or Registrar without notice to any Holder. The Issuers shall
notify the Trustee of the name and address of any Agent not a party to this
Indenture. If the Issuers fail to appoint or maintain another entity as
Registrar or Paying Agent, the Trustee shall act as such. The Company or any of
its Subsidiaries may act as Paying Agent or Registrar, except that for purposes
of Articles Three and Eight and Sections 4.1, 4.10 and 4.14, neither the Company
nor any of its Subsidiaries shall act as Paying Agent.
The Issuers shall enter into an appropriate agency agreement with any
Agent not a party to this Indenture, which shall incorporate the provisions of
the TIA. The agreement shall implement the provisions of this Indenture that
relate to such Agent.
The Issuers initially appoint DTC to act as Depositary with respect to
the Global Notes. The Trustee shall act as custodian for the Depositary with
respect to the Global Notes.
Section 2.4. Paying Agent to Hold Money in Trust.
----------- -----------------------------------
The Issuers shall require each Paying Agent other than the Trustee to
agree in writing that the Paying Agent shall hold in trust for the benefit of
the Holders or the Trustee all money held by the Paying Agent for the payment of
principal, premium, if any, or interest on the Notes and shall notify the
Trustee in writing of any default by the Issuers in making any such payment.
While any such default continues, the Trustee may require a Paying Agent to pay
all money held by it to the Trustee. The Issuers at any time may require a
Paying Agent to pay all money held by it to the Trustee. Upon payment over to
the Trustee, the Paying Agent (if other than the Company or a Subsidiary of the
Company) shall have no further liability for the money delivered to the Trustee.
If the Company or a Subsidiary of the Company acts as Paying Agent (subject to
Section 2.3), it shall
33
<PAGE>
segregate and hold in a separate trust fund for the benefit of the Holders all
money held by it as Paying Agent.
Section 2.5. Holder Lists.
- ----------- ------------
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
all Holders and shall otherwise comply with TIA (S) 312(a). If the Trustee is
not the Registrar, the Issuers shall furnish to the Trustee at least seven
Business Days before each interest payment date and at such other times as the
Trustee may request in writing a list in such form and as of such date as the
Trustee may reasonably require of the names and addresses of the Holders,
including the aggregate principal amount of Notes held by each such Holder, and
the Issuers shall otherwise comply with TIA (S) 312(a).
Section 2.6. Transfer and Exchange.
- ----------- ---------------------
(a) Transfer and Exchange of Definitive Notes. When Definitive Notes
-----------------------------------------
are presented by a Holder to the Registrar with a request (1) to register the
transfer of the Definitive Notes or (2) to exchange such Definitive Notes for an
equal principal amount of Definitive Notes of other authorized denominations,
the Registrar shall register the transfer or make the exchange as requested if
its requirements for such transactions are met; provided, that the Definitive
--------
Notes so presented (A) have been duly endorsed or accompanied by a written
instruction of transfer in form satisfactory to the Registrar duly executed by
such Holder or by his attorney, duly authorized in writing; and (B) in the case
of a Restricted Security, such request shall be accompanied by the following
additional documents:
(i) if such Restricted Security is being delivered to the Registrar
by a Holder for registration in the name of such Holder, without transfer,
a certification to that effect (in substantially the form of Exhibit B
attached hereto); or
(ii) if such Restricted Security is being transferred to a QIB in
accordance with Rule 144A or pursuant to an effective registration
statement under the Securities Act, a certification to that effect (in
substantially the form of Exhibit B attached hereto); or
34
<PAGE>
(iii) if such Restricted Security is being transferred in reliance on
another exemption from the registration requirements of the Securities Act,
a certification to that effect (in substantially the form of Exhibit B
attached hereto) and an opinion of counsel reasonably acceptable to the
Issuers and the Registrar to the effect that such transfer is in compliance
with the Securities Act.
(b) Transfer of a Definitive Note for a Beneficial Interest in a
------------------------------------------------------------
Global Note. A Definitive Note may be exchanged for a beneficial interest in a
- -----------
Global Note only upon receipt by the Trustee of a Definitive Note, duly endorsed
or accompanied by appropriate instruments of transfer, in form satisfactory to
the Trustee, together with:
(i) written instructions directing the Trustee to make an
endorsement on the appropriate Global Note to reflect an increase in the
aggregate principal amount of the Notes represented by such Global Note,
and
(ii) if such Definitive Note is a Restricted Security, a
certification (in substantially the form of Exhibit B attached hereto) and,
if applicable, a legal opinion, in each case similar to that required
pursuant to Section 2.6(a)(i)-(iii), as applicable;
in which case the Trustee shall cancel such Definitive Note and cause the
aggregate principal amount of Notes represented by the appropriate Global Note
to be increased accordingly. If no Global Note is then outstanding, the Issuers
shall issue and the Trustee shall authenticate a new Global Note in the
appropriate principal amount.
(c) Transfer and Exchange of Global Notes. The transfer and
-------------------------------------
exchange of Global Notes or beneficial interests therein shall be effected
through the Depositary in accordance with this Indenture and the procedures of
the Depositary therefor, which shall include restrictions on transfer comparable
to those set forth herein to the extent required by the Securities Act.
(d) Transfer of a Beneficial Interest in a Global Note for a
--------------------------------------------------------
Definitive Note. Upon receipt by the Trustee of written transfer instructions
- ---------------
(or such other form of instructions as is customary for the Depositary), from
the Depositary (or its nominee) on behalf of any Person having a beneficial
interest in a Global Note, the Trustee shall, in accordance with the standing
instructions and procedures existing between the Depositary and the Trustee,
cause the aggregate principal amount of
35
<PAGE>
Global Notes to be reduced accordingly and, following such reduction, the
Issuers shall execute and the Trustee shall authenticate and deliver to the
transferee a Definitive Note in the appropriate principal amount; provided, that
in the case of a Restricted Security, such instructions shall be accompanied by
the following additional documents:
(i) if such beneficial interest is being transferred to the Person
designated by the Depositary as being the beneficial owner, a certification
to that effect (in substantially the form of Exhibit B attached hereto); or
(ii) if such beneficial interest is being transferred to a QIB in
accordance with Rule 144A or pursuant to an effective registration
statement under the Securities Act, a certification to that effect (in
substantially the form of Exhibit B attached hereto); or
(iii) if such beneficial interest is being transferred in reliance on
another exemption from the registration requirements of the Securities Act,
a certification to that effect (in substantially the form of Exhibit B
attached hereto) and an opinion of counsel reasonably acceptable to the
Issuers and to the Registrar to the effect that such transfer is in
compliance with the Securities Act.
Definitive Notes issued in exchange for a beneficial interest in a
Global Note shall be registered in such names and in such authorized
denominations as the Depositary shall instruct the Trustee.
(e) Transfer and Exchange of Global Notes. Notwithstanding any
-------------------------------------
other provision of this Indenture, the Global Note may not be transferred as a
whole except by the Depositary to a nominee of the Depositary or by a nominee of
the Depositary to the Depositary or another nominee of the Depositary or by the
Depositary or any such nominee to a successor Depositary or a nominee of such
successor Depositary; provided, that if:
--------
(i) the Depositary (a) notifies the Issuers that the Depositary is
unwilling or unable to continue as Depositary and a successor Depositary is
not appointed by the Issuers within 90 days after delivery of such notice,
or (b) has ceased to be a clearing agency registered under the Exchange
Act; or
36
<PAGE>
(ii) the Issuers, at their sole discretion, notify the Trustee in
writing that they elect to cause the issuance of Definitive Notes under
this Indenture;
then the Issuers shall execute and the Trustee shall authenticate and deliver,
Definitive Notes in an aggregate principal amount equal to the aggregate
principal amount of the Global Note in exchange for such Global Note.
(f) Cancellation and/or Adjustment of Global Notes. At such time as
----------------------------------------------
all beneficial interests in the Global Note have either been exchanged for
Definitive Notes, redeemed, repurchased or cancelled, the Global Note shall be
returned to (or retained by) and cancelled by the Trustee. At any time prior to
such cancellation, if any beneficial interest in the Global Note is exchanged
for Definitive Notes, redeemed, repurchased or cancelled, the aggregate
principal amount of Notes represented by such Global Note shall be reduced
accordingly and an endorsement shall be made on such Global Note by the Trustee
to reflect such reduction.
(g) General Provisions Relating to Transfers and Exchanges. To
------------------------------------------------------
permit registrations of transfers and exchanges, the Issuers shall execute and
the Trustee shall authenticate Definitive Notes and Global Notes at the
Registrar's request. All Definitive Notes and Global Notes issued upon any
registration of transfer or exchange of Definitive Notes or Global Notes shall
be legal, valid and binding obligations of the Issuers, evidencing the same
debt, and entitled to the same benefits under this Indenture, as the Definitive
Notes or Global Notes surrendered upon such registration of transfer or
exchange.
No service charge shall be made to a Holder for any registration of
transfer or exchange, but the Issuers may require payment of a sum sufficient to
cover any transfer tax or similar governmental charge payable in connection
therewith (other than any such transfer taxes or similar governmental charge
payable upon exchange (without transfer to another person) pursuant to Sections
2.10, 3.7, 3.8, 4.10, 4.14 and 9.5 of this Indenture).
The Issuers shall not be required to (i) issue, register the transfer
of or exchange Notes during a period beginning at the opening of business 15
days before the day of any selection of Notes for redemption under Section 3.2
hereof and ending at the close of business on the day of selection; or (ii)
register the transfer of or exchange any Note so selected for redemption in
whole or in part, except the unredeemed portion of any Note being redeemed in
part; or (iii) register the transfer
37
<PAGE>
of or exchange a Note between a record date and the next succeeding interest
payment date.
Prior to due presentment for the registration of a transfer of any
Note, the Trustee, any Agent and the Issuers may deem and treat the Person in
whose name any Note is registered as the absolute owner of such Note for all
purposes, and neither the Trustee, any Agent nor the Issuers shall be affected
by notice to the contrary.
(h) Exchange of Series A Notes for Series B Notes. The Series A
---------------------------------------------
Notes may be exchanged for Series B Notes pursuant to the terms of the Exchange
Offer. The Trustee and Registrar shall make the exchange as follows:
The Issuers shall present the Trustee with an Officers' Certificate
certifying the following:
(A) upon issuance of the Series B Notes, the transactions
contemplated by the Exchange Offer have been consummated; and
(B) the principal amount of Series A Notes properly tendered in the
Exchange Offer that are represented by a Global Note and the
principal amount of Series A Notes properly tendered in the
Exchange Offer that are represented by Definitive Notes; the name
of each Holder of such Definitive Notes; the principal amount
properly tendered in the Exchange Offer by each such Holder; and
the name and address to which Definitive Notes for Series B Notes
shall be registered and sent for each such Holder.
The Trustee, upon receipt of (i) such Officers' Certificate, (ii) an
Opinion of Counsel (x) to the effect that the Series B Notes have been
registered under Section 5 of the Securities Act and this Indenture has been
qualified under the TIA and (y) with respect to the matters set forth in Section
6(p) of the Registration Rights Agreement and (iii) a Company Order, shall
authenticate (A) a Global Note for Series B Notes in aggregate principal amount
equal to the aggregate principal amount of Series A Notes represented by a
Global Note indicated in such Officers' Certificate as having been properly
tendered and (B) Definitive Notes representing
38
<PAGE>
Series B Notes registered in the names of, and in the principal amounts
indicated in such Officers' Certificate.
If the principal amount at maturity of the Global Note for the Series
B Notes is less than the principal amount at maturity of the Global Note for the
Series A Notes, the Trustee shall make an endorsement on such Global Note for
Series A Notes indicating a reduction in the principal amount at maturity
represented thereby.
The Trustee shall deliver such Definitive Notes for Series B Notes to
the Holders thereof as indicated in such Officers' Certificate.
Section 2.7. Replacement Notes.
- ----------- -----------------
If any mutilated Note is surrendered to the Trustee, or the Issuers
and the Trustee receive evidence to their satisfaction of the destruction, loss
or theft of any Note, the Issuers shall issue and the Trustee shall authenticate
a replacement Note if the Trustee's requirements for replacements of Notes are
met. If required by the Trustee or the Issuers, an indemnity bond must be
supplied by the Holder that is sufficient in the judgment of the Trustee and the
Issuers to protect the Issuers, the Trustee, any Agent or any authenticating
agent from any loss that any of them may suffer if a Note is replaced. The
Issuers or the Trustee may charge for their expenses in replacing a Note.
Every replacement Note is an obligation of the Issuers and shall be
entitled to all of the benefits of this Indenture equally and proportionately
with all other Notes duly issued hereunder.
Section 2.8. Outstanding Notes.
- ----------- -----------------
The Notes outstanding at any time are all the Notes authenticated by
the Trustee except for those cancelled by it, those delivered to it for
cancellation, those reductions in the interest in a Global Note effected by the
Trustee in accordance with the provisions hereof, and those described in this
Section 2.8 as not outstanding.
If a Note is replaced pursuant to Section 2.7 hereof, the replaced
Note ceases to be outstanding unless the Trustee receives proof satisfactory to
it that the replaced Note is held by a bona fide purchaser.
39
<PAGE>
If the principal amount of any Note is considered paid under Section
4.1 hereof, it ceases to be outstanding and interest on it ceases to accrue.
Subject to Section 2.9 hereof, a Note does not cease to be outstanding
because the Issuers or an Affiliate of the Issuers holds the Note.
Section 2.9. Treasury Notes.
- ------------ --------------
In determining whether the Holders of the required principal
amount of Notes have concurred in any direction, waiver or consent, Notes owned
by the Issuers or any Affiliate of the Issuers shall be considered as though not
outstanding, except that for purposes of determining whether the Trustee shall
be protected in relying on any such direction, waiver or consent, only Notes
that the Trustee knows to be so owned shall be considered as not outstanding.
Section 2.10. Temporary Notes.
- ------------- ---------------
Pending the preparation of definitive Notes, the Issuers (and the
Guarantors) may execute, and upon Company Order the Trustee shall authenticate
and deliver, temporary Notes that are printed, lithographed, typewritten,
mimeographed or otherwise reproduced, in any authorized denomination,
substantially of the tenor of the definitive Notes in lieu of which they are
issued and with such appropriate insertions, omissions, substitutions and other
variations as the officers executing such Notes may determine, as conclusively
evidenced by their execution of such Notes.
If temporary Notes are issued, the Issuers (and the Guarantors)
shall cause definitive Notes to be prepared without unreasonable delay. The
definitive Notes shall be printed, lithographed or engraved, or provided by any
combination thereof, or in any other manner permitted by the rules and
regulations of any principal national securities exchange, if any, on which the
Notes are listed, all as determined by the Officers executing such definitive
Notes. After the preparation of definitive Notes, the temporary Notes shall be
exchangeable for definitive Notes upon surrender of the temporary Notes at the
office or agency maintained by the Issuers for such purpose pursuant to Section
4.2 hereof, without charge to the Holder. Upon surrender for cancellation of any
one or more temporary Notes, the Issuers (and the Guarantors) shall execute, and
the Trustee shall authenticate and deliver, in exchange therefor the same
aggregate principal amount of definitive Notes of
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authorized denominations. Until so exchanged, the temporary Notes shall in all
respects be entitled to the same benefits under this Indenture as definitive
Notes.
Section 2.11. Cancellation.
------------
The Issuers at any time may deliver Notes to the Trustee for
cancellation. The Registrar and Paying Agent shall forward to the Trustee any
Notes surrendered to them for registration of transfer, exchange or payment. The
Trustee and no one else shall cancel all Notes surrendered for registration of
transfer, exchange, payment, replacement or cancellation and shall retain or
destroy cancelled Notes in accordance with its normal practices (subject to the
record retention requirement of the Exchange Act) unless the Issuers direct them
to be returned to the Issuers. The Issuers may not issue new Notes to replace
Notes that have been redeemed or paid or that have been delivered to the Trustee
for cancellation. All cancelled Notes held by the Trustee shall be destroyed and
certification of their destruction delivered to the Issuers unless by a written
order, signed by one Officer of each of the Issuers, the Issuers shall direct
that cancelled Notes be returned to them.
Section 2.12. Defaulted Interest.
- ------------ ------------------
If the Issuers default in a payment of interest on the Notes, the
Issuers shall pay the defaulted interest in any lawful manner plus, to the
extent lawful, interest payable on the defaulted interest, to the Persons who
are Holders on a subsequent special record date, which date shall be at the
earliest practicable date but in all events at least five Business Days prior to
the payment date, in each case at the rate provided in the Notes and in Section
4.1 hereof. The Issuers shall, with the consent of the Trustee, fix or cause to
be fixed each such special record date and payment date. At least 15 days
before the special record date, the Issuers (or the Trustee, in the name of and
at the expense of the Issuers) shall mail to the Holders a notice that states
the special record date, the related payment date and the amount of such
interest to be paid.
Section 2.13. Legends.
- ------------- -------
(a) Except as permitted by subsections (b) or (c) of this Section
2.13, each Note shall bear legends relating to restrictions on transfer pursuant
to the securities laws in substantially the form set forth on Exhibit A attached
hereto.
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(b) Upon any sale or transfer of a Restricted Security (including any
Restricted Security represented by a Global Note) pursuant to Rule 144 under the
Securities Act or pursuant to an effective registration statement under the
Securities Act:
(i) in the case of any Restricted Security that is a Definitive Note,
the Registrar shall permit the Holder thereof to exchange such Restricted
Security for a Definitive Note that does not bear the legends required by
subsection (a) above; and
(ii) in the case of any Restricted Security represented by a Global
Note, such Restricted Security shall not be required to bear the legends
required by subsection (a) above, but shall continue to be subject to the
provisions of Section 2.6(c) hereof; provided, that with respect to any
--------
request for an exchange of a Restricted Security that is represented by a
Global Note for a Definitive Note that does not bear the legends required
by subsection (a) above, which request is made in reliance upon Rule 144,
the Holder thereof shall certify in writing to the Registrar that such
request is being made pursuant to Rule 144.
(c) The Issuers (and the Guarantors) shall issue and the Trustee
shall authenticate Series B Notes in exchange for Series A Notes accepted for
exchange in the Exchange Offer. The Series B Notes shall not bear the legends
required by subsection (a) above unless the Holder of such Series A Notes is
either (A) a broker-dealer who purchased such Series A Notes directly from the
Issuers to resell pursuant to Rule 144A or any other available exemption under
the Securities Act, (B) a Person participating in the distribution of the Series
A Notes or (C) a Person who is an affiliate (as defined in Rule 144A) of the
Issuers.
Section 2.14. Deposit of Moneys.
- ------------- -----------------
Subject to Section 3.5 hereof, prior to 10:00 a.m. on each date on
which the principal of, premium, if any, and interest on the Notes are due, the
Issuers shall deposit with the Trustee or Paying Agent in immediately available
funds, money sufficient to make cash payments, if any, due on such date in a
timely manner that permits the Trustee or the Paying Agent to remit payment to
the Holders on such date.
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ARTICLE 3
REDEMPTION
Section 3.1. Notices to Trustee.
- ------------ ------------------
If the Issuers elect to redeem Notes pursuant to Section 3.7
hereof, or are required to redeem Notes pursuant to Section 3.8 hereof, the
Issuers shall furnish to the Trustee, at least 45 days but not more than 60 days
before a redemption date (except in the case of a Required Regulatory Redemption
requiring less notice), an Officers' Certificate setting forth (i) the clause of
Section 3.7 pursuant to which the redemption shall occur or if the redemption is
required by Section 3.8, (ii) the redemption date, (iii) the principal amount of
Notes to be redeemed and (iv) the redemption price.
Section 3.2. Selection of Notes to Be Redeemed.
- ------------ ---------------------------------
If less than all the Notes are to be redeemed pursuant to Section
3.7 or 3.8 hereof, the Trustee shall select the Notes to be redeemed in
compliance with the requirement of the principal national securities exchange,
if any, on which the Notes are listed, or, if the Notes are not so listed, pro
---
rata, by lot or by such method as the Trustee deems to be fair and reasonable.
- ----
The Trustee shall promptly notify the Issuers in writing of the
Notes selected for redemption and, in the case of any Note selected for partial
redemption, the principal amount thereof to be redeemed. Notes and portions of
Notes selected shall be in amounts of $1,000 or whole multiples of $1,000.
Provisions of this Indenture that apply to Notes called for redemption also
apply to portions of Notes called for redemption.
Section 3.3. Notice of Redemption.
- ------------ --------------------
At least 30 days but not more than 60 days before a redemption
date (except in the case of a Required Regulatory Redemption requiring less
notice), the Issuers shall mail a notice of redemption by first class mail to
each Holder whose Notes are to be redeemed at such Holder's registered address.
The notice shall identify the Notes to be redeemed and shall state:
(1) the redemption date;
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(2) the redemption price;
(3) if any Note is being redeemed in part only, the portion of
the principal amount of such Note to be redeemed and that, after the
redemption date, upon cancellation of the original Note, a new Note or
Notes in principal amount equal to the unredeemed portion shall be issued;
(4) the name and address of the Paying Agent;
(5) that Notes called for redemption must be surrendered to the
Paying Agent to collect the redemption price;
(6) that, unless the Issuers default in making such redemption
payment, interest on Notes or portions of Notes called for redemption
ceases to accrue on and after the redemption date;
(7) the paragraph of the Notes and/or the section of this
Indenture pursuant to which the Notes called for redemption are being
redeemed; and
(8) the CUSIP number of the Notes to be redeemed.
At the Issuers' request, the Trustee shall give the notice of
redemption in the name of the Issuers and at the Issuers' expense; provided that
--------
the Issuers shall deliver to the Trustee, at least 45 days (unless a shorter
period is acceptable to the Trustee) prior to the redemption date, an Officers'
Certificate requesting that the Trustee give such notice and setting forth the
information to be stated in such notice as provided in the preceding paragraph.
Section 3.4. Effect of Notice of Redemption.
- ------------ ------------------------------
Once notice of redemption has been mailed to the Holders in
accordance with Section 3.3 herein, Notes called for redemption become due and
payable on the redemption date at the redemption price. At any time prior to the
mailing of a notice of redemption to the Holders pursuant to Section 3.3, the
Issuers may with draw, revoke or rescind any notice of redemption delivered to
the Trustee without any continuing obligation to redeem the Notes as
contemplated by such notice of redemption.
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Section 3.5. Deposit of Redemption Price.
- ------------ ---------------------------
At or before 10:00 a.m. on the redemption date, the Issuers shall
deposit with the Trustee (to the extent not already held by the Trustee) or with
the Paying Agent money in immediately available funds sufficient to pay the
redemption price of and accrued interest on all Notes to be redeemed on that
date. The Trustee or the Paying Agent shall return to the Issuers any money
deposited with the Trustee or the Paying Agent by the Issuers in excess of the
amounts necessary to pay the redemption price of, and accrued interest on, all
Notes to be redeemed.
Interest on the Notes to be redeemed shall cease to accrue on the
applicable redemption date, whether or not such Notes are presented for payment,
if the Issuers make or deposit the redemption payment in accordance with this
Section 3.5. If any Note called for redemption shall not be paid upon surrender
for redemption because of the failure of the Issuers to comply with the
preceding paragraph, interest shall be paid on the unpaid principal, from the
redemption date until such principal is paid, and to the extent lawful on any
interest not paid on such unpaid principal, in each case at the rate provided in
the Notes.
Section 3.6. Notes Redeemed in Part.
- ------------ ----------------------
Upon surrender of a Note that is redeemed in part, the Issuers shall
issue and the Trustee shall authenticate for the Holder at the expense of the
Issuers a new Note equal in principal amount to the unredeemed portion of the
Note surrendered.
Section 3.7. Optional Redemption.
- ------------ -------------------
(a) Except as set forth in Sections 3.7(b) and 3.8 hereof, the Notes
are not redeemable at the Issuers' option prior to July 1, 2003. Thereafter,
the Notes will be subject to redemption at the option of the Issuers, in whole
or in part, at the redemption prices (expressed as percentages of principal
amount) set forth below, plus accrued and unpaid interest thereon and Liquidated
Damages, if any, to the applicable date of redemption, if redeemed during the
12-month period beginning on July 1 of the years indicated below:
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Year Percentage
---- ----------
2003 105.438%
2004 102.719%
2005 and thereafter 100.000%
(b) Notwithstanding the foregoing, at any time or from time to time
prior to July 1, 2002, the Issuers may redeem, at their option, up to 35% of the
aggregate principal amount of the Notes then outstanding at a redemption price
of 110.875% of the principal amount thereof, plus accrued and unpaid interest
thereon and Liquidated Damages, if any, through the applicable date of
redemption, with the net cash proceeds of one or more Public Equity Offerings;
provided, that (a) such redemption shall occur within 60 days of the date of
- --------
closing of such Public Equity Offering and (b) at least 65% of the aggregate
principal amount of Notes issued on or after the Issue Date remains outstanding
immediately after giving effect to each such redemption.
Section 3.8. Required Regulatory Redemption
- ------------ ------------------------------
The Notes shall be redeemable by the Issuers, in whole or in part, at any
time upon not less than 20 Business Days nor more than 60 days notice (or such
earlier date as may be required by any Governmental Authority) at 100% of the
principal amount thereof plus accrued and unpaid interest thereon and Liquidated
Damages, if any, to the redemption date, pursuant to a Required Regulatory
Redemption. Any Required Regulatory Redemption shall be made in accordance with
the applicable provisions of Sections 3.3, 3.4 and 3.5 unless other procedures
are required by any Governmental Authority.
ARTICLE 4
COVENANTS
Section 4.1. Payment of Notes.
- ------------ ----------------
The Issuers shall pay the principal and premium, if any, of, and
interest on, the Notes on the dates and in the manner provided in the Notes.
Principal, premium, if any, and interest shall be considered paid on the date
due if the Paying Agent, other than the Company or a Subsidiary of the Company,
holds on or before that date money deposited by the Issuers in immediately
available funds and
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designated for and sufficient to pay all principal, premium, if any, and
interest then due. Such Paying Agent shall return to the Issuers, no later than
three Business Days following the date of payment, any money that exceeds such
amount of principal, premium, if any, and interest then due and payable on the
Notes. The Issuers shall pay any and all amounts, including, without limitation,
Liquidated Damages, if any, on the dates and in the manner required under the
Registration Rights Agreement.
The Issuers shall pay interest (including post-petition interest) on
overdue principal at the rate equal to 1% per annum in excess of the then
applicable interest rate on the Notes to the extent lawful; it shall pay
interest (including post-petition interest) on overdue installments of interest
(without regard to any applicable grace period) at the same rate to the extent
lawful.
Section 4.2. Maintenance of Office or Agency.
- ------------ -------------------------------
The Issuers shall maintain an office or agency (which may be an office
of the Trustee, Registrar or co-registrar) in the Borough of Manhattan, the City
of New York where Notes may be surrendered for registration of transfer or ex
change and where notices and demands to or upon the Issuers in respect of the
Notes and this Indenture may be served. The Issuers shall give prompt written
notice to the Trustee of the location, and any change in the location, of such
office or agency. If at any time the Issuers shall fail to maintain any such
required office or agency or shall fail to furnish the Trustee with the address
thereof, such presentations, surrenders, notices and demands may be made or
served at the Corporate Trust Office of the Trustee.
The Issuers may also from time to time designate one or more other
offices or agencies where the Notes may be presented or surrendered for any or
all such purposes and may from time to time rescind such designations; provided,
--------
that no such designation or rescission shall in any manner relieve the Issuers
of their obligation to maintain an office or agency for such purposes. The
Issuers shall give prompt written notice to the Trustee of any such designation
or rescission and of any change in the location of any such other office or
agency.
The Issuers hereby designate the Corporate Trust Office of the Trustee
as one such office or agency of the Issuers in accordance with Section 2.3.
Section 4.3. Reports.
- ------------ -------
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(a) The Issuers shall file with the Trustee, within 15 days after the
date of filing by the Company with the Commission, copies of the reports,
information and other documents (or copies of such portions of any of the
foregoing as the Commission may by rules and regulations prescribe) that the
Company is required to file with the Commission pursuant to Section 13 or 15(d)
of the Exchange Act. If the Company is not subject to the requirements of
Section 13 or 15(d) of the Exchange Act, the Company shall file with the Trustee
all such reports, information and other documents as it would be required to
file if it were subject to the requirements of Section 13 or 15(d) of the
Exchange Act, within such 15-day period assuming the Company had filed such
reports, information and other documents with the Commission. From and after
the time the Issuers file a registration statement with the Commission with
respect to the Notes, the Company shall file such information with the
Commission; provided, that the Issuers shall not be in default of the provisions
of this Section 4.3 for any failure of the Company to file reports with the
Commission solely by refusal by the Commission to accept the same for filing.
The Issuers shall deliver (or cause the Trustee to deliver) copies of all
reports, information and documents required to be filed with the Trustee
pursuant to this Section 4.3 to the Holders at their addresses appearing in the
register of Notes maintained by the Registrar. The Issuers shall also comply
with the provisions of TIA (S) 314(a).
(b) If the Company is required to furnish annual, quarterly or current
reports to its members pursuant to the Exchange Act, the Issuers shall cause any
annual, quarterly, current or other financial report furnished by the Company
generally to its members to be filed with the Trustee and mailed to the Holders
at their addresses appearing in the register of Notes maintained by the
Registrar. If the Company is not required to furnish annual, quarterly or
current reports to its members pursuant to the Exchange Act, the Issuers shall
cause the financial statements of the Company and its consolidated Subsidiaries
(and similar financial statements for all unconsolidated Subsidiaries, if any),
including any notes thereto (and, with respect to annual reports, an auditors'
report by an accounting firm of established national reputation), and a
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," comparable to that which would have been required to appear in
annual or quarterly reports filed under Section 13 or 15(d) of the Exchange Act
to be so filed with the Trustee and mailed to the Holders promptly, but in any
event, within 90 days after the end of each of the fiscal years of the Company
and within 45 days after the end of each of the first three quarters of each
such fiscal year.
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(c) So long as is required for an offer or sale of the Notes to
qualify for an exemption under Rule 144A, the Issuers (and the Guarantors)
shall, upon request, provide the information required by clause (d)(4)
thereunder to each Holder and to each beneficial owner and prospective purchaser
of Notes identified by any Holder of Restricted Securities.
Section 4.4. Compliance Certificate.
- ------------ ----------------------
(a) The Issuers shall deliver to the Trustee, within 120 days after
the end of each fiscal year, an Officers' Certificate (provided, that two of the
--------
signatories to such Officers' Certificate shall be the principal executive
officer, principal financial officer or principal accounting officer of each of
the Issuers) stating that a review of the activities of the Issuers and the
Subsidiaries during the preceding fiscal year has been made under the
supervision of the signing Officers with a view to determine whether each has
kept, observed, performed and fulfilled their obligations under this Indenture,
and further stating, as to each such Officer signing such certificate, that each
of the Issuers and the Subsidiaries has kept, observed, performed and fulfilled
each and every covenant contained in this Indenture and is not in default in the
performance or observance of any of the terms, provisions and conditions hereof
or thereof (or, if a Default or Event of Default shall have occurred, describing
all such Defaults or Events of Default of which he may have knowledge and what
action each is taking or proposes to take with respect thereto).
(b) The year-end financial statements delivered pursuant to Section
4.3 above shall be accompanied by a written statement of the independent public
accountants of the Company (which shall be a firm of established national
reputation reasonably satisfactory to the Trustee) that in making the
examination necessary for certification of such financial statements nothing has
come to their attention which would lead them to believe that either the Company
or any of its Subsidiaries has violated any provisions of this Indenture or, if
any such violation has occurred, specifying the nature and period of existence
thereof, it being under stood that such accountants shall not be liable
directly or indirectly to any Person for any failure to obtain knowledge of any
such violation.
(c) So long as any of the Notes are outstanding, the Issuers shall
deliver to the Trustee forthwith upon any Officer becoming aware of (i) any
Default or Event of Default or (ii) any event of default under any mortgage,
indenture or instrument referred to in Section 6.1(5) hereof, an Officers'
Certificate specifying
49
<PAGE>
such Default, Event of Default or other event of default and what action the
Issuers are taking or propose to take with respect thereto.
Section 4.5. Taxes.
- ------------ -----
The Company shall, and shall cause its Subsidiaries to, file all tax
returns required to be filed and to pay prior to delinquency all material taxes,
assessments and governmental levies except as contested in good faith and by
appropriate proceedings and for which reserves have been established in
accordance with GAAP.
Section 4.6. Stay, Extension and Usury Laws.
- ------------ ------------------------------
The Issuers (and each Guarantor) covenant (to the extent that it may
lawfully do so) that neither of them shall at any time insist upon, plead, or in
any manner whatsoever claim or take the benefit or advantage of, any stay,
extension, usury or other law, wherever enacted, now or at any time hereafter in
force, that would prohibit or forgive the payment of all or any portion of the
principal of or interest on the Notes, or that may affect the covenants or the
performance of this Indenture; and each of the Issuers and each Guarantor (to
the extent that it may lawfully do so) hereby expressly waives all benefit or
advantage of any such law and covenants that it shall not, by resort to any such
law, hinder, delay or impede the execution of any power herein granted to the
Trustee but shall suffer and permit the execution of every such power as though
no such law has been enacted.
Section 4.7. Limitation on Restricted Payments.
- ------------ ---------------------------------
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly:
(i) declare or pay any dividend or make any distribution on account of
any Equity Interests of the Company or any of its Subsidiaries or make any other
payment to any Excluded Person or Affiliate thereof (other than (A) dividends or
distributions payable in Equity Interests (other than Disqualified Capital
Stock) of the Company or (B) amounts payable to the Company or any Restricted
Subsidiary);
(ii) purchase, redeem or otherwise acquire or retire for value any Equity
Interest of the Company, any Subsidiary or any other Affiliate of the Company
(other than any such Equity Interest owned by the Company or any Restricted
Subsidiary);
50
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(iii) make any principal payment on, or purchase, redeem, defease or
otherwise acquire or retire for value any Indebtedness of the Company or any
Guarantor that is subordinated in right of payment to the Notes or such
Guarantor's Guaranty thereof, as the case may be, prior to any scheduled
principal payment, sinking fund payment or other payment at the stated maturity
thereof; or
(iv) make any Restricted Investment
(all such payments and other actions set forth in clauses (i) through (iv) above
being collectively referred to as "Restricted Payments"), unless, at the time of
such Restricted Payment:
(a) no Default or Event of Default has occurred and is continuing or
would occur as a consequence thereof, and
(b) immediately after giving effect to such Restricted Payment on a pro
forma basis, the Company could incur at least $1.00 of additional Indebtedness
under the Interest Coverage Ratio test set forth in Section 4.9 hereof, and
(c) such Restricted Payment (the value of any such payment, if other than
cash, being determined in good faith by the Managers of the Company and
evidenced by a resolution set forth in an Officers' Certificate delivered to the
Trustee), together with the aggregate of all other Restricted Payments made
after the Issue Date (including Restricted Payments permitted by clauses (i) and
(ii) of the next following paragraph and excluding Restricted Payments permitted
by the other clauses therein), is less than the sum of
(1) 50% of the Consolidated Net Income of the Company for the period
(taken as one accounting period) from the beginning of the first
fiscal quarter commencing immediately after the Issue Date to
the end of the Company's most recently ended fiscal quarter for
which internal financial statements are available at the time of
such Restricted Payment (or, if such Consolidated Net Income for
such period is a deficit, 100% of such deficit), plus
(2) 100% of the aggregate net cash proceeds (or of the net cash
proceeds received upon the conversion of non-cash proceeds into
cash) received by the Company from the issuance or sale,
51
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other than to a Subsidiary, of Equity Interests of the Company
(other than Disqualified Capital Stock) after the Issue Date and
on or prior to the time of such Restricted Payment, plus
(3) 100% of the aggregate net cash proceeds (or of the net cash
proceeds received upon the conversion of non-cash proceeds into
cash) received by the Company from the issuance or sale, other
than to a Subsidiary, of any convertible or exchangeable debt
security of the Company that has been converted or exchanged
into Equity Interests of the Company (other than Disqualified
Capital Stock) pursuant to the terms thereof after the Issue
Date and on or prior to the time of such Restricted Payment
(including any additional net proceeds received by the Company
upon such conversion or exchange) plus
(4) the aggregate Return from Unrestricted Subsidiaries after the
Issue Date and on or prior to the time of such Restricted
Payment.
The foregoing provisions shall not prohibit:
(i) the payment of any dividend within 60 days after the date of
declaration thereof, if at said date of declaration such payment
would not have been prohibited by the provisions of this Indenture;
(ii) the redemption, purchase, retirement or other acquisition of any
Equity Interests of the Company or Indebtedness of the Company or any
Restricted Subsidiary in exchange for, or out of the proceeds of, the
substantially concurrent sale (other than to a Subsidiary) of, other
Equity Interests of the Company (other than Disqualified Capital
Stock);
(iii) so long as clause (a) above is satisfied, with respect to each
taxable year that the Company qualifies as a Flow Through Entity, the
payment of Permitted Tax Distributions; provided, that (A) prior to
any payment of Permitted Tax Distributions the Company provides an
Officers' Certificate and Opinion of Counsel to the effect that the
Company and each Subsidiary in respect of which such distributions
are being made, qualify as Flow Through Entities for Federal income
52
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tax purposes and for the states in respect of which such
distributions are being made and (B) at the time of such
distribution, the most recent audited financial statements of the
Company provided to the Trustee pursuant to Section 4.3 hereof,
provide that the Company and each such Subsidiary were treated as
Flow Through Entities for the period of such financial statements;
(iv) the redemption, repurchase or payoff of any Indebtedness of the
Company or a Restricted Subsidiary with proceeds of any Refinancing
Indebtedness permitted to be incurred pursuant to Section 4.9(i)
hereof;
(v) cash capital contributions, loans or advances to the BHR Joint
Venture that are used by the BHR Joint Venture to make capital
expenditures in the ordinary course of business; provided, that
concurrently with such contribution, loan or advance all other
members of the BHR Joint Venture make cash capital contributions,
loans or advances, as the case may be, on a pro rata basis, based on
each member's owner ship interest in the BHR Joint Venture;
(vi) capital contributions to the BHR Joint Venture to pay for harbor
improvements required by the Harbor Lease (or otherwise necessary
for ordinary course operations of the Majestic Star Casino Vessel)
and other improvements ancillary to such harbor improvements;
(vii) Restricted Investments in an aggregate amount not to exceed $10
million to satisfy the Company's off-site development obligation
under the Development Agreement, less any amounts paid by a third-
party on behalf of the Company; and
(viii) so long as clause (a) above is satisfied, Restricted Payments
required under the Management Agreement as in effect on the Issue
Date; provided, that the Interest Coverage Ratio for the Company's
most recently ended four full fiscal quarters for which internal
financial statements are available immediately preceding the date on
which such payment is made would have been not less than 1.75 to
1.0, determined on a pro forma basis, as if such payment had been
made during such four-quarter period.
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Not later than the date of making any Restricted Payment, the Company
shall deliver to the Trustee an Officers' Certificate stating that such
Restricted Payment is permitted and setting forth the basis upon which the
calculations required by this Section 4.7 were computed, which calculations
may be based upon the Company's latest available financial statements.
Section 4.8. Limitation on Restrictions on Subsidiary Dividends.
- ------------ --------------------------------------------------
The Company shall not, and shall not permit any Restricted
Subsidiary to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any encumbrance or restriction on the ability of any
Restricted Subsidiary to:
(i) pay dividends or make any other distributions to the Company or any
of its Restricted Subsidiaries (a) on such Restricted Subsidiary's
Capital Stock or (b) with respect to any other interest or
participation in, or measured by, such Restricted Subsidiary's
profits, or
(ii) pay any Indebtedness owed to the Company or any of its Restricted
Subsidiaries, or
(iii) make loans or advances to the Company or any of its Restricted
Subsidiaries, or
(iv) transfer any of its assets to the Company or any of its Restricted
Subsidiaries,
except, with respect to clauses (i) through (iv) above, for such encumbrances or
restrictions existing under or by reason of:
(1) any Credit Facility containing dividend or other payment restrictions
that are not more restrictive than those contained in the documents
governing the Original Credit Facility;
(2) this Indenture, the Security Documents and the Notes;
(3) applicable law;
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(4) Acquired Debt; provided, that such encumbrances and restrictions are
not applicable to any Person, or the properties or assets of any
Person, other than the Person, or the property or assets of the
Person, so acquired;
(5) customary non-assignment and net worth provisions of any contract,
lease or license entered into in the ordinary course of business;
(6) customary restrictions on the transfer of assets subject to a
Permitted Lien imposed by the holder of such Lien; and
(7) the agreements governing permitted Refinancing Indebtedness;
provided, that such restrictions contained in any agreement governing
such Refinancing Indebtedness are no more restrictive than those
contained in any agreements governing the Indebtedness being
refinanced.
Section 4.9. Limitation on Incurrence of Indebtedness.
- ----------- ----------------------------------------
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, (i) create, incur, issue, assume,
guaranty or otherwise become directly or indirectly liable with respect to,
contingently or otherwise (collectively, "incur"), any Indebtedness (including,
without limitation, Acquired Debt) or (ii) issue any Disqualified Capital Stock;
provided, that the Company may incur Indebtedness (including, without
limitation, Acquired Debt) and issue shares of Disqualified Capital Stock (and a
Restricted Subsidiary may incur Acquired Debt) if (x) no Default or Event of
Default shall have occurred and be continuing at the time of, or would occur
after giving effect on a pro forma basis to such incurrence or issuance, and (y)
the Interest Coverage Ratio for the Company's most recently ended four full
fiscal quarters for which internal financial statements are available
immediately preceding the date on which such additional Indebtedness is incurred
or such Disqualified Capital Stock is issued would have been not less than 2.0
to 1.0, determined on a pro forma basis (including a pro forma application of
the net proceeds therefrom), as if the additional Indebtedness had been
incurred, or the Disqualified Capital Stock had been issued, as the case may be,
at the beginning of such four-quarter period; provided, that in the case of
Indebtedness (other than Indebtedness outstanding under the Credit Facility,
Purchase Money Obligations, Capital Lease Obligations or Acquired Debt), the
Weighted Average Life to Maturity
55
<PAGE>
and final stated maturity of such Indebtedness is equal to or greater than the
Weighted Average Life to Maturity and final stated maturity of the Notes.
Notwithstanding the foregoing, the foregoing limitations will not
prohibit the incurrence of:
(a) Indebtedness under the Credit Facility in an aggregate principal
amount not to exceed, at any time, the excess of (x) $20 million less
the aggregate amount of repayments of indebtedness contemplated by
Section 4.10(iii) hereof (the "Permitted Amount") over (y) the
aggregate principal amount of BHR Attributed Debt then outstanding;
(b) Purchase Money Obligations in an aggregate principal amount not to
exceed, at any time, the product of (i) $2.5 million times (ii) the
number of Casinos owned and operated solely by the Company and its
Restricted Subsidiaries on the date of such incurrence;
(c) FF&E Financing in an aggregate principal amount not to exceed, at any
time, the sum of (i) the principal amount of FF&E Financing
outstanding on the Issue Date and (ii) the product of (x) $5.0 million
times (y) the number of Casinos owned and operated solely by the
Company and its Restricted Subsidiaries on the date of such
incurrence;
(d) performance bonds, appeal bonds, surety bonds, insurance obligations
or bonds and other similar bonds or obligations (including Obligations
under letters of credit) incurred in the ordinary course of business;
(e) Hedging Obligations incurred to fix the interest rate on any variable
rate Indebtedness otherwise permitted by this Indenture; provided,
that the notional principal amount of each such Hedging Obligation
does not exceed the principal amount of the Indebtedness to which such
Hedging Obligation relates;
(f) Indebtedness outstanding on the Issue Date, including the Notes
outstanding on the Issue Date;
(g) Indebtedness incurred by the Company in an aggregate principal amount
not to exceed, at any time, $3 million;
56
<PAGE>
(h) any Guaranty of the Notes; and
(i) Indebtedness issued in exchange for, or the proceeds of which are
contemporaneously used to extend, refinance, renew, replace, or
refund (collectively, "Refinance"), Indebtedness incurred pursuant to
the Interest Coverage Ratio test set forth in the immediately
preceding paragraph, clause (f) above or this clause (i) (the
"Refinancing Indebtedness"); provided, that (i) the principal amount
of such Refinancing Indebtedness does not exceed the principal amount
of Indebtedness so Refinanced (including any required premiums and
out-of-pocket expenses reasonably incurred in connection therewith),
(ii) the Refinancing Indebtedness has a final scheduled maturity
that equals or exceeds the final stated maturity, and a Weighted
Average Life to Maturity that is equal to or greater than the
Weighted Average Life to Maturity, of the Indebtedness being
Refinanced and (iii) the Refinancing Indebtedness ranks, in right of
payment, no more favorable to the Notes than the Indebtedness being
Refinanced.
Section 4.10. Limitation on Asset Sales.
- ------------ -------------------------
The Company shall not, and shall not permit any Restricted Subsidiary
to, make any Asset Sale unless
(i) the Company or such Restricted Subsidiary receives consideration at
the time of such Asset Sale not less than the fair market value of
the assets subject to such Asset Sale;
(ii) at least 75% of the consideration for such Asset Sale is in the form
of cash or Cash Equivalents or liabilities of the Company or any
Restricted Subsidiary (other than liabilities that are by their
terms subordinated to the Notes) that are assumed by the transferee
of such assets (provided, that following such Asset Sale there is no
further recourse to the Company or its Restricted Subsidiaries with
respect to such liabilities); and
(iii) within 270 days of such Asset Sale, the Net Proceeds thereof are (A)
invested in assets related to the business of the Company or its
Re stricted Subsidiaries (which, in the case of an Asset Sale of the
Majestic Star Casino Vessel or any replacement Gaming Vessel (a
57
<PAGE>
"Replacement Vessel"), must be a Gaming Vessel having a fair market
value, as determined by an independent appraisal, at least equal to
the fair market value of the Majestic Star Casino Vessel or such
Replacement Vessel immediately preceding such Asset Sale), (B)
applied to repay Indebtedness under Purchase Money Obligations
incurred in connection with the asset so sold, (C) applied to repay
Indebtedness under the Credit Facility and permanently reduce the
commitment thereunder in the amount of the Indebtedness so repaid or
(D) to the extent not used as provided in clauses (A), (B), or (C)
applied to make an offer to purchase Notes as described below (an
"Excess Proceeds Offer"); provided, that the Company will not be
required to make an Excess Proceeds Offer until the amount of Excess
Proceeds is greater than $5,000,000.
The foregoing provisions in (i) or (ii) above shall not apply to an
Event of Loss.
Pending the final application of any Net Proceeds, the Company may
temporarily reduce Indebtedness under the Credit Facility or temporarily invest
such Net Proceeds in Cash Equivalents.
Net Proceeds not invested or applied as set forth in the preceding
clauses (A), (B) or (C) constitute "Excess Proceeds." If the Company elects, or
becomes obligated to make an Excess Proceeds Offer, the Issuers shall offer to
purchase Notes having an aggregate principal amount equal to the Excess Proceeds
(the "Purchase Amount"), at a purchase price equal to 100% of the aggregate
principal amount thereof, plus accrued and unpaid interest thereon and
Liquidated Damages, if any, to the purchase date. The Issuers must commence such
Excess Proceeds Offer not later than 30 days after the expiration of the 270 day
period following the Asset Sale that produced such Excess Proceeds. If the
aggregate purchase price for the Notes tendered pursuant to the Excess Proceeds
Offer is less than the Excess Proceeds, the Company and its Restricted
Subsidiaries may use the portion of the Excess Proceeds remaining after payment
of such purchase price for general corporate purposes.
Each Excess Proceeds Offer shall remain open for a period of 20
Business Days and no longer, unless a longer period is required by law (the
"Excess Proceeds Offer Period"). Promptly after the termination of the Excess
----------------------------
Proceeds Offer Period (the "Excess Proceeds Payment Date"), the Issuers shall
----------------------------
purchase and
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<PAGE>
mail or deliver payment for the Purchase Amount for the Notes or portions
thereof tendered, pro rata or by such other method as may be required by law,
--------
or, if less than the Purchase Amount has been tendered, all Notes tendered
pursuant to the Excess Proceeds Offer. The principal amount of Notes to be
purchased pursuant to an Excess Proceeds Offer may be reduced by the principal
amount of Notes acquired by the Issuers through purchase or redemption (other
than pursuant to a Change of Control Offer) subsequent to the date of the Asset
Sale and surrendered to the Trustee for cancellation.
Each Excess Proceeds Offer shall be conducted in compliance with all
applicable laws, including without limitation, Regulation 14E of the Exchange
Act and the rules thereunder and all other applicable Federal and state
securities laws. To the extent that the provisions of any securities laws or
regulations conflict with the provisions of this Section 4.10, the Issuers shall
comply with the applicable securities laws and regulations and shall not be
deemed to have breached its obligations under this Section 4.10 by virtue
thereof. The Company shall not, and shall not permit any of its Subsidiaries
to, create or suffer to exist or become effective any restriction that would
impair the ability of the Issuers to make an Excess Proceeds Offer upon an Asset
Sale or, if such Excess Proceeds Offer is made, to pay for the Notes tendered
for purchase.
The Issuers shall, no later than 30 days following the expiration of
the 12-month period following the Asset Sale that produced Excess Proceeds,
commence the Excess Proceeds Offer by mailing to the Trustee and each Holder, at
such Holder's last registered address, a notice, which shall govern the terms of
the Excess Proceeds Offer, and shall state:
(1) that the Excess Proceeds Offer is being made pursuant to this
Section 4.10, the principal amount of Notes which shall be accepted for
payment and that all Notes validly tendered shall be accepted for payment
on a pro rata basis;
--- ----
(2) the purchase price and the date of purchase;
(3) that any Notes not tendered or accepted for payment pursuant
to the Excess Proceeds Offer shall continue to accrue interest;
(4) that, unless the Issuers default in the payment of the
purchase price with respect to any Notes tendered, Notes accepted for
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<PAGE>
payment pursuant to the Excess Proceeds Offer shall cease to accrue
interest after the Excess Proceeds Payment Date;
(5) that Holders electing to have Notes purchased pursuant to an
Excess Proceeds Offer shall be required to surrender their Notes, with the
form entitled "Option of Holder to Elect Purchase" on the reverse of the
Note completed, to the Issuers prior to the close of business on the third
Business Day immediately preceding the Excess Proceeds Payment Date;
(6) that Holders shall be entitled to withdraw their election if
the Issuers receive, not later than the close of business on the second
Business Day preceding the Excess Proceeds Payment Date, a telegram, telex,
facsimile transmission or letter setting forth the name of the Holder, the
principal amount of Notes the Holder delivered for purchase and a statement
that such Holder is withdrawing his election to have such Notes purchased;
(7) that Holders whose Notes are purchased only in part shall be
issued Notes representing the unpurchased portion of the Notes surrendered;
provided that each Note purchased and each new Note issued shall be in
--------
principal amount of $1,000 or whole multiples thereof; and
(8) the instructions that Holders must follow in order to tender
their Notes.
On or before the Excess Proceeds Payment Date, the Issuers shall (i)
accept for payment on a pro rata basis the Notes or portions thereof tendered
--- ----
pursuant to the Excess Proceeds Offer, (ii) deposit with the Paying Agent money
sufficient to pay the purchase price of all Notes or portions thereof so
accepted and (iii) deliver to the Trustee the Notes so accepted, together with
an Officers' Certificate stating that the Notes or portions thereof tendered to
the Issuers are accepted for payment. The Paying Agent shall promptly mail to
each Holder of Notes so accepted payment in an amount equal to the purchase
price of such Notes, and the Trustee shall promptly authenticate and mail to
such Holders new Notes equal in principal amount to any unpurchased portion of
the Notes surrendered.
The Issuers shall make a public announcement of the results of the
Excess Proceeds Offer as soon as practicable after the Excess Proceeds Payment
Date. For the purposes of this Section 4.10, the Trustee shall act as the
Paying Agent.
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Section 4.11. Limitation on Transactions With Affiliates.
- ------------ ------------------------------------------
The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, directly or indirectly, sell, lease, transfer or
otherwise dispose of any of its properties or assets to, or purchase any
property or assets from, or enter into any contract, agreement, understanding,
loan, advance or guaranty with, or for the benefit of, any Affiliate (each of
the foregoing, an "Affiliate Transaction"), except for:
(i) Affiliate Transactions that, together with all related Affiliate
Transactions, have an aggregate value of not more than $2,000,000;
provided, that (i) such transactions are conducted in good faith and
on terms that are no less favorable to the Company or the relevant
Restricted Subsidiary than those that would have been obtained in a
comparable transaction at such time by the Company or such Restricted
Subsidiary on an arm's-length basis from a Person that is not an
Affiliate of the Company or such Restricted Subsidiary and (ii) prior
to entering into such transaction the Company shall have delivered to
the Trustee an Officers' Certificate certifying to such effect;
(ii) Affiliate Transactions that, together with all related Affiliate
Transactions, have an aggregate value of not more than $5,000,000;
pro vided, that (i) a majority of the disinterested Managers
determine that such transactions are conducted in good faith and on
terms that are no less favorable to the Company or the relevant
Restricted Subsidiary than those that would have been obtained in a
comparable transaction at such time by the Company or such Restricted
Subsidiary on an arm's-length basis from a Person that is not an
Affiliate of the Company or such Restricted Subsidiary and (ii)
prior to entering into such transaction the Company shall have
delivered to the Trustee an Officers' Certificate certifying to such
effect; or
(iii) Affiliate Transactions for which the Company delivers to the Trustee
an opinion as to the fairness to the Company or such Restricted
Subsidiary from a financial point of view issued by an accounting,
appraisal or investment banking firm of national standing.
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Notwithstanding the foregoing, the following shall be deemed not to
be Affiliate Transactions:
(a) Restricted Payments permitted by Section 4.7 hereof;
(b) payments pursuant to the Berthing Agreement;
(c) the non-exclusive licensing of any service mark of the Company to
an Affiliate or Affiliates of the Company; and
(d) transactions between or among the Company and any Wholly Owned
Subsidiary of the Company.
Section 4.12. Limitation on Liens.
- ------------- -------------------
The Company shall not, and shall not permit any Restricted
Subsidiary to, directly or indirectly, create, incur, assume or suffer to exist
any Lien on any asset (including, without limitation, all real, tangible or
intangible property) of the Company or any Restricted Subsidiary, whether now
owned or hereafter acquired, or on any income or profits therefrom, or assign or
convey any right to receive income therefrom, except Permitted Liens.
Section 4.13. Existence.
- ------------- ----------
Subject to Article 5 of this Indenture, the Issuers shall do or
cause to be done all things necessary to preserve and keep in full force and
effect (i) their respective limited liability company and corporate existence,
and corporate, partnership or other existence of each of the Subsidiaries, in
accordance with their respective organizational documents (as the same may be
amended from time to time) and (ii) their (and the Subsidiaries') rights
(charter and statutory), licenses (including gaming and related licenses) and
franchises; provided, that the Issuers shall not be required to preserve any
such right, license or franchise, or the corporate, partnership or other
existence of any Subsidiary, if the Board of Directors on behalf of the Company
shall determine in good faith that the preservation thereof is no longer
desirable in the conduct of the business of the Issuers and the Company's
Subsidiaries taken as a whole and that the loss thereof is not adverse in any
material respect to the Holders.
Section 4.14. Repurchase Upon a Change of Control.
- ------------- ------------------------------------
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Upon the occurrence of a Change of Control, the Issuers shall offer to
repurchase all of the Notes then outstanding (the "Change of Control Offer") at
a purchase price equal to 101% of the aggregate principal amount thereof, plus
accrued and unpaid interest thereon and Liquidated Damages, if any, to the date
of repurchase (the "Change of Control Payment").
The Change of Control Offer shall be made in compliance with all
applicable laws, including without limitation, Regulation 14E of the Exchange
Act and the rules thereunder and all other applicable Federal and state
securities laws. To the extent that the provisions of any securities laws or
regulations conflict with the provisions of this Section 4.14, the Issuers shall
comply with the applicable securities laws and regulations and shall not be
deemed to have breached its obligations under this Section 4.14 by virtue
thereof.
Within 30 days following any Change of Control, the Issuers shall
commence the Change of Control Offer by mailing to the Trustee and each Holder a
notice, which shall govern the terms of the Change of Control Offer, and shall
state that:
(i) the Change of Control Offer is being made pursuant to this
Section 4.14 and that all Notes tendered will be accepted for payment,
(ii) the purchase price and the purchase date, which shall be a
Business Day no earlier than 30 days nor later than 45 days from the date
such notice is mailed (the "Change of Control Payment Date"),
------------------------------
(iii) that any Note not tendered for payment pursuant to the
Change of Control Offer shall continue to accrue interest,
(iv) that, unless the Issuers default in the payment of the
Change of Control Payment, all Notes accepted for payment pursuant to the
Change of Control Offer shall cease to accrue interest on the Change of
Control Payment Date,
(v) that any Holder electing to have Notes purchased pursuant
to a Change of Control Offer shall be required to surrender such Notes,
with the form entitled "Option of Holder to Elect Purchase" on the reverse
of the Notes completed, to the Paying Agent at the address specified in the
notice
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prior to the close of business on the third Business Day preceding
the Change of Control Payment Date,
(vi) that any Holder shall be entitled to withdraw such
election if the Paying Agent receives, not later than the close of business
on the second Business Day preceding the Change of Control Payment Date, a
telegram, telex, facsimile transmission or letter setting forth the name of
the Holder, the principal amount of Notes such Holder delivered for
purchase, and a statement that such Holder is withdrawing his election to
have such Notes purchased,
(vii) that a Holder whose Notes are being purchased only in part
shall be issued new Notes equal in principal amount to the unpurchased
portion of the Notes surrendered, which unpurchased portion must be equal
to $1,000 in principal amount or an integral multiple thereof,
(viii) the instructions that Holders must follow in order to
tender their Notes, and
(ix) the circumstances and relevant facts regarding such Change
of Control.
On the Change of Control Payment Date, the Issuers shall, to the
extent lawful, (i) accept for payment the Notes or portions thereof tendered
pursuant to the Change of Control Offer, (ii) deposit with the Paying Agent an
amount equal to the Change of Control Payment in respect of all Notes or
portions thereof so tendered and not withdrawn, and (iii) deliver or cause to be
delivered to the Trustee the Notes so accepted, together with an Officers'
Certificate stating that the Notes or portions thereof tendered to the Issuers
are accepted for payment. The Paying Agent shall promptly mail to each Holder
of Notes so accepted payment in an amount equal to the purchase price for such
Notes, and the Trustee shall authenticate and mail (or cause to be transferred
by book entry) to each Holder a new Note equal in principal amount to any
unpurchased portion of the Notes surrendered, if any; provided, that each such
new Note will be in the principal amount of $1,000 or an integral multiple
thereof.
The Issuers shall make a public announcement of the results of the
Change of Control Offer on or as soon as practicable after the Change of Control
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<PAGE>
Payment Date. For the purposes of this Section 4.14, the Trustee shall act as
the Paying Agent.
The Issuers shall not be required to make a Change of Control
Offer upon a Change of Control if a third party makes the Change of Control
Offer in the manner, at the times and otherwise in compliance with the
requirements set forth in this Section 4.14 and purchases all Notes validly
tendered and not withdrawn under such Change of Control Offer.
Section 4.15. Maintenance of Properties.
- ------------- -------------------------
The Company shall, and shall cause each of its Subsidiaries to,
maintain their properties and assets in normal working order and condition as on
the date of this Indenture (reasonable wear and tear excepted) and make all
necessary repairs, renewals, replacements, additions, betterments and
improvements thereto, as shall be reasonably necessary for the proper conduct of
the business of the Issuers and the Subsidiaries taken as a whole; provided,
--------
that nothing herein shall prevent the Issuers or any of the Subsidiaries from
discontinuing any maintenance of any such properties if the Company determines
that such discontinuance is desirable in the conduct of the business of the
Issuers and the Subsidiaries taken as a whole.
Section 4.16. Maintenance of Insurance.
- ------------- ------------------------
The Company shall, and shall cause each of its Subsidiaries to,
maintain liability, casualty and other insurance (including self-insurance
consistent with prior practice) with responsible insurance companies in such
amounts and against such risks as is in accordance with customary industry
practice in the general areas in which the Issuers and the Subsidiaries operate.
Section 4.17. Restrictions on Sale and Issuance of Subsidiary Stock.
- ------------- -----------------------------------------------------
The Company shall not sell, and shall not permit any Restricted
Subsidiary to issue or sell, any Equity Interests (other than directors'
qualifying shares) of any Restricted Subsidiary to any Person other than the
Company or a Wholly Owned Subsidiary of the Company; provided, that the Company
and its Restricted Subsidiaries may sell all (but not less than all) of the
Capital Stock of a Restricted Subsidiary owned by the Company and its Restricted
Subsidiaries if the Net Proceeds from such Asset Sale are used in accordance
with the terms of Section 4.10 hereof.
65
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Section 4.18. Line of Business.
- ------------- ----------------
The Company shall not, and shall not permit any of its Restricted
Subsidiaries or the BHR Joint Venture to, directly or indirectly engage to any
substantial extent in any line or lines of business activity other than a
Related Business.
Section 4.19. Restrictions on BHR Joint Venture.
- ------------ ---------------------------------
The Company shall not permit the BHR Joint Venture to, directly or
indirectly:
(a) incur any Indebtedness or issue any Disqualified Capital Stock;
provided that the BHR Joint Venture may incur:
(i) Indebtedness if immediately after giving effect to such
incurrence on a pro forma basis, the Company could incur at
least $1.00 of additional Indebtedness under the Interest
Coverage Ratio Test set forth in Section 4.9 hereof;
(ii) Indebtedness; provided, that after giving effect to the
incur rence of such Indebtedness, the aggregate principal
amount of BHR Attributed Debt does not exceed the Permitted
Amount less the aggregate principal amount of Indebtedness
then outstanding under Section 4.9(a) hereof; and
(iii) Indebtedness incurred to Refinance any Indebtedness incurred
pursuant to clause (i) above or Indebtedness of the BHR
Joint Venture outstanding on the Issue Date;
(b) create, incur, assume or suffer to exist any Lien on any asset of
the BHR Joint Venture, or on any income or profits therefrom, or
assign or convey any right to receive income therefrom, except
Permitted Liens;
(c) declare or pay any dividend or make any distribution on account of
any Equity Interests of the BHR Joint Venture, unless such
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<PAGE>
distributions are made on a pro rata basis to all members of the
BHR Joint Venture, based on each member's ownership interest
therein;
(d) purchase, redeem or otherwise acquire or retire for value any
Equity Interest of the BHR Joint Venture (other than any such
Equity Interest owned by the Company or any Restricted
Subsidiary); or
(e) transfer, other than in the ordinary course of business, any
assets of the BHR Joint Venture, unless:
(i) the BHR Joint Venture receives consideration at the time of
such transfer not less than the fair market value of the
assets subject to such transfer;
(ii) at least 75% of the consideration for such transfer is in
the form of cash or Cash Equivalents or liabilities of the
BHR Joint Venture that are assumed by the transferee of
such assets (provided, that following such transfer there
is no further recourse to the BHR Joint Venture with
respect to such liabilities); and
(iii) within 270 days of such transfer, the net proceeds thereof
are (A) invested in assets related to the business of the
BHR Joint Venture, (B) applied to permanently repay
Indebtedness of the BHR Joint Venture, or (C) distributed
to the members of the BHR Joint Venture in accordance with
paragraph (c) above.
Section 4.20. Restrictions on Activities of Capital.
- ------------ -------------------------------------
Capital shall not hold any assets, become liable for any
obligations or engage in any business activities; provided, that Capital may be
a co-obligor of the Notes pursuant to the terms of this Indenture and as
contemplated by the Purchase Agreement, dated as of June 15, 1999, by and among
the Issuers and the Initial Purchaser, and, as necessary, may engage in any
activities directly related or necessary in connection therewith.
ARTICLE 5
SUCCESSORS
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Section 5.1. When the Company May Merge, etc.
- ------------ --------------------------------
Neither Issuer shall consolidate or merge with or into (regardless
of whether such Issuer is the surviving corporation), or sell, assign, transfer,
lease, convey or otherwise dispose of all or substantially all of its properties
or assets (determined on a consolidated basis for the Company and its Restricted
Subsidiaries) in one or more related transactions to, any other Person, unless:
(i) such Issuer is the surviving Person or the Person formed by or
surviving any such consolidation or merger (if other than such
Issuer) or to which such sale, assignment, transfer, lease,
conveyance or other disposition has been made is a corporation
organized and existing under the laws of the United States of
America, any state thereof or the District of Columbia;
(ii) the Person formed by or surviving any such consolidation or merger
(if other than such Issuer) or the Person to which such sale,
assignment, transfer, lease, conveyance or other disposition has
been made assumes all the Obligations of such Issuer, pursuant to
a supplemental indenture and in a form reasonably satisfactory to
the Trustee, under the Notes, this Indenture, the Security
Documents and the Registration Rights Agreement;
(iii) immediately after giving effect to such transaction on a pro forma
basis, no Default or Event of Default exists;
(iv) such transaction would not result in the loss or suspension or
material impairment of any Gaming License unless a comparable
replacement Gaming License is effective prior to or simultaneously
with such loss, suspension or material impairment; and
(v) such Issuer, or any Person formed by or surviving any such
consolidation or merger, or to which such sale, assignment,
transfer, lease, conveyance or other disposition has been made,
(A) has Consolidated Net Worth (immediately after the transaction
but prior to any purchase accounting adjustments resulting from
the transaction) equal to or greater than the Consolidated Net
Worth of such Issuer immediately preceding the transaction and (B)
will be
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<PAGE>
permitted, at the time of such transaction and after giving pro
forma effect thereto as if such transaction had occurred at the
beginning of the applicable four-quarter period, to incur at least
$1.00 of additional Indebtedness pursuant to the Interest Coverage
Ratio test set forth in Section 4.9 hereof.
The Issuers shall deliver to the Trustee prior to the consummation
of any proposed transaction an Officers' Certificate to the foregoing effect, an
Opinion of Counsel, stating that all conditions precedent to the proposed
transaction provided for in this Indenture have been complied with and a written
statement from a firm of independent public accountants of established national
reputation reasonably satisfactory to the Trustee stating that the proposed
transaction complies with clause (v).
For purposes of this Section 5.1, the transfer of all or
substantially all of the properties and assets of one or more Subsidiaries of
the Company, which properties and assets, if held by the Company instead of such
Subsidiaries, would constitute all or substantially all of the properties and
assets of the Company on a consolidated basis, shall be deemed to be the
transfer of all or substantially all of the properties and assets of the
Company.
Section 5.2. Successor Substituted.
----------- ---------------------
In the event of any transaction (other than a lease) contemplated
by Section 5.1 hereof in which neither of the Issuers is the surviving Person,
the successor formed by such consolidation or into or with which the applicable
Issuer is merged or to which such transfer is made, or formed by such
reorganization, as the case may be, shall succeed to, and be substituted for,
and may exercise every right and power of, such Issuer, and such Issuer shall be
discharged from its Obligations under this Indenture, the Notes, the Security
Documents and the Registration Rights Agreement with the same effect as if such
successor Person had been named as such Issuer herein or therein. The Trustee
shall have the right to require any such Person to ensure, by executing and
delivering appropriate instruments and Opinions of Counsel, that the Trustee
continues to hold a first priority Lien on all Collateral for the benefit of the
Holders.
ARTICLE 6
DEFAULTS AND REMEDIES
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Section 6.1. Events of Default.
- ------------ -----------------
Each of the following is an "Event of Default":
----------------
(1) The Issuers default in the payment of interest on any Note when the
same becomes due and payable and the Default continues for a period of
30 days;
(2) The Issuers default in the payment of principal (or premium, if any)
on any Note when the same becomes due and payable at maturity, upon
redemption, by acceleration, or otherwise:;
(3) the Issuers default in the performance of or breaches the provisions
of Sections 4.10 or 4.14 or Article 5 hereof;
(4) the Issuers or any Guarantor fails to comply with any of its other
agreements or covenants in, or provisions of, the Notes or this Inden
ture and the Default continues for 60 days after written notice
thereof has been given to the Issuers by the Trustee or to the Issuers
and the Trustee by the Holders of at least 25% in aggregate principal
amount of the then outstanding Notes, such notice to state that it is
a "Notice of Default";
(5) default under (after giving effect to any applicable grace periods or
any extension of any maturity date) any mortgage, indenture or
instrument under which there may be issued or by which there may be
secured or evidenced any Indebtedness for money borrowed by the
Issuers or any Restricted Subsidiary (or the payment of which is
guaranteed by the Issuers or any Restricted Subsidiary), whether such
Indebtedness or guaranty now exists or is created after the Issue
Date, if (A) either (1) such default results from the failure to pay
principal of or interest on such Indebtedness or (2) as a result of
such default the maturity of such Indebtedness has been accelerated,
and (B) the principal amount of such Indebtedness, together with the
principal amount of any other such Indebtedness with respect to which
such a payment default (after the expiration of any applicable grace
period or any extension of the maturity date) has occurred, or the
maturity of which has been so accelerated, exceeds $5,000,000 in the
aggregate;
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(6) a final non-appealable judgment or judgments for the payment of money
(other than judgments as to which a reputable insurance company has
accepted full liability) is or are entered by a court or courts of
competent jurisdiction against the Issuers or any Subsidiary of the
Company and such judgment or judgments remain undischarged, unbonded
or unstayed for a period of 60 days after entry, provided that the
aggregate of all such judgments exceeds $5,000,000;
(7) intentionally omitted;
(8) the cessation of substantially all gaming operations of the Issuers
for more than 60 days, except as a result of an Event of Loss,
(9) any revocation, suspension, expiration (without previous or concur
rent renewal) or loss of any Gaming License for more than 60 days;
(10) any failure to comply with any material agreement or covenant in, or
material provision of, any Security Document;
(11) either of the Issuers or any Guarantor, pursuant to or within the
meaning of any Bankruptcy Law:
(a) commences a voluntary case,
(b) consents to the entry of an order for relief against it in an
involuntary case,
(c) consents to the appointment of a Custodian of it or for all or
substantially all of its property,
(d) makes a general assignment for the benefit of its creditors, or
(e) admits in writing its inability to pay debts as the same become
due; and
(12) a court of competent jurisdiction enters an order or decree under any
Bankruptcy Law that:
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(a) is for relief against either of the Issuers or any Guarantor in
an involuntary case,
(b) appoints a Custodian of either of the Issuers or any Guarantor or
for all or substantially all of their property, or
(c) orders the liquidation of either of the Issuers or any Guarantor,
and such order or decree remains unstayed and in effect for 60 days.
The Issuers shall, upon becoming aware of any Default or Event of
Default, deliver to the Trustee a statement specifying such Default or Event of
Default and what action the Issuers are taking or propose to take with respect
thereto.
Section 6.2. Acceleration.
- ------------ ------------
Subject to the terms of the Intercreditor Agreement, if an Event of
Default (other than an Event of Default specified in clauses (11) and (12) of
Section 6.1) occurs and is continuing, the Trustee by written notice to the
Issuers, or the Holders of at least 25% in principal amount of the then
outstanding Notes by written notice to the Issuers and the Trustee, may declare
the unpaid principal of and any accrued interest on all the Notes to be due and
payable. Upon such declaration the principal and interest shall be due and
payable immediately. If an Event of Default specified in clause (11) or (12) of
Section 6.1 with respect to the Issuers occurs, all outstanding Notes shall ipso
----
facto become and be immediately due and payable without any declaration or other
- -----
act on the part of the Trustee or any Holder.
Section 6.3. Other Remedies.
- ------------ --------------
If an Event of Default occurs and is continuing, subject to the terms
of the Intercreditor Agreement, the Trustee may pursue any available remedy
(under this Indenture or otherwise) to collect the payment of principal or
interest on the Notes to enforce the performance of any provision of the Notes,
this Indenture or the Security Documents.
The Trustee may maintain a proceeding even if it does not possess any
of the Notes or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Holder in exercising any right or remedy accruing
upon an Event of Default shall not impair the right or remedy or constitute a
waiver
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of or acquiescence in the Event of Default. All remedies are cumulative to the
extent permitted by law.
Section 6.4. Waiver of Past Defaults.
- ------------ -----------------------
Holders of a majority of the aggregate principal amount of the then
outstanding Notes by written notice to the Trustee may on behalf of the Holders
of all of the Notes (a) waive any existing Default or Event of Default and its
consequences under this Indenture except a continuing Default or Event of
Default in the payment of the principal of, or interest on, any Note or a
Default or an Event of Default with respect to any covenant or provision which
cannot be modified or amended without the consent of the Holder of each
outstanding Note affected, and/or (b) rescind an acceleration and its
consequences if the rescission would not conflict with any judgment or decree
and if all existing Events of Default (except nonpayment of principal or
interest that has become due solely because of the acceleration) have been cured
or waived. Upon any such waiver, such Default shall cease to exist, and any
Event of Default arising therefrom shall be deemed to have been cured for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other Default or impair any right consequent thereon.
Section 6.5. Control by Majority.
- ------------ -------------------
The Holders of a majority in principal amount of the then outstanding
Notes may direct the time, method and place of conducting any proceeding for any
remedy available to the Trustee or exercising any trust or power conferred on
it. However, the Trustee may refuse to follow any direction that conflicts with
law or this Indenture, that the Trustee determines may be unduly prejudicial to
the rights of other Holders, or that may involve the Trustee in personal
liability.
Section 6.6. Limitation on Suits.
- ------------ -------------------
A Holder may pursue a remedy with respect to this Indenture or the
Notes only if:
(a) the Holder gives to the Trustee written notice of a continuing
Event of Default;
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(b) the Holders of at least 25% in principal amount of the then
outstanding Notes make a written request to the Trustee to pursue the
remedy;
(c) such Holder or Holders offer and, if requested, provide to the
Trustee indemnity satisfactory to the Trustee against any loss, liability
or expense;
(d) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer and, if requested, the provision of
indemnity; and
(e) during such 60-day period the Holders of a majority in principal
amount of the then outstanding Notes do not give the Trustee a direction
inconsistent with the request.
A Holder may not use this Indenture to prejudice the rights of another Holder or
to obtain a preference or priority over another Holder.
Section 6.7. Rights of Holders to Receive Payment.
- ------------ ------------------------------------
Notwithstanding any other provision of this Indenture, the right of
any Holder of a Note to receive payment of principal and interest on the Note,
on or after the respective due dates expressed in the Note, or to bring suit for
the enforcement of any such payment on or after such respective dates, shall not
be impaired or affected without the consent of the Holder.
Section 6.8. Collection Suit by Trustee.
- ------------ --------------------------
If an Event of Default specified in Section 6.1(1) or (2) occurs and
is continuing, the Trustee is authorized to recover judgment in its own name and
as trustee of an express trust against the Issuers for the whole amount of
principal and interest remaining unpaid on the Notes and interest on overdue
principal (and premium, if any) and, to the extent lawful, interest on overdue
interest and such further amount as shall be sufficient to cover the costs and
expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel.
Section 6.9. Trustee May File Proofs of Claim.
- ------------ --------------------------------
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The Trustee is authorized to file such proofs of claim and other
papers or documents as may be necessary or advisable in order to have the claims
of the Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Holders allowed in any judicial proceedings relative to the Issuers (or any
other obligor under the Notes), their creditors or their property and shall be
entitled and empowered to collect, receive and distribute any money or other
property payable or deliverable on any such claims and any custodian in any such
judicial proceeding is hereby authorized by each Holder to make such payments
to the Trustee, and in the event that the Trustee shall consent to the making of
such payments directly to the Holders, to pay to the Trustee any amount due to
it for the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 7.7 hereof. To the extent that the payment of any such compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel, and
any other amounts due the Trustee under Section 7.7 hereof out of the estate in
any such proceeding, shall be denied for any reason, payment of the same shall
be secured by a Lien on, and shall be paid out of, any and all distributions,
dividends, money, securities and other properties that the Holders of the Notes
may be entitled to receive in such proceeding whether in liquidation or under
any plan of reorganization or arrangement or otherwise. Nothing herein
contained shall be deemed to authorize the Trustee to authorize or consent to or
accept or adopt on behalf of any Holder any plan of reorganization, arrangement,
adjustment or composition affecting the Notes or the rights of any Holder
thereof, or to authorize the Trustee to vote in respect of the claim of any
Holder in any such proceeding.
Section 6.10. Priorities.
- ------------- ----------
Subject to the terms of the Intercreditor Agreement, if the
Trustee collects any money pursuant to this Article, it shall pay out the money
in the following order:
First: to the Trustee, its agents and attorneys for amounts due
under Section 7.7, including payment of all compensation, expense and
liabilities incurred, and all advances made, by the Trustee and the costs and
expenses of collection;
Second: to Holders for amounts due and unpaid on the Notes for
principal and interest, ratably, without preference or priority of any kind,
according to the amounts due and payable on the Notes for principal and
interest, respectively;
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Third: without duplication, to Holders for any other Obligations
owing to the Holders under the Notes or this Indenture; and
Fourth: to the Issuers or to such party as a court of competent
jurisdiction shall direct.
The Trustee may fix a record date and payment date for any payment to
Holders.
Section 6.11. Undertaking for Costs.
- ------------- ---------------------
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as a Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section 6.11 does not apply to a suit by the Trustee, a suit by a Holder
pursuant to Section 6.6, or a suit by Holders of more than 10% in principal
amount of the then outstanding Notes.
ARTICLE 7
TRUSTEE
Section 7.1. Duties of Trustee.
- ------------ -----------------
(1) If an Event of Default has occurred and is
continuing, the Trustee shall exercise such of the rights and powers vested in
it by this Indenture and use the same degree of care and skill in their exercise
as a prudent person would exercise or use under the circumstances in the conduct
of his or her own affairs.
(2) Except during the continuance of an Event of
Default:
(a) The duties of the Trustee shall be determined
solely by the express provisions of this Indenture, and the Trustee need
perform only those duties that are specifically set forth in this Indenture
and the Security Documents, and no others, and no implied covenants or
obligations shall be read into this Indenture against the Trustee.
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(b) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this Indenture and the
Security Documents. However, the Trustee shall examine the certificates
and opinions to determine whether or not they conform to the requirements
of this Indenture and the Security Documents.
(3) The Trustee may not be relieved from liabilities for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(a) This paragraph does not limit the effect of paragraph (2) of
this Section.
(b) The Trustee shall not be liable for any error of judgment
made in good faith by a Responsible Officer, unless it is proved that the
Trustee was negligent in ascertaining the pertinent facts.
(c) The Trustee shall not be liable with respect to any action
it takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.5.
(4) Whether or not therein expressly so provided, every provision of
this Indenture that in any way relates to the Trustee is subject to paragraphs
(1), (2) and (3) of this Section.
(5) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or incur any liability. The Trustee may refuse to
perform any duty or exercise any right or power unless it receives security and
indemnity satisfactory to it against any loss, liability or expense.
(6) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Issuers.
Money held in trust by the Trustee need not be segregated from other funds
except to the extent required by law.
(7) The Trustee is hereby authorized and directed to enter into the
Intercreditor Agreement upon execution thereof by the other parties thereto.
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(8) If the Issuers shall enter into any FF&E Financing secured by a
Permitted Vessel Lien, the Trustee is hereby authorized, at the Company's
request, to enter into an intercreditor agreement with the related FF&E Lender,
provided, that (a) such agreement contains the agreements required under clause
(a) of the definition of Permitted Vessel Lien, (b) the rights of the Trustee
and the Holders hereunder and under the Security Documents are not adversely
affected thereby in any respect, and (c) the Holders are not otherwise adversely
affected thereby.
Section 7.2. Rights of Trustee.
- ------------ -----------------
(1) The Trustee may conclusively rely upon any document believed by
it to be genuine and to have been signed or presented by the proper Person. The
Trustee need not investigate any fact or matter stated in the document.
(2) Before the Trustee acts or refrains from acting, it may require
an Officers' Certificate or an Opinion of Counsel or both. The Trustee shall not
be liable for any action it takes or omits to take in good faith in reliance on
such Officers' Certificate or Opinion of Counsel. The Trustee may consult with
counsel and the advice of such counsel or any Opinion of Counsel shall be full
and complete authorization and protection from liability in respect of any
action taken, suffered or omitted by it hereunder in good faith and in reliance
thereon.
(3) The Trustee may act through agents and shall not be responsible
for the misconduct or negligence of any agent appointed with due care.
(4) The Trustee shall not be liable for any action it takes or omits
to take in good faith which it believes to be authorized or within its rights or
powers conferred upon it by this Indenture.
(5) Unless otherwise specifically provided in this Indenture or the
Security Documents, any demand, request, direction or notice from the Issuers
shall be sufficient if signed by an Officer of each of the Issuers, on behalf of
the Issuers.
(6) Except with respect to Section 4.1, the Trustee shall have no
duty to inquire as to the performance of the Issuers' covenants in Article 4
hereof. In addition, the Trustee shall not be deemed to have knowledge of any
Default or Event of Default except (i) any Event of Default occurring pursuant
to Sections
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6.1(1), 6.1(2) and 4.1, or (ii) any Default or Event of Default of which the
Trustee shall have received written notification or obtained actual knowledge.
Section 7.3. Individual Rights of Trustee.
- ------------ ----------------------------
The Trustee in its individual or any other capacity may become the
owner or pledgee of Notes and may otherwise deal with the Issuers or an
Affiliate of the Issuers with the same rights it would have if it were not
Trustee. Any Agent may do the same with like rights. However, the Trustee is
subject to Sections 7.10 and 7.11.
Section 7.4. Trustee's Disclaimer.
- ------------ --------------------
The Trustee shall not be responsible for and makes no representation
as to the validity or adequacy of this Indenture, the Security Documents or the
Notes or as to the adequacy of the security for the Notes, it shall not be
accountable for the Issuers' use of the proceeds from the Notes or any money
paid to the Issuers or upon the Issuers' direction under any provision hereof,
it shall not be responsible for the use or application of any money received by
any Paying Agent other than the Trustee and it shall not be responsible for any
statement or recital herein or any statement in the Notes or any other document
in connection with the sale of the Notes or pursuant to this Indenture other
than its certificate of authentication.
Section 7.5. Notice of Defaults.
- ------------ ------------------
If a Default or Event of Default occurs and is continuing and if the
Trustee has knowledge thereof (within the meaning of Section 7.2(6)), the
Trustee shall mail to the Holders a notice of the Default or Event of Default
within 90 days after it occurs.
Section 7.6. Reports by Trustee to Holders.
- ------------ -----------------------------
Within 60 days after each May 15 beginning with the May 15 following
the date of this Indenture, the Trustee shall mail to the Holders a brief report
dated as of such reporting date that complies with TIA (S) 313(a) (but if no
event described in TIA (S) 313(a) has occurred within the twelve months
preceding the reporting date, no report need be transmitted). The Trustee also
shall comply with TIA (S) 313(b). The Trustee shall also transmit by mail all
reports as required by TIA (S) 313(c).
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Commencing at the time this Indenture is qualified under the TIA, a
copy of each report at the time of its mailing to the Holders shall be filed
with the Commission and each stock exchange on which the Notes are listed. The
Issuers shall promptly notify the Trustee when the Notes are listed on any stock
exchange.
At the express direction of the Company and at the Company's expense,
the Trustee will provide any Gaming Authority with:
(i) copies of all notices, reports and other written communications
that the Trustee gives to Holders;
(ii) a list of all of the Holders promptly after the original
issuance of the Notes and periodically thereafter if the Company
so directs;
(iii) notice of any Default or Event of Default under this Indenture,
any acceleration of the Indebtedness evidenced hereby, the
institution of any legal actions or proceedings before any court
or governmental authority in respect of a Default or Event of
Default hereunder;
(iv) notice of the removal or resignation of the Trustee within five
Business Days of the effectiveness thereof;
(v) notice of any transfer or assignment of rights under this Inden-
ture known to the Trustee within five Business Days thereof; and
(vi) a copy of any amendment to the Notes or this Indenture within
five Business Days of the effectiveness thereof.
To the extent requested by the Company and at the Company's expense,
the Trustee shall cooperate with any Gaming Authority in order to provide such
Gaming Authority with the information and documentation requested and as
otherwise required by applicable law.
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Section 7.7. Compensation and Indemnity.
- ------------ --------------------------
The Issuers shall pay to the Trustee from time to time reasonable
compensation for its acceptance of this Indenture and services hereunder. The
Trustee's compensation shall not be limited by any law on compensation of a
trustee of an express trust. The Issuers shall reimburse the Trustee promptly
upon request for all reasonable disbursements, advances and expenses incurred or
made by it in addition to the compensation for its services. Such expenses shall
include the reasonable compensation, disbursements and expenses of the Trustee's
agents and counsel, except such disbursements, advances and expenses as may be
attributable to its negligence or bad faith.
Except as set forth below, the Issuers shall indemnify the Trustee and
its officers, directors, agents and employees against any and all losses,
liabilities or expenses incurred by it without negligence or bad faith on its
part arising out of or in connection with the acceptance or administration of
its duties under this Indenture and the Security Documents, including the costs
and expenses of enforcing this Indenture or the Security Documents against the
Issuers and defending itself against any claim or liability in connection with
the exercise or performance of any of its powers or duties hereunder. The
Trustee shall notify the Issuers promptly of any claim for which it may seek
indemnity. Failure by the Trustee to so notify the Issuers shall not relieve the
Issuers of their obligations hereunder. The Issuers shall defend the claim and
the Trustee shall cooperate in the defense. In the event that a conflict of
interest or conflicting defenses would arise in connection with the
representation of the Issuers and the Trustee by the same counsel, the Trustee
may have separate counsel and the Issuers shall pay the reasonable fees and
expenses of such counsel. The Issuers need not pay for any settlement made
without its consent, which consent shall not be unreasonably withheld.
The obligations of the Issuers under this Section 7.7 shall survive
the satisfaction and discharge of this Indenture.
The Issuers need not reimburse any expense or indemnify against any
loss or liability incurred by the Trustee through its own negligence or bad
faith.
To secure the Issuers' payment obligations in this Section, the
Trustee shall have a Lien prior to the Notes on all money or property held or
collected by the Trustee, except that held in trust to pay principal of (and
premium, if any) and
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interest on particular Notes. Such Lien shall survive the satisfaction and
discharge of this Indenture.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.1(11) or (12) occurs, the expenses and the
compensation for the services are intended to constitute expenses of
administration under any Bankruptcy Law.
Section 7.8. Replacement of Trustee.
- ------------ ----------------------
A resignation or removal of the Trustee and appointment of a successor
Trustee shall become effective only upon the successor Trustee's acceptance of
appointment as provided in this Section 7.8.
The Trustee may resign at any time and be discharged from the trust
hereby created by so notifying the Issuers. The Holders of a majority in
principal amount of the then outstanding Notes may remove the Trustee by so
notifying the Trustee and the Issuers. The Issuers may remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10;
(b) the Trustee is adjudged a bankrupt or an insolvent or an order
for relief is entered with respect to the Trustee under any Bankruptcy Law;
(c) a Custodian or public officer takes charge of the Trustee or its
property;
(d) the Trustee becomes incapable of acting; or
(e) the Trustee is found unsuitable or unqualified by any Gaming
Authority.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Issuers shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holders
of a majority in principal amount of the then outstanding Notes may appoint a
successor Trustee to replace the successor Trustee appointed by the Issuers.
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If any Gaming Authority requires the Trustee to be approved, licensed
or qualified and the Trustee fails or declines to do so, such approval, license
or qualification shall be obtained upon the request of, and at the expense of,
the Company, unless the Trustee declines to do so, in which case the Trustee
shall be replaced in accordance with this Section 7.8, or, if the Trustee's
relationship with the Company may, in the Company's discretion, jeopardize any
material Gaming License or franchise or right or approval granted thereto, the
Trustee shall resign, and, in addition, the Trustee may, at its option, resign
if the Trustee in its sole discretion determines not to be so approved, licensed
or qualified.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Issuers or the
Holders of at least 10% in principal amount of the then outstanding Notes may
petition any court of competent jurisdiction for the appointment of a successor
Trustee.
If the Trustee after written request by any Holder who has been a
Holder for at least six months fails to comply with Section 7.10, such Holder
may petition any court of competent jurisdiction for the removal of the Trustee
and the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its appoint-
ment to the retiring Trustee and to the Issuers. Thereupon, the resignation or
removal of the retiring Trustee shall become effective, and the successor
Trustee shall have all the rights, powers and duties of the Trustee under this
Indenture. The successor Trustee shall mail a notice of its succession to the
Holders. The retiring Trustee shall promptly transfer all property held by it as
Trustee to the successor Trustee, provided that all sums owing to the Trustee
--------
hereunder have been paid and subject to the Lien provided for in Section 7.7.
Notwithstanding replacement of the Trustee pursuant to this Section 7.8, the
Issuers' obligations under Section 7.7 hereof shall continue for the benefit of
the retiring Trustee, and the Issuers shall pay to any such replaced or removed
Trustee all amounts owed under Section 7.7 upon such replacement or removal.
Section 7.9. Successor Trustee by Merger, etc.
- ------------ ---------------------------------
If the Trustee consolidates, merges or converts into, or transfers all
or substantially all of its corporate trust business to, another corporation or
banking association, the successor corporation without any further act shall be
the successor Trustee.
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Section 7.10. Eligibility; Disqualification.
- ------------- -----------------------------
There shall at all times be a Trustee hereunder that shall (a) be a
corporation organized and doing business under the laws of the United States of
America or of any state thereof or of the District of Columbia authorized under
such laws to exercise corporate trustee power, (b) be subject to supervision or
examination by Federal or state or the District of Columbia authority, and (c)
have a combined capital and surplus of at least $100,000,000 as set forth in its
most recent published annual report of condition.
This Indenture shall always have a Trustee who satisfies the
require ments of TIA (S)(S) 310(a)(1), 310(a)(2) and 310(a)(5). The Trustee is
subject to TIA (S) 310(b); provided, however, that there shall be excluded from
-------- -------
the operations of TIA (S) 310(b)(1) any indenture or indentures under which
other securities, or certificates of interest or participation in other
securities, of the Issuers are outstanding, if the requirements for such
exclusion set forth in TIA (S) 310(b)(1) are met.
Section 7.11. Preferential Collection of Claims Against Issuers.
- ------------- -------------------------------------------------
The Trustee is subject to TIA (S) 311(a), excluding any creditor
relationship listed in TIA (S) 311(b). A Trustee who has resigned or been
removed shall be subject to TIA (S) 311(a) to the extent indicated therein. The
provisions of TIA (S) 311 shall apply to the Issuers, as obligors on the Notes.
ARTICLE 8
DISCHARGE; LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Section 8.1. Discharge; Option to Effect Legal Defeasance or Covenant
- ------------ --------------------------------------------------------
Defeasance.
----------
This Indenture shall cease to be of further effect (except that the
Issuers' and the Guarantors' obligations under Section 7.7 and the Trustee's and
the Paying Agent's obligations under Sections 8.6 and 8.7 shall survive) when
all outstanding Notes theretofore authenticated and issued have been delivered
(other than destroyed, lost or stolen Notes that have been replaced or paid) to
the Trustee for cancellation and the Issuers or the Guarantors have paid all
sums payable hereunder. In addition, the Issuers may elect at any time to have
Section 8.2 or
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Section 8.3, at the Issuers' option, of this Indenture applied to all
outstanding Notes upon compliance with the conditions set forth below in this
Article 8.
Section 8.2. Legal Defeasance and Discharge.
- ------------ ------------------------------
Upon the Issuers' exercise under Section 8.1 hereof of the option
applicable to this Section 8.2, except as set forth below, the Issuers and the
Guarantors shall be deemed to have been discharged from their respective
obligations with respect to all outstanding Notes on the date the conditions set
forth below are satisfied (hereinafter, "Legal Defeasance"). Following such
Legal Defeasance, (a) the Issuers shall be deemed to have paid and discharged
the entire indebtedness outstanding hereunder, and this Indenture shall cease to
be of further effect as to all outstanding Notes and Guarantees, and (b) the
Issuers and the Guarantors shall be deemed to have satisfied all other of their
respective obligations under the Notes, the Guaranty and this Indenture (and the
Trustee, on demand of and at the expense of the Issuers, shall execute proper
instruments acknowledging the same), except for the following which shall
survive until otherwise terminated or discharged hereunder:
(i) the rights of Holders to receive payments in respect of the
principal of, premium, if any, and interest (and Liquidated Damages, if
any) on such Notes when such payments are due from the trust described in
Section 8.5;
(ii) the Issuers' obligations under Sections 2.4, 2.6, 2.7,
2.10, 4.2, 8.5, 8.6 and 8.7 hereof; and
(iii) the rights, powers, trusts, duties and immunities of the
Trustee hereunder and the Issuers' and the Guarantors' obligations in
connection therewith.
Subject to compliance with the provisions of this Article 8, the Company may
exercise its option under this Section 8.2 notwithstanding the prior exercise of
its option under Section 8.3 hereof.
Section 8.3. Covenant Defeasance.
- ------------ -------------------
Upon the Issuers' exercise under Section 8.1 hereof of the option
applicable to this Section 8.3, the Issuers and the Guarantors shall be released
from
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their respective obligations under the covenants contained in Sections 4.3, 4.4,
4.7, 4.8, 4.9, 4.10, 4.11, 4.12, 4.14, 4.15, 4.16, 4.17, 4.18, 4.19, 4.20 and
Article V hereof on and after the date the conditions set forth below are
satisfied (hereinafter, "Covenant Defeasance"), and the Notes shall thereafter
be deemed not "outstanding" for the purposes of any direction, waiver, consent
or declaration or act of Holders (and the consequences of any thereof) in
connection with such covenants, but shall continue to be deemed "outstanding"
for all other purposes hereunder. Following such Covenant Defeasance, (a)
neither the Issuers nor any Guarantor need comply with, and none of them shall
have any liability in respect of, any term, condition or limitation set forth in
any such covenant, whether directly or indirectly, by reason of any reference
elsewhere herein to any such covenant or by reason of any reference in any such
covenant to any other provision herein or in any other document, but, except as
specified above, the remainder of this Indenture, the Notes and the Guaranty
shall be unaffected thereby, and (b) Sections 6.1(3) through 6.1(10) hereof
shall not constitute Events of Default with respect to the Notes.
Section 8.4. Conditions to Legal Defeasance or Covenant Defeasance.
- ------------ -----------------------------------------------------
The following shall be the conditions to the application of either
Section 8.2 or 8.3 hereof to the outstanding Notes:
(i) the Issuers shall irrevocably have deposited or caused to be deposited
with the Trustee, in trust, for the benefit of the Holders, cash in
U.S. dollars, non-callable Government Securities, or a combination
thereof, in such amounts as will be sufficient, in the opinion of a
nationally recognized firm of independent public accountants, to pay
the principal of, premium, if any, and interest on the outstanding
Notes on the stated maturity or on the applicable redemption date, as
the case may be, and the Issuers shall specify whether the Notes are
being defeased to maturity or to a particular redemption date;
(ii) in the case of Legal Defeasance, the Issuers shall have delivered to
the Trustee an Opinion of Counsel confirming that (A) the Issuers have
received from, or there has been published by, the Internal Revenue
Service a ruling or (B) since the Issue Date, there has been a change
in the applicable Federal income tax law, in either case to the effect
that, and based thereon such Opinion of Counsel shall confirm that,
the Holders will not recognize income, gain or loss for Federal income
tax purposes as a result of such Legal Defeasance and will be subject
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to Federal income tax on the same amounts, in the same manner and at
the same times as would have been the case if such Legal Defeasance
had not occurred;
(iii) in the case of Covenant Defeasance, the Issuers shall have delivered
to the Trustee an Opinion of Counsel confirming that the Holders will
not recognize income, gain or loss for Federal income tax purposes as
a result of such Covenant Defeasance and will be subject to Federal
income tax on the same amounts, in the same manner and at the same
times as would have been the case if such Covenant Defeasance had not
occurred;
(iv) no Default or Event of Default shall have occurred and be continuing
on the date of such deposit (other than a Default or Event of Default
resulting from the borrowing of funds to be applied to such deposit);
(v) such Legal Defeasance or Covenant Defeasance will not result in a
breach or violation of, or constitute a default under any material
agreement or instrument (other than this Indenture) to which the
Issuers or any of the Subsidiaries is a party or by which the Issuers
or any of the Subsidiaries is bound;
(vi) the Issuers shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Issuers with
the intent of preferring the Holders over the other creditors of the
Issuers with the intent of defeating, hindering, delaying or
defrauding creditors of the Issuers or others; and
(vii) the Issuers shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating, subject to
certain factual assumptions and bankruptcy and insolvency exceptions,
that all conditions precedent provided for in this Indenture relating
to the Legal Defeasance or the Covenant Defeasance have been complied
with.
Section 8.5. Deposited Cash and U.S. Government Obligations to be Held in
- ------------ ------------------------------------------------------------
Trust; Other Miscellaneous Provisions.
-------------------------------------
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Subject to Section 8.6 hereof, all cash and U.S. Government
Obligations (including the proceeds thereof) deposited with the Trustee (or
other qualifying trustee, collectively for purposes of this Section 8.5, the
"Paying Agent") pursuant to Section 8.4 hereof in respect of the outstanding
Notes shall be held in trust and applied by the Paying Agent, in accordance with
the provisions of such Notes and this Indenture, to the payment, either directly
or through any other Paying Agent as the Trustee may determine, to the Holders
of such Notes of all sums due and to become due thereon in respect of principal,
premium, if any, and interest (and Liquidated Damages, if any).
The Issuers shall pay and indemnify the Trustee against any tax, fee
or other charge imposed on or assessed against the U.S. Government Obligations
deposited pursuant to Section 8.4 or the principal and interest received in
respect thereof other than any such tax, fee or other charge which by law is for
the account of the Holders of outstanding Notes.
Section 8.6. Repayment to the Issuers.
- ------------ ------------------------
(a) The Trustee or the Paying Agent shall deliver or pay to the
Issuers from time to time upon the request of the Issuers any cash or U.S.
Government Obligations held by it as provided in Section 8.4 hereof which in
the opinion of a nationally recognized firm of independent public accountants
expressed in a written certification thereof delivered to the Trustee (which may
be the opinion delivered under Section 8.4(a) hereof), are in excess of the
amount thereof that would then be required to be deposited to effect an
equivalent Legal Defeasance or Covenant Defeasance.
(b) Any cash and U.S. Government Obligations (including the proceeds
thereof) deposited with the Trustee or any Paying Agent, or then held by the
Issuers, in trust for the payment of the principal of, premium, if any, or
interest (and Liquidated Damages, if any) on any Note and remaining unclaimed
for two years after such principal, and premium, if any, or interest has become
due and payable shall be paid to the Issuers on their request; and the Holder of
such Note shall thereafter look only to the Issuers for payment thereof, and all
liability of the Trustee or such Paying Agent with respect to such trust money
shall thereupon cease; provided, however, that the Trustee or such Paying Agent,
before being required to make any such repayment, shall at the expense of the
Issuers cause to be published once, in the New York Times and The Wall Street
Journal (national edition), notice that such money remains unclaimed and that,
after a date specified therein, which
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shall not be less than 30 days from the date of such notification or
publication, any unclaimed balance of such money then remaining will be repaid
to the Issuers.
Section 8.7. Reinstatement.
- ------------ -------------
If the Trustee or Paying Agent is unable to apply any cash or U.S.
Government Obligations in accordance with Section 8.2 or 8.3 hereof, as the case
may be, of this Indenture by reason of any order or judgment of any court or
govern mental authority enjoining, restraining or otherwise prohibiting such
application, or if any event occurs at any time in the period ending on the 91st
day after the date of deposit pursuant to Section 8.2 or 8.3 hereof which event
would constitute an Event of Default under Section 6.1 (11) or (12) had Legal
Defeasance or Covenant Defeasance, as the case may be, not occurred, then the
Issuers' and the Guarantors' obligations under this Indenture and the Notes
shall be revived and reinstated as though no deposit had occurred pursuant to
Section 8.2 or 8.3 hereof until such time as the Trustee or Paying Agent is
permitted to apply such money in accordance with Section 8.2 or 8.3 hereof, as
the case may be; provided, however, that, if the Issuers make any payment of
principal of, premium, if any, or interest (and Liquidated Damages, if any) on
any Note following the reinstatement of its obligations, the Issuers shall be
subrogated to the rights of the Holders of such Notes to receive such payment
from the cash or U.S. Government Obligations held by the Trustee or Paying
Agent.
ARTICLE 9
AMENDMENTS
Section 9.1. Without Consent of Holders.
- ------------ --------------------------
The Issuers, the Guarantors and the Trustee may amend or supplement
this Indenture, the Notes and the Security Documents, without the consent of any
Holder:
(1) to cure any ambiguity, defect or inconsistency;
(2) to provide for uncertificated Notes in addition to or in
place of certificated Notes;
(3) to comply with Article 5 and Section 10.12 hereof;
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(4) to make any change that would provide any additional rights
or benefits to the Holders of the Notes or that does not adversely affect
the legal rights hereunder or thereunder of any Holder;
(5) to comply with requirements of the Commission in order to
effect or maintain the qualification of this Indenture under the TIA; or
(6) to release any Guarantee of the Notes permitted to be
released under Section 10.7 hereof.
Upon the request of the Issuers, accompanied by a resolution of the
Board of Directors of each of the Issuers authorizing the execution of any such
supplemental indenture or amendment, and upon receipt by the Trustee of the
documents described in Section 9.6 hereof required or requested by the Trustee,
the Trustee shall join with the Issuers in the execution of any supplemental
indenture or amendment authorized or permitted by the terms of this Indenture
and shall make any further appropriate agreements and stipulations which may be
therein contained, but the Trustee shall not be obligated to enter into such
supplemental indenture or amendment that affects its own rights, duties or
immunities under this Indenture or otherwise.
Section 9.2. With Consent of Holders.
- ------------ -----------------------
(a) Subject to Sections 6.4 and 6.7 hereof, the Issuers and the Trustee,
as applicable, may amend, or waive any provision of, this Indenture or the
Notes, with the written consent of the Holders of at least a majority of the
principal amount of the then outstanding Notes (including consents obtained in
connection with a tender offer or exchange offer for Notes).
(b) Upon the request of the Issuers, accompanied by a resolution of the
Board of Directors of each of the Issuers authorizing the execution of any such
supplemental indenture or amendment, and upon filing with the Trustee of
evidence satisfactory to the Trustee of the consent of the Holders as aforesaid,
and upon receipt by the Trustee of the documents described in Section 9.6
hereof, the Trustee shall join with the Issuers in the execution of such
supplemental indenture or amendment unless such supplemental indenture or
amendment affects the Trustee's own rights, duties or immunities under this
Indenture or otherwise, in which case the Trustee may in its discretion, but
shall not be obligated to, enter into such supplemental indenture.
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(c) It shall not be necessary for the consent of the Holders under this
Section to approve the particular form of any proposed supplemental indenture or
amendment, but it shall be sufficient if such consent approves the substance
thereof.
(d) After a supplemental indenture or amendment under this Section
becomes effective, the Issuers shall mail to the Holders of each Note affected
thereby a notice briefly describing the amendment or waiver. Any failure of the
Issuers to mail such notice, or any defect therein, shall not, however, in any
way impair or affect the validity of any such supplemental indenture, amendment
or waiver.
(e) Notwithstanding any other provision hereof, without the consent of
each Holder affected, an amendment or waiver under this Section may not (with
respect to any Notes held by a non-consenting Holder):
(i) reduce the principal amount of Notes whose Holders must consent to
an amendment, supplement or waiver;
(ii) reduce the principal of, or the premium (including, without
limitation, redemption premium) on, or change the fixed maturity of,
any Note; alter the provisions with respect to the payment on
redemption of the Notes; or alter the price at which repurchases of
the Notes may be made pursuant to Section 4.10 or 4.14 hereof;
(iii) reduce the rate of or change the time for payment of interest on any
Note;
(iv) waive a Default or Event of Default in the payment of principal of
or premium, if any, or interest on the Notes (except a rescission of
acceleration if the Holder rescinds such acceleration pursuant to
Section 6.2 hereof);
(v) make any Note payable in money other than that stated in the Notes;
(vi) make any change in Section 6.4 or 6.7 hereof or in this Section 9.2;
(vii) waive a redemption payment with respect to any Note; or
(viii) adversely affect the contractual ranking of the Notes or Guarantees.
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Section 9.3. Compliance with Trust Indenture Act.
- ------------ -----------------------------------
If, at the time of an amendment to this Indenture or the Notes, this
Indenture shall be qualified under the TIA, every amendment to this Indenture or
the Notes shall be set forth in a supplemental indenture that complies with the
TIA as then in effect.
Section 9.4. Revocation and Effect of Consents.
- ------------ ---------------------------------
Until a supplemental indenture, an amendment or waiver becomes
effective, a consent to it by a Holder of a Note is a continuing consent by the
Holder and every subsequent Holder of a Note or portion of a Note that evidences
the same debt as the consenting Holder's Note, even if notation of the consent
is not made on any Note. A supplemental indenture, amendment or waiver becomes
effective in accordance with its terms and thereafter binds every Holder.
The Issuers may fix a record date for determining which Holders must
consent to such supplemental indenture, amendment or waiver. If the Issuers
fixes a record date, the record date shall be fixed at (i) the later of 30 days
prior to the first solicitation of such consent or the date of the most recent
list of Holders furnished to the Trustee prior to such solicitation pursuant to
Section 2.5, or (ii) such other date as the Issuers shall designate.
Section 9.5. Notation on or Exchange of Notes.
- ------------ --------------------------------
The Trustee may place an appropriate notation about a supplemental
indenture, amendment or waiver on any Note thereafter authenticated. The Issuers
in exchange for all Notes may issue and the Trustee shall authenticate new Notes
that reflect the amendment or waiver.
Failure to make the appropriate notation or issue a new Note shall not
affect the validity and effect of such amendment or waiver.
Section 9.6. Trustee to Sign Amendments, etc.
- ------------ --------------------------------
The Trustee shall sign any amendment or supplemental indenture
authorized pursuant to this Article 9 if the amendment does not adversely affect
the rights, duties, liabilities or immunities of the Trustee. If it does, the
Trustee may, but need not, sign it. In signing or refusing to sign such
amendment or supplemental
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indenture, the Trustee shall be entitled to receive, if requested, an indemnity
reason ably satisfactory to it and to receive and, subject to Section 7.1, shall
be fully protected in relying upon, an Officers' Certificate and an Opinion of
Counsel as conclusive evidence that such amendment or supplemental indenture is
authorized or permitted by this Indenture, that it is not inconsistent herewith,
and that it shall be valid and binding upon the Issuers in accordance with its
terms. The Issuers may not sign an amendment or supplemental indenture until the
Board of Directors of each of the Issuers approves it.
ARTICLE 10
COLLATERAL AND SECURITY AND GUARANTY
Section 10.1. Collateral Documents.
- ------------- --------------------
The due and punctual payment of the principal and premium, if any, of,
and interest on, the Notes when and as the same shall be due and payable,
whether on an interest payment date, at maturity, by acceleration, repurchase,
redemption or otherwise, interest on the overdue principal of and interest (to
the extent permitted by law), if any, on the Notes and performance of all other
Obligations under this Indenture, the Notes, the Security Documents and the
Registration Rights Agreement, shall be secured as provided in the Security
Documents.
The Issuers shall, and shall cause each of the Restricted Subsidiaries
to, do or cause to be done all such acts and things as may be necessary or
proper, or as may be required by the provisions of the Security Documents, to
assure and confirm to the Trustee the security interest in the Collateral
contemplated hereby and by the Security Documents, as from time to time
constituted, so as to render the same available for the security and benefit of
this Indenture and of the Notes secured hereby, according to the intent and
purposes herein and therein expressed. The Issuers shall, and shall cause each
of the Restricted Subsidiaries to, take, upon request of the Trustee, any and
all actions required to cause the Security Documents to create and maintain, as
security for the Obligations under this Indenture, the Notes, the Security
Documents and the Registration Rights Agreement, valid and enforceable,
perfected (except as expressly provided herein or therein) Liens in and on all
the Collateral, in favor of the Trustee, superior to and prior to the rights of
all third Persons, and subject to no other Liens, other than as provided herein
and therein; provided, that the Trustee's Lien securing the Collateral may be
subordinated
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pursuant to the terms of the Intercreditor Agreement to a Lien securing
Indebtedness outstanding pursuant to Section 4.9(a) hereof, but only to the
extent provided in the Intercreditor Agreement.
Section 10.2. Opinions.
- ------------ --------
The Issuers shall furnish to the Trustee within three months
after each anniversary of the Issue Date, an Opinion of Counsel, dated as of
such date, stating either that (i) in the opinion of such counsel, all action
has been taken with respect to the recording, registering, filing, re-recording,
re-registering and refiling of all supplemental indentures, financing
statements, continuation statements or other instruments of further assurance as
is necessary to maintain the Liens of the Security Documents and reciting the
details of such action, subject to customary assumptions and exclusions or (ii)
in the opinion of such Counsel, no such action is necessary to maintain such
Liens, which Opinion of Counsel also shall state what actions it then believes
are necessary to maintain the effectiveness of such liens during the next year,
subject to customary assumptions and exclusions.
Section 10.3. Release of Collateral.
- ------------ ---------------------
(a) Collateral shall be released from the Liens created by the
Security Documents from time to time at the sole cost and expense of the
Issuers:
(i) upon payment in full of the Notes and all other Obligations
under this Indenture, the Notes, the Security Documents and the
Registration Rights Agreement then due and owing,
(ii) unless an Event of Default shall have occurred and be
continuing, upon the (A) sale or other disposition of such Collateral
pursuant to an Asset Sale made in accordance with Section 4.10 hereof, (B)
sale or other disposition of such Collateral meeting the conditions of
(b)(1) of the definition of Asset Sale, or (C) transfer or exchange of such
Collateral in the ordinary course of business,
(iii) upon the written consent of the Holders of at least a
majority of the aggregate principal amount of the then outstanding Notes
(including consents obtained in connection with a tender offer or exchange
offer for Notes),
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(iv) as required pursuant to the terms of the Intercreditor
Agreement,
or
(v) upon a Legal Defeasance or Covenant Defeasance;
provided, that the Trustee shall not release any Lien on any Collateral unless
- --------
and until it shall have received an Officers' Certificate certifying that all
conditions precedent hereunder have been met and such other documents required
by Section 10.4 hereof. Upon compliance with the above provisions, the Trustee
shall execute, deliver or acknowledge any necessary or proper instruments of
termination, satisfaction or release to evidence the release of any Collateral
permitted to be released pursuant to this Indenture or the Security Documents.
(b) The release of any Collateral from the terms of the Security
Documents shall not be deemed to impair the security under this Indenture in
contravention of the provisions hereof and of the Security Documents if and to
the extent the Collateral is released pursuant to the terms of this Indenture
and the Security Documents.
Section 10.4. Certificates of the Issuers.
- ------------ ---------------------------
The Issuers shall furnish to the Trustee, prior to each proposed
release of Collateral, all documents required by TIA (S) 314(d). The Trustee
may, to the extent permitted by Sections 7.1 and 7.2 hereof, accept as
conclusive evidence of compliance with the foregoing provisions the appropriate
statements contained in such instruments. Any certificate or opinion required
by TIA (S) 314(d) may be made by an Officer of each of the Issuers, except in
cases where TIA (S) 314(d) requires that such certificate or opinion be made by
an independent engineer, appraiser or other expert within the meaning of TIA (S)
314(d).
Section 10.5. Authorization of Actions to be Taken by the Trustee Under the
------------ -------------------------------------------------------------
Security Documents.
-------------------
Subject to the terms of the Intercreditor Agreement, the Trustee
may, in its sole discretion and without the consent of the Holders, on behalf of
the Holders, take all actions it deems necessary or appropriate in order to (a)
enforce any of the terms of the Security Documents and (b) collect and receive
any and all amounts payable in respect of the Obligations of the Issuers and the
Guarantors hereunder and under the Notes, the Security Documents and the
Registration Rights
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Agreement. Subject to the terms of the Intercreditor Agreement, the Trustee
shall have the power to institute and to maintain such suits and proceedings as
it may deem expedient to prevent any impairment of the Collateral by any acts
that may be unlawful or in violation of the Security Documents or this
Indenture, and such suits and proceedings as the Trustee may deem expedient to
preserve or protect its interest and the interests of the Holders in the
Collateral (including power to institute and maintain suits or proceedings to
restrain the enforcement of or compliance with any legislative or other
governmental enactment, rule or order that may be unconstitutional or otherwise
invalid if the enforcement of, or compliance with, such enactment, rule or order
would impair the security interest hereunder or be prejudicial to the interests
of the Holders or the Trustee).
Section 10.6. Authorization of Receipt of Funds by the Trustee Under the
- ------------ ----------------------------------------------------------
Security Documents.
------------------
The Trustee is authorized to receive any funds for the benefit of
the Holders distributed under the Security Documents, and to make further
distributions of such funds to the Holders according to the provisions of this
Indenture and the Security Documents.
Section 10.7. Guaranty.
- ------------ --------
For good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, subject to Section 10.9 hereof, each Guarantor,
jointly and severally, hereby unconditionally guarantees (such guarantees,
together with further guarantees granted from time to time pursuant to Section
10.12, being the "Guaranty") to each Holder and the Trustee irrespective of the
validity or enforceability of this Indenture, the Notes, the Security Documents,
the Registration Rights Agreement or the Obligations of the Issuers hereunder or
thereunder: (i) the due and punctual payment of the principal and premium, if
any, of, and interest on, the Notes (including, without limitation, interest
after the filing of a petition initiating any proceedings referred to in clause
(11) or (12) of Section 6.1 hereof), whether at maturity or on an interest
payment date, by acceleration, call for redemption or otherwise; (ii) the due
and punctual payment of interest on the overdue principal and premium, if any,
of, and interest on, the Notes, if lawful; (iii) the due and punctual payment
and performance of all other Obligations of the Issuers under the Notes, this
Indenture, the Security Documents and the Registration Rights Agreement, all in
accordance with the terms set forth herein and in the Notes, the Security
Documents and the Registration Rights Agreement; and (iv) in case of any
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extension of time of payment or renewal of any Notes or any of such other
Obligations hereunder or under the Notes, the Security Documents or the
Registration Rights Agreement, the due and punctual payment or performance
thereof in accordance with the terms of the extension or renewal, whether at
stated maturity, by acceleration or otherwise.
Failing payment when due by the Issuers of any amount so guaranteed
for whatever reason, the Guarantors shall be jointly and severally obligated to
pay the same immediately.
Each Guarantor hereby agrees that (i) its obligations hereunder shall
be unconditional, irrespective of the validity, regularity or enforceability of
the Notes, this Indenture, the Security Documents, the Registration Rights
Agreement or the Obligations of the Issuers hereunder or thereunder, the absence
of any action to enforce the same, any waiver or consent by any Holder with
respect to any provisions hereof or thereof, any releases of Collateral, any
amendment of this Indenture, the Notes or Security Documents, any delays in
obtaining or realizing upon or failures to obtain or realize upon Collateral,
the recovery of any judgment against either of the Issuers or any of the
Subsidiaries, any action to enforce the same, or any other circumstance that
might otherwise constitute a legal or equitable discharge or defense of a
guarantor and (ii) this Guaranty will not be discharged except by complete
performance of the Obligations of the Issuers under the Notes, this Indenture,
the Security Documents and the Registration Rights Agreement.
Each Guarantor hereby agrees that it shall not be entitled to and
irrevocably waives (i) diligence, presentment, demand of payment, filing of
claim with a court in the event of insolvency or bankruptcy of either of the
Issuers, any Guarantor, any other Subsidiary or any other obligor under the
Notes, any right to require a proceeding first against the applicable Issuer,
any Guarantor, any other Subsidiary or any other obligor under this Indenture,
the Notes or the Security Documents, protest, notice and all demands whatsoever,
(ii) any right of subrogation, reimbursement, exoneration, contribution or
indemnification in respect of any Obligations guaranteed hereby and (iii) any
claim or other rights that it may now or hereafter acquire against the Issuers
or any of the Subsidiaries that arise from the existence or performance of its
Obligations under this Guaranty, including, without limitation, any right to
participate in any claim or remedy of a Holder against the Issuers or any of the
Subsidiaries or any Collateral that a Holder now has or hereafter acquires,
whether or not such claim, remedy or right arises in equity or under contract,
statute or common law, by any payment made hereunder or otherwise, and
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including, without limitation, the right to take or receive from the Issuers or
any of the Subsidiaries, directly or indirectly, in cash or other property, by
setoff or in any other manner, payment or security on account of such claim or
other rights.
If any Holder or the Trustee is required by any court or
otherwise to return to the Issuers, any Guarantor, any other Subsidiary of the
Issuers or any other obligor under this Indenture, the Notes or the Security
Documents, trustee, liquidator, or other similar official, any amount paid by
the Issuers, any Guarantor, any other Subsidiary of the Issuers or any other
obligor under this Indenture, the Notes or the Security Documents to the Trustee
or such Holder, this Guaranty, to the extent theretofore discharged, shall be
reinstated in full force and effect.
Each Guarantor agrees that, as between the Guarantors, on the one
hand, and the Holders and the Trustee, on the other hand, (i) the maturity of
the Obligations guaranteed hereby may be accelerated as provided in Section 6.2
for the purposes of this Guaranty, notwithstanding any stay, injunction or other
prohibition preventing such acceleration as to the Issuers of the Obligations
guaranteed hereby, and (ii) in the event of any declaration of acceleration of
those Obligations as provided in Section 6.2, those Obligations (whether or not
due and payable) will forthwith become due and payable by each of the Guarantors
for the purpose of this Guaranty.
Section 10.8. Execution and Delivery of Guaranty.
- ------------ ----------------------------------
To evidence the Guaranty set forth in Section 10.7, the Issuers
and each Guarantor hereby agrees that (a) a notation of such Guaranty
substantially as set forth on Exhibit C hereto shall be endorsed on each Note
authenticated and delivered by the Trustee, (b) such endorsement shall be
executed on behalf of each Guarantor by its Chairman of the Board, President,
Chief Financial Officer, Chief Operating Officer, Treasurer, Secretary or any
Vice President and (c) a counterpart signature page to this Indenture shall be
executed on behalf of each Guarantor by its Chairman of the Board, President or
one of its Vice Presidents and attested to by another officer acknowledging such
Guarantor's agreement to be bound by the provisions hereof and thereof.
Each Guarantor hereby agrees that its Guaranty set forth in
Section 10.7 shall remain in full force and effect notwithstanding any failure
to endorse on each Note a notation of such Guaranty.
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If an officer whose signature is on this Indenture no longer
holds that office at the time the Trustee authenticates the Notes on which a
Guaranty is endorsed, the Guaranty shall nevertheless be valid.
The delivery of any Note by the Trustee, after the authentication
thereof hereunder, shall constitute due delivery of the Guaranty set forth in
this Indenture on behalf of the Guarantor.
Section 10.9. Limitation on Guarantor's Liability.
- ------------ -----------------------------------
Each Guarantor and by its acceptance hereof each Holder hereby
confirms that it is the intention of all such parties that the guarantee by such
Guarantor pursuant to its Guaranty not constitute a fraudulent transfer or
conveyance for purposes of any Federal or state law. To effectuate the
foregoing intention, the Holders and the Guarantors hereby irrevocably agree
that the Obligations of each Guarantor under its Guaranty shall be limited to
the maximum amount as will, after giving effect to all other contingent and
fixed liabilities of such Guarantor and to any collections from or payments made
by or on behalf of any other Guarantor in respect of the Obligations of such
other Guarantor under its Guaranty, result in the Obligations of such
Guarantor under the Guaranty not constituting a fraudulent conveyance or
fraudulent transfer under Federal or state law or render a Guarantor insolvent.
Section 10.10. Rights under the Guaranty.
- ------------- -------------------------
(a) No payment by any Guarantor pursuant to the provisions
hereof shall entitle such Guarantor to any payment out of any Collateral or give
rise to any claim of the Guarantors against the Trustee or any Holder.
(b) Each Guarantor waives notice of the issuance, sale and
purchase of the Notes and notice from the Trustee or the Holders from time to
time of any of the Notes of their acceptance and reliance on this Guaranty.
(c) No set-off, counterclaim, reduction or diminution of any
obligation or any defense of any kind or nature (other than performance by the
Guarantors of their obligations hereunder) that any Guarantor may have or assert
against the Trustee or any Holder shall be available hereunder to such
Guarantor.
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(d) Each Guarantor shall pay all costs, expenses and fees,
including all reasonable attorneys' fees, that may be incurred by the Trustee in
enforcing or attempting to enforce the Guaranty or protecting the rights of the
Trustee or the Holder, if any, in accordance with this Indenture.
Section 10.11. Primary Obligations.
- ------------- -------------------
The Obligations of each Guarantor hereunder shall constitute a
guaranty of payment and not of collection. Each Guarantor agrees that it is
directly liable to each Holder hereunder, that the Obligations of each Guarantor
hereunder are independent of the Obligations of the Issuers or any other
Guarantor, and that a separate action may be brought against each Guarantor,
whether such action is brought against the Issuers or any other Guarantor or
whether the Issuers or any other Guarantor is joined in such action. Each
Guarantor agrees that its liability hereunder shall be immediate and shall not
be contingent upon the exercise or enforcement by the Trustee or the Holders of
whatever remedies they may have against the Issuers or any other Guarantor, or
the enforcement of any lien or realization upon any security Trustee may at any
time possess. Each Guarantor agrees that any release that may be given by the
Trustee or the Holders to the Issuers or any other Guarantor shall not release
such Guarantor.
Section 10.12. Guarantee by Subsidiary.
- ------------- -----------------------
The Company shall cause (i) each Restricted Subsidiary that is
formed or acquired after the date hereof and (ii) each Subsidiary that becomes a
Restricted Subsidiary after the date hereof, in each case concurrently
therewith, to (i) become a Guarantor hereunder and execute and deliver to the
Trustee a Guaranty in the form of Exhibit C attached hereto and a supplemental
indenture in form reasonably satisfactory to the Trustee pursuant to which such
Restricted Subsidiary shall unconditionally guarantee all of the Issuers'
Obligations as set forth in Section 10.7 of this Indenture; and (ii) execute a
Security Agreement (substantially in the form of the Security Agreement entered
into on the Issue Date) and other Security Documents necessary or reasonably
requested by the Trustee to grant the Trustee a valid, enforceable, perfected
Lien on the Collateral described therein, subject only to Liens permitted under
Section 4.12; and (iii) cause such Restricted Subsidiary to deliver to the
Trustee an Opinion of Counsel, in form reasonably satisfactory to the Trustee,
that (i) such Security Agreement, supplemental indenture and Guaranty have been
duly authorized, executed and delivered by such Restricted Subsidiary and (ii)
such Security Agreement, this Indenture and such Guaranty constitute a legal,
valid,
100
<PAGE>
binding and enforceable obligation of such Restricted Subsidiary, subject to
customary assumptions and exceptions, including for bankruptcy, fraudulent
transfer and equitable principles.
Each Note issued after the date of execution by any Guarantor of
a Guaranty shall be endorsed with a form of Guaranty that has been executed by
such Guarantor. However, the failure of any Note to have endorsed thereon a
Guaranty executed by such Guarantor shall not affect the validity or
enforceability of such Guaranty against such Guarantor.
Section 10.13. Release of Guarantors.
- ------------- ---------------------
If all of the Capital Stock of any Guarantor is sold to a Person
(other than the Issuers or any of the Restricted Subsidiaries) and the Net
Proceeds from such Asset Sale are used in accordance with Section 4.10, then
such Guarantor will be released and discharged from all of its obligations under
its Guaranty of the Notes and this Indenture.
Section 10.14. Gaming Law Considerations.
- ------------- -------------------------
(a) The Trustee acknowledges, understands and agrees that the
rules and regulations of the IGC (together with the Indiana Riverboat Gambling
Act, the "Gaming Laws") may impose certain licensing or transaction approval
requirements prior to the exercise of the rights and remedies granted to it
under this Indenture with respect to the Collateral subject to the Gaming Laws.
(b) If any consent under the Gaming Laws is required in
connection with the taking of any of the actions which may be taken by the
Trustee in the exercise of its rights hereunder, then the Issuers agree to use
their reasonable best efforts to secure such consent and to cooperate with the
Trustee in obtaining any such consent. Upon the occurrence and during the
continuation of any Event of Default, the Issuers shall promptly execute and/or
cause the execution of all applications, certificates, instruments and other
documents and papers that the Trustee may be required to file in order to obtain
any necessary approvals under the Gaming Laws, and if the Issuers fail or refuse
to execute such documents, the Trustee or the clerk of the court with
jurisdiction may execute such documents on behalf of the Issuers.
101
<PAGE>
(c) Notwithstanding any other provision of this Indenture to the
contrary, nothing in this Indenture shall (i) effect any transfer of any
ownership interest (within the meaning of 68 Indiana Administrative Code 5) in
the Company or (ii) effect any transfer, sale, purchase, lease or hypothecation
of, or any borrowing or loaning of money against, or any establishment of any
voting trust agreement or other similar agreement with respect to (all within
the meaning of Indiana Code 4-33-4-21), any certificate of suitability or any
owner's license heretofore or hereafter issued to any person, including the
Company, under any of the Gaming Laws, including Indiana Code 4-33.
ARTICLE 11
MISCELLANEOUS
Section 11.1. Trust Indenture Act Controls.
- ------------ ----------------------------
If any provision of this Indenture limits, qualifies or conflicts
with the duties imposed by TIA (S) 318(c), the imposed duties shall control.
Section 11.2. Notices.
- ------------ -------
Any notice or communication by the Issuers or the Trustee to the
others is duly given if in writing and delivered in Person or mailed by first-
class mail (registered or certified, return receipt requested), telex,
telecopier or overnight air courier guaranteeing next day delivery, to the
others' addresses:
If to the Issuers:
c/o The Majestic Star Casino, LLC
One Buffington Harbor Drive
Gary, Indiana 46406-3000
Attention: Michael Kelly
Telecopier No.: (219) 944-9137
With copies to:
Barden Companies, Inc.
400 Renaissance Center
Suite 2400
102
<PAGE>
Detroit, MI 48243
Attention: Michelle Sherman
Telecopier No.: (313) 259-0154
and
Dykema Gossett PLLC
400 Renaissance Center
Detroit, MI 48243-1668
Attention: Frank Zinn and Judy O'Neill
Telecopier No.: (313) 568-6915
If to the Trustee:
IBJ Whitehall Bank & Trust Company
One State Street
New York, New York 10004
Attention: Michael Daly
Telecopier No.: (212) 858-2952
The Issuers or the Trustee by notice to the others may designate
additional or different addresses for subsequent notices or communications.
All notices and communications (other than those sent to Holders)
shall be deemed to have been duly given: at the time delivered by hand, if
personally delivered; upon receipt, if deposited in the mail, postage prepaid;
when answered back, if telexed; when receipt acknowledged, if telecopied; and
the next Business Day after timely delivery to the courier, if sent by overnight
air courier guaranteeing next day delivery. All notices and communications to
the Trustee shall be deemed to have been duly given only if actually received by
the Trustee.
Any notice or communication to a Holder shall be mailed by first-class
mail, certified or registered, return receipt requested, to his address shown on
the register kept by the Registrar. Failure to mail a notice or communication
to a Holder or any defect in it shall not affect its sufficiency with respect to
other Holders.
If a notice communication is mailed in the manner provided above
within the time prescribed, it is duly given, whether or not the addressee
receives it.
103
<PAGE>
If the Issuers mails a notice or communication to Holders, it
shall mail a copy to the Trustee and each Agent at the same time.
Section 11.3. Communication by Holders with Other Holders.
- ------------ -------------------------------------------
Holders may communicate pursuant to TIA (S) 312(b) with other
Holders with respect to their rights under this Indenture or the Notes. The
Issuers, the Trustee, the Registrar and any other person shall have the
protection of TIA (S) 312(c).
Section 11.4. Certificate and Opinion as to Conditions Precedent.
- ------------ --------------------------------------------------
Upon any request or application by the Issuers to the Trustee to
take any action under this Indenture, the Issuers shall furnish to the Trustee:
(a) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth
in Section 11.5) stating that, in the opinion of the signers, all
conditions precedent and covenants, if any, provided for in this Indenture
relating to the proposed action have been complied with; and
(b) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth
in Section 11.5) stating that, in the opinion of such counsel, all such
conditions precedent and covenants have been complied with.
Section 11.5. Statements Required in Certificate or Opinion.
- ------------ ---------------------------------------------
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (other than a certificate
provided pursuant to TIA (S) 314(a)(4)) shall include:
(a) a statement that the Person making such certificate or
opinion has read such covenant or condition;
(b) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
104
<PAGE>
(c) a statement that, in the opinion of such Person, he has made
such examination or investigation as is necessary to enable him to express
an informed opinion as to whether or not such covenant or condition has
been complied with; and
(d) a statement as to whether or not, in the opinion of such
Person, such condition or covenant has been complied with,
provided that with respect to matters of fact, an Opinion of Counsel may rely
- --------
upon an Officers' Certificate or a certificate of a public official.
Section 11.6. Rules by Trustee and Agents.
- ------------ ---------------------------
The Trustee may make reasonable rules for action by or at a
meeting of Holders. The Registrar or Paying Agent may make reasonable rules and
set reasonable requirements for its functions.
Section 11.7. Legal Holidays.
- ------------ --------------
If a payment date is a Legal Holiday at a place of payment,
payment may be made at that place on the next succeeding day that is not a Legal
Holiday, and no interest shall accrue for the intervening period.
Section 11.8. No Recourse Against Others.
- ------------ --------------------------
No director, member, manager, officer, employee, incorporator,
stockholder or controlling person of the Issuers or any Guarantor, as such,
shall have any liability for any obligations of the Issuers or any Guarantor
under the Notes, this Indenture, the Security Documents or the Registration
Rights Agreement or for any claim based on, in respect of, or by reason of such
obligations or their creation. Each Holder by accepting a Note waives and
releases all such liability. The waiver and release shall be part of the
consideration for the issuance of the Notes and the Guaranty. Notwithstanding
the foregoing, nothing in this provision shall be construed as a waiver or
release of any claims under the Federal securities laws.
Section 11.9. Governing Law.
- ------------ -------------
THIS AGREEMENT SHALL BE CONSTRUED, INTERPRETED AND THE RIGHTS OF
THE PARTIES DETERMINED IN ACCORDANCE
105
<PAGE>
WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE AND
PERFORMED WITHIN THE STATE OF NEW YORK, INCLUDING, WITHOUT LIMITATION, SECTIONS
5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW AND NEW YORK CIVIL
PRACTICE LAWS AND RULES 327(b). THE ISSUERS HEREBY IRREVOCABLY SUBMIT TO THE
JURISDICTION OF ANY NEW YORK STATE COURT SITTING IN THE BOROUGH OF MANHATTAN IN
THE CITY OF NEW YORK OR ANY FEDERAL COURT SITTING IN THE BOROUGH OF MANHATTAN IN
THE CITY OF NEW YORK IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF
OR RELATING TO THIS AGREEMENT, AND IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT
OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, JURISDICTION OF THE AFORESAID
COURTS. THE ISSUERS IRREVOCABLY WAIVE, TO THE FULLEST EXTENT IT MAY EFFECTIVELY
DO SO UNDER APPLICABLE LAW, TRIAL BY JURY AND ANY OBJECTION THAT IT MAY NOW OR
HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING
BROUGHT IN ANY SUCH COURT AND ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING
BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. THE ISSUERS
IRREVOCABLY CONSENT, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO UNDER
APPLICABLE LAW, TO THE SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN
ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR
CERTIFIED MAIL, POSTAGE PREPAID, TO THE ISSUERS AT THEIR ADDRESS SET FORTH
HEREIN, SUCH SERVICE TO BECOME EFFECTIVE 30 DAYS AFTER SUCH MAILING. NOTHING
HEREIN SHALL AFFECT THE RIGHT OF ANY PURCHASER TO SERVE PROCESS IN ANY OTHER
MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED
AGAINST THE ISSUERS IN ANY OTHER JURISDICTION.
Section 11.10. No Adverse Interpretation of Other Agreements.
- ------------- ---------------------------------------------
This Indenture may not be used to interpret another indenture,
loan or debt agreement of the Issuers or any of the Subsidiaries. Any such
indenture, loan or debt agreement may not be used to interpret this Indenture.
Section 11.11. Successors.
- ------------- ----------
106
<PAGE>
All agreements of the Issuers and any Guarantors in this
Indenture and the Notes shall bind their respective successors. All agreements
of the Trustee in this Indenture shall bind its successor.
Section 11.12. Severability.
- ------------- ------------
In case any provision in this Indenture or in the Notes shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
Section 11.13. Counterpart Originals.
- ------------- ---------------------
The parties may sign any number of copies of this Indenture. Each
signed copy shall be an original, but all of them together represent the same
agreement.
Section 11.14. Table of Contents, Headings, etc.
- ------------- --------------------------------
The Table of Contents, Cross-Reference Table and Headings of the
Articles and Sections of this Indenture have been inserted for convenience of
reference only, are not to be considered a part hereof and shall in no way
modify or restrict any of the terms or provisions hereof.
(Signature pages follow.)
107
<PAGE>
INDENTURE
---------
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Indenture as of the date first written above.
THE MAJESTIC STAR CASINO, LLC
By: Barden Development, Inc.
Attest: By: _____________________________
Name:
Title:
________________________
Name:
Title:
THE MAJESTIC STAR CASINO CAPITAL CORP.
Attest: By: _____________________________
Name:
Title:
________________________
Name:
Title:
S-1
<PAGE>
IBJ WHITEHALL BANK & TRUST COMPANY,
as Trustee
Attest:
By: ______________________________
Name:
Title:
______________________
Name:
Title:
S-2
<PAGE>
EXHIBIT A
(Face of Security)
[UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN DEFINITIVE
FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITORY TRUST
COMPANY (THE "DEPOSITARY") TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE
DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE
DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH
SUCCESSOR DEPOSITARY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITARY TO THE ISSUERS OR THEIR AGENT FOR REGISTRATION
OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN
THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS MAY BE REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DEPOSITARY (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR
SUCH OTHER ENTITY AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF
DEPOSITARY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY
OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE &
CO., HAS AN INTEREST HEREIN.]/1/
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT") OR ANY STATE SECURITIES LAWS. NEITHER THIS NOTE NOR ANY
INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED,
PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION
OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS NOTE BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR
OTHERWISE TRANSFER SUCH NOTE, PRIOR TO THE DATE WHICH IS TWO YEARS (OR SUCH
SHORTER PERIOD THAT MAY HEREAFTER BE PROVIDED UNDER RULE 144(k) AS PERMITTING
RESALES BY NON-AFFILIATES OF RESTRICTED SECURITIES WITHOUT RESTRICTION) AFTER
THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE
ISSUERS OR ANY AFFILIATE OF THE ISSUERS WAS THE OWNER OF THIS NOTE (OR ANY
PREDECESSOR OF SUCH NOTE) ONLY (A) TO THE ISSUERS, (B) PURSUANT TO A
REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES
ACT, (C) FOR SO LONG AS THE NOTES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A
UNDER THE SECURITIES ACT, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A) THAT PURCHASES FOR ITS OWN
ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS
GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) TO AN
INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF RULE 501(a)(1), (2),
(3) OR (7) UNDER THE SECURITIES ACT THAT IS PURCHASING THE NOTE FOR ITS OWN
ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL "ACCREDITED INVESTOR," FOR
INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION
WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT OR (E) PURSUANT TO
ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT, SUBJECT TO THE ISSUERS' AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER,
SALE OR TRANSFER PURSUANT TO CLAUSES (D) OR (E) TO REQUIRE THE DELIVERY OF AN
OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH
OF THEM, AND IN EACH OF THE FOREGOING CASES, A CERTIFICATE OF TRANSFER IN THE
FORM APPEARING ON THIS NOTE IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE
TRUSTEE.
- -------------------------
/1/ This paragraph should be included only if the Note is issued in global
form.
A-1
<PAGE>
THE MAJESTIC STAR CASINO, LLC
THE MAJESTIC STAR CASINO CAPITAL CORP.
10 7/8% SENIOR SECURED NOTE
DUE 2006
No. $___________
CUSIP NO.
The Majestic Star Casino, LLC, an Indiana limited liability company
(the "Company"), and The Majestic Star Casino Capital Corp., an Indiana
corporation ("Capital" and, together with the Company, the "Issuers"), as
obligors, for value received promises to pay to ______________ or registered
assigns, the principal sum of [ ] Dollars on July 1, 2006.
Interest Payment Dates: July 1 and January 1 and on the maturity date. Record
Dates: June 15 and December 15 (whether or not a Business Day).
Reference is hereby made to the further provisions of this Note set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
A-2
<PAGE>
IN WITNESS WHEREOF, the Issuers have caused this Note to be signed
manually or by facsimile by their duly authorized officers.
Dated:
THE MAJESTIC STAR CASINO, LLC
By: Barden Development, Inc.
By: ___________________________________________________
Name:
Title:
By: ___________________________________________________
Name:
Title:
THE MAJESTIC STAR CASINO CAPITAL CORP.
By: ___________________________________________________
Name:
Title:
By: ___________________________________________________
Name:
Title:
Trustee's Certificate of Authentication:
This is one of the Notes referred to
in the within-mentioned Indenture:
IBJ Whitehall Bank & Trust Company, as Trustee
By:______________________________
Authorized Signatory
A-3
<PAGE>
(Back of Security)
10 7/8% SENIOR SECURED NOTE
DUE 2006
1. Interest. The Majestic Star Casino, LLC, an Indiana limited
--------
liability company (the "Company"), and The Majestic Star Casino Capital Corp.,
an Indiana corporation ("Capital" and, together with the Company, the
"Issuers"), as obligors, promise to pay interest on the principal amount of this
Note at the rate and in the manner specified below.
The Issuers shall pay, in cash, interest on the principal amount of
this Note, at the rate of 10 7/8% per annum. The Issuers shall pay interest
semi-annually on July 1 and January 1 of each year, and on the maturity date,
commencing on January 2000, or if any such day is not a Business Day, on the
next succeeding Business Day (each an "Interest Payment Date").
Interest shall be computed on the basis of a 360-day year consisting
of twelve 30-day months. Interest shall accrue from the most recent date to
which interest has been paid or, if no interest has been paid, from the Issue
Date. To the extent lawful, the Issuers shall pay interest on overdue principal
at the rate of 1% per annum in excess of the then applicable interest rate on
the Notes; the Issuers shall pay interest on overdue installments of interest
(without regard to any applicable grace periods) at the same rate to the extent
lawful.
2. Method of Payment. The Issuers shall pay interest on the Notes
-----------------
(except defaulted interest) to the Persons who are registered Holders of Notes
at the close of business on the record date next preceding the Interest Payment
Date, even if such Notes are cancelled after such record date and on or before
such Interest Payment Date. The Holder must surrender this Note to a Paying
Agent to collect principal payments. The Issuers shall pay principal and
interest in money of the United States that at the time of payment is legal
tender for payment of public and private debts. The Issuers may pay principal
and interest by check to a Holder's registered address.
3. Paying Agent and Registrar. Initially, the Trustee shall act as
--------------------------
Paying Agent and Registrar. The Issuers may change any Paying Agent, Registrar
or co-registrar without notice to any Holder. Subject to certain exceptions,
the Company or any of its Subsidiaries may act in any such capacity.
4. Indenture. The Issuers issued the Notes under an Indenture dated
---------
as of June 18, 1999 (the "Indenture") among the Issuers, the Guarantors named
therein and the Trustee. The terms of the Notes include those stated in the
Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939 (the "TIA") (15 U.S. Code (S)(S) 77aaa-77bbbb) as in
effect on the date of the Indenture until such time as the Indenture is
qualified under the TIA and thereafter as in effect on the date the Indenture is
so qualified. The Notes are subject to all such terms, and Holders are referred
to the Indenture and the TIA for a statement of such terms. The terms of the
Indenture shall govern any inconsistencies between the Indenture and the Notes.
Terms not otherwise defined herein shall have the meanings assigned in the
Indenture. The aggregate principal amount of Notes that may be authenticated
and delivered under the Indenture is unlimited.
5. Optional Redemption. Except as set forth in Sections 3.7(b) and
-------------------
3.8 of the Indenture, the Notes are not redeemable at the Issuers' option prior
to July 1, 2003. Thereafter, the Notes shall be subject to redemption at the
option of the Issuers, in whole or in part, at the redemption prices (expressed
as percentages of principal amount) set forth below plus accrued and unpaid
interest thereon and Liquidated Damages, if any, to the applicable date of
redemption, if redeemed during the 12-month period beginning on July 1 of the
years indicated below:
A-4
<PAGE>
Year Percentage
---- ----------
2003............................. 105.438%
2004............................. 102.719%
2005 and thereafter.............. 100.000%
Notwithstanding the foregoing, at any time or from time to time prior
to July 1, 2002, the Issuers may redeem, at their option, up to 35% of the
aggregate principal amount of the Notes then outstanding at a redemption price
of 110.875% of the principal amount thereof, plus accrued and unpaid interest
thereon and Liquidated Damages, if any, through the applicable date of
redemption, with the net cash proceeds of one or more Public Equity Offerings;
provided, that (a) such redemption shall occur within 60 days of the date of
- --------
closing of such Public Equity Offering and (b) at least 65% of the aggregate
principal amount of Notes issued on or after the Issue Date remains outstanding
immediately after giving effect to each such redemption.
6. Mandatory Redemption. There shall be no mandatory redemption of
--------------------
the Notes (other than a Required Regulatory Redemption).
7. Denominations, Transfer, Exchange. The Notes are in registered
---------------------------------
form without coupons in denominations of $1,000 and integral multiples of
$1,000. The transfer of Notes may be registered and Notes may be exchanged as
provided in the Indenture. The Registrar and the Trustee may require a Holder,
among other things, to furnish appropriate endorsements and transfer documents
and the Issuers may require a Holder to pay any taxes and fees required by law
or permitted by the Indenture. The Registrar and the Issuers need not exchange
or register the transfer (i) of any Note or portion of a Note selected for
redemption or (ii) of any Notes for a period of 15 days before a selection of
Notes to be redeemed or during the period between a record date and the
corresponding Interest Payment Date.
8. Persons Deemed Owners. The registered Holder of a Note may be
---------------------
treated as its owner for all purposes, subject to the provisions of the
Indenture with respect to the record dates for the payment of interest.
9. Amendments and Waivers. Subject to certain exceptions, the
----------------------
Indenture or the Notes may be amended with the written consent of the Holders of
at least a majority in principal amount of the then outstanding Notes (including
consents obtained in connection with a tender offer or exchange offer for
Notes), and any existing Default or Event of Default (except certain payment
defaults) may be waived with the consent of the Holders of a majority in
principal amount of the then outstanding Notes (including consents obtained in
connection with a tender offer or exchange offer for Notes). Without the consent
of any Holders, the Indenture, the Notes and the Security Documents, may be
amended or supplemented to cure any ambiguity, defect or inconsistency, to
provide for assumption of the Issuers' obligations to the Holders in the case of
a merger or consolidation, to provide for uncertificated Notes in addition to or
in place of certificated Notes, to make any change that would provide any
additional rights or benefits to the Holders of the Notes, or that does not
adversely affect the legal rights hereunder or under the Indenture or the
Security Documents of any Holder, to release any Guarantee of the Notes
permitted to be released under the terms of the Indenture or to comply with
requirements of the Commission in order to effect or maintain the qualification
of the Indenture under the TIA.
10. Defaults and Remedies. If an Event of Default occurs and is
---------------------
continuing, the Trustee or the Holders of at least 25% in principal amount of
the then outstanding Notes may declare by written notice to the Issuers and the
Trustee all the Notes to be due and payable immediately, except that in the case
of an Event of Default arising from certain events of bankruptcy or insolvency,
all outstanding Notes become due and payable immediately without further action
or notice. Holders may not enforce the Indenture or the Notes except as
provided in the Indenture. The Trustee may require security and indemnity
satisfactory to it before it enforces the Indenture or the Notes. Subject to
certain limitations, Holders of a majority in principal amount of the then
A-5
<PAGE>
outstanding Notes may direct the Trustee in its exercise of any trust or power.
The Issuers must furnish an annual compliance certificate to the Trustee.
11. Trustee Dealings with Issuers. The Trustee under the Indenture,
-----------------------------
in its individual or any other capacity, may make loans to, accept deposits
from, and perform services for the Issuers or their Affiliates, and may
otherwise deal with the Issuers or their Affiliates, as if it were not Trustee.
12. No Recourse Against Others. No director, member, manager,
--------------------------
officer, employee, incorporator, stockholder or controlling person of the
Issuers or any Guarantor, as such, shall have any liability for any obligations
of the Issuers or any Guarantor under the Notes, the Indenture, the Security
Documents or the Registration Rights Agreement or for any claim based on, in
respect of, or by reason of such obligations or their creation. Each Holder by
accepting a Note waives and releases all such liability. The waiver and release
are part of the consideration for the issuance of the Notes and the Guarantees.
Notwithstanding the foregoing, nothing in this provision shall be construed as a
waiver or release of any claims under the Federal securities laws.
13. Authentication. This Note shall not be valid until authenticated
--------------
by the manual signature of the Trustee or an authenticating agent.
14. Abbreviations. Customary abbreviations may be used in the name
-------------
of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
15. CUSIP Numbers. Pursuant to a recommendation promulgated by the
-------------
Committee on Uniform Security Identification Procedures, the Issuers have caused
CUSIP numbers to be printed on the Notes and has directed the Trustee to use
CUSIP numbers in notices of redemption as a convenience to Holders. No
representation is made as to the accuracy of such numbers either as printed on
the Notes or as contained in any notice of redemption and reliance may be placed
only on the other identification numbers placed thereon.
16. Governing Law. This Note and the Indenture shall be construed,
-------------
interpreted and the rights of the parties determined in accordance with the laws
of the State of New York, including, without limitation, Sections 5-1401 and 5-
1402 of the New York General Obligations Law and New York Civil Practice Laws
and Rules 327(b).
[17. Holders' Compliance with Registration Rights Agreement. Each
------------------------------------------------------
Holder of a Note, by his acceptance thereof, acknowledges and agrees to the
provisions of the Registration Rights Agreement, dated as of June 18, 1999,
among the Issuers and the parties named on the signature page thereof (the
"Registration Rights Agreement"), including but not limited to the obligations
of the Holders with respect to a registration and the indemnification of the
Issuers and the Purchasers (as defined therein) to the extent provided
therein.]/2/
The Issuers shall furnish to any Holder upon written request and
without charge a copy of the Indenture and/or the Registration Rights Agreement.
Requests may be made to: The Majestic Star Casino, LLC, One Buffington Harbor
Drive, Gary, Indiana, 46406-3000, Attention: Chief Operating and Financial
Officer.
- ------------------------
/2/ This paragraph should only be included in the Series A Notes.
A-6
<PAGE>
ASSIGNMENT FORM
To assign this Note, fill in the form below: (I) or (we) assign and
transfer this Note to
________________________________________________________________________________
(Insert assignee's soc. sec. or tax I.D. no.)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint______________________________
agent to transfer this Note on the books of the Issuers. The agent may
substitute another to act for him.
________________________________________________________________________________
Date:____________________
Your Signature:____________________
(Sign exactly as your name appears
on the face of this Note)
Your Tax ID Number:____________________
Signature Guarantee*
_______________________
* NOTICE: The signature must be guaranteed by an institution which is a
member of one of the following recognized signature guarantee
programs:
(1) The Securities Transfer Agent Medallian Program (STAMP);
(2) The New York Stock Exchange Medallian Program (MSP);
(3) The Stock Exchange Medallian Program (SEMP).
A-7
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have all or any part of this Note purchased by the
Issuers pursuant to Section 4.10 or Section 4.14 of the Indenture, as the case
may be, state the amount you elect to have purchased (if all, write "ALL"):
$______________
Date:__________________________
Your Signature:_________________________
(Sign exactly as your name appears
on the face of this Note)
Your Tax ID Number:____________________
Signature Guarantee*
__________________________
* NOTICE: The signature must be guaranteed by an institution which is a
member of one of the following recognized signature guarantee
programs:
(1) The Securities Transfer Agent Medallian Program (STAMP);
(2) The New York Stock Exchange Medallian Program (MSP);
(3) The Stock Exchange Medallian Program (SEMP).
A-8
<PAGE>
SCHEDULE OF EXCHANGES OF DEFINITIVE NOTES /3/
The following exchanges of a part of this Global Note for Definitive Notes
have been made:
<TABLE>
<CAPTION>
Principal Amount
Amount of decrease Amount of increase of this Global Note Signature of
in Principal Amount in Principal Amount following such authorized officer
Date of Exchange of this Global Note of this Global Note decrease (or increase) of Trustee
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
</TABLE>
______________________
/3/ This Schedule should be included only if the Note is issued in global form.
A-9
<PAGE>
EXHIBIT B
CERTIFICATE TO BE DELIVERED UPON EXCHANGE
OR REGISTRATION OF TRANSFER OF NOTES
Re: [Series A] [Series B] % Senior Secured Notes due 2006 (the "Notes") of
The Majestic Star Casino, LLC and The Majestic Star Casino Capital Corp.
This Certificate relates to $______ principal amount of Notes held in * [_]
book-entry or * [_] definitive form by _______________________ (the
"Transferor").
The Transferor, by written order, has requested the Trustee:
[_] to deliver in exchange for its beneficial interest in the Global Note held
by the depositary, a Note or Notes in definitive, registered form of
authorized denominations and an aggregate principal amount equal to its
beneficial interest in such Global Note (or the portion thereof indicated
above); or
[_] to exchange or register the transfer of a Note or Notes. In connection
with such request and in respect of each such Note, the Transferor does
hereby certify that Transferor is familiar with the Indenture relating to
the above captioned Notes and, the transfer of this Note does not require
registration under the Securities Act of 1933, as amended (the "Securities
Act") because such Note:
[_] is being acquired for the Transferor's own account, without transfer;
[_] is being transferred pursuant to an effective registration statement;
[_] is being transferred to a "qualified institutional buyer" (as defined in
Rule 144A under the Securities Act), in reliance on such Rule 144A;
[_] is being transferred pursuant to an exemption from registration in
accordance with Rule 904 under the Securities Act;**
[_] is being transferred pursuant to Rule 144 under the Securities Act;** or
[_] is being transferred pursuant to another exemption from the registration
requirements of the Securities Act (explain: ______________________________
_______________________________________________________________________).**
___________________________
[INSERT NAME OF TRANSFEROR]
By:_______________________________
Date:_____________________
* Check applicable box.
** If this box is checked, this certificate must be accompanied by an
opinion of counsel to the effect that such transfer is in compliance
with the Securities Act.
B-1
<PAGE>
EXHIBIT C
FORM OF GUARANTY
GUARANTY
For good and valuable consideration received from the Issuers by the
undersigned (hereinafter referred to as the "Guarantors," which term includes
any successor or additional Guarantors), the receipt and sufficiency of which is
hereby acknowledged, subject to Section 10.9 of the Indenture, each Guarantor,
jointly and severally, hereby unconditionally guarantees, irrespective of the
validity or enforceability of the Indenture, the Notes, the Security Documents,
the Registration Rights Agreement or the Obligations thereunder, (a) the due and
punctual payment of the principal and premium, if any, of and interest on the
Notes (including, without limitation, interest after the filing of a petition
initiating any proceedings referred to in Sections 6.1(11) or (12) of the
Indenture), whether at maturity or on an interest payment date, by acceleration,
call for redemption or otherwise, (b) the due and punctual payment of interest
on the overdue principal and premium, if any, of and interest, if any, on the
Notes, if lawful, (c) the due and punctual payment and performance of all other
Obligations under such documents, all in accordance with the terms set forth in
the Indenture, the Notes, the Security Documents and the Registration Rights
Agreement, and (d) in case of any extension of time of payment or renewal of any
Notes or any of such other Obligations thereunder or under the Indenture, the
Security Documents or the Registration Rights Agreement, the due and punctual
payment or performance thereof in accordance with the terms of the extension or
renewal, whether at stated maturity, by acceleration or otherwise.
No director, member, manager, officer, employee, incorporator,
stockholder or controlling person of the Guarantor, as such, shall have any
liability under this Guaranty for any obligations of the Guarantor under the
Notes, the Indenture, the Security Documents or the Registration Rights
Agreement or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each Holder of the Notes by accepting a Note
waives and releases all such liability.
GUARANTOR:
By: __________________________________
Name:
Title:
C-1
<PAGE>
EXHIBIT D
FORM OF INTERCREDITOR AGREEMENT
D-1
<PAGE>
EXHIBIT E
FORM OF PREFERRED SHIP MORTGAGE
E-1
<PAGE>
EXHIBIT F
FORM OF SECURITY AGREEMENT
F-1
<PAGE>
EXHIBIT G
FORM OF BDI PLEDGE AGREEMENT
G-1
<PAGE>
EXHIBIT H
FORM OF BHR PLEDGE AGREEMENT
H-1
<PAGE>
EXHIBIT I
FORM OF TRADEMARK SECURITY AGREEMENT
I-2
<PAGE>
CROSS-REFERENCE TABLE*Trust Indenture
<TABLE>
<CAPTION>
Act Section Indenture Section
--------------- -----------------
<S> <C>
310(a)(1)............................................................................... 7.10
(a)(2)............................................................................... 7.10
(a)(3)............................................................................... N.A.
(a)(4)............................................................................... N.A.
(a)(5)............................................................................... 7.10
(b).................................................................................. 7.8; 7.10
(c).................................................................................. N.A.
311(a).................................................................................. 7.11
(b).................................................................................. 7.11
(c).................................................................................. N.A.
312(a).................................................................................. 2.5
(b).................................................................................. 11.3
(c).................................................................................. 11.3
313(a).................................................................................. 7.6
(b)(1)............................................................................... 7.6
(b)(2)............................................................................... 7.6
(c).................................................................................. 7.6
(d).................................................................................. 7.6
314(a).................................................................................. 4.3; 4.4
(b).................................................................................. N.A
(c)(1)............................................................................... 11.4
(c)(2)............................................................................... 11.4
(c)(3)............................................................................... N.A.
(d).................................................................................. N.A.
(e).................................................................................. 11.5
(f).................................................................................. N.A.
315(a).................................................................................. 7.1(2)
(b).................................................................................. 7.5
(c).................................................................................. 7.1(1)
(d).................................................................................. 7.1(3)
(e).................................................................................. 6.11
316(a)(last sentence)................................................................... 2.9
(a)(1)(A)............................................................................ 6.5
(a)(1)(B)............................................................................ 6.4
(a)(2)............................................................................... N.A.
(b).................................................................................. 9.2
(c).................................................................................. 9.4
317(a)(1)............................................................................... 6.8
(a)(2)............................................................................... 6.9
(b).................................................................................. 2.4
318(a).................................................................................. 11.1
(b).................................................................................. N.A.
(c).................................................................................. 11.1
</TABLE>
N.A. means not applicable.
*This Cross-Reference Table is not part of the Indenture.
<PAGE>
EXHIBIT 4.4
SECURITY AGREEMENT
Dated as of June 18, 1999
between
THE MAJESTIC STAR CASINO, LLC
and
IBJ WHITEHALL BANK & TRUST COMPANY,
as Trustee
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<S> <C>
SECTION 1. Defined Terms................................................................................... 1
SECTION 2. Grant of Security............................................................................... 2
SECTION 3. Authorization................................................................................... 4
SECTION 4. Grantor Remains Liable.......................................................................... 5
SECTION 5. Representations and Warranties.................................................................. 5
SECTION 6. Perfection and Maintenance of Security Interest and Lien........................................ 6
SECTION 7. Financing Statements............................................................................ 6
SECTION 8. Protection of Collateral........................................................................ 6
SECTION 9. Processing, Sale and Collections................................................................ 7
SECTION 10. Equipment and Inventory......................................................................... 7
SECTION 11. Partial Release of Collateral................................................................... 8
SECTION 12. Trademark Licenses.............................................................................. 8
SECTION 13. General Covenants............................................................................... 8
SECTION 14. Trustee Appointed Attorney-in-Fact.............................................................. 9
SECTION 15. Trustee May Perform............................................................................. 10
SECTION 16. Trustee's Duties................................................................................ 10
SECTION 17. Remedies........................................................................................ 10
SECTION 18. Exercise of Remedies............................................................................ 11
SECTION 19. License......................................................................................... 11
SECTION 20. Injunctive Relief............................................................................... 11
SECTION 21. Interpretation and Inconsistencies: Merger...................................................... 12
SECTION 22. Expenses........................................................................................ 12
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
SECTION 23. Amendments, Etc................................................................................. 12
SECTION 24. Notices......................................................................................... 12
SECTION 25. Continuing Security Interest; Termination....................................................... 12
SECTION 26. Severability.................................................................................... 13
SECTION 27. GOVERNING LAW................................................................................... 13
SECTION 28. CONSENT TO JURISDICTION; SERVICE OF PROCESS; JURY TRIAL......................................... 13
(A) NON-EXCLUSIVE JURISDICTION...................................................................... 13
(B) OTHER JURISDICTIONS............................................................................. 13
(C) SERVICE OF PROCESS; INCONVENIENT FORUM.......................................................... 14
(D) WAIVER OF JURY TRIAL............................................................................ 14
(E) WAIVER OF BOND.................................................................................. 14
(F) ADVICE OF COUNSEL............................................................................... 14
SECTION 29. Gaming Laws..................................................................................... 14
SECTION 30. Interaction with Indenture...................................................................... 15
SECTION 31. Trust Indenture Act............................................................................. 15
SECTION 32. Appointment of Collateral Agent................................................................. 15
SECTION 33. Intercreditor Arrangement....................................................................... 15
</TABLE>
ii
<PAGE>
SECURITY AGREEMENT
This SECURITY AGREEMENT, dated as of June 18, 1999, is made by The
Majestic Star Casino, LLC, an Indiana limited liability company ("Grantor"), in
-------
favor of IBJ Whitehall Bank & Trust Company, as trustee under the Indenture (as
defined below) (the "Trustee"), for its benefit and for the benefit of the
-------
"Holders" (as defined below) who are, or may hereafter become, parties to the
Indenture.
PRELIMINARY STATEMENT
Grantor and Trustee have entered into a certain Indenture of even date
herewith (as the same may be amended, restated, supplemented or otherwise
modified from time to time, the "Indenture"), pursuant to which Grantor and the
---------
Trustee have agreed to certain terms for the benefit of Grantor and the Holders.
It is a condition precedent to the Purchase Agreement (as defined below) that
Grantor shall have granted the security interest contemplated by this Agreement.
NOW, THEREFORE, in consideration of the premises set forth herein and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
SECTION 1. Defined Terms. Capitalized terms used in this Agreement
-------------
that are not defined herein are used with the meanings ascribed to such terms in
the Indenture. As used herein, the following terms shall have the meanings
indicated below (such meanings being equally applicable to both the singular and
the plural forms of the terms defined):
"Agreement" shall mean this Security Agreement, as the same may from
---------
time to time be amended, restated, modified or supplemented, and shall refer to
this Agreement as the same may be in effect at the time such reference becomes
operative.
"Collateral" shall mean all property and rights in property now owned
----------
or hereafter at any time acquired by Grantor in or upon which a Lien is granted
in favor of the Trustee by Grantor under this Agreement, including, without
limitation, the property described in Section 2.
---------
"Holders" shall mean the holders of the Secured Obligations from time
-------
to time and shall include their respective successors, transferees and assigns.
"Purchase Agreement" shall mean that certain Purchase Agreement, dated
------------------
June 15, 1999, by and among the Grantor, Capital and Initial Purchaser.
"Secured Obligations" shall mean (1) the Obligations of the Issuers
-------------------
arising under or pursuant to or evidenced by the Indenture, the Notes, the other
Security Documents, and the Registration Rights Agreement, as the same may be
amended, modified, or supplemented from time to time, and (ii) Grantor's
obligations and liabilities under this Agreement and each agreement, document or
instrument executed pursuant to or in connection with this Agreement or the
Indenture, as the same may be amended, modified, or supplemented from time to
time.
<PAGE>
"UCC" shall mean the Uniform Commercial Code as adopted and in effect
---
on the date hereof in the State of Indiana; provided, however, in the event
-------- -------
that, by reason of mandatory provisions of law, any or all of the attachment,
perfection, priority or enforcement of the Trustee's and the Holders' security
interest in any Collateral is governed by the laws of a jurisdiction other than
the State of Indiana, the term "UCC" shall mean the Uniform Commercial Code as
adopted and in effect in such other jurisdiction on the date hereof, for
purposes relating to such attachment, perfection, priority or enforcement and
for purposes of descriptions of property that incorporate terms that are defined
in the UCC.
The terms "accounts", "chattel paper", "documents", "equipment",
"general intangibles", "instruments", "inventory", and "proceeds," when the
first letter is lower case, are used herein with the meanings ascribed to such
terms in the UCC.
SECTION 2. Grant of Security. To secure the prompt and complete
-----------------
payment, observance and performance of the Secured Obligations, Grantor hereby
assigns and pledges to Trustee, for the equal and ratable benefit of the
Holders, and grants to Trustee for the equal and ratable benefit of the Holders
a security interest, subject only to (i) the security interest which may be
granted after the date hereof to the Lender as security for the Credit Facility,
and (ii) Permitted Liens, in all of Grantor's right, title and interest in and
to the following, whether now owned or existing or hereafter arising or acquired
and wheresoever located:
(a) All rights to payment for goods sold or leased or for services
rendered, whether or not evidenced by an instrument or chattel paper,
and whether or not earned by performance; all accounts receivable,
contract rights, book debts, notes, drafts and other obligations or
indebtedness owing to Grantor arising from the sale, lease or exchange
of goods or other property by it and/or the performance of services by
it and all of Grantor's rights in, to and under all purchase orders
for goods, services or other property, and all of Grantor's rights to
any goods, services or other property represented by any of the
foregoing (including, without limitation, returned or repossessed
goods and unpaid sellers' rights of rescission, replevin, reclamation
and rights to stoppage in transit), in each case whether now in
existence or hereafter arising or acquired including, without
limitation, the right to receive the proceeds of said purchase orders
and contracts and all collateral security and guarantees of any kind
given by any person or entity with respect to any of the foregoing,
and all other property constituting accounts, whether now owned or
existing or hereafter acquired or arising (collectively, "Accounts");
--------
(b) All goods now owned or hereafter acquired by Grantor (wherever
located, whether in the possession of Grantor or of a bailee or other
person for sale, storage, transit, processing, use or otherwise and
whether consisting of whole goods, spare parts, components, supplies,
materials, or consigned, returned or repossessed goods) which are held
for sale or lease, which are to be furnished (or have been furnished)
under any contract of service or which are raw materials, work in
process or materials used or consumed in Grantor's business, and all
other
2
<PAGE>
property constituting inventory, whether now owned or existing
or hereafter acquired or arising (collectively, "Inventory");
---------
(c) All machinery and equipment (including but not limited to slot
machines and other gaming machines and equipment), all manufacturing,
distribution, selling, data processing and office equipment, all
furniture, furnishings, appliances, fixtures and trade fixtures,
tools, tooling, molds, dies, vehicles, vessels, trucks, buses, motor
vehicles and all other goods of every type and description (other than
Inventory), in each instance whether now owned or hereafter acquired
by Grantor and wherever located and all other property constituting
equipment, whether now owned or hereafter acquired or arising
(collectively, "Equipment");
---------
(d) All rights, interests, choses in action, causes of actions, claims and
all other intangible property of Grantor of every kind and nature, in
each instance whether now owned or hereafter acquired by Grantor and
however and whenever arising, including, without limitation, all
corporate and other business records; all loans, royalties, and other
obligations receivable; customer lists, credit files, correspondence,
and advertising materials; firm sale orders, other contracts and
contract rights; all tax refunds and tax refund claims; all right,
title and interest under leases, subleases, licenses and concessions
and other agreements relating to real or personal property; all
payments due or made to Grantor in connection with any requisition,
confiscation, condemnation, seizure or forfeiture of any property by
any person or governmental authority; all credits with and other
claims against carriers and shippers; all rights to indemnification;
all patents, and patent applications (including all reissues,
divisions, continuations and extensions); all trade secrets and
inventions; all copyrights (including all computer software and
related documentation); all rights and interests in and to trademarks,
trademark registrations and applications therefor, service marks,
service mark registrations and applications therefor, trade names,
corporate names, brand names, slogans, all goodwill associated with
the foregoing; all license agreements and franchise agreements, all
reversionary interests in pension and profit sharing plans and
reversionary, beneficial and residual interest in trusts; all proceeds
of insurance of which Grantor is beneficiary; and all letters of
credit, guaranties, liens, security interests and other security held
by or granted to Grantor; all other intangible property, whether or
not similar to the foregoing; and all other property constituting
general intangibles, whether now owned or existing or hereafter
acquired or arising;
(e) All rights and interests in and to any pending or executory contracts,
requests for quotations, invitations for bid, agreements, leases and
arrangements of which Grantor is a party to or in which Grantor has an
interest, whether now owned or existing or hereafter acquired or
arising;
(f) All chattel paper, leases, and instruments, and all payments
thereunder and instruments and other property from time to time
delivered in respect thereof or in
3
<PAGE>
exchange therefor, all documents, and all bills of sale, bills of
lading, warehouse receipts and other documents of title, in each
instance whether now owned or hereafter acquired by Grantor;
(g) All right, title and interest in the Berthing Agreement dated as of
April 23, 1996, by and between Grantor and Buffington Harbor
Riverboats, L.L.C., as amended, supplemented or modified from time to
time (the "Berthing Agreement");
------------------
(h) All property or interests in property now owned or hereafter acquired
by Grantor which now may be owned or hereafter may come into the
possession, custody or control of Trustee or any of the Holders or any
agent or Affiliate of any of them in any way and for any purpose
(whether for safekeeping, deposit, custody, pledge, transmission,
collection or otherwise); and all rights and interests of Grantor, now
existing or hereafter arising and however and wherever arising, in
respect of any and all (a) notes, drafts, letters of credit, stocks,
bonds, and debt and equity securities, whether or not certificated,
and warrants, options, puts and calls and other rights to acquire or
otherwise relating to the same; and (b) proceeds of loans, including,
without limitation, loans made under the Indenture;
(i) All books and records relating to any of the property described above,
and all accessions and additions to, substitutions, and replacements,
and products of any of the property described above; and
(j) All "proceeds" as defined in the UCC of all or any of the types or
items of property described above, including insurance proceeds,
proceeds of all warranty and tort claims, and all other property of
the types described above arising from or received by Grantor in
connection with the sale or disposition thereof ("Proceeds").
--------
Notwithstanding the foregoing or anything to the contrary contained in
this Agreement, the term "Collateral" shall not include, and no security
interest is granted in Excluded Assets, including any agreements, permits,
licenses, authorizations, or similar property which under the terms thereof or
applicable law may not be pledged, hypothecated or given as collateral security
without the consent of some third party, including any Governmental Authority.
SECTION 3. Authorization. Grantor hereby authorizes Trustee to
-------------
retain and authorizes each Holder, and each Affiliate of Trustee and of each
Holder, to pay or deliver to Trustee, for the benefit of the Holders, without
any necessity on the Trustee's or any Holder's part to resort to other security
or sources of reimbursement for the Secured Obligations, at any time following
the occurrence and during the continuance of any Event of Default, and without
further notice to Grantor (such notice being expressly waived), any sums or
property held by such Person, for application against any portion of the Secured
Obligations, irrespective of whether any demand has been made or whether such
portion of the Secured Obligations is then due and payable. Trustee will
promptly notify Grantor of Trustee's receipt of such funds or other
4
<PAGE>
property for application against the Secured Obligations, but failure to do so
will not affect or impair in any respect the rights granted to the Trustee and
the Holders under the preceding sentence. Trustee may give notice to such Person
of the above authorization and of the assignment and grant of a security
interest in such sums made in the Agreement, and make any suitable arrangements
with any such Person for effectuation thereof, and Grantor hereby irrevocably
appoints Trustee as its attorney to collect, following the occurrence and during
the continuance of an Event of Default, any and all such sums to the extent any
such payment is not made to Trustee by such Holder or Affiliate thereof.
SECTION 4. Grantor Remains Liable. Anything herein to the contrary
----------------------
notwithstanding, (a) Grantor shall remain solely liable under the contracts and
agreements included in the Collateral to the extent set forth therein to perform
all of its duties and obligations thereunder to the same extent as if this
Agreement had not been executed, (b) the exercise by Trustee of any of its
rights hereunder shall not release Grantor from any of its duties or obligations
under the contracts and agreements included in the Collateral, and (c) neither
Trustee nor the Holders shall have any responsibility, obligation or liability
under the contracts and agreements included in the Collateral by reason of this
Agreement, nor shall Trustee or the Holders be required or obligated, in any
manner, to (i) perform or fulfill any of the obligations or duties of Grantor
thereunder, (ii) make any payment, or make any inquiry as to the nature or
sufficiency of any payment received by Grantor or the sufficiency of any
performance by any party under any such contract or agreement, or (iii) present
or file any claim, or take any action to collect or enforce any claim for
payment assigned hereunder.
SECTION 5. Representations and Warranties. Grantor represents and
------------------------------
warrants, as of the date of this Agreement, as follows:
(a) The locations listed on Schedule 1 constitute all locations at
----------
which Grantor's Inventory and/or Equipment is located and Grantor has exclusive
possession and control of such Inventory and Equipment, except for such
Inventory and Equipment which is (i) temporarily in transit between or to such
locations, or (ii) temporarily stored with third parties or held by third
parties for processing, engineering, evaluation or repairs, and the location of
such Inventory and/or Equipment is set forth in Schedule 1-A. The chief place
------------
of business and chief executive office of Grantor are located at 1 Buffington
Harbor, Gary, Indiana 46406-3000.
(b) This Agreement creates in favor of Trustee a legal, valid and
enforceable security interest in the Collateral. When financing statements have
been filed in the appropriate offices against Grantor in the locations listed on
Schedule 1-B, Trustee will have a fully perfected lien on, and security interest
- ------------
in, the Collateral in which a security interest may be perfected by such filing,
subject only to (i) the Lien which may be granted after the date hereof to the
Lender as security for the Credit Facility and (ii) Permitted Liens.
(c) Grantor is the legal and beneficial owner of the Collateral free
and clear of all Liens. Grantor has taken all actions necessary under the UCC
to perfect its interest in any Accounts purchased or otherwise acquired by it,
as against its assignors and creditors of its assignors.
5
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(d) The correct legal name of Grantor is The Majestic Star Casino,
LLC. Grantor currently conducts business under the name The Majestic Star
Casino, LLC and, in certain areas and for certain operations, the trade names
listed on Schedule 2, which are the only trade names or fictitious names
----------
currently used by Grantor. Grantor has never had any other legal name or used
any trade name or fictitious name that is not set forth on Schedule 2.
-----------
(e) No authorization, approval or other action by, notice to or filing
with any Governmental Authority other than those previously obtained, taken, or
made and which are in full force and effect, or contemplated by this Agreement
is required (i) for the grant by Grantor of the security interest in the
Collateral granted hereby; or (ii) the execution, delivery or performance of
this Agreement by Grantor.
SECTION 6. Perfection and Maintenance of Security Interest and Lien.
--------------------------------------------------------
Grantor agrees that until all of the Secured Obligations (other than contingent
indemnity obligations for which no unsatisfied demand has been made) have been
fully satisfied and the Indenture has been terminated, Trustee's security
interests in and Liens on and against the Collateral and all proceeds and
products thereof, shall continue in full force and effect. Grantor shall
perform any and all steps required to perfect, maintain and protect Trustee's
security interests in and Liens on and against the Collateral granted or
purported to be granted hereby or to enable Trustee to exercise its rights and
remedies hereunder with respect to any Collateral, including, without
limitation, (i) executing and filing financing statements, amendments thereof,
and continuation statements executed by the Trustee in form and substance
reasonably satisfactory to Trustee, (ii) delivering to Trustee all chattel
paper, certificates, notes and other instruments, and letters of credit on which
Grantor is named as a beneficiary, that represent, evidence or secure any of the
Collateral, duly endorsed and accompanied by duly executed instruments of
transfer or assignment, all in form and substance satisfactory to Trustee, (iii)
delivering to Trustee warehouse receipts covering that portion of the
Collateral, if any, located in warehouses and for which warehouse receipts are
issued, (iv) after the occurrence and during the continuance of an Event of
Default, transferring Inventory and Equipment to warehouses designated by
Trustee or taking such other steps as are deemed reasonably necessary by Trustee
to maintain Trustee's control of the Inventory and Equipment, and (v) marking
conspicuously each document, contract, chattel paper and all records pertaining
to the Collateral with a legend, in form and substance satisfactory to Trustee,
indicating that such document, contract, chattel paper, or Collateral is subject
to the security interest granted hereby.
If any Inventory or Equipment is in the possession or control of any
warehouseman or Grantor's agents or processors, Grantor shall notify such
warehouseman, agent or processor of Trustee's security interest in such
Inventory and Equipment and instruct them to hold all such Inventory or
Equipment for Trustee's account and subject to Trustee's instructions in a
manner satisfactory to the Trustee.
SECTION 7. Financing Statements. To the extent permitted by
--------------------
applicable law, Grantor hereby authorizes Trustee to file one or more financing
or continuation statements and amendments thereto with respect to all or any
portion of the Collateral, without Grantor's signature appearing thereon.
Grantor agrees that a carbon, photographic, photostatic, or other
6
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reproduction of this Agreement or of a financing statement is sufficient as a
financing statement. Grantor shall pay the costs of, or incidental to, all
recordings or filings of all financing statements, including, without
limitation, any filing expenses incurred by Trustee pursuant to this Section 7.
---------
SECTION 8. Protection of Collateral. Grantor, at its sole cost and
------------------------
expense, shall:
(a) upon request by Trustee, deliver to Trustee certified schedules,
in such form as may be specified by Trustee, identifying the Collateral, or such
part thereof as may be specified in such request, together with such supporting
documents and information as reasonably may be requested, all in reasonable
detail;
(b) acquire and maintain its property (excepting only Excluded Assets)
in a manner that will enable such property to become subject to the Lien granted
under this Security Agreement and refrain from entering into agreements that
would prohibit any such property from becoming subject to the Lien granted
hereunder without the consent of some third party; and
(c) acquire and maintain the consent or approval of any person or
entity (including any Governmental Authority) whose consent or approval is
required for the granting of a lien or security interest in any Collateral to
Trustee.
SECTION 9. Processing, Sale and Collections. Until the occurrence of
--------------------------------
an Event of Default which is continuing and receipt from Trustee of written
notice of the revocation of Grantor's authority, Grantor:
(a) will, at its own expense, endeavor to collect, as and when due,
all amounts due with respect to any Account, including the taking of such action
with respect to such collection as Trustee may reasonably request or, in the
absence of such request, as Grantor may deem advisable; and
(b) may grant, in the ordinary course of business, to any Account
debtor, any rebate, refund or adjustment to which such Account debtor may be
lawfully entitled, and may accept, in connection therewith, the return of goods,
the sale or lease of which shall have given rise to the obligation of the
Account debtor.
If requested by Trustee (but only after the occurrence of an Event of
Default which is continuing), Grantor will note the security interest of Trustee
on all records relative to the Collateral, including, without limitation, any
invoice that evidences an Account. Upon the occurrence and during the
continuance of any Event of Default, upon request of Trustee, Grantor will
promptly notify (and Grantor hereby authorizes Trustee so to notify) each
Account debtor in respect of any Account that such Collateral has been assigned
to Trustee, and that any payments due or to become due in respect of such
Collateral are to be made directly to Trustee or its designee.
7
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SECTION 10. Equipment and Inventory. Grantor covenants and agrees
-----------------------
with Trustee that from the date of this Agreement and until termination of this
Agreement pursuant to Section 25, Grantor shall :
----------
(a) keep the Equipment and Inventory (other than Equipment or
Inventory sold in the ordinary course of business, or otherwise, if permitted
under the Indenture) at the places specified in Schedule 1, except for Equipment
----------
and Inventory (i) temporarily in transit between such locations or (ii)
temporarily stored at locations set forth on Schedule 1-A, and deliver written
------------
notice to Trustee at least thirty (30) days prior to establishing any other
location at which it reasonably expects to maintain Inventory and/or Equipment;
and
(b) cause all property used or useful in the conduct of its business
to be maintained and kept in good condition, repair and working order and
supplied with all necessary equipment and shall cause to be made all necessary
repairs, renewals, replacements, betterments and improvements thereof, all as in
the judgment of Grantor may be necessary so that the business carried on in
connection therewith may be properly and advantageously conducted at all times;
provided, however, that nothing in this Section 10(b) shall prevent Grantor from
- -------- ------- -------------
discontinuing the operation or maintenance of any of such property if such
discontinuance is, in the judgment of Grantor, desirable in the conduct of its
business and not disadvantageous in any material respect to the Trustee or the
Holders.
SECTION 11. Partial Release of Collateral. So long as no Default or
-----------------------------
Event of Default has occurred and is continuing under the Indenture, Collateral
may be released from the security interest created by this Agreement at any time
or from time to time as provided in the Indenture.
SECTION 12. Trademark Licenses. As long as no Default or Event of
------------------
Default has occurred and is continuing, nothing set forth herein or in any other
Security Document is intended or shall be construed to prevent the Grantor from
entering into license agreements pertaining to the Trademarks (as such term is
defined in the Trademark Security Agreement); provided that Grantor will not,
-------------
without the Trustee's prior written consent, enter into any license agreement
which is inconsistent with the Trademark Security Agreement.
SECTION 13. General Covenants. Grantor covenants and agrees with
-----------------
Trustee that from and after the date of this Agreement and until termination of
this Agreement pursuant to Section 25,:
----------
(a) Grantor will keep and maintain at Grantor's own cost and expense
satisfactory and complete records of Grantor's Collateral in a manner consistent
with Grantor's current business practice, including, without limitation, a
record of all payments received and all credits granted with respect to such
Collateral. Grantor shall, for Trustee's further security, at Trustee's
request, deliver and turn over to Trustee or Trustee's designated
representatives at any time following the occurrence and during the continuation
of an Event of Default, any such books and records (including, without
limitation, any and all computer tapes, programs and
8
<PAGE>
source and object codes relating to such Collateral in which Grantor has an
interest or any part or parts thereof).
(b) Grantor will not create, permit or suffer to exist, and will
defend the Collateral against, and take such other action as is necessary to
remove, any Lien on any of the Collateral other than (i) the Lien which may be
granted after the date hereof to the Lender as security for the Credit Facility
and (ii) Permitted Liens, and will defend the right, title and interest of
Trustee in and to Grantor's rights to such Collateral, including, without
limitation, the proceeds and products thereof, against the claims and demands of
all Persons whatsoever.
(c) Grantor agrees to pay promptly when due all taxes, assessments and
governmental charges upon or against the Collateral, or Grantor, or for the
property or operations of Grantor, in each case before the same become
delinquent and before penalties accrue thereon, unless and to the extent that
the same are being contested in good faith by appropriate proceedings and for
which Grantor has established adequate reserves. Grantor shall give written
notice to Trustee of all happenings and events having a material adverse effect
on the Collateral or the value or amount thereof, including, without limitation,
the creation or assertion of any Lien or security interest against any of the
Collateral that is not a Permitted Lien.
(d) In the event Grantor fails to pay taxes, assessments, costs and
expenses which Grantor is required to pay or in the event Grantor fails to keep
the Collateral free from other security interests, liens or encumbrances not
permitted under the terms of this Security Agreement, Trustee may make
expenditures for any and all such purposes. All costs and expenses of Trustee
in retaking, holding, preparing for sale and selling or otherwise realizing upon
any Collateral or enforcing any provisions hereof, including reasonable
attorneys' fees, shall constitute part of the Secured Obligations, and shall
bear interest from the date incurred at the rate of 11 7/8% per annum.
(e) Grantor shall: (i) at all reasonable times allow Trustee and its
representatives to examine, inspect and/or make abstracts from Grantor's books
and records and to arrange for verification of Collateral, under reasonable
procedures, which in the case of Accounts may be made directly with the Account
debtors or by other methods; provided, however, that until the occurrence of an
Event of Default which is continuing, Trustee shall endeavor (subject to
receiving Grantor's cooperation and assistance) to utilize procedures reasonably
calculated to avoid communicating to Account debtors that such inquiries
directed to Account debtors are requested for the benefit of the Trustee; and
(ii) furnish to Trustee upon request additional statements of any Account,
together with all notes or other papers evidencing the same and any guaranty,
security or other information relating thereto.
(f) Grantor will comply with the terms of the Indenture with respect
to the Collateral, including without limitation, provisions regarding the
maintenance of insurance covering the Collateral.
9
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(g) Grantor will not change the location of its chief place of
business and chief executive office, except upon not fewer than thirty (30)
days' prior written notice to Trustee.
SECTION 14. Trustee Appointed Attorney-in-Fact. Grantor hereby
----------------------------------
irrevocably appoints Trustee as Grantor's attorney-in-fact, with full authority
in the place and stead of Grantor and in the name of Grantor or otherwise, from
time to time in Trustee's discretion, to take any action and to execute any
instrument which Trustee may deem necessary or advisable to accomplish the
purposes of this Agreement, including, without limitation, (a) following the
occurrence and during the continuance of an Event of Default, to:
(i) obtain and adjust insurance required to be paid to the Trustee
or any Holders pursuant to the Indenture;
(ii) ask, demand, collect, sue for, recover, compromise, receive and
give acquittance and receipts for moneys due and to become due under or in
respect of any of the Collateral;
(iii) receive, endorse, and collect any drafts or other instruments,
documents and chattel paper, in connection with clause (i) or (ii) above; and
---------- ----
(iv) file any claims or take any action or institute any proceedings
which Trustee may deem necessary or desirable for the collection of any of the
Collateral, or otherwise to enforce the rights of Trustee with respect to any of
the Collateral;
and (b) at any time, to:
(i) obtain access to records maintained for Grantor by computer
services companies and other service companies or bureaus; and
(ii) do all other things reasonably necessary to carry out this
Agreement.
SECTION 15. Trustee May Perform. If Grantor fails to perform any
-------------------
agreement contained herein or in the Indenture, Trustee may perform, or cause
performance of, such agreement, and the expenses of Trustee incurred in
connection therewith shall be payable by Grantor under Section 22.
-----------
SECTION 16. Trustee's Duties. The powers conferred on Trustee
----------------
hereunder are solely to protect its interest in the Collateral and shall not
impose any duty upon it to exercise any such powers. Except for the safe
custody of any Collateral in its possession and the accounting for monies
actually received by it hereunder, Trustee shall not have any duty as to any
Collateral. Trustee shall be deemed to have exercised reasonable care in the
custody and preservation of the Collateral in its possession if the Collateral
is accorded treatment substantially equal to that which Trustee accords its own
property, it being understood that Trustee shall be under no obligation to take
any necessary steps to preserve rights against prior
10
<PAGE>
parties or any other rights pertaining to any Collateral, but may do so at its
option, and all reasonable expenses incurred in connection therewith shall be
for the sole account of Grantor and shall be added to the Secured Obligations.
SECTION 17. Remedies. If any Event of Default shall have occurred
--------
and be continuing Trustee shall have, in addition to other rights and remedies
provided for herein or otherwise available to it, all the rights and remedies of
a secured party upon default under the UCC (whether or not the UCC applies to
the affected Collateral) and further, Trustee may, without notice, demand or
legal process of any kind (except as may be required by law), all of which
Grantor waives, at any time or times, (i) enter Grantor's owned or leased
premises and take physical possession of the Collateral and maintain such
possession on Grantor's owned or leased premises, at no cost to Trustee or any
of the Holders, or remove the Collateral, or any part thereof, to such other
place(s) as Trustee may desire, (ii) require Grantor to, and Grantor hereby
agrees that it will at its expense and upon request of Trustee forthwith,
assemble all or any part of the Collateral as directed by Trustee and make it
available to Trustee at a place to be designated by Trustee which is reasonably
convenient to Trustee, and (iii) sell, lease, assign, grant an option or options
to purchase or otherwise dispose of the Collateral or any part thereof at public
or private sale, at any exchange, broker's board or at any of the offices of
Trustee or elsewhere, for cash, on credit or for future delivery, and upon such
other terms as Trustee may deem commercially reasonable. Grantor agrees that,
to the extent notice of sale shall be required by law, at least ten (10) days'
notice to Grantor of the time and place of any public sale or the time after
which any private sale is to be made shall constitute reasonable notification.
Trustee shall not be obligated to make any sale of Collateral regardless of
notice of sale having been given. Trustee may adjourn any public or private
sale from time to time by announcement at the time and place fixed therefor, and
such sale may, without further notice, be made at the time and place to which it
was so adjourned. Trustee shall apply all cash proceeds received by Trustee in
respect of any sale of, collection from, or other realization upon all or any
part of the Collateral (after payment of any amounts payable to Trustee pursuant
to Section 22) for the benefit of the Holders, against all or any part of the
----------
Secured Obligations in such order as may be required by the Indenture. Any
surplus of such cash or cash proceeds held by Trustee and remaining after
payment in full of all the Secured Obligations shall be paid over to Grantor or
to whomsoever may be lawfully entitled to receive such surplus. The rights and
remedies provided under this Agreement are cumulative and may be exercised
singly or concurrently and are not exclusive of any rights and remedies provided
by law or equity.
SECTION 18. Exercise of Remedies. In connection with the exercise
--------------------
of its remedies pursuant to Section 17, Trustee may, (i) exchange, enforce,
----------
waive or release any portion of the Collateral and any other security for the
Secured Obligations; (ii) apply such Collateral or security and direct the order
or manner of sale thereof as Trustee may, from time to time, determine; and
(iii) settle, compromise, collect or otherwise liquidate any such Collateral or
security in any manner following the occurrence of an Event of Default, without
affecting or impairing Trustee's right to take any other further action with
respect to any Collateral or security or any part thereof.
11
<PAGE>
SECTION 19. License. Trustee is hereby granted a license or other
-------
right to use, following the occurrence and during the continuance of an Event of
Default, without charge, Grantor's labels, patents, copyrights, trade secrets,
trade names, trademarks, service marks, customer lists and advertising matter,
or any property of a similar nature, as it pertains to the Collateral, in
completing production of, advertising for sale, and selling any Collateral,
provided that Trustee uses quality standards at least substantially equivalent
to those of Grantor for the manufacture, advertising, sale and distribution of
Grantor's products and services; Grantor's rights under all licenses and all
franchise agreements shall inure to Trustee's benefit.
SECTION 20. Injunctive Relief. Grantor recognizes that in the event
-----------------
Grantor fails to perform, observe or discharge any of its obligations or
liabilities under this Agreement, any remedy of law may prove to be inadequate
relief to the Holders; therefore, Grantor agrees that the Holders, if Trustee so
determines and requests, shall be entitled to temporary and permanent injunctive
relief in any such case without the necessity of proving actual damages.
SECTION 21. Interpretation and Inconsistencies: Merger.
-------------------------------------------
(a) The rights and duties created by this Agreement shall, in all
cases, be interpreted consistently with, and shall be in addition to (and not in
lieu of), the rights and duties created by the Indenture and the other Security
Documents. In the event that any provision of this Agreement shall be
inconsistent with any provision of the Indenture, the Intercreditor Agreement,
or any other Security Document, such provision of the other agreement shall
govern.
(b) Except as provided in subsection (a) above, this Agreement and the
other Security Documents represent the final agreement of the Grantor and the
Trustee with respect to the matters contained herein and therein and may not be
contradicted by evidence of prior or contemporaneous agreements, or subsequent
oral agreements, between the Grantor and the Trustee or any other Holder.
SECTION 22. Expenses. Grantor will upon demand pay to Trustee
--------
and/or the Holders the amount of any and all reasonable fees and expenses,
including the reasonable fees and expenses of their counsel and agents, as
provided in the Indenture.
SECTION 23. Amendments, Etc. Except as otherwise provided by the
----------------
Indenture, the consent of the Holders of at least a majority in principal amount
of the Notes then outstanding (including consents obtained in connection with a
tender offer or exchange offer for Notes) shall be required to amend, modify,
supplement, or waive any provision of this Agreement. Any such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given.
SECTION 24. Notices. All notices and other communications provided
-------
for hereunder shall be given in the manner set forth in Section 11.2 of the
------------
Indenture.
12
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SECTION 25. Continuing Security Interest; Termination. (a) Except
-----------------------------------------
as provided in Section 25(b), this Agreement shall create a continuing security
-------------
interest in the Collateral and shall (i) remain in full force and effect until
the later of the payment or satisfaction in full of the Secured Obligations
(other than contingent indemnity obligations for which no unsatisfied demand has
been made) and the termination of the Indenture, (ii) be binding upon Grantor,
its successors and assigns, and (iii) inure, together with the rights and
remedies of Trustee hereunder, to the benefit of the Trustee and any of the
Holders. Nothing set forth herein or in any other Security Document is
intended or shall be construed to give any other Person any right, remedy or
claim under, to or in respect of this Agreement or any other Security Document
or any Collateral. Grantor's successors and assigns shall include, without
limitation, a receiver, trustee or Grantor-in-possession thereof or therefor.
(b) Upon the payment in full in cash of the Secured Obligations (other
than contingent indemnity obligations for which no unsatisfied demand has been
made) and the termination of the Indenture, this Agreement and the security
interest granted hereby shall terminate and all rights to the Collateral shall
revert to Grantor. Upon any such termination of security interest, Grantor
shall be entitled to the return, upon its request and at its expense, of such of
the Collateral held by Trustee as shall not have been sold or otherwise applied
pursuant to the terms hereof and Trustee will, at Grantor's expense, execute and
deliver to Grantor such other documents as Grantor shall reasonably request to
evidence such termination.
SECTION 26. Severability. It is the parties' intention that this
------------
Agreement be interpreted in such a way that it is valid and effective under
applicable law. However, if one or more of the provisions of this Agreement
shall for any reason be found to be invalid or unenforceable, the remaining
provisions of this Agreement shall be unimpaired.
SECTION 27. GOVERNING LAW. ANY DISPUTE BETWEEN THE GRANTOR AND THE
-------------
TRUSTEE OR ANY HOLDER ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL
TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH, THIS AGREEMENT,
AND WHETHER ARISING IN CONTRACT, TORT, EQUITY, OR OTHERWISE, SHALL BE RESOLVED
IN ACCORDANCE WITH THE INTERNAL LAWS (WITHOUT REGARD TO THE CONFLICTS OF LAWS
PROVISIONS) OF THE STATE OF INDIANA.
SECTION 28. CONSENT TO JURISDICTION; SERVICE OF PROCESS; JURY TRIAL.
--------------------------------------------------------
(A) NON-EXCLUSIVE JURISDICTION. THE GRANTOR HEREBY IRREVOCABLY
--------------------------
SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR NEW
YORK STATE COURT SITTING IN NEW YORK, NEW YORK IN ANY ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT AND THE GRANTOR HEREBY IRREVOCABLY
AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND
DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR
HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT,
13
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ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT IS AN
INCONVENIENT FORUM, BUT THE GRANTOR ACKNOWLEDGES THAT ANY APPEALS FROM THOSE
COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF NEW YORK, NEW YORK.
(B) OTHER JURISDICTIONS. GRANTOR AGREES THAT THE TRUSTEE OR ANY
-------------------
HOLDER SHALL HAVE THE RIGHT TO PROCEED AGAINST GRANTOR OR ITS PROPERTY IN A
COURT IN ANY LOCATION TO ENABLE SUCH PERSON TO (1) OBTAIN PERSONAL JURISDICTION
OVER THE GRANTOR OR (2) REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE
SECURED OBLIGATIONS OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER ENTERED IN
FAVOR OF SUCH PERSON. GRANTOR AGREES THAT IT WILL NOT ASSERT ANY PERMISSIVE
COUNTERCLAIMS IN ANY PROCEEDING BROUGHT BY SUCH PERSON TO REALIZE ON THE
COLLATERAL OR ANY OTHER SECURITY FOR THE SECURED OBLIGATIONS OR TO ENFORCE A
JUDGMENT OR OTHER COURT ORDER IN FAVOR OF SUCH PERSON. GRANTOR WAIVES ANY
OBJECTION THAT IT MAY HAVE TO THE LOCATION OF THE COURT IN WHICH SUCH PERSON HAS
COMMENCED A PROCEEDING DESCRIBED IN THIS SUBSECTION.
(C) SERVICE OF PROCESS; INCONVENIENT FORUM. IF AND TO THE EXTENT
--------------------------------------
GRANTOR'S RESIDENT AGENT IN ANY JURISDICTION IS NOT CT CORPORATION SYSTEM, THE
GRANTOR WAIVES PERSONAL SERVICE OF PROCESS UPON IT AND IRREVOCABLY APPOINTS CT
CORPORATION SYSTEM, WHOSE ADDRESS IS ONE NORTH CAPITOL AVENUE, INDIANAPOLIS,
INDIANA 46204, AS GRANTOR'S AGENT FOR THE PURPOSE OF ACCEPTING SERVICE OF
PROCESS ISSUED BY ANY COURT. THE GRANTOR IRREVOCABLY WAIVES ANY OBJECTION
(INCLUDING, WITHOUT LIMITATION, ANY OBJECTION OF THE LAYING OF VENUE OR BASED ON
THE GROUNDS OF FORUM NON CONVENIENS) WHICH IT MAY NOW OR HEREAFTER HAVE TO THE
---------------------
BRINGING OF ANY SUCH ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY
OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION
HEREWITH IN NEW YORK, NEW YORK.
(D) WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO IRREVOCABLY
--------------------
WAIVES ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER
SOUNDING IN CONTRACT, TORT, OR OTHERWISE, ARISING OUT OF, CONNECTED WITH,
RELATED TO OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN
CONNECTION WITH THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT
EXECUTED OR DELIVERED IN CONNECTION HEREWITH. EACH OF THE PARTIES HERETO AGREES
AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE
DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT ANY PARTY HERETO MAY FILE AN
ORIGINAL COUNTERPART OR A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN
EVIDENCE OF THE
14
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CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
(E) WAIVER OF BOND. GRANTOR WAIVES THE POSTING OF ANY BOND
--------------
OTHERWISE REQUIRED OF ANY PARTY HERETO IN CONNECTION WITH ANY JUDICIAL PROCESS
OR PROCEEDING TO REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE SECURED
OBLIGATIONS OR TO ENFORCE ANY JUDGMENT OR OTHER COURT ORDER ENTERED IN FAVOR OF
SUCH PARTY, OR TO ENFORCE THIS AGREEMENT BY SPECIFIC PERFORMANCE, TEMPORARY
RESTRAINING ORDER, PRELIMINARY OR PERMANENT INJUNCTION.
(F) ADVICE OF COUNSEL. EACH OF THE PARTIES REPRESENTS TO EACH OTHER
-----------------
PARTY HERETO THAT IT HAS DISCUSSED THIS AGREEMENT AND, SPECIFICALLY, THE
PROVISIONS OF THIS SECTION 28, WITH ITS COUNSEL.
----------
SECTION 29. Gaming Laws. (a) The Trustee acknowledges, understands
-----------
and agrees that the Gaming Laws may impose certain licensing or transaction
approval requirements prior to the exercise of the rights and remedies granted
to it under this Agreement with respect to the Collateral subject to the Gaming
Laws.
(b) If any consent under the Gaming Laws is required in connection
with the taking of any of the actions which may be taken by the Trustee in the
exercise of its rights hereunder, then Grantor agrees to use its best efforts to
secure such consent and to cooperate with the Trustee in obtaining any such
consent. Upon the occurrence and during the continuation of any Event of
Default, Grantor shall promptly execute and/or cause the execution of all
applications, certificates, instruments, and other documents and papers that the
Trustee may be required to file in order to obtain any necessary approvals under
the Gaming Laws, and if Grantor fails or refuses to execute such documents, the
Trustee or the clerk of the court with jurisdiction may execute such documents
on behalf of Grantor.
(c) Notwithstanding any other provision of this Agreement to the
contrary, nothing in this Agreement shall (i) effect any transfer of any
ownership interest (within the meaning of 68 Indiana Administrative Code 5) in
Grantor or (ii) effect any transfer, sale, purchase, lease or hypothecation of,
or any borrowing or loaning of money against, or any establishment of any voting
trust agreement or other similar agreement with respect to (all within the
meaning of Indiana Code 4-33-4-21), any certificate of suitability or any
owner's license heretofore or hereafter issued to any person, including Grantor,
under any of the Gaming Laws, including Indiana Code 4-33.
SECTION 30. Interaction with Indenture. All terms, covenants,
--------------------------
conditions, provisions and requirements of the Indenture are incorporated by
reference in this Security Agreement. In the event of any conflict or
inconsistency between the provisions of this Security Agreement and those of the
Indenture, including, without limitation, any conflicts or inconsistencies in
any definitions herein or therein, the provisions or definitions of the
Indenture shall govern.
15
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SECTION 31. Trust Indenture Act. If any provision of this Agreement
-------------------
conflicts with any provision of the Trust Indenture Act, the provisions of the
Trust Indenture Act shall control.
SECTION 32. Appointment of Collateral Agent. The Trustee may, solely
-------------------------------
at its discretion, appoint a collateral agent to enforce the rights and remedies
available to the Trustee under this Agreement.
SECTION 33. Intercreditor Arrangement. The parties hereto
-------------------------
acknowledge and agree, for the benefit of the Lender under the Credit Facility,
that, during any period that obligations or commitments are outstanding under
the Credit Facility, the exercise of the rights and remedies of the Trustee
hereunder are or will be subject to the terms of the Intercreditor Agreement.
In the event of any inconsistency between the terms hereof and the Intercreditor
Agreement, the Intercreditor Agreement shall control.
16
<PAGE>
IN WITNESS WHEREOF, Grantor and Trustee caused this Agreement to be
duly executed and delivered by their respective duly authorized officers as of
the date first above written.
THE MAJESTIC STAR CASINO, LLC
as Grantor
By: Barden Development, Inc., its manager
By: _________________________________
Name: _______________________________
Title: ______________________________
IBJ WHITEHALL BANK & TRUST COMPANY,
as Trustee
By: _________________________________
Name: _______________________________
Title: ______________________________
17
<PAGE>
SCHEDULE 1
TO
SECURITY AGREEMENT
Locations of Collateral:
-----------------------
One Buffington Drive
Gary, Indiana 46406
18
<PAGE>
SCHEDULE 1-A
TO
SECURITY AGREEMENT
Third Party Locations:
---------------------
<TABLE>
<CAPTION>
Corporate Name of Description Maximum
Third Party Address of Relationship Amount
- ----------- ------- --------------- ------
<S> <C> <C> <C>
</TABLE>
19
<PAGE>
SCHEDULE 1-B
TO
SECURITY AGREEMENT
Financing Statement Filing Locations:
------------------------------------
None, except:
Office of Secretary of State of Indiana
20
<PAGE>
SCHEDULE 2
TO
SECURITY AGREEMENT
Trade Names:
-----------
Majestic Star
Majestic Star Casino
Club M-Star
21
<PAGE>
EXHIBIT 4.5
TRADEMARK SECURITY AGREEMENT
----------------------------
THIS TRADEMARK SECURITY AGREEMENT ("Agreement") is made as of June 18,
---------
1999, by and between The Majestic Star Casino, LLC, an Indiana limited liability
company ("Grantor"), and IBJ Whitehall Bank & Trust Company, as trustee under
-------
the Indenture described below (the "Trustee") for the "Holders" (as such term is
-------
defined in the Indenture defined below).
W I T N E S S E T H:
--------------------
WHEREAS, Grantor and the Trustee have entered into that certain
Indenture dated as of even date herewith (as the same may hereafter be modified,
amended, restated or supplemented from time to time, the "Indenture"), pursuant
---------
to which Grantor and the Trustee have agreed to certain terms for the benefit of
Grantor and the Holders; and
WHEREAS, Grantor and the Trustee have entered into that certain
Security Agreement of even date herewith (as the same may hereafter be modified,
amended, restated or supplemented from time to time, the "Security Agreement"),
------------------
pursuant to which Grantor has granted a security interest in certain of its
assets to the Trustee for the benefit of the Trustee and the Holders; and
WHEREAS, the Holders have required Grantor to execute and deliver this
Agreement (i) in order to secure the prompt and complete payment, observance and
performance of the Secured Obligations and (ii) as a condition precedent to the
Purchase Agreement dated June 15, 1999, by and among Grantor, Capital and the
Initial Purchaser.
NOW, THEREFORE, in consideration of the premises set forth herein and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, Grantor agrees as follows:
1. Defined Terms.
-------------
(a) Unless otherwise defined herein, each capitalized term used
herein that is defined in the Indenture is used with the meaning ascribed to
such term in the Indenture. Unless otherwise defined herein or in the Indenture,
each capitalized term used herein that is defined in the Security Agreement is
used with the meaning ascribed to such term in the Security Agreement.
(b) The words "hereof," "herein" and "hereunder" and words of like
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement, and section references are to
this Agreement unless otherwise specified.
1
<PAGE>
(c) All terms defined in this Agreement in the singular shall have
comparable meanings when used in the plural, and vice versa, unless otherwise
----------
specified.
2. Incorporation of Premises. The premises set forth above are
-------------------------
incorporated into this Agreement by this reference thereto and are made a part
hereof.
3. Incorporation of the Indenture. The Indenture and the terms and
------------------------------
provisions thereof are hereby incorporated herein in their entirety by this
reference thereto. In the event of any conflict or inconsistency between the
provisions of this Agreement and those of the Indenture, including, without
limitation, any conflicts or inconsistencies in any definitions herein or
therein, the provisions and definitions of the Indenture shall govern.
4. Security Interest in Trademarks. To secure the complete and
-------------------------------
timely payment, performance and satisfaction of all of the Secured Obligations,
Grantor hereby grants to the Trustee, for the equal and ratable benefit of the
Holders, a lien and security interest, subject only to (i) the security interest
which may be granted after the date hereof to the Lender as security for the
Credit Facility, and (ii) Permitted Liens, with power of sale to the extent
permitted by applicable law, in all of Grantor's right, title and interest in
and to the types and items of property described below, and all proceeds (as
defined in the UCC) thereof whether now owned or existing and hereafter acquired
or arising:
(i) trademarks, registered trademarks, trademark applications,
service marks, registered service marks and service mark applications,
including, without limitation, the trademarks, registered trademarks,
trademark applications, service marks, registered service marks and service
mark applications listed on Schedule A attached hereto and made a part
----------
hereof, and (a) all renewals thereof, (b) all income, royalties, damages
and payments now and hereafter due and/or payable under and with respect
thereto, including, without limitation, payments under all licenses entered
into in connection therewith and damages and payments for past or future
infringements or dilutions thereof, (c) the right to sue for past, present
and future infringements and dilutions thereof, (d) the goodwill of
Grantor's business symbolized by the foregoing and connected therewith, and
(e) all of Grantor's rights corresponding thereto throughout the world (all
of the foregoing trademarks, registered trademarks and trademark
applications, and service marks, registered service marks and service mark
applications, together with the items described in clauses (a)-(e) in this
---------------
paragraph 4(i), are sometimes hereinafter individually and/or collectively
--------------
referred to as the "Trademarks"); and
----------
(ii) rights under and interests in any trademark license agreements
or service mark license agreements with any other party, whether Grantor is
a licensee or licensor under any such license agreement, including, without
limitation, those trademark license agreements and service mark license
agreements listed on Schedule B attached hereto and made a part hereof,
----------
together with any goodwill connected with and symbolized by any such
trademark license agreements or service mark license agreements (all of the
2
<PAGE>
foregoing are hereinafter referred to collectively as the "Licenses").
--------
Notwithstanding the foregoing provisions of this Section 4, the Licenses
---------
shall not include any license agreement in effect as of the date hereof
which by its terms prohibits the grant of the security contemplated by this
Agreement; provided, however, that upon the termination of such
-------- -------
prohibitions for any reason whatsoever, the provisions of this Section 4
---------
shall be deemed to apply thereto automatically, and such license agreement
shall constitute a License subject to the lien and security interest
granted herein.
5. Future Agreements. As long as no Event of Default has occurred
-----------------
and is continuing, nothing set forth herein or in any other Security Document is
intended or shall be construed to prevent the Grantor from entering into license
agreements pertaining to the Trademarks; provided that Grantor will not, without
--------------
the Trustee's prior written consent, enter into any agreement, including,
without limitation, any license agreement, which is inconsistent with this
Agreement, and Grantor further agrees that it will not take any action, and will
use its best efforts not to permit any action to be taken by others, including,
without limitation, licensees, or fail to take any action, which would in any
respect affect the validity or enforcement of the rights transferred to the
Trustee under this Agreement or the rights associated with the Trademarks or
Licenses.
6. New Trademarks and Licenses. Grantor represents and warrants
---------------------------
that as of the date hereof, (a) the Trademarks listed on Schedule A include all
----------
of the trademarks, registered trademarks, trademark applications, service marks,
registered service marks and service mark applications now owned or held by
Grantor, (b) the Licenses listed on Schedule B include all of the trademark
----------
license agreements and service mark license agreements under which Grantor is
the licensee or licensor and (c) no liens, claims or security interests in such
Trademarks and Licenses have been granted by Grantor to any Person (other than
the Trustee) which remain valid and effective. If, prior to the termination of
this Agreement, Grantor shall (i) obtain rights to any new or additional
trademarks, registered trademarks, trademark applications, service marks,
registered service marks or service mark applications, (ii) become entitled to
the benefit of any new or additional trademarks, registered trademarks,
trademark applications, trademark licenses, trademark license renewals, service
marks, registered service marks, service mark applications, service mark
licenses or service mark license renewals whether as licensee or licensor, or
(iii) enter into any new trademark license agreement or service mark license
agreement, the provisions of paragraph 4 above shall automatically apply
------------
thereto, and the same shall be subject to the security interest granted herein.
Grantor shall give to the Trustee written notice of events described in clauses
-------
(i), (ii) and (iii) of the preceding sentence promptly after the occurrence
- --- ---- -----
thereof, but in any event not less frequently than on a quarterly basis.
Promptly after the occurrence of each such event Grantor shall (and Trustee is
hereby authorized to, at Grantor's expense, but is not required to) modify this
Agreement unilaterally (i) by amending Schedule A to include new and additional
----------
trademarks, registered trademarks, trademark applications, service marks,
registered service marks and service mark applications and by amending Schedule
--------
B to include additional trademark license agreements and service mark license
- -
agreements, which are Trademarks or Licenses under paragraph 4 above or under
-----------
this paragraph 6, and (ii) by filing, in
-----------
3
<PAGE>
addition to and not in substitution for this Agreement, a duplicate original of
this Agreement identifying on Schedule A or B thereto, as the case may be, such
new or additional trademarks, registered trademarks, trademark applications,
service marks, registered service marks and service mark applications, and
trademark license agreements and service mark license agreements. The party
making a filing pursuant to the preceding sentence shall promptly provide a copy
of it to the other party.
7. Royalties. Grantor hereby agrees that the use by the Trustee of
---------
the Trademarks and Licenses as authorized hereunder in connection with the
Trustee's exercise of its rights and remedies under paragraph 15 or pursuant to
------------
the Security Agreement or any other Security Document shall be coextensive with
Grantor's rights thereunder and with respect thereto and without any liability
for royalties or other related charges from the Trustee or the Holders to
Grantor.
8. Right to Inspect; Further Assignments and Security Interests.
------------------------------------------------------------
The Trustee may at all reasonable times (and at any time when an Event of
Default exists) have access to, examine, audit, make copies (at Grantor's
expense) and extracts from and inspect Grantor's premises and examine Grantor's
books, records and operations relating to the Trademarks and Licenses; provided,
--------
that in conducting such inspections and examinations, the Trustee shall use
reasonable efforts not to disturb unnecessarily the conduct of Grantor's
ordinary business operations. Grantor agrees (i) not to sell or assign its
respective interests in, or grant any license under, the Trademarks or the
Licenses without the prior and express written consent of the Trustee, (ii) to
maintain the quality of such products as of the date hereof, and (iii) not to
change the quality of such products in any material respect without the
Trustee's prior and express written consent.
9. Nature and Continuation of the Trustee's Security Interest;
-----------------------------------------------------------
Termination of the Trustee's Security Interest. This Agreement is made for
- ----------------------------------------------
collateral security purposes only. This Agreement shall create a continuing
security interest in the Trademarks and Licenses and shall terminate only when
the Secured Obligations (other than contingent indemnity obligations) have been
paid in full in cash and the Indenture and the Security Agreement have been
terminated. When this Agreement has terminated, the Trustee shall promptly
execute and deliver to Grantor, at Grantor's expense, all termination statements
and other instruments as may be necessary or proper to terminate the Trustee's
security interest in the Trademarks and the Licenses, subject to any disposition
thereof which may have been made by the Trustee pursuant to this Agreement or
the Security Agreement.
10. Duties of Grantor. Grantor shall have the duty, to the extent
-----------------
desirable in the normal conduct of Grantor's business, to: (a) prosecute
diligently any trademark application or service mark application that is part of
the Trademarks pending as of the date hereof or hereafter until the termination
of this Agreement, and (b) make application for trademarks or service marks.
Grantor further agrees to use its best efforts to maintain in full force and
effect the Trademarks and the Licenses that are or shall be necessary in the
operation of Grantor's business.
4
<PAGE>
Any expenses incurred in connection with the foregoing shall be borne by
Grantor. Neither the Trustee nor any of the Holders shall have any duty with
respect to the Trademarks and Licenses. Without limiting the generality of the
foregoing, neither the Trustee nor any of the Holders shall be under any
obligation to take any steps necessary to preserve rights in the Trademarks or
Licenses against any other parties, but the Trustee may do so at its option from
and after the occurrence of an Event of Default, and all expenses incurred in
connection therewith shall be for the sole account of Grantor and shall be added
to the Secured Obligations secured hereby.
11. The Trustee's Right to Sue. From and after the occurrence of an
--------------------------
Event of Default, the Trustee shall have the right, but shall not be obligated,
to bring suit in its own name to enforce the Trademarks and the Licenses and, if
the Trustee shall commence any such suit, Grantor shall, at the request of the
Trustee, do any and all lawful acts and execute any and all proper documents
required by the Trustee in aid of such enforcement. Grantor shall, upon demand,
promptly reimburse the Trustee for all costs and expenses incurred by the
Trustee in the exercise of its rights under this paragraph 11 (including,
------------
without limitation, reasonable fees and expenses of attorneys and paralegals for
the Trustee).
12. Waivers. The Trustee's failure, at any time or times hereafter,
-------
to require strict performance by Grantor of any provision of this Agreement
shall not waive, affect or diminish any right of the Trustee thereafter to
demand strict compliance and performance therewith nor shall any course of
dealing between Grantor and the Trustee have such effect. No single or partial
exercise of any right hereunder shall preclude any other or further exercise
thereof or the exercise of any other right.
13. Severability Whenever possible, each provision of this Agreement
------------
shall be interpreted in such manner as to be effective and valid under
applicable law, but the provisions of this Agreement are severable, and if any
clause or provision shall be held invalid and unenforceable in whole or in part
in any jurisdiction, then such invalidity or unenforceability shall affect only
such clause or provision, or part hereof, in such jurisdiction, and shall not in
any manner affect such clause or provision in any other jurisdiction, or any
other clause or provision of this Agreement in any jurisdiction.
14. Amendments, Etc. Except as otherwise provided by the Indenture,
----------------
the consent of the Holders of at least a majority in principal amount of the
Notes then outstanding (including consents obtained in connection with a tender
offer or exchange offer for Notes) shall be required to amend, modify,
supplement, or waive any provision of this Agreement. Any such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given.
15. Cumulative Remedies; Power of Attorney. Grantor hereby
--------------------------------------
irrevocably designates, constitutes and appoints the Trustee (and all Persons
designated by the Trustee in its sole and absolute discretion) as Grantor's true
and lawful attorney-in-fact, and authorizes the Trustee and any of the Trustee's
designees, in Grantor's or the Trustee's name, to take any action
5
<PAGE>
and execute any instrument which the Trustee may deem necessary or advisable to
accomplish the purposes of this Agreement, including, without limitation, from
and after the occurrence of an Event of Default and the giving by the Trustee of
notice to Grantor of the Trustee's intention to enforce its rights and claims
against Grantor, to (i) endorse Grantor's name on all applications, documents,
papers and instruments necessary or desirable for the Trustee in the use of the
Trademarks or the Licenses, (ii) assign, pledge, convey or otherwise transfer
title in or dispose of the Trademarks or the Licenses to anyone on commercially
reasonable terms, (iii) grant or issue any exclusive or nonexclusive license
under the Trademarks or, to the extent permitted, under the Licenses, to anyone
on commercially reasonable terms, and (iv) take any other actions with respect
to the Trademarks or the Licenses as the Trustee deems in its own or the
Holders' best interest. Grantor hereby ratifies all that such attorney shall
lawfully do or cause to be done by virtue hereof. This power of attorney is
coupled with an interest and shall be irrevocable until all of the Secured
Obligations shall have been paid in full in cash and the Security Agreement and
the Indenture shall have been terminated. Grantor acknowledges and agrees that
this Agreement is not intended to limit or restrict in any way the rights and
remedies of the Trustee or the other Holders under the Security Agreement or the
Indenture, but rather is intended to facilitate the exercise of such rights and
remedies.
The Trustee shall have, in addition to all other rights and remedies
given it by the terms of this Agreement, all rights and remedies allowed by law
and the rights and remedies of a secured party under the UCC. Upon the
occurrence of an Event of Default and the election by the Trustee to exercise
any of its remedies under the UCC with respect to the Trademarks and Licenses,
Grantor agrees, at the demand of the Trustee, to assign, convey and otherwise
transfer title in and to the Trademarks and the Licenses and the goodwill
associated therewith to the Trustee or any transferee of the Trustee and to
execute and deliver to the Trustee or any such transferee all such agreements,
documents and instruments as may be necessary, in the Trustee's sole discretion,
to effect such assignment, conveyance and transfer. All of the Trustee's rights
and remedies with respect to the Trademarks and the Licenses, whether
established hereby, by the Security Agreement, by any other agreements or by
law, shall be cumulative and may be exercised separately or concurrently.
Notwithstanding anything set forth herein to the contrary, but subject in all
respects to the Intercreditor Agreement, it is hereby expressly agreed that upon
the occurrence of an Event of Default, the Trustee may exercise any of the
rights and remedies provided in this Agreement, the Indenture and any of the
other Security Documents. Grantor agrees that any notification of intended
disposition of any of the Trademarks and Licenses required by law shall be
deemed reasonably and properly given if given at least five (5) Business Days
before such disposition; provided, however, that the Trustee may give any
-------- -------
shorter notice that is commercially reasonable under the circumstances.
16. Intercreditor Arrangement. The parties hereto acknowledge and
-------------------------
agree, for the benefit of the lenders under the Credit Facility, that, during
any period that obligations or commitments are outstanding under the Credit
Facility, the exercise of the rights and remedies of the Trustee hereunder are
or will be subject to the terms of the Intercreditor Agreement. In the
6
<PAGE>
event of any inconsistency between the terms hereof and the Intercreditor
Agreement, the Intercreditor Agreement shall control.
17. Successors and Assigns. This Agreement shall be binding upon
----------------------
Grantor and its successors and assigns, and shall inure to the benefit of each
of the Holders and its nominees, successors and assigns. Grantor's successors
and assigns shall include, without limitation, a receiver, trustee or debtor-in-
possession of or for Grantor; provided, however, that Grantor shall not
-------- -------
voluntarily assign or transfer its rights or obligations hereunder without the
Trustee's prior written consent.
18. Governing Law. This Agreement shall be construed and enforced
-------------
and the rights and duties of the parties shall be governed by in all respects in
accordance with the internal laws (as opposed to conflict of laws provisions) of
the State of Indiana.
19. Notices. All notices or other communications hereunder shall be
-------
given in the manner prescribed in the Indenture for the giving of notices.
20. Section Titles. The section titles herein are for convenience of
--------------
reference only, and shall not affect in any way the interpretation of any of the
provisions hereof.
21. Execution in Counterparts. This Agreement may be executed in any
-------------------------
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed shall be deemed to be an original and all of
which taken together shall constitute one and the same agreement.
22. Merger. This Agreement represents the final agreement of the
------
Grantor and the Trustee with respect to the matters contained herein and may not
be contradicted by evidence of prior or contemporaneous agreements, or
subsequent oral agreements, between the Grantor and the Trustee or any Holder.
23. Gaming Laws.
-----------
(a) The Trustee acknowledges, understands and agrees that the Gaming
Laws may impose certain licensing or transaction approval requirements prior to
the exercise of the rights and remedies granted to it under the Agreement with
respect to the Trademarks subject to the Gaming Laws.
(b) If any consent under the Gaming Laws is required in connection
with the taking of any of the actions which may be taken by the Trustee in the
exercise of its rights hereunder, then Grantor agrees to use its best efforts to
secure such consent and to cooperate with the Trustee in obtaining any such
consent. Upon the occurrence and during the continuation of any Event of
Default, Grantor shall promptly execute and/or cause the execution of all
applications, certificates, instruments, and other documents and papers that the
Trustee may be
7
<PAGE>
required to file in order to obtain any necessary approvals under the Gaming
Laws, and if Grantor fails or refuses to execute such documents, the Trustee or
the clerk of the court with jurisdiction may execute such documents on behalf of
Grantor.
(c) Notwithstanding any other provision of this Agreement to the
contrary, nothing in this Agreement shall (i) effect any transfer of any
ownership interest (within the meaning of 68 Indiana Administrative Code 5) in
Grantor, or (ii) effect any transfer, sale, purchase, lease or hypothecation of,
or any borrowing or loaning of money against, or any establishment of any voting
trust agreement or other similar agreement with respect to (all within the
meaning of Indiana Code 4-33-4-21), any certificate of suitability or any
owner's license heretofore or hereafter issued to any person, including Grantor,
under any of the Gaming Laws, including Indiana Code 4-33.
24. Trust Indenture Act. If any provision of this Agreement
-------------------
conflicts with any provision of the Trust Indenture Act, the provisions of the
Trust Indenture Act shall control.
25. Appointment of Collateral Agent. The Trustee may, solely at its
-------------------------------
discretion, appoint a collateral agent to enforce the rights and remedies
available to the Trustee under this Agreement.
8
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
THE MAJESTIC STAR CASINO, LLC
By: Barden Development, Inc., its manager
By: ______________________________________
Name: ____________________________________
Title: ___________________________________
Accepted and agreed to as of the day and year
first above written.
IBJ WHITEHALL BANK & TRUST COMPANY,
as Trustee
By: ______________________________________
Name: ____________________________________
Title: ___________________________________
9
<PAGE>
STATE OF __________________ )
) SS
COUNTY OF _________________ )
The foregoing Trademark Security Agreement was acknowledged before me
this _____ day of June, 1999, by ___________________, the _____________________
of Barden Development, Inc., the manager of The Majestic Star Casino, LLC, an
Indiana limited liability company, on behalf of such limited liability company.
_____________________________________
Notary Public
_____________________________________
My commission expires: ______________
10
<PAGE>
STATE OF ___________________ )
) SS
COUNTY OF __________________ )
The foregoing Trademark Security Agreement was acknowledged before me
this _____ day of June, 1999, by ____________________, the ____________________
of IBJ Whitehall Bank & Trust Company, on behalf of such bank.
_____________________________________
Notary Public
_____________________________________
My commission expires: ______________
11
<PAGE>
Schedule A
to
Trademark Security Agreement
Dated as of June 18, 1999
Trademarks
----------
None
Service Marks
-------------
Servicemark Date of Registration Registration No.
----------- -------------------- ---------------
MAJESTIC STAR May 12, 1998 2,157,290
Trademark and Service Mark Applications
---------------------------------------
None, except:
Servicemark Application Date Serial No.
- ----------- ---------------- ----------
THE MAJESTIC STAR
CASINO M
(and design) 2/1/96 75/052416
<PAGE>
Schedule B
to
Trademark Security Agreement
Dated as of June 18, 1999
License Agreements
------------------
None
<PAGE>
EXHIBIT 4.6
PREFERRED SHIP MORTGAGE
ON THE WHOLE OF THE
MAJESTIC STAR
(Official Number 1057517)
THE MAJESTIC STAR CASINO, LLC
c/o The Majestic Star Casino, LLC
One Buffington Harbor Drive
Gary, Indiana 46406-3000
Attention: Chief Operating and Financial Officer
In Favor of
IBJ WHITEHALL BANK & TRUST COMPANY
in its capacity as Trustee under
that certain Indenture dated as of
June 18, 1999 between Trustee,
The Majestic Star Casino Capital Corp. and
The Majestic Star Casino, LLC
IBJ Whitehall Bank & Trust Company
One State Street
New York, NY 10004
Attention: Corporate Trust Administration
Dated as of June 18, 1999
Discharge Amount: $130,000,000 Together
With Interest, Expenses, Fees
and Performance of Mortgage Covenants
<PAGE>
PREFERRED SHIP MORTGAGE
This PREFERRED SHIP MORTGAGE (hereinafter called the "Mortgage") on the
whole of the Vessel as hereinafter defined, which is dated as of June 18, 1999,
is provided and made by The Majestic Star Casino, LLC, an Indiana limited
liability company, whose mailing address is c/o The Majestic Star Casino, LLC,
One Buffington Harbor Drive, Gary, Indiana 46406-3000, Attention: Chief
Operating and Financial Officer (hereinafter called "Mortgagor") to IBJ
Whitehall Bank & Trust Company, One State Street Place, New York, NY, 10004,
Attention: Michael Daly, a national banking association, as Trustee (the
"Mortgagee") under that certain Indenture (the "Indenture") dated as of June 18,
1999 by and between the Issuers and any future Guarantors referred to therein
and the Mortgagee. Capitalized terms not otherwise defined herein shall have
the meaning set forth for such terms in the Indenture.
WHEREAS:
1. The Mortgagor is the sole owner of the whole of the vessel, MAJESTIC
STAR, Official Number 1057517, having its hailing port as the Port of Buffington
Harbor, Gary, Indiana. The Vessel is documented under the laws and flag of the
United States.
2. The Mortgagor has duly authorized the creation of an issue of 10 7/8%
Senior Secured Notes due 2006 (the "Notes"), as more fully described in the
Indenture.
3. In order to secure (i) the due and punctual payment of the principal
of, and interest on, the Notes and the payment of any fees, expenses and all
other amounts at any time and from time to time payable by the Mortgagor with
respect to the Notes, or under the Indenture, the Registration Rights Agreement
or any of the Security Documents (collectively, the "Transaction Documents") and
(ii) all the obligations of the Mortgagor under the Mortgage (all such
obligations recited in subsections (i) and (ii) of this Recital 3 being the
"Secured Obligations" of the Mortgagor) the Mortgagor has duly authorized the
execution and delivery of this Preferred Ship Mortgage under and pursuant to 46
United States Code, Sections 31301 through 31343, as amended from time to time
(the "Ship Mortgage Act").
4. For purposes of this Mortgage and in order to comply with Section
31321(b)(3) of the Ship Mortgage Act, the parties to this Mortgage hereby
declare that the maximum amount of Indebtedness that is now or will in the
future be owed under the Secured Obligations at any one time
2
<PAGE>
is $130,000,000, plus interest, expenses and fees incurred by the Trustee and/or
the Holders and performance of the covenants of this Mortgage and the
Transaction Documents.
5. The interest of the Mortgagor in the Vessel (as defined below) and the
interest mortgaged by this Mortgage is that of one-hundred percent (100%)
absolute and sole ownership.
NOW, THEREFORE, in consideration of the premises and the purchase of the
Notes and in order to secure the payment of the Secured Obligations and the
performance and observance of all of the agreements, covenants and provisions
contained in this Mortgage and in each other Transaction Document, and for other
good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the MORTGAGOR HAS GRANTED, CONVEYED, MORTGAGED, PLEDGED,
CONFIRMED, ASSIGNED, TRANSFERRED AND SET OVER, AND BY THESE PRESENTS DOES HEREBY
GRANT, CONVEY, MORTGAGE, PLEDGE, CONFIRM, ASSIGN, TRANSFER AND SET OVER UNTO THE
MORTGAGEE in its capacity as the Trustee for the benefit of the Holders, the
WHOLE of the vessel described in Recital 1 above, together with all of its
boilers, engines, machinery, masts, spars, boats, cables, motors, tools,
anchors, chains, booms, cranes, rigs, pumps, pipe, tanks, tackle, apparel,
furniture, fixtures, rigging, supplies, fittings and machinery equipment
including, but not limited to, communication systems, visual and electronic
surveillance systems and transportation systems, tools, utensils, food and
beverage, liquor, uniforms, linens, housekeeping and maintenance supplies, fuel,
and any other electronic equipment of every nature used in connection with the
operation of the Vessel, all machinery, equipment, engines, appliances and
fixtures for generating or distributing air, water, heat, electricity, light,
fuel or refrigeration, or for ventilating or sanitary purposes, or for the
exclusion of vermin or insects, or safes, built-in furniture and installations,
shelving, lockers, partitions, door stops, vaults, motors, elevators, dumb-
waiters, hoses and brackets and boxes for the same, fire sprinklers, alarm,
surveillance and security systems, computers, drapes, drapery rods and brackets,
mirrors, mantles, screens, linoleum, carpets and carpeting, plumbing, bathtubs,
sinks, basins, pipes, faucets, water closets, laundry equipment, washers,
dryers, ice-boxes and heating units, all kitchen and restaurant equipment,
utensils, stoves, refrigerators, ovens, ranges, dishwashers, disposals, water
heaters, incinerators, furniture, fixtures and furnishings, all cocktail lounge
supplies, including, but not limited to, bars, glassware, bottles and tables
used in connection with the Vessel, beauty and barber equipment, and maintenance
supplies used in connection with the Vessel, all specifically designed
installations and furnishings and all furniture, furnishings and personal
property of every nature whatsoever now or hereafter owned by Mortgagor or in
which Mortgagor has any rights or interest in and located in or on, or attached
to, or used or intended to be used or which are now or may hereafter be
appropriated for use on or in connection with the operation of the Vessel or in
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connection with any construction being conducted or which may be conducted
thereon, and all extensions, additions, accessions, improvements, betterments,
renewals, substitutions and replacement to any of the foregoing, all of which
(to the fullest extent permitted by law) shall be conclusively deemed
appurtenances to the Vessel, and all other appurtenances to the Vessel
appertaining or belonging, whether now owned or hereafter acquired, whether on
board or not, and all additions, improvements and replacements hereafter made in
or to the Vessel, or any part thereof, or in or to her equipment and
appurtenances aforesaid (each of the foregoing individually, a "Vessel" and,
collectively, the "Vessel"); provided, that the term "Vessel" shall not include
--------
Excluded Assets, and no Excluded Assets shall be subject to the Lien created by
the Mortgage.
TO HAVE AND TO HOLD all and singular the above mortgaged and described
property unto the Mortgagee and its successors and assigns, to its and its
successors' and assigns' own use, benefit and behoof forever under the terms
herein set forth to secure the performance and observance of and compliance with
the covenants, terms and conditions in the Secured Obligations.
PROVIDED, HOWEVER, and these presents are conditioned that, if the
Mortgagor or any of its successors or assigns shall pay or cause to be paid the
Secured Obligations in accordance with the terms hereof and of the other
Transaction Documents, and shall perform and observe all of the agreements,
covenants and provisions contained herein and in the other Transaction
Documents, this Mortgage and the estate and rights hereby granted shall cease to
be binding and be void, otherwise to remain in full force and effect.
The terms and conditions of this Mortgage are as follows:
ARTICLE I
REPRESENTATIONS, WARRANTIES AND
COVENANTS OF MORTGAGOR
The Mortgagor hereby represents, warrants, covenants and agrees with
Mortgagee as follows:
1.01. Subject to applicable grace or cure periods (if any), the
Mortgagor will pay the Secured Obligations payable by it and will observe,
perform and comply with the covenants, terms and conditions herein and in the
other Transaction Documents, expressed or implied, on its part to be observed,
performed or complied with.
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1.02. Mortgagor was duly organized and is now duly existing as a
limited liability company under the laws of the State of Indiana; it is duly
authorized to mortgage the Vessel; all action necessary and required by law for
the execution and delivery of this Mortgage has been duly and effectively taken;
and the Mortgagor has and shall at all times maintain its existence and right to
carry on its business. The Mortgagor is and will remain a citizen of the United
States of America within the meaning of Title 46, Section 802 of the United
States Code, entitled to own and document the Vessel under the laws of the
United States of America and operate the Vessel in the coastwise trade.
1.03. The Mortgagor lawfully owns the whole of and is lawfully
possessed of the Vessel free from any Lien or taxes whatsoever, except for
Permitted Liens and Liens for current crew wages, salvage and those Liens which
arise during normal operations and which are not yet past due and which will be
paid in the ordinary course of business (collectively, the "Permitted
Encumbrances") and will warrant and defend the title and possession thereto and
to every part thereof for the benefit of the Mortgagee against the claims and
demands of all Persons whomsoever.
1.04. The Vessel is duly documented in the name of the Mortgagor under
the laws and flag of the United States of America, with the National Vessel
Documentation Center, entitled to engage in operations conducted by the
Mortgagor, and the Mortgagor will, at its own expense, cause the Vessel to
remain so documented. The Mortgagor will cause this Mortgage immediately after
its execution and delivery, to be filed for recordation with the National Vessel
Documentation Center in accordance with the Ship Mortgage Act and will comply
with and satisfy all of the provisions of the Untied States law and all other
provisions and requirements of law from time to time in force so as to establish
and maintain the Lien of this Mortgage, as at any time amended, supplemented or
assigned, as a valid and enforceable preferred ship mortgage under the Ship
Mortgage Act upon the Vessel and upon all additions, improvements and
replacements hereafter made on or to the Vessel or any part thereof for the
amount of the Secured Obligations. The Mortgagor shall promptly pay and
discharge all United States Coast Guard fees and expenses in connection with the
recordation of this Mortgage and any supplement or amendment thereto.
1.05. The Mortgagor will not cause or permit the Vessel to be operated
in any manner contrary to law and the Mortgagor will not engage in any unlawful
act or violate any law or expose the Vessel to penalty, forfeiture or capture,
and will not do or suffer or permit to be done, anything which can or may
injuriously affect the documentation of the Vessel under the laws and
regulations of the United States of America and will at all times keep the
Vessel duly documented thereunder.
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Mortgagor will never operate the Vessel outside the navigation limits of the
insurance carried pursuant to Article I, Section 1.16 of this Mortgage.
1.06. The Mortgagor shall comply with and satisfy all applicable laws
and regulations of the United States and the State of Indiana or any other
jurisdiction in which the Vessel is or may be operating pursuant to the terms of
the Indenture, specifically including, but not limited to, the provisions of any
applicable laws.
1.07. The Mortgagor will pay and discharge when due and payable from
time to time, all taxes, assessments, governmental charges, fines and penalties
lawfully imposed on the Vessel or any income therefrom, subject to the proviso
of Section 1.10.
1.08. Neither the Mortgagor, any charterer, the Master of the Vessel,
nor any other Person has or shall have any right, power or authority to create,
incur or permit to be placed or imposed or continued upon the Vessel any Lien
whatsoever other than Permitted Encumbrances.
1.09. The Mortgagor will place, and at all times, will retain a
properly certified copy of the Mortgage on board the Vessel with her papers and
will cause such certified copy in the Vessel's Certificate of Documentation to
be exhibited to (i) any and all persons having business therewith which might
give rise to any Lien thereon other than Permitted Encumbrances and (ii) to any
representative of the Mortgagee; and will place and keep prominently displayed a
framed printed notice in plain type reading as follows:
NOTICE OF MORTGAGE
This Vessel is covered by a Preferred Ship Mortgage under 46
U.S.C. Section 31301, et seq., to IBJ Whitehall Bank & Trust
------
Company, as Trustee for the Holders under an Indenture dated as
of June 18, 1999 with the Majestic Star Casino, LLC and The
Majestic Star Casino Capital Corp. Under the terms of said
Mortgage, neither the Mortgagor, any charterer, the Master of
this Vessel, nor any other person has any right, power or
authority to create, incur or permit to be imposed upon this
Vessel any Lien whatsoever other than Permitted Encumbrances (as
defined in such Preferred Ship Mortgage).
1.10. Except for the Lien of this Mortgage, the Mortgagor will not
suffer to be continued any Lien other than Permitted Encumbrances and in due
course and in any event within thirty (30)
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days after the same becomes due and payable will pay or cause to be discharged
or make adequate provision for the satisfaction or discharge of all claims or
demands, or will cause the Vessel encumbered by such Lien to be released or
discharged from any Lien therefor; provided, however, that the Mortgagor shall
have the right to contest, at its own expense, by appropriate legal proceedings
conducted in good faith and with due diligence, the amount or validity (or the
applicability to the Mortgagor, the Vessel or this Mortgage) of any tax,
assessment, governmental charge, fine, penalty or Lien (other than this
Mortgage, any Transaction Document or any other document or instrument securing
any of the Secured Obligations or creating a Lien in favor of the Trustee and/or
the Holders); provided further that (a) the Mortgagor gives the Mortgagee timely
notice of its intention to contest the same, (b) the commencement of such
proceedings shall suspend the collection or enforcement of the matter under
contest, or, if the commencement of such proceedings does not suspend such
collection or enforcement, the Mortgagor shall have made payment of any item
sought to be collected with or without protest, (c) there shall be no impairment
of the Lien of this Mortgage or any other Transaction Document or undue
interference with the normal conduct of the Mortgagor's riverboat gaming
operation on the Vessel, (d) neither the Vessel, nor any part thereof or
interest therein, would be in any immediate danger of being sold, forfeited or
lost, (e) neither the Mortgagee nor any Holder would be potentially subjected to
criminal, or in imminent danger of civil, liability for failure to comply
therewith pending the outcome of such proceedings, (f) in the case of taxes,
assessments, charges, fines, penalties or other impositions, the Mortgagor shall
have either (i) paid the amount in dispute prior to instituting such contest, in
which event the notice requirement of clause (a) above shall be satisfied by
giving notice prior to initiating such contest rather than prior to making
payment, or (ii) furnished reasonable security during the pendency of such
proceedings, and (g) if such contest be finally resolved against the Mortgagor,
the Mortgagor shall promptly pay the amount required to be paid, together with
all interest and penalties accrued thereon, or comply with the applicable
requirement. The Mortgagor shall indemnify and save the Mortgagee and each
Holder harmless from and against any liability, loss, damage, cost or expense of
any kind (including reasonable attorneys fees and expenses) that may be imposed
upon the Mortgagee or such Holder in connection with any such contest and any
determination resulting therefrom.
1.11. (a) If a complaint be filed against the Vessel or the Vessel be
otherwise attached, arrested, levied upon or taken into custody under process or
color of legal authority for any cause whatsoever, the Mortgagor will promptly
notify the Mortgagee by telecopier or by telephone that is confirmed in writing,
at the address specified in Section 3.5 of this Mortgage, and within seven (7)
days from the time of such complaint, attachment, arrest or seizure will cause
the Vessel to be
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released and all Liens thereon, other than Permitted Encumbrances, to be
discharged and will promptly notify the Mortgagee hereof in the manner
aforesaid.
(b) If the Mortgagor shall fail or neglect to furnish proper
security or otherwise to release the Vessel from complaint, arrest, levy,
seizure or attachment, within such seven day period, the Mortgagee or any person
acting on behalf of the Mortgagee may furnish security to release the Vessel and
by so doing shall not be deemed to cure the default of the Mortgagor and
Mortgagor does hereby authorize and empower the Mortgagee, in the name of the
Mortgagor, or its successors or assigns, to apply for and receive possession and
to take possession of such Vessel with all the rights and powers that the
Mortgagor, or its successors or assigns might have, possess or exercise in any
such event; and this power of attorney shall be irrevocable and may be exercised
not only by the Mortgagee hereinabove named but also by any one such appointee
or the appointees of the Mortgagee, with full power of substitution, to the same
extent as if the said appointee or appointees had been named as one of the
attorneys above named by express designation.
1.12. (a). The Mortgagor will at all times and without cost or expense
to the Mortgagee maintain and preserve, or cause to be maintained and preserved,
the Vessel in good running order and repair, so that the Vessel shall be,
insofar as due diligence can make her so, tight, staunch, strong and well and
sufficiently tackled, appareled, furnished, equipped and in every respect
seaworthy and in compliance with all applicable United States Coast Guard
requirements.
(b) The Mortgagee shall have the right at any time, on
reasonable notice, to inspect or survey the Vessel to ascertain its condition
and to satisfy itself that the Vessel is being properly repaired and maintained,
and the Mortgagor shall cause to be made all such repairs, without expense to
the Mortgagee, as such inspection or survey may show to be required. The
Mortgagor shall also permit the Mortgagee to inspect the Vessel's logs whenever
requested, on reasonable notice, and shall furnish the Mortgagee with full
information regarding any material casualties or other accidents or damage to
the Vessel.
(c) The Vessel shall, and the Mortgagor covenants that she will,
at all times comply with all applicable laws, treaties and conventions of the
United States, and rules and regulations issued thereunder, and shall have on
board as and when required thereby valid certificates showing compliance
therewith.
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(d) The Mortgagor will not make, or permit to be made, any
substantial change in the structure, type or speed of the Vessel or change in
her rig, without first receiving the written approval thereof of the Mortgagee.
1.13. The Mortgagor will permit the Mortgagee or any agents or
representatives thereof from time to time, upon prior reasonable notice, full
and complete access to the Vessel for the purpose of inspecting the Vessel and
her papers and, at the reasonable request of the Mortgagee, the Mortgagor will
deliver for inspection copies of any and all contracts and documents relating to
the Vessel, whether on board or not.
1.14. The Mortgagor will not transfer or change the flag of the Vessel
unless and until, upon thirty (30) days' prior written notice to the Mortgagee,
all filings, recordations or other actions necessary to perfect and protect the
Lien created by this Mortgage and to enable the Mortgagee to exercise and
enforce its rights and remedies hereunder with respect to the Vessel after
giving effect to such transfer or change of flag shall have been completed
(including, without limitation, opinions of counsel as to the perfected status
of the Mortgagee after giving effect to such transfer or change of flag).
1.15. Except to the extent expressly permitted by the Indenture, the
Mortgagor will not sell, mortgage, charter or in any way transfer the Vessel or
any interest therein without the written consent of the Mortgagee first had and
obtained, and any such written consent to any one sale, mortgage, charter or
transfer shall not be construed to be a waiver of this provision with respect to
any subsequent proposed sale, mortgage, charter or transfer. Any such sale,
mortgage, charter or transfer of the Vessel or any interest therein shall be
subject to the provisions of this Mortgage and the Lien hereof.
1.16. (a) (i) The Mortgagor shall at all times and at its sole cost
and expense cause to be carried and maintained in respect of the Vessel (and all
additions, improvements and replacements made in and to the Vessel, or any part
thereof) payable in United States Dollars in such amounts against such risks as
are generally covered by marine hull and machinery (including excess value)
insurance, marine protection and indemnity insurance, public and general
liability insurance, in such form (including, without limitation, the form of
the loss payable clause and the designation of named assureds) and with such
insurance companies, underwriters, funds, mutual insurance associations or clubs
as shall be selected by the Mortgagor and are acceptable to Mortgagee.
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(ii) In the case of all marine hull and machinery
policies, the Mortgagor will cause the Mortgagee to be named an additional
assured and will (and cause its insurance broker to) cause the insurers under
such policies to waive any liability of the Mortgagee and the Holders for
premiums payable under such policies. Such marine hull and machinery insurance
shall cover, among other things, all loss or damage caused by or resulting from
fire, lightning, wind storm, tornado, hail and such other further additional
hazards of whatever kind or nature as now or hereafter may be covered by
standard extended coverage "all risks" endorsements (including, without
limitation, and specifically, piracy, barratry and water damage) of whatsoever
kind. In the case of all protection and indemnity insurance, the Mortgagor will
cause the Mortgagee, to be named as an additional assured. Notwithstanding the
foregoing, at no time shall there be recourse against the Mortgagee or the
Holders under such policies for payment of any premium, club call, assessment,
advance or commission.
(iii) The Mortgagor will cause the firm of insurance
brokers referenced in this Section 1.16 of this Mortgage to agree to advise the
Mortgagee forthwith by telecopier to its address specified in Section 3.5 of
this Mortgage, of any lapse of any such insurance by expiration, termination,
failure to renew or otherwise and of any default in payment of any premium and
of any other act or omission on the part of the Mortgagor of which such brokers
have knowledge and which might invalidate or render unenforceable, in whole or
in part, any insurance on the Vessel. Absent actual knowledge, the Mortgagee
shall not be deemed to have knowledge of any such lapse of insurance in the
absence of receipt of notice from such brokers. The Mortgagor also will cause
such brokers to agree to mark their records and to advise the Mortgagee, by
telecopier, addressed as provided above in this subsection, at least five (5)
business days prior to the expiration date of any insurance carried pursuant to
this Mortgage, that such insurance has been renewed or replaced with new
insurance that complies with the provisions of this Section 1.16. In addition,
Mortgagor shall endeavor to or use its best efforts to cause each insurance
company, underwriter, club or fund (or an authorized agent thereof) with respect
to all insurance required hereby to agree in writing for the benefit of the
Mortgagee that each policy or contract issued by such insurance company,
underwriter, club or fund shall not lapse, cancel for any reason whatsoever
without at least thirty (30) days prior written notice to the Mortgagee by
telecopier as provided above in this subsection 1.16 and that any loss payable
thereunder shall be payable notwithstanding any act or negligence, breach of
warranty or otherwise.
(iv) The Mortgagor, at its sole cost and expense, shall
furnish to the Mortgagee, simultaneously with the execution and delivery of this
Mortgage, and thereafter within one hundred twenty (120) days after the end of
each fiscal year, a detailed report, in form and substance
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satisfactory to the Mortgagee, (which shall set forth, without limitation with
respect to each type of insurance coverage, each policy or certificate of entry,
its form, its number, its amount, each direct or indirect or participating
insurer or underwriter, the type of risk covered and the expiration date),
signed by a firm of independent insurance brokers appointed by the Mortgagor and
acceptable to the Mortgagee as to the type and form of insurance and identity of
broker, with respect to the insurance carried and maintained in respect of the
Vessel, together with the written opinion of such brokers, in form and substance
satisfactory to the Mortgagee, as to the compliance of such insurance with the
provisions of this Section 1.16.
(v) All insurance provided hereunder (except workmen's
compensation) shall name Mortgagee as a named assured under a standard "non-
contributory mortgagee" endorsement or its equivalent, which shall be acceptable
to Mortgagee.
(b) For the purposes of insurance against total loss, the
Vessel, its equipment, appurtenances, etc., shall be insured for a declared
value in an amount not less than the fair market value thereof as determined by
an independent appraiser appointed by the Mortgagor and acceptable to Mortgagee
as to amounts and identity of appraiser, and for purposes of insurance against
liability, such coverage shall be in the highest amount from time to time
commercially reasonable for similar vessels engaged in the business of passenger
cruising and gaming in northern Indiana. Protection and indemnity insurance (as
well as insurance against liability for pollution) in respect of the Vessel
shall be in the highest amount from time to time commercially reasonable for
vessels of the same type, size, age and flag as the Vessel, but in any event,
shall be in an amount for each occurrence of not less than the declared value of
the Vessel under its hull and machinery insurance.
(c) Mortgagor shall (i) pay as they become due all premiums for
the insurance required hereunder, and (ii) not later than thirty (30) days prior
to the expiration of each such policy, deliver a renewal policy or a duplicate
original thereof and a certificate of insurance certified to Mortgagee by the
insurer as being a true copy evidencing the insurance required to be provided
hereunder, marked "premium paid" or accompanied by such other evidence of
payment as shall be satisfactory to Mortgagee in its sole discretion.
(d) If Mortgagor shall be in default of its obligations to so
insure or deliver any such prepaid policy or policies and insurance to Mortgagee
in accordance with the provisions hereof, Mortgagee, at its option and without
notice, may effect such insurance from year to year, and pay the premium or
premiums therefor, and, in such event, the amount of all such premium or
premiums (i) shall be deemed to be Indebtedness secured hereby and (ii) shall be
immediately due and payable,
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on demand, together with interest thereon at the rate of interest which is equal
to the sum of the fixed interest rate payable on the Notes and one (1.00%)
percent (the "Interest Rate"), from date of any such payment by Mortgagee to the
date of repayment to Mortgagee.
(e) Mortgagor promptly shall comply with, and shall cause the Vessel to
comply with (i) all of the provisions of each such insurance policy and (ii) all
of the requirements of the insurers thereunder applicable to Mortgagor or to the
Vessel or to the use, manner of use, occupancy, possession, operation,
maintenance, alteration or repair of the Vessel, even if such compliance would
necessitate structural changes or improvements or would result in interference
with the use or enjoyment of the Vessel or any portion thereof. If Mortgagor
shall use the Vessel or any portion thereof in any manner which would permit the
insurer to cancel the insurance required to be provided hereunder, Mortgagor
immediately shall obtain a substitute policy which shall be satisfactory to
Mortgagee and which shall be effective on or prior to the date on which any such
other insurance policy shall be canceled. Furthermore, if any insurance required
to be provided hereunder shall expire, be withdrawn, become void by breach of
any condition thereof by Mortgagor, or become void or questionable by reason of
the failure or impairment of the capital of any insurer, or if for any other
reason whatsoever any such insurance shall become unsatisfactory to Mortgagee,
Mortgagor immediately shall obtain new or additional insurance which shall be
satisfactory to Mortgagee in its sole discretion. Mortgagor shall not take out
any separate or additional insurance which is contributing in the event of loss
unless it is properly endorsed and otherwise satisfactory to Mortgagee in all
respects.
(f) Unless otherwise required by the Mortgagee, although the following
insurance is payable to the Mortgagee, (i) any loss under any insurance on the
Vessel with respect to protection and indemnity risks and public liability may
be paid directly to the Mortgagor to reimburse it for any loss, damage or
expense incurred by it and covered by such insurance or directly to the person
to whom any liability covered by such insurance has been incurred and (ii) in
the case of any loss (other than (A) a loss covered by clause (i) of this
subsection or by Section 1.16 (g) or (B) a loss in excess of $1,000,000 per
occurrence) under any insurance with respect to the Vessel involving any damage
to the Vessel, the Mortgagee may pay directly for the repair, salvage or other
charges involved or may pay the Mortgagor directly so long as the Mortgagor
shall use such funds to repair the loss or damage or pay all of the salvage or
other charges.
(g) In the event of an actual, constructive or compromised total loss of
the Vessel, all insurance or other payments for such loss shall be paid to the
Mortgagee to be distributed or
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disbursed in accordance with the agreements between the parties and to the
extent of the respective interests of the Mortgagor and Mortgagee, as they may
appear.
(h) The Mortgagor will cause all policies and certificates of entry with
respect to insurance required hereby to contain a loss payable clause which
shall (i) in the case of protection and indemnity insurance and public liability
insurance, provide for payment to the Mortgagor or its order unless and until
the underwriters or associations receive notice from the Mortgagee that there
has occurred and is continuing an Event of Default hereunder, in which event all
payments shall be made to the Mortgagee and (ii) in the case of all other
insurance, provide for payment in accordance with the terms of subsections (f)
and (g) of this Section 1.16. In addition, the Mortgagor will, at its own cost
and expense, assign to the Mortgagee all of the Mortgagor's right, title and
interest in and to each policy and contract of insurance (including all entries
in protection and indemnity associations) with respect to the insurance required
hereby and furnish, or cause its brokers to furnish, written notice of such
assignment to all insurers, underwriters, clubs and associations with respect to
such insurance.
(i) In the event that any claim or Lien is asserted against the Vessel for
loss, damage or expense which is covered by insurance required hereunder, and it
is necessary for the Mortgagor to obtain a bond or supply other security to
prevent arrest of the Vessel or to release the Vessel from arrest on account of
such claim or Lien, the Mortgagee, on request of the Mortgagor or its agent, may
assign to any person, firm or corporation executing a surety or guarantee bond
or other agreement to save or release the Vessel from such arrest, all right,
title and interest of the Mortgagee in and to said insurance covering said loss,
damage or expense, as collateral security to indemnify against liability under
said bond or other agreement.
(j) If the Vessel or any portion thereof shall be damaged, destroyed or
injured by fire or any other casualty (whether insured or uninsured) in an
amount in excess of $500,000, Mortgagor shall give immediate written notice
thereof to Mortgagee.
(k) The Mortgagor shall deliver to the Mortgagee copies of all cover
notes, binders, policies and certificates of entry in protection and indemnity
associations, and all endorsements and riders amendatory thereof, in respect of
insurance maintained in connection with the Vessel.
(l) The Mortgagor agrees that it will not do or permit or willingly allow
to be done any act by which any insurance required by the terms of this Mortgage
may be suspended, impaired or canceled, and that it will not permit or allow the
Vessel to undertake any voyage or run any risk or
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transport any cargo which is not permitted by the policies in force, without
having previously insured the Vessel by additional coverage to extend to such
voyages, risks or cargoes.
1.17. The Mortgagor will reimburse the Mortgagee promptly, with interest at
a rate equal to the Interest Rate, for any and all expenditures which the
Mortgagee may from time to time make, lay out or expend in providing such
protection in respect of insurance, discharge or purchase of Liens, taxes, dues,
assessments, governmental charges, fines and penalties lawfully imposed,
repairs, attorneys' fees and other matters as the Mortgagor is obligated herein
to provide, but fails to provide. Such obligation of the Mortgagor to reimburse
the Mortgagee shall be an additional Indebtedness due from the Mortgagor,
secured by this Mortgage, and shall be payable by the Mortgagor on demand. The
Mortgagee, though privileged so to do, shall be under no obligation to the
Mortgagor to make any such expenditures, nor shall the making thereof relieve
the Mortgagor of any default in that respect.
1.18. Mortgagor agrees to execute all additional documents, instruments,
UCC Financing Statements and other agreements necessary and appropriate, to keep
this Mortgage in effect, to better reflect the true intent of this Mortgage, and
to consummate fully all the transactions contemplated by the Notes and the
Indenture, hereby.
1.19. The Mortgagor will fully perform any and all charter parties which
are or may be entered into with respect to the Vessel.
1.20. In the event that at any time and from time to time this Mortgage,
any other Transaction Document or any provisions hereof or thereof shall be
deemed invalidated in whole or in part by reason of any present or future law or
any decision of any court, or if the documents at any time held by the Mortgagee
shall be deemed by the Mortgagee for any reason insufficient to carry out the
true intent and spirit of this Mortgage and each other Transaction Document,
then the Mortgagor, forthwith upon the reasonable request of the Mortgagee, will
execute and deliver, on its own behalf, such other and further assurances and
documents as may be reasonably necessary to more effectively subject the Vessel
to secure the payment of the Secured Obligations, as provided in this Mortgage
and each other Transaction Document and the performance of the terms and
provisions of this Mortgage and each other Transaction Document and do such
things as the Mortgagee in its sole discretion may reasonably deem to be
necessary to carry out the true intent of this Mortgage.
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1.21. In the event of the requisition (whether of title or use),
condemnation, sequestration, seizure or forfeiture of the Vessel by any
governmental or purported authority or by anyone else, any payments in respect
thereof shall be paid to the Mortgagee and applied in accordance with the terms
of Section 1.16(g).
ARTICLE II
EVENTS OF DEFAULT AND REMEDIES
2.01. In case any one or more of the following events, herein termed
"Events of Default", shall have occurred and be continuing:
(a) if any "Event of Default", as said term is defined in the
Indenture, shall have occurred and be continuing; or
(b) if the Mortgagor shall default in the use and punctual
performance or observance of any of the provisions of Sections 1.02, 1.04, 1.05,
1.10, 1.14, 1.15 and 1.16 of Article I hereof; or
(c) if the Mortgagor shall fail to perform or observe any other
term, covenant or agreement contained in this Mortgage on its part to be
performed or observed and if such failure shall remain unremedied for the lesser
of the cure period provided for herein and thirty (30) days after written notice
thereof shall have been given to the Mortgagor by the Mortgagee (who shall not
be deemed to have knowledge of an Event of Default unless actually known by the
Mortgagee); or
(d) if any representation and warranty made in this Mortgage is
untrue in any material respect as of the time when the same shall have been
made;
then, in each and every such case, the Mortgagee shall have the right
to:
(1) declare immediately due and payable all of the Secured
Obligations (in which case all of the same shall be immediately
due), bring suit at law, in equity or in admiralty, as it may be
advised, to recover judgment for the Secured Obligations and
collect the same out of any and all property of the Mortgagor,
whether covered by this Mortgage or otherwise;
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(2) exercise all of the rights and remedies in foreclosure and
otherwise given to mortgagees by the provisions of applicable
law, including, but not limited to, the provisions of the Ship
Mortgage Act;
(3) take and enter into possession of the Vessel, at any time,
wherever the same may be, without legal process (except to the
extent required by applicable law), and, except to the extent
caused by the Mortgagee's gross negligence or bad faith, without
being responsible for loss or damage, and the Mortgagor or other
person in possession forthwith upon demand of the Mortgagee,
shall surrender to the Mortgagee possession of the Vessel, and
the Mortgagee may, without being responsible for loss or damage,
except to the extent caused by the Mortgagee's gross negligence
or bad faith, hold, lay up, lease, charter, operate or otherwise
use the Vessel for such time and upon such terms as it may deem
to be for its best advantage, and demand, collect and retain all
hire, freights, earnings, issues, revenues, income, profits,
return premiums, salvage awards or recoveries, recoveries in
general average, and all other sums due or to become due in
respect of the Vessel or in respect of any insurance thereon from
any person whomsoever, accounting only for the net profits, if
any, arising from such use of the Vessel and charging upon all
receipts from the use of the Vessel or from the sale thereof by
court proceedings or pursuant to subsection (4) next following,
all costs, expenses, charges, damages or losses by reason of such
use; and if at any time the Mortgagee shall avail itself of the
right herein given it to take the Vessel, the Mortgagee shall
have the right to dock the Vessel at any dock, pier or other
premises of the Mortgagor without charge, or to dock her at any
other place at the cost and expense of the Mortgagor; and/or
(4) take and enter into possession of the Vessel, upon reasonable
notice, wherever the same may be, without legal process (except
to the extent required by applicable law), and if it seems
desirable to the Mortgagee and without being responsible for loss
or damage, except to the extent caused by the Mortgagee's gross
negligence or bad faith, sell the Vessel, at any place and at
such time as the Mortgagee may specify and in such manner and
such place (whether by public or private sale) as the Mortgagee
may deem advisable (without necessity of bringing the Vessel to
the place designated for such sale), free from any claim by the
Mortgagor in admiralty, in equity,
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at law or by statute, after first giving notice of the time and
place of any public sale with a general description of the
property in the following manner:
(a) by publishing such notice for ten consecutive days in a
daily newspaper of general circulation published in Gary, Indiana;
(b) if the place of sale should not be Gary, Indiana, then also
by publication of a similar notice in a daily newspaper, if any, published at
the place of sale; and
(c) by mailing a similar notice to the Mortgagor at its last
known address on the day of first publication and notice of the time and place
of any private sale by mailing such notice to the Mortgagor at its last known
address.
(d) The notice provisions contained in this Section are not
exclusive, and to the extent that Mortgagee elects to foreclose or enforce its
interests in a court of admiralty, Mortgagee will comply with the notice
provisions required by any applicable federal statutes and procedural rules.
(e) Mortgagor hereby consents to the appointment of a consent
keeper or substitute custodian by Mortgagee with the cost thereof to be a cost
of the sale to be paid from the proceeds of the sale or by Mortgagor.
2.02. Any sale of the Vessel made in pursuance of this Mortgage shall
operate to divest all right, title and interest of any nature whatsoever of the
Mortgagor therein and thereto and shall bar any claim from the Mortgagor, its
successors and assigns, and all persons claiming by, through or under them. No
purchaser shall be bound to inquire whether notice has been given, or whether
any default has occurred, or as to the property of the sale, or as to the
application of the proceeds thereof. In the case of any such sale, the Mortgagee
shall be entitled to bid for the purchase of the Vessel and, for the purpose of
making settlement or payment for the property purchased, to use and apply the
Secured Obligations in order that there may be credited against the amount
remaining due and unpaid thereon the sums payable out of the net proceeds of
such sale with respect to the Secured Obligations after allowing for the costs
and expense of sale and other charges; and thereupon such purchaser shall be
credited, on account of such purchase price, with the net proceeds that shall
have been so credited with respect to the Secured Obligations. At any such sale,
the Mortgagee may bid
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for and purchase such property and upon compliance with the terms of sale may
hold, retain and dispose of such property without further accountability
therefor.
2.03. The Mortgagee is hereby appointed attorney-in-fact of the Mortgagor
to execute and deliver to any purchaser aforesaid, and is hereby vested with
full power and authority to make, in the name and on behalf of the Mortgagor, a
good conveyance of the title to the Vessel so sold. In the event of any sale of
the Vessel under any power herein contained, the Mortgagor will, if and when
required by the Mortgagee, execute such form of conveyance of the Vessel and
other related documents as the Mortgagee may direct or approve.
2.04. The Mortgagor hereby irrevocably appoints the Mortgagee attorney-in-
fact in the name of the Mortgagor with full authority in the place and stead of
the Mortgagor from time to time upon the occurrence and during the continuance
of an Event of Default, to demand, collect, receive, compromise and sue for, so
far as may be permitted by law, all freights, hire, earnings, issues, revenues,
income and profits of the Vessel and all amounts due from underwriters under any
insurance thereon as payments of losses or as return premiums or otherwise,
salvage awards and recoveries, recoveries in general, average or otherwise, and
all other sums due or to become due at the time of the occurrence of any Event
of Default, or in respect of any insurance thereon, from any person whomsoever,
and to make, give and execute in the name of the Mortgagor acquittances,
receipts, releases or other discharges for the same, whether under seal or
otherwise, and to endorse and accept in the name of the Mortgagor all checks,
notes, drafts, warrants, agreements and other instruments in writing with
respect to the foregoing, or in respect of any actions in law or in equity, in
contract or in negligence, against third parties, to file suit against said
third parties for damage sustained by the Vessel while under the care and
custody of said third parties and prosecute through judgment or settlement, the
Mortgagee to have by assignments, all rights and remedies that would be afforded
to the Mortgagor under principles and theories of privity, standing and
jurisdiction.
2.05. Whenever any right to enter and take possession of the Vessel
accrues to the Mortgagee, it may require the Mortgagor to deliver, and the
Mortgagor shall on demand, at its own cost and expense, deliver to the Mortgagee
the Vessel as demanded. If any legal proceedings shall be taken to enforce any
right under this Mortgage, the Mortgagee shall be entitled as a matter of right
to the appointment of a receiver of the Vessel and of the freights, hire,
earnings, issues, revenues, income and profits due or to become due and arising
from the operation thereof.
2.06. Upon the occurrence and during the continuance of an Event of
Default, the Mortgagor authorizes and empowers the Mortgagee or its appointees
or any of them to appear in the
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name of the Mortgagor, its successors and assigns, in any court of any country
or nation of the world where a suit is pending against the Vessel because of or
on account of an alleged Lien against the Vessel from which the Vessel has not
been released and to take such proceedings as to them or any of them may seem
proper towards the defense of such suit and the purchase or discharge of such
Lien, and all expenditures made or incurred by them or any of them for the
purpose of such defense or purchase or discharge shall be a debt due from the
Mortgagor, its successors and assigns, to the Mortgagee, and shall be secured by
the Lien of this Mortgage in like manner and extent as if the amount and
description thereof were written herein.
2.07. The Mortgagor covenants that, at any time that any Secured
Obligations shall be due and payable (whether by acceleration or otherwise), the
Mortgagee may demand the payment thereof; and in case the Mortgagor shall fail
to pay the same forthwith upon such demand, the Mortgagee shall be entitled to
recover judgment for the whole amount so due and unpaid together with such
further amounts as shall be sufficient to cover the reasonable compensation to
the Mortgagee's agents, attorneys and counsel and any necessary advances,
expenses and liabilities made or incurred by it hereunder. All moneys collected
by the Mortgagee under this Section 2.07 shall be applied by the Mortgagee in
accordance with the provisions of Section 2.11.
2.08. Each and every power and remedy herein given to the Mortgagee shall
be cumulative and shall be in addition to every other power and remedy herein
given or now or hereafter existing at law, in equity, in admiralty or by
statute, and each and every power and remedy whether herein given or otherwise
existing may be exercised from time to time and as often and in such order as
may be deemed expedient by the Mortgagee, and the exercise or the beginning of
the exercise of any power or remedy shall not be construed to be a waiver of the
right to exercise at the same time or thereafter any other power or remedy. No
delay or omission by the Mortgagee in the exercise of any right or power or in
the pursuance of any remedy accruing upon any Event of Default shall impair any
such right, power or remedy or be construed to be a waiver of any such Event of
Default or to be an acquiescence therein; nor shall the acceptance by the
Mortgagee of any security or of any payment of or on account of the Secured
Obligations after any Event of Default or of any payment on account of any past
Event of Default be construed to be a waiver of any right to take advantage of
any future Event of Default or of any past Event of Default not completely cured
thereby.
2.09. If at any time after an Event of Default and prior to the actual sale
of the Vessel by the Mortgagee or prior to any foreclosure proceedings, the
Mortgagor offers completely to cure all Events of Default and to pay all
expenses, advances and damages to the Mortgagee consequent on such Events of
Default, with interest at the Interest Rate, then the Mortgagee may, but shall
be under
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no obligation to, accept such offer, cure and payment and restore the Mortgagor
to its former position, but such action shall not affect any subsequent Event of
Default or impair any rights consequent thereon.
2.10. In case the Mortgagee shall have proceeded to enforce any right,
power or remedy under this Mortgage by foreclosure, entry or otherwise, and such
proceedings shall have been discontinued or abandoned for any reason or shall
have been determined adversely to the Mortgagee, then and in every such case the
Mortgagor and the Mortgagee shall be restored to their former positions and
rights hereunder with respect to the property subject or intended to be subject
to this Mortgage and all rights, remedies and powers of the Mortgagee shall
continue as if no such proceedings had been taken.
2.11. The proceeds of any sale of the Vessel and the net earnings of any
charter operation or other use of the Vessel by the Mortgagee under any of the
powers herein specified in this Article II, as well as any and all other moneys
received by the Mortgagee pursuant to or under any of the provisions of Article
I hereof or this Article II or in any proceedings pursuant to this Article II,
shall be held and applied by the Mortgagee from time to time as set forth in the
Indenture, any other provision in this Mortgage to the contrary notwithstanding.
In the event that the proceeds and amounts referred to above received by the
Mortgagee are insufficient to pay in full all Secured Obligations, the Mortgagee
shall be entitled to collect the balance from the Mortgagor or from any other
person or entity liable therefor.
2.12. Unless and until one or more Events of Default shall occur and be
continuing, the Mortgagor (a) shall be suffered and permitted to retain actual
possession and use of the Vessel and (b) shall have the right, from time to
time, in its discretion, and without application to the Mortgagee, and without
obtaining a release therefrom by the Mortgagee, to dispose of, free from the
Lien hereof, any boilers, engines, machinery, masts, spars, sails, rigging,
boats, anchors, cables, chains, tackle, apparel, furniture, fittings, equipment
or any other appurtenances of the Vessel that are no longer useful, necessary,
profitable or advantageous in the operation of the Vessel, by first or
simultaneously replacing the same by new boilers, engines, machinery, masts,
spars, sails, rigging, boats, anchors, cables, chains, tackle, apparel,
furniture, fittings, equipment or other appurtenances of not less than equal
value, which shall forthwith become subject to the Lien of this Mortgage as a
preferred ship mortgage thereon unless otherwise permitted by the Indenture.
ARTICLE III
SUNDRY PROVISIONS
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3.01. All of the covenants, promises, stipulations and agreements of the
Mortgagor in this Mortgage contained shall bind the Mortgagor and its successors
and assigns and shall inure to the benefit of the Mortgagee and its successors
and assigns (including successor trustees under the Indenture). In the event of
any assignment of this Mortgage, the term "Mortgagee" as used in this Mortgage
shall be deemed to mean any such assignee.
3.02. Wherever and whenever herein any right, power or authority is granted
or given to the Mortgagee, such right, power or authority may be exercised in
all cases by the Mortgagee or such agent or agents as it may appoint, and the
act or acts of such agent or agents when taken shall constitute the act of the
Mortgagee hereunder. Without limitation of the foregoing, in each instance where
the Mortgagee has engaged a consultant to advise the Mortgagee in connection
with the exercise of any such rights, powers and authority, the Mortgagee shall
be entitled to rely upon the advice of such consultant and when so relying shall
conclusively be deemed to have acted in a reasonable manner.
3.03. In the event that any provision of this Mortgage shall be deemed
invalid or unenforceable by reason of any present or future law or any decision
of any court of competent jurisdiction, the validity and enforceability of any
other provision hereof shall not be affected thereby. Any such invalidity or
unenforceability of any provision of this Mortgage in any jurisdiction or nation
shall not render such provision invalid or unenforceable under the laws of any
other jurisdiction or nation.
3.04. Anything herein to the contrary notwithstanding, it is intended that
nothing herein shall waive the preferred status of this Mortgage and that, if
any provision of this Mortgage or portion hereof shall be construed to waive the
preferred status of this Mortgage, then such provision to such extent shall be
void and of no effect and shall cease to be a part of this Mortgage without
affecting the remaining provisions, which shall remain in full force and effect.
3.05. The Mortgagor irrevocably submits itself to the non-exclusive
jurisdiction of the State of New York or federal court sitting in New York and
any appellate court of any thereof, for the purposes of any suit, action or
other proceeding arising out of, or relating to, this Mortgage or any of the
transactions contemplated hereby, hereby irrevocably agrees that all claims in
respect of such action or proceeding may be heard in such New York state or
federal court and hereby, to the fullest extent it may effectively do so,
irrevocably waives, and agrees not to assert, by way of motion, as a defense or
otherwise, in any such suit, action or proceeding any claim that it is not
personally
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subject to the jurisdiction of the above-named courts for any reason whatsoever,
that such suit, action or proceeding is brought in an inconvenient forum, that
the venue of such suit, action or proceeding is improper or that this Mortgage
or the subject matter hereof may not be enforced in or by such courts. The
Mortgagor hereby irrevocably consents to the service of any and all process in
any suit, action or proceeding by the mailing (certified mail, return receipt
requested) or delivery of copies of such process to the Mortgagor at The
Majestic Star Casino, LLC, an Indiana limited liability company, whose mailing
address is c/o The Majestic Star Casino, LLC, One Buffington Harbor Drive, Gary,
IN 46406-3000, Attention: Chief Operating and Financial Officer. The Mortgagor
agrees that all notices to the Mortgagee hereunder shall be validly given only
if delivered at or mailed (certified mail, return receipt requested) to the
Mortgagee at IBJ Whitehall Bank & Trust Company, One State Street , New York,
NY, 10004, Attention: Michael Daly. The Mortgagor further agrees that a final
judgment in any such action, suit or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law. Nothing in this Section 3.05 shall affect the right of the
Mortgagee to serve legal process in any other manner permitted by law or affect
the right of the Mortgagee to bring any action or proceeding against the
Mortgagor or its property in the courts of any other jurisdiction. This
Mortgage, and all of the rights and obligations of the parties hereunder, and
the their respective successors and assigns, shall be governed by Title 46,
United States Code, Chapters 301 and 313 and the Federal Maritime Laws of the
United States of America and, only to the extent not addressed thereby, by the
laws of the State of Indiana.
3.06. This Mortgage may be executed in any number of counterparts, each of
which shall be an original, but such counterparts shall together constitute but
one and the same instrument.
3.07. The term "Dollars" or the symbol as used herein shall mean Dollars in
any coin or currency of the United States of America which at the time of
payment shall be legal tender for public and private debts.
3.08. If the Mortgagor shall pay and discharge all Secured Obligations
secured hereby by well and truly paying or causing to be paid all Secured
Obligations, as and when the same become due and payable, and if the Mortgagor
shall also pay or cause to be paid all other sums payable hereunder by the
Mortgagor, then this Mortgage and the Lien, rights and interest granted
hereunder shall cease, determine and become null and void, and the Mortgagee
shall, at the request and cost and expense of the Mortgagor, execute and deliver
such instrument or instruments of satisfaction as may be reasonably necessary to
satisfy and discharge the Lien hereof; and forthwith the estate, right,
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title and interest of the Mortgagee in and to all property subject to this
Mortgage shall thereupon cease, determine and become null and void.
3.09. The powers conferred on the Mortgagee by this Mortgage are solely to
protect its interest and the interests of the Holders in the Vessel and shall
not impose any duty upon it to exercise such provisions. Except for the safe
custody of any part of the Vessel in its possession (subject to standards of
care governing the Mortgagee hereunder) and the accounting for moneys actually
received by it hereunder, the Mortgagee shall have no duty as to any part of the
Vessel whether or not the Mortgagee or any Holder has or is deemed to have
knowledge of such matters, or as to the taking of any necessary steps to
preserve rights against any parties or any other rights pertaining to the
Vessel.
3.10. The provisions of Article 9 of the Indenture regarding amendments are
specifically incorporated in this Mortgage by reference, with the same force and
effect as if the same were set out in this Mortgage in full. All references in
such incorporated provisions to "Company" shall without further reference mean
and refer to the Mortgagor; and all references in such incorporated provisions
to "this Indenture" shall without further reference mean and refer to this
Mortgage; and all references in such incorporated provisions to "Trustee" shall
without further reference mean and refer to Mortgagee.
3.11. In the event that the provisions of this Mortgage shall conflict with
or be inconsistent with the provisions of the Indenture, the terms and
provisions of the Indenture shall control and govern the obligations, rights and
responsibilities of the parties hereto.
3.12. The Mortgagee and Mortgagor hereby acknowledge and agree, for the
benefit of the Lender under the Credit Facility, that, during any period that
obligations or commitments are outstanding under the Credit Facility, the
exercise of the rights and remedies of the Trustee hereunder are or will be
subject to the terms of the Intercreditor Agreement. In the event of any
inconsistency between the terms hereof and the Intercreditor Agreement, the
Intercreditor Agreement shall control.
3.13. The Mortgagor hereby agrees to indemnify and defend Mortgagee, and
its directors, officers, agents and employees, and each Holder and saves each of
them harmless from and against any and all liability, loss, damages, judgments,
claims and expenses, including reasonable attorneys' fees and expenses,
disbursements, bond expenses, printing and automated document preparation and
retention expenses and other ordinary litigation expenses, incurred in
connection with any action or
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proceeding to foreclose this Mortgage or in or to which the Mortgagee or any
Holder may be made a party due to the existence of this Mortgage or to which
action or proceeding the Mortgagee or any Holder may become a party for the
purpose of protecting the Vessel or the Lien of this Mortgage. All sums paid by
the Mortgagee or any Holder to prosecute or defend the rights herein set forth
shall be deemed a part of the Secured Obligations and shall be paid by the
Mortgagor to the Mortgagee or such Holder within ten days after written demand,
and if not paid within that period, shall accrue interest from and including the
date of disbursement or advance by the Mortgagee or such Holder to and including
the date of payment by the Mortgagor at the Interest Rate.
3.14. Notwithstanding any other provision herein to the contrary, no sale,
charter, transfer or other disposition of the Vessel or any interest therein may
be made to any entity not a citizen of the United States within the meaning of
Section 2 of the Shipping Act of 1916, as amended, without the approval of the
Secretary of Transportation of the United States.
3.15. (a) The Mortgagee acknowledges, understands and agrees that the
Gaming Laws may impose certain licensing or transaction approval
requirements prior to the exercise of the rights and remedies
granted to it under the Mortgage with respect to the Vessel
subject to the Gaming Laws.
(b) If any consent under the Gaming Laws is required in connection
with the taking of any of the actions which may be taken by the
Mortgagee in the exercise of its rights hereunder, then
Mortgagor agrees to use its reasonable best efforts to secure
such consent and to cooperate with the Trustee in obtaining any
such consent. Upon the occurrence and during the continuation of
any Event of Default, Mortgagor shall promptly execute and/or
cause the execution of all applications, certificates,
instruments, and other documents and papers that the Mortgagee
may be required to file in order to obtain any necessary
approvals under the Gaming Laws, and if Mortgagor fails or
refuses to execute such documents, the Trustee or the clerk of
the court with jurisdiction may execute such documents on behalf
of Mortgagor.
(c) Notwithstanding any other provision of this Mortgage to the
contrary, nothing in this Mortgage shall (i) effect any transfer
of any ownership interest (within the meaning of 68 Indiana
Administrative Code 5) in Mortgagor or (ii) effect any transfer,
sale, purchase, lease or hypothecation of, or any borrowing or
loaning of money against, or any establishment of any voting
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trust agreement or other similar agreement with respect to (all
within the meaning of Indiana Code 4-33-4-21), any certificate
of suitability or any owner's license heretofore or hereafter
issued to any person, including Mortgagor, under any of the
Gaming Laws, including Indiana Code 4-33.
3.16. All representations, warranties, covenants and agreements herein
contained or made in writing in connection with this Mortgage shall survive the
execution of this Mortgage and shall continue in full force and effect until all
sums secured hereby shall have been paid in full and the same shall bind and
inure to the benefit of the respective successors and assigns of the Mortgagor
and the Mortgagee.
3.17. All notices or demands to or upon the respective parties hereto to be
effective shall be in writing (including by telex or facsimile transmission),
and, unless otherwise expressly provided herein, shall be deemed to have been
duly given or made when actually delivered, or in the case of telex notice, when
sent answer back received, or in the case of facsimile transmission, when
received and telephonically confirmed, addressed as follows or to such other
address as may be hereafter notified by the respective parties hereto or any
assignee thereof or successor thereto:
Mortgagor: The Majestic Star Casino, LLC
c/o The Majestic Star Casino, LLC
One Buffington Harbor Drive
Gary, Indiana 46406-3000
Attention: Chief Operating and Financial Officer
Telecopier: 219-944-9137
Mortgagee: IBJ Whitehall Bank & Trust Company
One State Street
New York, NY 10004
Telecopier: 212-858-2952
Attention: Michael Daly
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IN WITNESS WHEREOF, the Mortgagor has caused this Mortgage to be duly
executed as of the day and year first above written.
THE MAJESTIC STAR CASINO, LLC
By: Barden Development, Inc., its manager
BY:________________________________________
Don H. Barden
President
Barden Development, Inc.
Manager-The Majestic Star Casino, LLC
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<PAGE>
ACKNOWLEDGMENT
STATE OF INDIANA
COUNTY OF LAKE
BE IT KNOWN, that on June __, 1999, personally appeared before me, Don H.
Barden, who, being duly sworn, did depose and say:
That he is the President of Barden Development, Inc., the Manager of The
Majestic Star Casino, LLC, the limited liability company described in and which
executed the foregoing Preferred Ship Mortgage; that by order of the Board of
Directors of said Manager, he signed his name thereto and acknowledged to me
that he executed said Preferred Ship Mortgage as such officer of said
corporation on behalf of The Majestic Star Casino, LLC; and that the same is the
free and voluntary act and deed of said corporation, and of himself as such
officer thereof, for the uses and purposes therein expressed.
_______________________________
Don H. Barden
Sworn to and Subscribed Before
me this _____ day of June, 1999.
_______________________________
Notary Public
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EXHIBIT 4.7
PLEDGE AGREEMENT
----------------
THIS PLEDGE AGREEMENT ("Agreement") is made as of June 18, 1999 by THE
---------
MAJESTIC STAR CASINO, LLC, an Indiana limited liability company ("Pledgor") and
-------
a member of Buffington Harbor Riverboats, L.L.C., a Delaware limited liability
company (the "BHR Joint Venture"), and IBJ WHITEHALL BANK & TRUST COMPANY, as
-----------------
trustee under the Indenture described below (the "Trustee"), for its benefit and
-------
the benefit of the Holders (as such term is defined in the Indenture).
W I T N E S S E T H:
WHEREAS, Pledgor and the Trustee have entered into the Indenture dated
as of the date hereof (as amended, restated, supplemented or modified from time
to time, the "Indenture"), pursuant to which Pledgor and the Trustee have agreed
---------
to certain terms for the benefit of Pledgor and the Holders;
WHEREAS, it is a condition precedent to the Purchase Agreement dated
June 15, 1999, by and among Pledgor, Capital, and the Initial Purchaser, that
this Agreement shall be executed and delivered by Pledgor to the Trustee and
that this Agreement shall be in full force and effect; and
WHEREAS, Pledgor desires to secure the Liabilities (as hereinafter
defined) to the Holders by the grant to the Trustee on behalf of the Holders of
a security interest in the Pledged Collateral (as hereinafter defined);
NOW, THEREFORE, for and in consideration of the foregoing and of any
financial accommodations or extensions of credit (including, without limitation,
the purchase of the Notes by the Holders) made or to be made to or for the
benefit of the Issuers pursuant to the Indenture or any other agreement,
instrument or document executed pursuant to or in connection therewith, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Pledgor and the Trustee hereby agree as follows:
1. Pledge. Pledgor hereby pledges, grants and assigns to the
------
Trustee, for the equal and ratable benefit of the Holders, and grants to the
Trustee for the equal and ratable benefit of the Holders, a security interest in
the following (collectively, the "Pledged Collateral"):
------------------
(a) (i) The membership interests of Pledgor in the BHR Joint Venture
now or at any time or times hereafter owned by Pledgor, and certificates
(if any) representing such membership interest in the BHR Joint Venture
(such membership interest, as it exists on the date hereof, being
identified on Exhibit A attached hereto and made a part hereof), (ii) all
---------
of the right, title and interest of Pledgor in, to and under its respective
percentage interest, shares or units as a Member including, without
limitation, Pledgor's interest in (or allocation of) the profits, losses,
income, gains, deductions, credits or
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similar items of the BHR Joint Venture and the right to receive
distributions of the BHR Joint Venture's cash, assets, and other property,
and all options and warrants for the purchase of membership interests,
whether now existing or hereafter arising, whether arising under the terms
of the Certificate of Formation of the BHR Joint Venture, the First Amended
and Restated Operating Agreement of the BHR Joint Venture or any of the
other organizational documents of the BHR Joint Venture (such documents
hereinafter collectively referred to as the "Organizational Documents"), or
------------------------
at law or in equity, or otherwise; (iii) all rights under the
Organizational Documents (including, without limitation, the right to vote
and the right to receive funds on dissolution); and (iv) any and all of the
proceeds thereof (collectively referred to herein as the "Pledged
-------
Membership Interest"), and all distributions, cash, instruments and other
-------------------
property from time to time received, receivable or otherwise distributed in
respect of, or in exchange for, any or all of the Pledged Membership
Interest (all of which, except during the Credit Facility Period (as
hereinafter defined), shall be delivered to the Trustee accompanied by the
certificates or other writings evidencing the same, and by duly executed
instruments of transfer or assignments in blank, all in form and substance
satisfactory to the Trustee; such instruments being collectively referred
to hereinafter as the "Powers");
------
(b) Any additional membership interests in the BHR Joint Venture from
time to time acquired by Pledgor in any manner, and any certificates
representing such additional membership interests or any additional
percentage interests, shares, units, options or warrants of membership
interests in the BHR Joint Venture (which additional membership interests
shall constitute part of the Pledged Membership Interest from the date
acquired by Pledgor), and all options, warrants, distributions, cash,
instruments and other rights and options from time to time received,
receivable or otherwise distributed in respect of or in exchange for any or
all of such membership interest;
(c) The property and interests in property described in Section 3
below; and
(d) All proceeds of the foregoing.
"Credit Facility Period" shall mean any period that obligations or
----------------------
commitments are outstanding under the Credit Facility.
2. Security for Liabilities. The Pledged Collateral secures the
------------------------
prompt payment, performance and observance of (i) the Obligations of the Issuers
arising under or pursuant to or evidenced by the Indenture, the Notes, the other
Security Documents, and the Registration Rights Agreement, as the same may be
amended, modified, or supplemented from time to time (hereinafter referred to as
the "Secured Obligations"), and (ii) Pledgor's obligations and liabilities under
-------------------
this Agreement and each agreement, document or instrument executed pursuant to
or in connection with this Agreement or the Indenture as the same may be
amended, modified, or supplemented from time to time (the Secured Obligations
and all such obligations
2
<PAGE>
and liabilities of Pledgor now existing or hereafter arising being referred to
herein as the "Liabilities").
-----------
3. Pledged Collateral Adjustments. If, during the term of this
------------------------------
Agreement:
(a) any reclassification, readjustment or other change is declared or
made in the capital structure of the BHR Joint Venture, or any option
included within the Pledged Collateral is exercised, or both,
(b) any subscription, warrants or any other rights or options shall
be issued in connection with the Pledged Collateral, or
(c) Pledgor acquires any additional membership interests in the BHR
Joint Venture in any manner, or any additional percentage interests,
shares, units, options or warrants of membership interests in the BHR Joint
Venture;
then Pledgor will promptly thereafter deliver to the Trustee a certificate duly
executed by Pledgor describing such new, substituted and additional membership
interests, percentage interests, certificates, units, warrants, rights, options
or other securities issued by reason of any of the foregoing and acquired by
Pledgor, and certifying that the same have been duly pledged hereunder, and
shall immediately deliver the same to the Trustee to be held by the Trustee
under the terms of this Agreement (provided that the same shall constitute
Pledged Collateral even if Pledgor fails to perform its obligations under this
Section 3). The Trustee is irrevocably authorized to amend Exhibit A from time
- --------- ----------
to time to reflect such additional Pledged Collateral. Nothing contained in this
Section 3 shall be deemed to permit any distribution, issuance of additional
- ---------
membership interests, warrants, rights or options, reclassification,
readjustment or other change in the capital structure of the BHR Joint Venture
which is not expressly permitted in the Indenture.
4. Subsequent Changes Affecting Pledged Collateral. Pledgor
-----------------------------------------------
represents and warrants that it has made its own arrangements for keeping itself
informed of changes or potential changes affecting the Pledged Collateral
(including, but not limited to, rights to convert, rights to subscribe, cash
distributions or other distributions, reorganization or other exchanges, tender
offers and voting rights), and Pledgor agrees that neither the Trustee nor any
of the Holders shall have any obligation to inform Pledgor of any such changes
or potential changes or to take any action or omit to take any action with
respect thereto. The Trustee may, after the occurrence of an Event of Default,
without notice and at its option, transfer or register the Pledged Collateral or
any part thereof into its or its nominee's name with or without any indication
that such Pledged Collateral is subject to the security interest hereunder.
5. Representations, Warranties and Covenants. (a) Pledgor
-----------------------------------------
represents and warrants, as of the date of this Agreement, as follows:
3
<PAGE>
(i) Pledgor is the sole legal and beneficial owner of the Pledged
Membership Interest and other Pledged Collateral, free and clear of any
Lien except for the security interest created by this Agreement;
(ii) This Agreement has been duly and validly authorized, executed
and delivered by Pledgor and constitutes the legal, valid and binding
obligation of Pledgor enforceable against Pledgor in accordance with its
terms except as enforcement may be limited by bankruptcy, insolvency and
other similar laws affecting the enforcement of creditors' rights generally
and by moratorium laws from time to time in effect and general equitable
principles;
(iii) The pledge of the Pledged Collateral by Pledgor does not
violate (i) the Organizational Documents of the BHR Joint Venture, or any
indenture, mortgage, bank loan or credit agreement to which Pledgor or the
BHR Joint Venture is a party or by which any of their respective properties
or assets may be bound; or (ii) any restriction on such transfer or
encumbrance of any of the Pledged Collateral;
(iv) There are no restrictions upon the voting rights associated
with, or upon the transfer of, any of the Pledged Collateral except as set
forth in the Organizational Documents;
(v) Pledgor has the right to vote, pledge, assign and grant a
security interest in or otherwise transfer the Pledged Collateral free of
any Liens (other than the Lien of the Lender which secures the Credit
Facility that may be granted after the date hereof);
(vi) No authorization, approval, or other action by, and no notice
to or filing with, any Governmental Authority, other than those previously
obtained, taken, or made, and which are in full force and effect, is
required either (i) for the pledge of the Pledged Collateral pursuant to
this Agreement or for the execution, delivery or performance of this
Agreement by Pledgor or (ii) for the exercise by the Trustee of the voting
or other rights provided for in this Agreement or the remedies in respect
of the Pledged Collateral pursuant to this Agreement (except as may be
required in connection with such disposition by laws affecting the offering
and sale of securities generally);
(vii) The pledge of the Pledged Collateral pursuant to this Agreement
creates a valid and (upon filing of the financing statements referred to
herein) perfected security interest in the Pledged Collateral, in favor of
the Trustee for the benefit of the Trustee and the Holders, securing the
payment and performance of the Liabilities;
(viii) None of the membership interests of the BHR Joint Venture is
evidenced by a certificate as of the date hereof;
4
<PAGE>
(ix) No membership interest of the BHR Joint Venture constitutes a
"security" or a "financial asset" held in a "securities account," as such
terms are defined in Article 8 of the Uniform Commercial Code as in effect
on the date hereof; and
(x) The chief executive office of Pledgor is located at 1 Buffington
Harbor, Gary, Indiana 46406-3000.
(b) Pledgor shall not take any action to permit or authorize the
membership interests of the BHR Joint Venture to be evidenced by
certificates.
(c) Pledgor shall not change the location of its chief executive
office without providing at least 30 days prior written notice to the
Trustee.
6. Voting Rights and Other Powers. During the term of this
------------------------------
Agreement, and except as provided in this Section 6, Pledgor shall have (i) the
---------
right to vote the Pledged Membership Interest on all questions in a manner not
inconsistent with the terms of this Agreement, the Indenture and any other
agreement, instrument or document executed pursuant thereto or in connection
therewith, and (ii) the right to be the member and manager of the BHR Joint
Venture, and shall be entitled to exercise all managerial, election and other
rights relating to the Pledged Collateral. After the occurrence and during the
continuance of an Event of Default, the Trustee or the Trustee's nominee may, at
the Trustee's or such nominee's option and following written notice ("Election
--------
Notice") from the Trustee to Pledgor (x) exercise, or direct Pledgor as to the
- ------
exercise of (whereupon Pledgor shall exercise as so directed) all voting,
consent, managerial, election and other membership rights and manager rights (if
any) to the Pledged Collateral of Pledgor (and the provision of this Section 6
---------
shall constitute an irrevocable voting proxy from Pledgor to the Trustee or, at
the Trustee's option, to the Trustee's nominee); and (y) exercise, or direct
Pledgor as to the exercise of (whereupon Pledgor shall exercise as so directed)
any and all rights of conversion, exchange, subscription or any other rights,
privileges or options pertaining to the Pledged Collateral of Pledgor as if the
Trustee were the absolute owner thereof, all without liability except to account
for property actually received by it, but the Trustee shall have no duty to
exercise any of the aforesaid rights, privileges or options and shall not be
responsible for any failure so to do or delay in so doing.
7. Cash and Other Distributions. (a) So long as no Event of Default
----------------------------
shall have occurred and be continuing:
(i) Pledgor shall be entitled to receive and retain any and all cash
distributions paid in respect of the Pledged Collateral (including a
distribution of net cash flow) to the extent such distributions are not
prohibited by the Indenture, provided, however, that any and all
-------- -------
(A) distributions paid or payable other than in cash with respect
to, and instruments and other property received, receivable or
otherwise
5
<PAGE>
distributed with respect to, or in exchange for, any of the Pledged
Collateral;
(B) other distributions paid or payable in cash with respect to
any of the Pledged Collateral on account of a partial or total
liquidation or dissolution or in connection with a reduction of
capital, capital surplus or paid-in surplus; and
(C) cash paid, payable or otherwise distributed with respect to
interest on or principal of, or in redemption of, or in exchange for,
any of the Pledged Collateral;
shall be Pledged Collateral, and shall be forthwith delivered to the
Trustee to hold, for the benefit of the Trustee and the Holders, as Pledged
Collateral, and shall, if received by Pledgor, be received in trust for the
Trustee, for the benefit of the Trustee and the Holders, be segregated from
the other property or funds of Pledgor, and be delivered immediately to the
Trustee as Pledged Collateral in the same form as so received (with any
endorsement necessary to effect the transfer thereof to the Trustee); and
(ii) The Trustee shall execute and deliver (or cause to be executed
and delivered) to Pledgor all such proxies and other instruments as Pledgor
may reasonably request for the purpose of enabling Pledgor to receive the
distributions which it is authorized to receive and retain pursuant to
clause (i) above.
----------
(b) After the occurrence and during the continuance of an Event of
Default, all rights of Pledgor to receive the distributions which it would
otherwise be authorized to receive and retain pursuant to Section 7(a)(i) hereof
---------------
shall cease, and all such rights shall thereupon become vested in the Trustee,
for the benefit of the Trustee and the Holders, which shall thereupon have the
sole right to receive, hold and apply as Pledged Collateral such distributions.
(c) All distributions which are received by Pledgor contrary to the
provisions of Section 7(b) shall be received in trust for the Trustee, for the
------------
benefit of the Trustee and the Holders, shall be segregated from other funds of
Pledgor and shall be paid over immediately to the Trustee as Pledged Collateral
in the same form as so received (with any endorsements necessary to effect the
transfer thereof to the Trustee).
8. Transfers and other Liens. Pledgor agrees that it will not (a)
-------------------------
sell or otherwise dispose of, or grant any option with respect to, any of the
Pledged Collateral without the prior written consent of the Trustee, or (b)
create or permit to exist any Lien upon or with respect to any of the Pledged
Collateral, except for (i) the security interest under this Agreement, (ii) the
security interest of the Lender which secures the Credit Facility, and (iii)
Liens of the type described in clauses (i) and (iii) of definition of the term
"Permitted Liens" in the Indenture. To the extent additional or different
members of the BHR Joint Venture are permitted, Pledgor shall
6
<PAGE>
cause as a condition to permitting such entity to become a member that the new
member consent to (i) the terms of this Agreement applicable to such new member;
(ii) the pledge and assignment of the Pledged Collateral; and (iii) the rights
granted hereunder for the Trustee to become the/a member of the BHR Joint
Venture at its election, and enter into an agreement substantially similar to
this Agreement with respect to the membership interests owned by such member.
9. Remedies. (a) The Trustee shall have, in addition to any other
--------
rights given under this Agreement or by law, all of the rights and remedies with
respect to the Pledged Collateral of a secured party under the Uniform
Commercial Code as adopted and in effect in the State of Indiana. After the
occurrence and during the continuance of an Event of Default and following
written notice to Pledgor, the Trustee (personally or through an agent) is
hereby authorized and empowered to transfer and register in its name or in the
name of its nominee the whole or any part of the Pledged Collateral, to exercise
all voting rights with respect thereto, to collect and receive all cash
distributions and other distributions made thereon, and to otherwise act with
respect to the Pledged Collateral as though the Trustee were the outright owner
thereof and a member of the BHR Joint Venture, Pledgor hereby irrevocably
constituting and appointing the Trustee as the proxy and attorney-in-fact of
Pledgor, with full power of substitution to do so, such proxy becoming effective
upon the occurrence of an Event of Default and following written notice thereof;
provided, however, that the Trustee shall have no duty to exercise any such
right or to preserve the same and shall not be liable for any failure to do so
or for any delay in doing so. In addition, after the occurrence of an Event of
Default, the Trustee shall have such powers of sale and other powers as may be
conferred by applicable law. With respect to the Pledged Collateral or any part
thereof which shall then be or shall thereafter come into the possession or
custody of the Trustee or which the Trustee shall otherwise have the ability to
transfer under applicable law, the Trustee may, in its sole discretion, without
notice except as specified below, after the occurrence of an Event of Default,
sell or cause the same to be sold at any exchange, broker's board or at public
or private sale, in one or more sales or lots, at such price as the Trustee may
deem best, for cash or on credit or for future delivery, without assumption of
any credit risk, and the purchaser of any or all of the Pledged Collateral so
sold shall thereafter own the same, absolutely free from any claim, encumbrance
or right of any kind whatsoever that is junior to the security interest granted
herein. The Trustee and each of the Holders may, in its own name, or in the
name of a designee or nominee, buy the Pledged Collateral at any public sale and
buy the Pledged Collateral at any private sale. Pledgor will pay to the Trustee
all reasonable expenses (including, without limitation, court costs and
reasonable attorneys' and paralegals' fees and expenses) of, or incidental to,
the enforcement of any of the provisions hereof. The Trustee agrees to
distribute any proceeds of the sale of the Pledged Collateral in accordance with
the Indenture and Pledgor shall remain liable for any deficiency following the
sale of the Pledged Collateral.
(b) Unless any of the Pledged Collateral threatens to decline
speedily in value or is or becomes of a type sold on a recognized market, the
Trustee will give Pledgor reasonable notice of the time and place of any public
sale thereof, or of the time after which any private sale or other intended
disposition is to be made. Any sale of the Pledged Collateral conducted in
7
<PAGE>
conformity with reasonable commercial practices of banks, commercial finance
companies, insurance companies or other financial institutions disposing of
property similar to the Pledged Collateral shall be deemed to be commercially
reasonable. Notwithstanding any provision to the contrary contained herein,
Pledgor agrees that any requirements of reasonable notice shall be met if such
notice is given by the Trustee as provided in Section 25 below at least ten (10)
----------
days before the time of the sale or disposition; provided, however, that Trustee
may give any shorter notice that is commercially reasonable under the
circumstances. Any other requirement of notice, demand or advertisement for sale
is waived, to the extent permitted by law.
(c) In view of the fact that federal and state securities laws may
impose certain restrictions on the method by which a sale of the Pledged
Collateral may be effected after an Event of Default, Pledgor agrees that after
the occurrence of an Event of Default, the Trustee may, from time to time,
attempt to sell all or any part of the Pledged Collateral by means of a private
placement restricting the bidders and prospective purchasers to those who are
qualified and will represent and agree that they are purchasing for investment
only and not for distribution. In so doing, the Trustee may solicit offers to
buy the Pledged Collateral, or any part of it, from a limited number of
investors deemed by the Trustee, in its reasonable judgment, to be financially
responsible parties who might be interested in purchasing the Pledged
Collateral. The acceptance by the Trustee of the highest offer obtained
therefrom shall be deemed to be a commercially reasonable method of disposing of
such Pledged Collateral; provided, however, that this Section does not impose a
requirement that the Trustee solicit offers from any minimum number of investors
in order for the sale to be commercially reasonable.
10. Security Interest Absolute. All rights of the Trustee and
--------------------------
security interests hereunder, and all obligations of Pledgor hereunder, shall be
absolute and unconditional irrespective of:
(i) Any lack of validity or enforceability of the Indenture or any
other agreement or instrument relating thereto;
(ii) Any change in the time, manner or place of payment of, or in
any other term of, all or any part of the Liabilities, or any other
amendment or waiver of or any consent to any departure from the Indenture;
(iii) Any exchange, release or non-perfection of any other
collateral, or any release or amendment or waiver of or consent to
departure from any guaranty, for all or any part of the Liabilities; or
(iv) Any other circumstance which might otherwise constitute a
defense available to, or a discharge of, Pledgor in respect of the
Liabilities or of this Agreement.
8
<PAGE>
11. Trustee Appointed Attorney-in-Fact. Pledgor hereby appoints the
----------------------------------
Trustee its-attorney-in-fact, with full authority, in the name of Pledgor or
otherwise, after the occurrence and during the continuance of an Event of
Default, from time to time in the Trustee's sole discretion, to take any action
and to execute any instrument which the Trustee may deem necessary or advisable
to accomplish the purposes of this Agreement, including, without limitation, to
receive, endorse and collect all instruments made payable to Pledgor
representing any cash distribution, interest payment or other distribution in
respect of the Pledged Collateral or any part thereof and to give full discharge
for the same, to exercise all rights of a member and manager (upon the election
of the Trustee) such as all voting, consent, managerial and other member rights,
and to arrange for the transfer of all or any part of the Pledged Collateral on
the books of the BHR Joint Venture to the name of the Trustee or the Trustee's
nominee.
12. Waivers. Pledgor waives presentment and demand for payment of
-------
any of the Liabilities, protest and notice of dishonor or default with respect
to any of the Liabilities and all other notices to which Pledgor might otherwise
be entitled except as otherwise expressly provided herein or in the Indenture.
13. Term. This Agreement shall remain in full force and effect until
----
the Liabilities (other than continuing indemnity obligations for which no
unsatisfied demand has been made) have been fully and indefeasibly paid in cash
and the Indenture has terminated pursuant to its terms. Upon the termination of
this Agreement as provided above (other than as a result of the sale of the
Pledged Collateral), the Trustee will release the security interest created
hereunder and, if it then has possession of the Pledged Membership Interest,
will deliver the Pledged Membership Interest and the Powers to Pledgor.
14. Definitions. All capitalized terms used in this Agreement that
-----------
are not defined herein are used with the meanings ascribed to such terms in the
Indenture. The singular shall include the plural and vice versa and any gender
shall include any other gender as the context may require.
15. Successors and Assigns. This Agreement shall be binding upon and
----------------------
inure to the benefit of Pledgor, the Trustee, for the benefit of itself and the
Holders, and their respective successors and assigns. Pledgor's successors and
assigns shall include, without limitation, a receiver, trustee or debtor-in-
possession of or for Pledgor.
16. GOVERNING LAW. ANY DISPUTE BETWEEN THE TRUSTEE AND PLEDGOR
-------------
ARISING OUT OF OR RELATED TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN
CONNECTION WITH THIS AGREEMENT, AND WHETHER ARISING IN CONTRACT, TORT, EQUITY,
OR OTHERWISE, SHALL BE RESOLVED IN ACCORDANCE WITH THE INTERNAL LAWS, AND NOT
THE CONFLICTS OF LAW PROVISIONS, OF THE STATE OF INDIANA.
9
<PAGE>
17. CONSENT TO JURISDICTION; COUNTERCLAIMS; FORUM NON CONVENIENS.
------------------------------------------------------------
(A) NON-EXCLUSIVE JURISDICTION. PLEDGOR HEREBY IRREVOCABLY SUBMITS TO
--------------------------
THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR NEW YORK STATE
COURT SITTING IN NEW YORK, NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF
OR RELATING TO THIS AGREEMENT AND PLEDGOR HEREBY IRREVOCABLY AGREES THAT ALL
CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN
ANY SUCH COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE
AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT
OR THAT SUCH COURT IS AN INCONVENIENT FORUM, BUT PLEDGOR ACKNOWLEDGES THAT ANY
APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF NEW
YORK, NEW YORK.
(B) OTHER JURISDICTIONS. PLEDGOR AGREES THAT THE TRUSTEE OR ANY
-------------------
HOLDER SHALL HAVE THE RIGHT TO PROCEED AGAINST PLEDGOR OR ITS PROPERTY IN A
COURT IN ANY LOCATION TO ENABLE SUCH PERSON TO (1) OBTAIN PERSONAL JURISDICTION
OVER PLEDGOR OR (2) REALIZE ON THE PLEDGED COLLATERAL OR ANY OTHER SECURITY FOR
THE LIABILITIES OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER ENTERED IN FAVOR
OF SUCH PERSON. PLEDGOR AGREES THAT IT WILL NOT ASSERT ANY PERMISSIVE
COUNTERCLAIMS IN ANY PROCEEDING BROUGHT BY SUCH PERSON TO REALIZE ON THE PLEDGED
COLLATERAL OR ANY OTHER SECURITY FOR THE LIABILITIES OR TO ENFORCE A JUDGMENT OR
OTHER COURT ORDER IN FAVOR OF SUCH PERSON. PLEDGOR WAIVES ANY OBJECTION THAT IT
MAY HAVE TO THE LOCATION OF THE COURT IN WHICH SUCH PERSON HAS COMMENCED A
PROCEEDING DESCRIBED IN THIS SUBSECTION.
(C) INCONVENIENT FORUM. PLEDGOR IRREVOCABLY WAIVES ANY OBJECTION
------------------
(INCLUDING, WITHOUT LIMITATION, ANY OBJECTION OF THE LAYING OF VENUE OR BASED ON
THE GROUNDS OF FORUM NON CONVENIENS) WHICH IT MAY NOW OR HEREAFTER HAVE TO THE
---------------------
BRINGING OF ANY SUCH ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY
OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION
HEREWITH IN NEW YORK, NEW YORK.
18. SERVICE OF PROCESS. IF AND TO THE EXTENT PLEDGOR'S RESIDENT
------------------
AGENT IN ANY JURISDICTION IS NOT CT CORPORATION SYSTEM, PLEDGOR WAIVES PERSONAL
SERVICE OF ANY PROCESS UPON IT AND IRREVOCABLY APPOINTS CT CORPORATION SYSTEM,
ONE NORTH CAPITAL.
10
<PAGE>
AVENUE, INDIANAPOLIS, INDIANA 46204 AS ITS REGISTERED AGENT FOR THE PURPOSE OF
ACCEPTING SERVICE OF PROCESS ISSUED BY ANY COURT.
19. WAIVER OF JURY TRIAL. EACH OF PLEDGOR AND THE TRUSTEE WAIVES ANY
--------------------
RIGHT TO TRIAL BY JURY IN ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT, OR
OTHERWISE, BETWEEN THE TRUSTEE AND PLEDGOR ARISING OUT OF OR RELATED TO THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR
AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH. EITHER PLEDGOR OR THE
TRUSTEE MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS AGREEMENT WITH ANY
COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF
THEIR RIGHT TO TRIAL BY JURY.
20. Waiver of Bond. Pledgor waives the posting of any bond otherwise
--------------
required of the Trustee in connection with any judicial process or proceeding to
realize on the Pledged Collateral or any other security for the Liabilities, to
enforce any judgment or other court order entered in favor of the Trustee, or to
enforce by specific performance, temporary restraining order, or preliminary or
permanent injunction, this Agreement or any other agreement or document between
the Trustee and Pledgor.
21. Advice of Counsel. Pledgor represents and warrants to the
-----------------
Trustee and the Holders that it has consulted with its legal counsel regarding
all waivers under this Agreement, including without limitation those under
Section 12 and Sections 16 through 20 hereof, that it believes that it fully
- ---------- ----------- --
understands all rights that it is waiving and the effect of such waivers, that
it assumes the risk of any misunderstanding that it may have regarding any of
the foregoing, and that it intends that such waivers shall be a material
inducement to the Trustee to enter into this Agreement.
22. Severability. Whenever possible, each provision of this
------------
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but, if any provision of this Agreement shall be held to be
prohibited or invalid under applicable law, such provision shall be ineffective
only to the extent of such prohibition or invalidity, without invalidating the
remainder of such provision or the remaining provisions of this Agreement.
23. Further Assurances. Pledgor shall perform any and all steps
------------------
required to perfect, maintain and protect Trustee's security interests in and
Liens on and against the Pledged Collateral granted or purported to be granted
hereby or to enable Trustee to exercise its rights and remedies hereunder with
respect to any Pledged Collateral. Pledgor agrees that it will cooperate with
the Trustee and will execute and deliver, or cause to be executed and
delivered, all such other stock powers, proxies, instruments and documents, and
will take all such other actions, as are necessary or appropriate from time to
time in order to carry out the provisions and purposes of this Agreement.
Trustee is authorized (but not required) to file one or more financing
11
<PAGE>
statements and continuation statements as Trustee may deem necessary or
advisable to perfect or maintain the perfection of the security interest granted
herein, without Pledgor's signature appearing thereon.
24. The Trustee's Duty of Care. The Trustee shall not be liable for
--------------------------
any acts, omissions, errors of judgment or mistakes of fact or law including,
without limitation, acts, omissions, errors or mistakes with respect to the
Pledged Collateral, except for those arising out of or in connection with the
Trustee's (i) gross negligence or willful misconduct, or (ii) failure to use
reasonable care with respect to the safe custody of the Pledged Collateral in
the Trustee's possession. Without limiting the generality of the foregoing, the
Trustee shall be under no obligation to take any steps necessary to preserve
rights in the Pledged Collateral against any other parties but may do so at its
option. All expenses incurred in connection therewith shall be for the sole
account of Pledgor, and shall constitute part of the Liabilities secured hereby.
The Trustee shall be deemed to use reasonable care if it accords the Pledged
Collateral treatment similar to that accorded to the Trustee's own property
which is of a similar nature as the Pledged Collateral.
25. Notices. All notices and other communications required or
-------
desired to be served, given or delivered hereunder shall be made in writing or
by a telecommunications device capable of creating a written record and shall be
addressed to the party to be notified as follows:
if to Pledgor, at
The Majestic Star Casino, LLC
One Buffington Harbor Drive
Gary, Indiana 46406
Attention: Michael Kelly
Chief Operating Officer and Financial Officer
Fax: 219-944-9137
with copies to:
Barden Development, Inc.
400 Renaissance Center
Suite 2400
Detroit, Michigan 48243
Attention: Michelle R. Sherman
Vice President
Fax: 313-259-7154
12
<PAGE>
and
Judy O'Neill, Esq.
Dykema Gossett PLLC
400 RenaissanceCenter
Detroit, Michigan 48243
Fax: 313-568-6915
if to the Trustee, at
IBJ Whitehall Bank & Trust Company, as Trustee
One State Street
New York, New York 10004
Attention: Michael Daly
Fax: 212-858-2952
or, as to each party, at such other address as designated by such party in a
written notice to the other party. All such notices and communications shall be
deemed to be validly served, given or delivered when delivered in person or sent
to such address by first-class mail (registered or certified, return receipt
requested), telex, telecopier or overnight air courier guaranteeing next day
delivery.
26. Intercreditor Arrangement. The parties hereto acknowledge and
-------------------------
agree, for the benefit of the Lender under the Credit Facility, that, during the
Credit Facility Period, the exercise of the rights and remedies of the Trustee
hereunder are subject to the terms of the Intercreditor Agreement. In the event
of any inconsistency between the terms hereof and the Intercreditor Agreement,
the Intercreditor Agreement shall control.
27. Amendments, Etc. Except as otherwise provided by the Indenture,
---------------
the consent of the Holders of at least a majority in principal amount of the
Notes then outstanding (including consents obtained in connection with a tender
offer or exchange offer for Notes) shall be required to amend, modify,
supplement, or waive any provision of this Agreement. Any such waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which given.
28. Section Headings. The section headings herein are for
----------------
convenience of reference only, and shall not affect in any way the
interpretation of any of the provisions hereof.
29. Execution in Counterparts. This Agreement may be executed in any
-------------------------
number of counterparts, each of which shall be an original, but all of which
shall together constitute one and the same agreement.
13
<PAGE>
30. Merger. This Agreement represents the final agreement of Pledgor
------
and the Trustee with respect to the matters contained herein and may not be
contradicted by evidence of prior or contemporaneous agreements, or subsequent
oral agreements, between Pledgor and the Trustee or any Holder.
31. Gaming Laws. (a) The Trustee acknowledges, understands and
-----------
agrees that the Gaming Laws may impose certain licensing or transaction approval
requirements prior to the exercise of the rights and remedies granted to it
under the Agreement with respect to the Pledged Collateral subject to the Gaming
Laws.
(b) If any consent under the Gaming Laws is required in connection
with the taking of any of the actions which may be taken by the Trustee in the
exercise of its rights hereunder, then Pledgor agrees to use its best efforts to
secure such consent and to cooperate with the Trustee in obtaining any such
consent. Upon the occurrence and during the continuation of any Event of
Default, Pledgor shall promptly execute and/or cause the execution of all
applications, certificates, instruments, and other documents and papers that the
Trustee may be required to file in order to obtain any necessary approvals under
the Gaming Laws, and if Pledgor fails or refuses to execute such documents, the
Trustee or the clerk of the court with jurisdiction may execute such documents
on behalf of Pledgor.
(c) Notwithstanding any other provision of this Agreement to the
contrary, nothing in this Agreement shall (i) effect any transfer of any
ownership interest (within the meaning of 68 Indiana Administrative Code 5) in
Pledgor, or (ii) effect any transfer, sale, purchase, lease or hypothecation of,
or any borrowing or loaning of money against, or any establishment of any voting
trust agreement or other similar agreement with respect to (all within the
meaning of Indiana Code 4-33-4-21), any certificate of suitability or any
owner's license heretofore or hereafter issued to any person, including Pledgor,
under any of the Gaming Laws, including Indiana Code 4-33.
32. Interaction with Indenture. All terms, covenants, conditions,
--------------------------
provisions and requirements of the Indenture are incorporated by reference in
this Agreement. In the event of any conflict or inconsistency between the
provisions of this Agreement and those of the Indenture, including, without
limitation, any conflicts or inconsistencies in any definitions herein or
therein, the provisions or definitions of the Indenture shall govern.
33. Trust Indenture Act. If any provision of this Agreement
-------------------
conflicts with any provision of the Trust Indenture Act, the provisions of the
Trust Indenture Act shall control.
34. Appointment of Collateral Agent. The Trustee may, solely at its
-------------------------------
discretion, appoint a collateral agent to enforce the rights and remedies
available to the Trustee under this Agreement.
14
<PAGE>
IN WITNESS WHEREOF, Pledgor and the Trustee have executed this
Agreement as of the date set forth above.
THE MAJESTIC STAR CASINO, LLC,
By: Barden Development, Inc., its manager
By: _______________________________________
Name: _____________________________________
Title: ____________________________________
IBJ WHITEHALL BANK & TRUST COMPANY,
as Trustee
By: _______________________________________
Name: _____________________________________
Title: ____________________________________
<PAGE>
EXHIBIT A
to
PLEDGE AGREEMENT
dated as of June 18, 1999
Pledged Membership Interests
----------------------------
Percentage of
Membership Interest in Issuer
Name of Issuer Held by Pledgor
- -------------- ---------------
Buffington Harbor Riverboats, L.L.C. 50%
A-1
<PAGE>
EXHIBIT 4.8
PLEDGE AGREEMENT
----------------
THIS PLEDGE AGREEMENT ("Agreement") is made as of June 18, 1999 by
---------
BARDEN DEVELOPMENT, INC., an Indiana corporation ("Barden") and a member of THE
------
MAJESTIC STAR CASINO, LLC, an Indiana limited liability company ("Majestic
--------
Star") GARY RIVERBOAT GAMING, LLC, an Indiana limited liability company and a
member of Majestic Star ("GRG"; Barden and GRG being referred to herein,
---
individually and collectively, as "Pledgor"), and IBJ WHITEHALL BANK & TRUST
-------
COMPANY, as trustee under the Indenture described below (the "Trustee"), for its
-------
benefit and the benefit of the Holders (as such term is defined in the
Indenture).
W I T N E S S E T H:
WHEREAS, Majestic Star and the Trustee have entered into the Indenture
dated as of the date hereof (as amended, restated, supplemented or modified from
time to time, the "Indenture"), pursuant to which Majestic Star and the Trustee
---------
have agreed to certain terms for the benefit of Majestic Star and the Holders;
WHEREAS, Pledgor, as a member of Majestic Star, will directly and
indirectly receive substantial benefits by reason of the financial
accommodations made by the Trustee and the Holders under the Indenture;
WHEREAS, it is a condition precedent to the Purchase Agreement dated
June 15, 1999, by and among Majestic Star, Capital and the Initial Purchaser
that this Agreement shall be executed and delivered by Pledgor to the Trustee
and that this Agreement shall be in full force and effect; and
WHEREAS, Pledgor desires to secure the Liabilities (as hereinafter
defined) to the Holders by the grant to the Trustee on behalf of the Holders of
a security interest in the Pledged Collateral (as hereinafter defined);
NOW, THEREFORE, for and in consideration of the foregoing and of any
financial accommodations or extensions of credit (including, without limitation,
the purchase of the Notes by the Holders) made or to be made to or for the
benefit of the Issuers and/or Pledgor pursuant to the Indenture or any other
agreement, instrument or document executed pursuant to or in connection
therewith, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Pledgor and the Trustee hereby
agree as follows:
1. Pledge. Pledgor hereby pledges, grants and assigns to the
------
Trustee, for the equal and ratable benefit of the Holders, and grants to the
Trustee for the equal and ratable benefit of the Holders, a security interest in
the following (collectively, the "Pledged Collateral"):
------------------
1
<PAGE>
(a) (i) The membership interests of Pledgor in Majestic Star now or at
any time or times hereafter owned by Pledgor, and certificates (if any)
representing such membership interest in Majestic Star (such membership
interest, as it exists on the date hereof, being identified on Exhibit A
---------
attached hereto and made a part hereof), (ii) all of the right, title and
interest of Pledgor in, to and under its respective percentage interest,
shares or units as a Member including, without limitation, Pledgor's
interest in (or allocation of) the profits, losses, income, gains,
deductions, credits or similar items of Majestic Star and the right to
receive distributions of Majestic Star's cash, assets, and other property,
and all options and warrants for the purchase of membership interests,
whether now existing or hereafter arising, whether arising under the terms
of the Articles of Organization of Majestic Star, the Third Amended and
Restated Operating Agreement of Majestic Star, as amended in June, 1999 or
any of the other organizational documents of Majestic Star (such documents
hereinafter collectively referred to as the "Organizational Documents"), or
------------------------
at law or in equity, or otherwise; (iii) all rights under the
Organizational Documents (including without limitation, the right to vote
and the right to receive funds on dissolution), and (iv) any and all of the
proceeds thereof (collectively referred to herein as the "Pledged
-------
Membership Interest"), and all distributions, cash, instruments and other
-------------------
property from time to time received, receivable or otherwise distributed in
respect of, or in exchange for, any or all of the Pledged Membership
Interest (all of which, except during the Credit Facility Period (as
hereinafter defined), shall be delivered to the Trustee accompanied by the
certificates or other writings evidencing the same, and by duly executed
instruments of transfer or assignments in blank, all in form and substance
satisfactory to the Trustee; such instruments being collectively referred
to hereinafter as the "Powers");
------
(b) Any additional membership interests in Majestic Star from time to
time acquired by Pledgor in any manner, and any certificates representing
such additional membership interests or any additional percentage
interests, shares, units, options or warrants of membership interests in
Majestic Star (which additional membership interests shall constitute part
of the Pledged Membership Interest from the date acquired by Pledgor), and
all options, warrants, distributions, cash, instruments and other rights
and options from time to time received, receivable or otherwise distributed
in respect of or in exchange for any or all of such membership interest;
(c) The property and interests in property described in Section 3
below; and
(d) All proceeds of the foregoing.
"Credit Facility Period" shall mean any period that obligations or
----------------------
commitments are outstanding under the Credit Facility.
2. Security for Liabilities. The Pledged Collateral secures the
------------------------
prompt payment, performance and observance of (i) the Obligations of the Issuers
arising under or pursuant to or evidenced by the Indenture, the Notes, the other
Security Documents, and the Registration Rights Agreement, as the same may be
amended, modified, or supplemented from
2
<PAGE>
time to time (hereinafter referred to as the "Secured Obligations"), and (ii)
-------------------
Pledgor's obligations and liabilities under this Agreement and each agreement,
document or instrument executed pursuant to or in connection with this Agreement
as the same may be amended, modified, or supplemented from time to time (the
Secured Obligations and all such obligations and liabilities of Pledgor now
existing or hereafter arising being referred to herein as the "Liabilities").
-----------
3. Pledged Collateral Adjustments. If, during the term of this
------------------------------
Agreement:
(a) any reclassification, readjustment or other change is declared or
made in the capital structure of Majestic Star, or any option included
within the Pledged Collateral is exercised, or both,
(b) any subscription, warrants or any other rights or options shall
be issued in connection with the Pledged Collateral, or
(c) Pledgor acquires any additional membership interests in Majestic
Star in any manner, or any additional percentage interests, shares, units,
options or warrants of membership interests in Majestic Star;
then Pledgor will promptly thereafter deliver to the Trustee a certificate duly
executed by Pledgor describing such new, substituted and additional membership
interests, percentage interests, certificates, units, warrants, rights, options
or other securities issued by reason of any of the foregoing and acquired by
Pledgor, and certifying that the same have been duly pledged hereunder, and
shall immediately deliver the same to the Trustee to be held by the Trustee
under the terms of this Agreement (provided that the same shall constitute
Pledged Collateral even if Pledgor fails to perform its obligations under this
Section 3). The Trustee is irrevocably authorized to amend Exhibit A from time
- --------- ----------
to time to reflect such additional Pledged Collateral. Nothing contained in this
Section 3 shall be deemed to permit any distribution, issuance of additional
- ---------
membership interests, warrants, rights or options, reclassification,
readjustment or other change in the capital structure of Majestic Star which is
not expressly permitted in the Indenture.
4. Subsequent Changes Affecting Pledged Collateral. Pledgor
-----------------------------------------------
represents and warrants that it has made its own arrangements for keeping itself
informed of changes or potential changes affecting the Pledged Collateral
(including, but not limited to, rights to convert, rights to subscribe, cash
distributions or other distributions, reorganization or other exchanges, tender
offers and voting rights), and Pledgor agrees that neither the Trustee nor any
of the Holders shall have any obligation to inform Pledgor of any such changes
or potential changes or to take any action or omit to take any action with
respect thereto. The Trustee may, after the occurrence of an Event of Default,
without notice and at its option, transfer or register the Pledged Collateral or
any part thereof into its or its nominee's name with or without any indication
that such Pledged Collateral is subject to the security interest hereunder.
3
<PAGE>
5. Representations, Warranties and Covenants. (a) Pledgor
-----------------------------------------
represents and warrants, as of the date of this Agreement, as follows:
(i) Pledgor is the sole legal and beneficial owner of the Pledged
Membership Interest identified on Exhibit A as being owned by Pledgor and
---------
other related Pledged Collateral, free and clear of any Lien except for the
security interest created by this Agreement;
(ii) This Agreement has been duly and validly authorized, executed
and delivered by Pledgor and constitutes the legal, valid and binding
obligation of Pledgor enforceable against Pledgor in accordance with its
terms except as enforcement may be limited by bankruptcy, insolvency and
other similar laws affecting the enforcement of creditors' rights generally
and by moratorium laws from time to time in effect and general equitable
principles;
(iii) The pledge of the Pledged Collateral by Pledgor does not
violate (i) the Organizational Documents of Majestic Star, or any
indenture, mortgage, bank loan or credit agreement to which Pledgor or
Majestic Star is a party or by which any of their respective properties or
assets may be bound; or (ii) any restriction on such transfer or
encumbrance of any of the Pledged Collateral;
(iv) There are no restrictions upon the voting rights associated
with, or upon the transfer of, any of the Pledged Collateral except as set
forth in the Organizational Documents;
(v) Pledgor has the right to vote, pledge, assign and grant a
security interest in or otherwise transfer the Pledged Collateral free of
any Liens (other than the Lien of the Lender which secures the Credit
Facility that may be granted after the date hereof);
(vi) No authorization, approval, or other action by, and no notice
to or filing with, any Governmental Authority, other than those previously
obtained, taken, or made, and which are in full force and effect, is
required either (i) for the pledge of the Pledged Collateral pursuant to
this Agreement or for the execution, delivery or performance of this
Agreement by Pledgor or (ii) for the exercise by the Trustee of the voting
or other rights provided for in this Agreement or the remedies in respect
of the Pledged Collateral pursuant to this Agreement (except as may be
required in connection with such disposition by laws affecting the offering
and sale of securities generally);
(vii) The pledge of the Pledged Collateral pursuant to this Agreement
creates a valid and (upon filing of the financing statements referred to
herein) perfected security interest in the Pledged Collateral, in favor of
the Trustee for the benefit of the Trustee and the Holders, securing the
payment and performance of the Liabilities;
(viii) None of the membership interests of Majestic Star is evidenced
by a certificate as of the date hereof;
4
<PAGE>
(ix) No membership interest in Majestic Star constitutes a
"security" or a "financial asset" held in a "securities account," as such
terms are defined in Article 8 of the Uniform Commercial Code in effect on
the date hereof; and
(x) The chief executive office of Barden is located at 400
Renaissance Center, Suite 2400, Detroit, Michigan 48243 and the chief
executive officer of GRC is located at 400 Renaissance Center, Suite 2400,
Detroit, Michigan 48243.
(b) Pledgor shall cause Majestic Star to make a notation on its
records, which notation shall indicate the security interest granted hereby, and
Pledgor agrees to execute and file financing statements and continuation
statements as may be required to perfect the security interest granted hereby.
Pledgor shall execute and deliver to Majestic Star a Pledge Instruction in the
form of Exhibit B hereto, together with a copy of the Agreement, and shall cause
---------
Majestic Star to execute the Consent of Limited Liability Company attached
thereto.
(c) Pledgor shall not take any action to permit or authorize the
membership interests of Majestic Star to be evidenced by certificates.
(d) Pledgor shall not change the location of its chief executive
office without providing at least 30 days prior written notice to the Trustee.
6. Voting Rights and Other Powers. During the term of this
------------------------------
Agreement, and except as provided in this Section 6, Pledgor shall have (i) the
---------
right to vote the Pledged Membership Interest on all questions in a manner not
inconsistent with the terms of this Agreement, the Indenture and any other
agreement, instrument or document executed pursuant thereto or in connection
therewith, (ii) the right to be a member of Majestic Star, and shall be entitled
to exercise all managerial, election and other rights relating to the Pledged
Collateral, and (iii) in the case of Barden, shall have the right to be the
manager of Majestic Star. After the occurrence and during the continuance of an
Event of Default, the Trustee or the Trustee's nominee may, at the Trustee's or
such nominee's option and following written notice ("Election Notice") from the
---------------
Trustee to Pledgor (x) exercise, or direct Pledgor as to the exercise of
(whereupon Pledgor shall exercise as so directed) all voting, consent,
managerial, election and other membership and manager rights to the Pledged
Collateral of Pledgor (and the provision of this Section 6 shall constitute an
---------
irrevocable voting proxy from Pledgor to the Trustee or, at the Trustee's
option, to the Trustee's nominee); and (y) exercise, or direct Pledgor as to the
exercise of (whereupon Pledgor shall exercise as so directed) any and all rights
of conversion, exchange, subscription or any other rights, privileges or options
pertaining to the Pledged Collateral of Pledgor as if the Trustee were the
absolute owner thereof, all without liability except to account for property
actually received by it, but the Trustee shall have no duty to exercise any of
the aforesaid rights, privileges or options and shall not be responsible for any
failure so to do or delay in so doing.
7. Cash and Other Distributions. (a) So long as no Event of
----------------------------
Default shall have occurred and be continuing:
5
<PAGE>
(i) Pledgor shall be entitled to receive and retain any and all cash
distributions paid in respect of the Pledged Collateral (including a
distribution of net cash flow) to the extent such distributions are not
prohibited by the Indenture, provided, however, that any and all
-------- -------
(A) distributions paid or payable other than in cash with
respect to, and instruments and other property received, receivable or
otherwise distributed with respect to, or in exchange for, any of the
Pledged Collateral;
(B) other distributions paid or payable in cash with respect to
any of the Pledged Collateral on account of a partial or total
liquidation or dissolution or in connection with a reduction of
capital, capital surplus or paid-in surplus; and
(C) cash paid, payable or otherwise distributed with respect to
interest or principal of, or in redemption of, or in exchange for, any
of the Pledged Collateral;
shall be Pledged Collateral, and shall be forthwith delivered to the
Trustee to hold, for the benefit of the Trustee and the Holders, as Pledged
Collateral, and shall, if received by Pledgor, be received in trust for the
Trustee, for the benefit of the Trustee and the Holders, be segregated from
the other property or funds of Pledgor, and be delivered immediately to the
Trustee as Pledged Collateral in the same form as so received (with any
endorsement necessary to effect the transfer thereof to the Trustee); and
(ii) The Trustee shall execute and deliver (or cause to be executed
and delivered) to Pledgor all such proxies and other instruments as Pledgor
may reasonably request for the purpose of enabling Pledgor to receive the
distributions which it is authorized to receive and retain pursuant to
clause (i) above.
----------
(b) After the occurrence and during the continuance of an Event of
Default, all rights of Pledgor to receive the distributions which it would
otherwise be authorized to receive and retain pursuant to Section 7(a)(i) hereof
---------------
shall cease, and all such rights shall thereupon become vested in the Trustee,
for the benefit of the Trustee and the Holders, which shall thereupon have the
sole right to receive, hold and apply as Pledged Collateral such distributions.
(c) All distributions which are received by Pledgor contrary to the
provisions of Section 7(b) shall be received in trust for the Trustee, for the
------------
benefit of the Trustee and the Holders, shall be segregated from other funds of
Pledgor and shall be paid over immediately to the Trustee as Pledged Collateral
in the same form as so received (with any endorsements necessary to effect the
transfer thereof to the Trustee).
8. Transfers and other Liens. Pledgor agrees that it will not (a)
-------------------------
sell or otherwise dispose of, or grant any option with respect to, any of the
Pledged Collateral without
6
<PAGE>
the prior written consent of the Trustee, or (b) create or permit to exist any
Lien upon or with respect to any of the Pledged Collateral, except for (i) the
security interest under this Agreement, (ii) the security interest of the Lender
which secures the Credit Facility, (iii) and Liens of the type described clauses
(i) and (iii) of the definition of the term "Permitted Liens" in the Indenture.
To the extent additional or different members of Majestic Star are permitted,
Pledgor shall cause as a condition to permitting such entity to become a member
that the new member consent to (i) the terms of this Agreement applicable to
such new member; (ii) the pledge and assignment of the Pledged Collateral; and
(iii) the rights granted hereunder for the Trustee to become the/a member of
Majestic Star at its election and enter into an agreement substantially similar
to this Agreement with respect to the membership interests owned by such member.
9. Remedies. (a) The Trustee shall have, in addition to any other
--------
rights given under this Agreement or by law, all of the rights and remedies with
respect to the Pledged Collateral of a secured party under the Uniform
Commercial Code as adopted and in effect in the State of Indiana. After the
occurrence and during the continuance of an Event of Default and following
written notice to Pledgor, the Trustee (personally or through an agent) is
hereby authorized and empowered to transfer and register in its name or in the
name of its nominee the whole or any part of the Pledged Collateral, to exercise
all voting rights with respect thereto, to collect and receive all cash
distributions and other distributions made thereon, and to otherwise act with
respect to the Pledged Collateral as though the Trustee were the outright owner
thereof and a member and the manager of Majestic Star, Pledgor hereby
irrevocably constituting and appointing the Trustee as the proxy and attorney-
in-fact of Pledgor, with full power of substitution to do so, such proxy
becoming effective upon the occurrence of an Event of Default and following
written notice thereof; provided, however, that the Trustee shall have no duty
to exercise any such right or to preserve the same and shall not be liable for
any failure to do so or for any delay in doing so. In addition, after the
occurrence of an Event of Default, the Trustee shall have such powers of sale
and other powers as may be conferred by applicable law. With respect to the
Pledged Collateral or any part thereof which shall then be or shall thereafter
come into the possession or custody of the Trustee or which the Trustee shall
otherwise have the ability to transfer under applicable law, the Trustee may, in
its sole discretion, without notice except as specified below, after the
occurrence of an Event of Default, sell or cause the same to be sold at any
exchange, broker's board or at public or private sale, in one or more sales or
lots, at such price as the Trustee may deem best, for cash or on credit or for
future delivery, without assumption of any credit risk, and the purchaser of any
or all of the Pledged Collateral so sold shall thereafter own the same,
absolutely free from any claim, encumbrance or right of any kind whatsoever that
is junior to the security interest granted herein. The Trustee and each of the
Holders may, in its own name, or in the name of a designee or nominee, buy the
Pledged Collateral at any public sale and, if permitted by applicable law, buy
the Pledged Collateral at any private sale. Pledgor will pay to the Trustee all
reasonable expenses (including, without limitation, court costs and reasonable
attorneys' and paralegals' fees and expenses) of, or incidental to, the
enforcement of any of the provisions hereof. The Trustee agrees to distribute
any proceeds of the sale of the Pledged Collateral in accordance with the
Indenture and Pledgor shall remain liable for any deficiency following the sale
of the Pledged Collateral.
7
<PAGE>
(b) Unless any of the Pledged Collateral threatens to decline
speedily in value or is or becomes of a type sold on a recognized market, the
Trustee will give Pledgor reasonable notice of the time and place of any public
sale thereof, or of the time after which any private sale or other intended
disposition is to be made. Any sale of the Pledged Collateral conducted in
conformity with reasonable commercial practices of banks, commercial finance
companies, insurance companies or other financial institutions disposing of
property similar to the Pledged Collateral shall be deemed to be commercially
reasonable. Notwithstanding any provision to the contrary contained herein,
Pledgor agrees that any requirements of reasonable notice shall be met if such
notice is given by the Trustee as provided in Section 25 below at least ten (10)
----------
days before the time of the sale or disposition; provided, however, that Trustee
may give any shorter notice that is commercially reasonable under the
circumstances. Any other requirement of notice, demand or advertisement for sale
is waived, to the extent permitted by law.
(c) In view of the fact that federal and state securities laws may
impose certain restrictions on the method by which a sale of the Pledged
Collateral may be effected after an Event of Default, Pledgor agrees that after
the occurrence of an Event of Default, the Trustee may, from time to time,
attempt to sell all or any part of the Pledged Collateral by means of a private
placement restricting the bidders and prospective purchasers to those who are
qualified and will represent and agree that they are purchasing for investment
only and not for distribution. In so doing, the Trustee may solicit offers to
buy the Pledged Collateral, or any part of it, from a limited number of
investors deemed by the Trustee, in its reasonable judgment, to be financially
responsible parties who might be interested in purchasing the Pledged
Collateral. The acceptance by the Trustee of the highest offer obtained
therefrom shall be deemed to be a commercially reasonable method of disposing of
such Pledged Collateral; provided, however, that this Section does not impose a
requirement that the Trustee solicit offers from any minimum number of investors
in order for the sale to be commercially reasonable.
10. Security Interest Absolute. All rights of the Trustee and
--------------------------
security interests hereunder, and all obligations of Pledgor hereunder, shall be
absolute and unconditional irrespective of:
(i) Any lack of validity or enforceability of the Indenture or any
other agreement or instrument relating thereto;
(ii) Any change in the time, manner or place of payment of, or in
any other term of, all or any part of the Liabilities, or any other
amendment or waiver of or any consent to any departure from the Indenture;
(iii) Any exchange, release or non-perfection of any other
collateral, or any release or amendment or waiver of or consent to
departure from any guaranty, for all or any part of the Liabilities; or
(iv) Any other circumstance which might otherwise constitute a
defense available to, or a discharge of, Pledgor in respect of the
Liabilities or of this Agreement.
8
<PAGE>
11. Trustee Appointed Attorney-in-Fact. Pledgor hereby appoints the
----------------------------------
Trustee its-attorney-in-fact, with full authority, in the name of Pledgor or
otherwise, after the occurrence and during the continuance of an Event of
Default, from time to time in the Trustee's sole discretion, to take any action
and to execute any instrument which the Trustee may deem necessary or advisable
to accomplish the purposes of this Agreement, including, without limitation, to
receive, endorse and collect all instruments made payable to Pledgor
representing any cash distribution, interest payment or other distribution in
respect of the Pledged Collateral or any part thereof and to give full discharge
for the same, to exercise all rights of a member and manager (upon the election
of the Trustee) such as all voting, consent, managerial and other member rights,
and to arrange for the transfer of all or any part of the Pledged Collateral on
the books of Majestic Star to the name of the Trustee or the Trustee's nominee.
12. Waivers. Pledgor waives presentment and demand for payment of
-------
any of the Liabilities, protest and notice of dishonor or default with respect
to any of the Liabilities and all other notices to which Pledgor might otherwise
be entitled except as otherwise expressly provided herein or in the Indenture.
13. Term. This Agreement shall remain in full force and effect until
----
the Liabilities (other than continuing indemnity obligations for which no
unsatisfied demand has been made) have been fully and indefeasibly paid in cash
and the Indenture has terminated pursuant to its terms. Upon the termination of
this Agreement as provided above (other than as a result of the sale of the
Pledged Collateral), the Trustee will release the security interest created
hereunder and, if it then has possession of the Pledged Membership Interest,
will deliver the Pledged Membership Interest and the Powers to Pledgor.
14. Definitions. All capitalized terms used in this Agreement that
-----------
are not defined herein are used with the meanings ascribed to such terms in the
Indenture. The singular shall include the plural and vice versa and any gender
shall include any other gender as the context may require.
15. Successors and Assigns. This Agreement shall be binding upon and
----------------------
inure to the benefit of Pledgor, the Trustee, for the benefit of itself and the
Holders, and their respective successors and assigns. Pledgor's successors and
assigns shall include, without limitation, a receiver, trustee or debtor-in-
possession of or for Pledgor.
16. GOVERNING LAW. ANY DISPUTE BETWEEN THE TRUSTEE AND PLEDGOR
-------------
ARISING OUT OF OR RELATED TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN
CONNECTION WITH THIS AGREEMENT, AND WHETHER ARISING IN CONTRACT, TORT, EQUITY,
OR OTHERWISE, SHALL BE RESOLVED IN ACCORDANCE WITH THE INTERNAL LAWS, AND NOT
THE CONFLICTS OF LAW PROVISIONS, OF THE STATE OF INDIANA.
17. CONSENT TO JURISDICTION; COUNTERCLAIMS; FORUM NON CONVENIENS.
------------------------------------------------------------
9
<PAGE>
(A) NON-EXCLUSIVE JURISDICTION. PLEDGOR HEREBY IRREVOCABLY SUBMITS TO
--------------------------
THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR NEW YORK STATE
COURT SITTING IN NEW YORK, NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF
OR RELATING TO THIS AGREEMENT AND PLEDGOR HEREBY IRREVOCABLY AGREES THAT ALL
CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN
ANY SUCH COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE
AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT
OR THAT SUCH COURT IS AN INCONVENIENT FORUM, BUT PLEDGOR ACKNOWLEDGES THAT ANY
APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF NEW
YORK, NEW YORK.
(B) OTHER JURISDICTIONS. PLEDGOR AGREES THAT THE TRUSTEE OR ANY
-------------------
HOLDER SHALL HAVE THE RIGHT TO PROCEED AGAINST PLEDGOR OR ITS PROPERTY IN A
COURT IN ANY LOCATION TO ENABLE SUCH PERSON TO (1) OBTAIN PERSONAL JURISDICTION
OVER PLEDGOR OR (2) REALIZE ON THE PLEDGED COLLATERAL OR ANY OTHER SECURITY FOR
THE LIABILITIES OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER ENTERED IN FAVOR
OF SUCH PERSON. PLEDGOR AGREES THAT IT WILL NOT ASSERT ANY PERMISSIVE
COUNTERCLAIMS IN ANY PROCEEDING BROUGHT BY SUCH PERSON TO REALIZE ON THE PLEDGED
COLLATERAL OR ANY OTHER SECURITY FOR THE LIABILITIES OR TO ENFORCE A JUDGMENT OR
OTHER COURT ORDER IN FAVOR OF SUCH PERSON. PLEDGOR WAIVES ANY OBJECTION THAT IT
MAY HAVE TO THE LOCATION OF THE COURT IN WHICH SUCH PERSON HAS COMMENCED A
PROCEEDING DESCRIBED IN THIS SUBSECTION.
(C) INCONVENIENT FORUM. PLEDGOR IRREVOCABLY WAIVES ANY OBJECTION
------------------
(INCLUDING, WITHOUT LIMITATION, ANY OBJECTION OF THE LAYING OF VENUE OR BASED ON
THE GROUNDS OF FORUM NON CONVENIENS) WHICH IT MAY NOW OR HEREAFTER HAVE TO THE
---------------------
BRINGING OF ANY SUCH ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY
OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION
HEREWITH IN NEW YORK, NEW YORK.
18. SERVICE OF PROCESS. IF AND TO THE EXTENT PLEDGOR'S RESIDENT
------------------
AGENT IN ANY JURISDICTION IS NOT CT CORPORATION SYSTEM, PLEDGOR WAIVES PERSONAL
SERVICE OF ANY PROCESS UPON IT AND IRREVOCABLY APPOINTS CT CORPORATION SYSTEM,
ONE NORTH CAPITAL AVENUE, INDIANAPOLIS, INDIANA 46204 AS ITS REGISTERED AGENT
FOR THE PURPOSE OF ACCEPTING SERVICE OF PROCESS ISSUED BY ANY COURT.
19. WAIVER OF JURY TRIAL. EACH OF PLEDGOR AND THE TRUSTEE WAIVES ANY
--------------------
RIGHT TO TRIAL BY JURY IN ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT, OR
OTHERWISE, BETWEEN THE TRUSTEE
10
<PAGE>
AND PLEDGOR ARISING OUT OF OR RELATED TO THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED
IN CONNECTION HEREWITH. EITHER PLEDGOR OR THE TRUSTEE MAY FILE AN ORIGINAL
COUNTERPART OR A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF
THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
20. Waiver of Bond. Pledgor waives the posting of any bond otherwise
--------------
required of the Trustee in connection with any judicial process or proceeding to
realize on the Pledged Collateral or any other security for the Liabilities, to
enforce any judgment or other court order entered in favor of the Trustee, or to
enforce by specific performance, temporary restraining order, or preliminary or
permanent injunction, this Agreement or any other agreement or document between
the Trustee and Pledgor.
21. Advice of Counsel. Pledgor represents and warrants to the
-----------------
Trustee and the Holders that it has consulted with its legal counsel regarding
all waivers under this Agreement, including without limitation those under
Section 12 and Sections 16 through 20 hereof, that it believes that it fully
- ---------- ----------- --
understands all rights that it is waiving and the effect of such waivers, that
it assumes the risk of any misunderstanding that it may have regarding any of
the foregoing, and that it intends that such waivers shall be a material
inducement to the Trustee to enter into this Agreement.
22. Severability. Whenever possible, each provision of this
------------
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but, if any provision of this Agreement shall be held to be
prohibited or invalid under applicable law, such provision shall be ineffective
only to the extent of such prohibition or invalidity, without invalidating the
remainder of such provision or the remaining provisions of this Agreement.
23. Further Assurances. Pledgor shall perform any and all steps
------------------
required to perfect, maintain and protect Trustee's security interests in and
Liens on and against the Pledged Collateral granted or purported to be granted
hereby or to enable Trustee to exercise its rights and remedies hereunder with
respect to any Pledged Collateral. Pledgor agrees that it will cooperate with
the Trustee and will execute and deliver, or cause to be executed and
delivered, all such other stock powers, proxies, instruments and documents, and
will take all such other actions, as are necessary or appropriate from time to
time in order to carry out the provisions and purposes of this Agreement.
Trustee is authorized (but not required) to file one or more financing
statements and continuation statements as Trustee may deem necessary or
advisable to perfect or maintain the perfection of the security interest granted
herein, without Pledgor's signature appearing thereon.
24. The Trustee's Duty of Care. The Trustee shall not be liable for
--------------------------
any acts, omissions, errors of judgment or mistakes of fact or law including,
without limitation, acts, omissions, errors or mistakes with respect to the
Pledged Collateral, except for those arising out of or in connection with the
Trustee's (i) gross negligence or willful misconduct, or (ii) failure to use
11
<PAGE>
reasonable care with respect to the safe custody of the Pledged Collateral in
the Trustee's possession. Without limiting the generality of the foregoing, the
Trustee shall be under no obligation to take any steps necessary to preserve
rights in the Pledged Collateral against any other parties but may do so at its
option. All expenses incurred in connection therewith shall be for the sole
account of Pledgor, and shall constitute part of the Liabilities secured hereby.
The Trustee shall be deemed to use reasonable care if it accords the Pledged
Collateral treatment similar to that accorded to the Trustee's own property
which is of a similar nature as the Pledged Collateral.
25. Notices. All notices and other communications required or
-------
desired to be served, given or delivered hereunder shall be made in writing or
by a telecommunications device capable of creating a written record and shall be
addressed to the party to be notified as follows:
if to Pledgor, at
Barden Development, Inc.
400 Renaissance Center
Suite 2400
Detroit, Michigan 48243
Attention: Michelle R. Sherman
Vice President
Fax: 313-259-7154
if to GRG, at
Gary Riverboat Gaming, LLC
400 Renaissance Center
Suite 2400
Detroit, Michigan 48243
Attention: Michelle R. Sherman
Vice President
Fax: 313-259-7154
and in the case of either Pledgor, with a copy to
Judy O'Neill, Esq.
Dykema Gossett PLLC
400 Renaissance Center
Detroit, Michigan 48243
Fax: 313-568-6915
12
<PAGE>
if to the Trustee, at
IBJ Whitehall Bank & Trust Company, as Trustee
One State Street
New York, New York 10004
Attention: Michael Daly
Fax: 212-858-2952
or, as to each party, at such other address as designated by such party in a
written notice to the other party. All such notices and communications shall be
deemed to be validly served, given or delivered when delivered in person or sent
to such address by first-class mail (registered or certified, return receipt
requested), telex, telecopier or overnight air courier guaranteeing next day
delivery.
26. Intercreditor Arrangement. The parties hereto acknowledge and
-------------------------
agree, for the benefit of the Lender under the Credit Facility, that, during the
Credit Facility Period, the exercise of the rights and remedies of the Trustee
hereunder are subject to the terms of the Intercreditor Agreement. In the event
of any inconsistency between the terms hereof and the Intercreditor Agreement,
the Intercreditor Agreement shall control.
27. Amendments, Etc. Except as otherwise provided by the Indenture,
---------------
the consent of the Holders of at least a majority in principal amount of the
Notes then outstanding (including consents obtained in connection with a tender
offer or exchange offer for Notes) shall be required to amend, modify,
supplement, or waive any provision of this Agreement. Any such waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which given.
28. Section Headings. The section headings herein are for
----------------
convenience of reference only, and shall not affect in any way the
interpretation of any of the provisions hereof.
29. Execution in Counterparts. This Agreement may be executed in any
-------------------------
number of counterparts, each of which shall be an original, but all of which
shall together constitute one and the same agreement.
30. Merger. This Agreement represents the final agreement of Pledgor
------
and the Trustee with respect to the matters contained herein and may not be
contradicted by evidence of prior or contemporaneous agreements, or subsequent
oral agreements, between Pledgor and the Trustee or any Holder.
31. Gaming Laws. (a) The Trustee acknowledges, understands and
-----------
agrees that the Gaming Laws may impose certain licensing or transaction approval
requirements prior to the exercise of the rights and remedies granted to it
under the Agreement with respect to the Pledged Collateral subject to the Gaming
Laws.
13
<PAGE>
(b) If any consent under the Gaming Laws is required in connection
with the taking of any of the actions which may be taken by the Trustee in the
exercise of its rights hereunder, then Pledgor agrees to use its best efforts to
secure such consent and to cooperate with the Trustee in obtaining any such
consent. Upon the occurrence and during the continuation of any Event of
Default, Pledgor shall promptly execute and/or cause the execution of all
applications, certificates, instruments, and other documents and papers that the
Trustee may be required to file in order to obtain any necessary approvals under
the Gaming Laws, and if Pledgor fails or refuses to execute such documents, the
Trustee or the clerk of the court with jurisdiction may execute such documents
on behalf of Pledgor.
(c) Notwithstanding any other provision of this Agreement to the
contrary, nothing in this Agreement shall (i) effect any transfer of any
ownership interest (within the meaning of 68 Indiana Administrative Code 5) in
Majestic Star or (ii) effect any transfer, sale, purchase, lease or
hypothecation of, or any borrowing or loaning of money against, or any
establishment of any voting trust agreement or other similar agreement with
respect to (all within the meaning of Indiana Code 4-33-4-21), any certificate
of suitability or any owner's license heretofore or hereafter issued to any
person, including Majestic Star, under any of the Gaming Laws, including Indiana
Code 4-33.
32. Interaction with Indenture. All terms, covenants, conditions,
--------------------------
provisions and requirements of the Indenture are incorporated by reference in
this Agreement. In the event of any conflict or inconsistency between the
provisions of this Agreement and those of the Indenture, including, without
limitation, any conflicts or inconsistencies in any definitions herein or
therein, the provisions or definitions of the Indenture shall govern.
33. Trust Indenture Act. If any provision of this Agreement
-------------------
conflicts with any provision of the Trust Indenture Act, the provisions of the
Trust Indenture Act shall control.
34. Appointment of Collateral Agent. The Trustee may, solely at its
-------------------------------
discretion, appoint a collateral agent to enforce the rights and remedies
available to the Trustee under this Agreement.
14
<PAGE>
IN WITNESS WHEREOF, Pledgor and the Trustee have executed this
Agreement as of the date set forth above.
BARDEN DEVELOPMENT, INC.,
By: _______________________________________
Name: _____________________________________
Title: ____________________________________
GARY RIVERBOAT GAMING, LLC
By: Barden Management, Inc.
By: _______________________________________
Name: _____________________________________
Title: ____________________________________
IBJ WHITEHALL BANK & TRUST COMPANY,
as Trustee
By: _______________________________________
Name: _____________________________________
Title: ____________________________________
15
<PAGE>
EXHIBIT A
to
PLEDGE AGREEMENT
dated as of June 18, 1999
Pledged Membership Interests
----------------------------
Percentage of
Membership Interest of Majestic Star
Name of Pledgor Held by Pledgor
- --------------- ---------------
Barden Development, Inc. 85%
Gary Riverboat Gaming, LLC 15%
A-1
<PAGE>
EXHIBIT B
to
PLEDGE AGREEMENT
dated as of June 18, 1999
Instruction in Connection with
Pledged Collateral
------------------
June 18, 1999
Limited Liability Company
- -------------------------
THE MAJESTIC STAR CASINO, LLC
MEMBERSHIP INTEREST OWNER:
BARDEN DEVELOPMENT, INC.
GARY RIVERBOAT GAMING, LLC
Reference is hereby made to that certain Pledge Agreement dated as of
June 18, 1999 (the "Pledge") between Barden Development, Inc. and Gary Riverboat
------
Gaming, LLC ("Interest Owners"), members of The Majestic Star Casino, LLC.
---------------
("Majestic Star") and IBJ Whitehall Bank & Trust Company, as Trustee, as pledgee
-------------
("Pledgee"), a copy of which is provided herewith.
-------
1. Pledge instructions. Majestic Star is hereby instructed by the
-------------------
Interest Owners to note in its books and records that all of the Interest
Owners' rights, title and interest in and to all of the Interest Owners' rights
in connection with any membership interest in Majestic Star now and hereafter
owned by the Interest Owners and subject to a pledge (or assignment) in favor of
Pledgee.
2. Warranties of the Interest Owner. Each Interest Owner hereby
--------------------------------
warrants that (i) the Interest Owner is an appropriate person to originate this
instruction; (ii) the Interest Owner is entitled to effect the instruction here
given; and (iii) the Interest Owners' taxpayer identification numbers are 35-
1904135 in the case of Barden Development, Inc., and 38-3287162 in the case of
Gary Riverboat Gaming, LLC.
B-1
<PAGE>
IN WITNESS WHEREOF, the Interest Owners have caused this Pledge
Instruction to be duly signed and delivered by their respective officers as
members duly authorized as of the date first above written.
BARDEN DEVELOPMENT, INC.
By: ______________________________________
Title: ___________________________________
GARY RIVERBOAT GAMING, LLC
By: Barden Management, Inc.
By: ______________________________________
Title: ___________________________________
CONSENT OF THE LIMITED LIABILITY COMPANY
----------------------------------------
The undersigned, ______________________________________________, in
his/her capacity as ________________________of Barden Development, Inc., the
manager of Majestic Star (in such capacity, the "Authorized Officer") hereby
acknowledges receipt of the Pledge. Majestic Star consents and agrees to note
on the books and records of Majestic Star the pledge of the membership interests
referenced above. Majestic Star agrees that upon receipt of written notice from
the Pledgee that An Event of Default has occurred and is continuing, Majestic
Star shall pay and remit to the Pledgee all distributions and other amounts
payable to the Interest Owners upon redemption, termination and dissolution of
Majestic Star or otherwise and will otherwise act in accordance with the
instructions of the Pledgee without seeking further consent from the Interest
Owners. Majestic Star further waives any rights or requirement at any time
hereafter to receive a copy of such Pledge in connection with the registration
of any Pledged Collateral (as defined in the Pledge) in the name of the Trustee
or its nominee or the exercise of voting rights by the Trustee or its nominee.
THE MAJESTIC STAR CASINO, LLC
By: Barden Development, Inc., its manager
By:___________________________________
Name:_________________________________
Title: _______________________________
B-2
<PAGE>
EXHIBIT 4.9
THE MAJESTIC STAR CASINO, LLC
The Majestic Star Casino Capital Corp.
$130,000,000 10_% Senior Secured Notes due 2006
REGISTRATION RIGHTS AGREEMENT
-----------------------------
June 18, 1999
JEFFERIES & COMPANY, INC.
11100 Santa Monica Boulevard
10th Floor
Los Angeles, California 90025
Ladies and Gentlemen:
The Majestic Star Casino, LLC, an Indiana limited liability company,
and The Majestic Star Casino Capital Corp., an Indiana corporation
(collectively, the "Issuers"), are issuing and selling to Jefferies & Company,
Inc. (the "Purchaser"), upon the terms set forth in a purchase agreement, dated
as of June 15, 1999 (the "Purchase Agreement"), $130,000,000 aggregate principal
amount of their 10_% Senior Secured Notes due 2006, Series A, including any
future guarantees to be endorsed thereon (the "Notes"). As an inducement to the
Purchaser to enter into the Purchase Agreement, the Issuers jointly and
severally agree with the Purchaser, for the benefit of the holders of the
Securities (defined below) (including, without limitation, the Purchaser), as
follows:
1. Definitions
-----------
Capitalized terms used herein without definition shall have their
respective meanings set forth in the Purchase Agreement. As used in this
Agreement, the following terms shall have the following meanings:
Advice: See Section 6.
------
Agreement: This Registration Rights Agreement.
---------
Applicable Period: See Section 2(f).
-----------------
<PAGE>
Business Days: Any day other than (i) Saturday or Sunday, or (ii) a day on
-------------
which banking institutions in the State of New York are authorized or obligated
by law or executive order to be closed.
Closing Date: June 18, 1999.
------------
DTC: See Section 6(i).
---
Effectiveness Date: The 120th day following the Closing Date.
------------------
Effectiveness Period: See Section 3(a).
--------------------
Event: See Section 4(a).
-----
Event Date: See Section 4(a).
----------
Exchange Act: The Securities Exchange Act of 1934, as amended, and the
------------
rules and regulations of the SEC promulgated thereunder.
Exchange Offer: See Section 2(a).
--------------
Exchange Offer Registration Statement: See Section 2(a).
-------------------------------------
Exchange Securities: 10_% Senior Secured Notes due 2006, Series B, of the
-------------------
Issuers, including any guarantees endorsed or to be endorsed thereon, identical
in all respects to the Notes, except for references to series and restrictive
legends.
Filing Date: The 60th day following the Closing Date.
-----------
Holder: Each holder of Registrable Securities.
------
Indenture: The Indenture, dated the date hereof, by and among the Issuers,
---------
the guarantors referred to therein and IBJ Whitehall Bank & Trust Company, as
trustee, pursuant to which the Notes are being issued, as amended or
supplemented from time to time, in accordance with the terms thereof.
Initial Shelf Registration: See Section 3(a).
--------------------------
Losses: See Section 8(a).
------
NASD: The National Association of Securities Dealers, Inc.
----
Participating Broker-Dealer: See Section 2(f).
---------------------------
2
<PAGE>
Person: An individual, trustee, corporation, limited liability company,
------
partnership, joint stock company, joint venture, trust, unincorporated
organization or government or any agency or political subdivision thereof,
union, business association, firm or other entity.
Private Exchange: See Section 2(g).
----------------
Private Exchange Securities: See Section 2(g).
---------------------------
Prospectus: The prospectus included in any Registration Statement
----------
(including, without limitation, a prospectus that discloses information
previously omitted from a prospectus filed as part of an effective registration
statement in reliance upon Rule 430A promulgated under the Securities Act), as
amended or supplemented by any prospectus supplement, with respect to the terms
of the offering of any portion of the Securities covered by such Registration
Statement, and all other amendments and supplements to the Prospectus, including
post-effective amendments, and all material incorporated by reference or deemed
to be incorporated by reference in such Prospectus.
Registrable Securities: (i) Notes, (ii) Private Exchange Securities and
----------------------
(iii) Exchange Securities received in the Exchange Offer that may not be sold
without restriction under federal or state securities law.
Registration Statement: Any registration statement of either of the
----------------------
Issuers that covers any of the Securities pursuant to the provisions of this
Agreement, including the Prospectus, amendments and supplements to such
registration statement, including post-effective amendments, all exhibits, and
all material incorporated by reference or deemed to be incorporated by reference
in such registration statement.
Rule 144: Rule 144 under the Securities Act, as such Rule may be amended
--------
from time to time, or any similar rule (other than Rule 144A) or regulation
hereafter adopted by the SEC.
Rule 144A: Rule 144A under the Securities Act, as such Rule may be amended
---------
from time to time, or any similar rule (other than Rule 144) or regulation
hereafter adopted by the SEC.
Rule 415: Rule 415 under the Securities Act, as such Rule may be amended
--------
from time to time, or any similar rule or regulation hereafter adopted by the
SEC.
SEC: The Securities and Exchange Commission.
---
Securities: The Notes, the Private Exchange Securities and the Exchange
----------
Securities, collectively.
3
<PAGE>
Securities Act: The Securities Act of 1933, as amended, and the rules and
--------------
regulations of the SEC promulgated thereunder.
Shelf Notice: See Section 2(i).
------------
Shelf Registration: The Initial Shelf Registration and any Subsequent
------------------
Shelf Registration.
Special Counsel: Counsel chosen by the holders of a majority in aggregate
---------------
principal amount of Securities.
Subsequent Shelf Registration: See Section 3(b).
-----------------------------
TIA: The Trust Indenture Act of 1939, as amended.
---
Trustee: The trustee under the Indenture and, if any, the trustee under
-------
any indenture governing the Exchange Securities or the Private Exchange
Securities.
Underwritten Registration or Underwritten Offering: A registration in
--------------------------------------------------
which securities of either of the Issuers are sold to an underwriter for
reoffering to the public.
Weekly Liquidated Damages Amount: means, with respect to any Event, an
--------------------------------
amount per week per $1,000 principal amount of Registrable Securities equal to
$.05 for the first 90-day period immediately following the applicable Event
Date, increasing by an additional $.05 per week per $1,000 principal amount of
Registrable Securities with respect to each subsequent 90-day period, up to a
maximum amount of $.20 per week per $1,000 principal amount of Registrable
Securities.
2. Exchange Offer
--------------
(a) The Issuers shall:
(i) prepare and file with the SEC promptly after the date hereof, but
in no event later than the Filing Date, a registration statement (the "Exchange
Offer Registration Statement") on an appropriate form under the Securities Act
with respect to a proposed offer (the "Exchange Offer") to the Holders to issue
and deliver to such Holders, in exchange for the Notes, a like aggregate
principal amount of Exchange Securities,
(ii) use their best efforts to cause the Exchange Offer Registration
Statement to become effective as promptly as practicable after the filing
thereof, but in no event later than the Effectiveness Date,
(iii) keep the Exchange Offer Registration Statement effective until
the consummation of the Exchange Offer pursuant to its terms, and
4
<PAGE>
(iv) unless the Exchange Offer would not be permitted by a policy of
the SEC, commence the Exchange Offer and use their best efforts to issue, on or
prior to 30 days after the date on which the Exchange Offer Registration
Statement is declared effective, Exchange Securities in exchange for all Notes
tendered prior thereto in the Exchange Offer.
The Exchange Offer shall not be subject to any conditions, other than that
the Exchange Offer does not violate applicable law or any applicable
interpretation of the staff of the SEC.
(b) The Exchange Securities shall be issued under, and entitled to the
benefits of, the Indenture or a trust indenture that is identical to the
Indenture (other than such changes as are necessary to comply with any
requirements of the SEC to effect or maintain the qualification thereof under
the TIA).
(c) In connection with the Exchange Offer, the Issuers shall:
(i) mail to each Holder a copy of the Prospectus forming part of the
Exchange Offer Registration Statement, together with an appropriate letter of
transmittal that is an exhibit to the Exchange Offer Registration Statement, and
any related documents;
(ii) keep the Exchange Offer open for not less than 30 days after the
date notice thereof is mailed to the Holders (or longer if required by
applicable law);
(iii) utilize the services of a depositary for the Exchange Offer with
an address in the Borough of Manhattan, The City of New York;
(iv) permit Holders to withdraw tendered Notes at any time prior to
the close of business, New York time, on the last Business Day on which the
Exchange Offer shall remain open; and
(v) otherwise comply with all laws applicable to the Exchange Offer.
(d) As soon as practicable after the close of the Exchange Offer, the
Issuers shall:
(i) accept for exchange all Notes validly tendered and not validly
withdrawn pursuant to the Exchange Offer;
(ii) deliver to the Trustee for cancellation all Notes so accepted
for exchange; and
(iii) cause the Trustee promptly to authenticate and deliver to each
Holder of Notes, Exchange Securities equal in aggregate principal amount to the
Notes of such Holder so accepted for exchange.
5
<PAGE>
(e) Interest on each Exchange Security and Private Exchange Security will
accrue from the last interest payment date on which interest was paid on the
Notes surrendered in exchange therefor or, if no interest has been paid on the
Notes, from the date of original issue of the Notes. Each Exchange Security and
Private Exchange Security shall bear interest at the rate set forth thereon;
provided, that interest with respect to the period prior to the issuance thereof
- --------
shall accrue at the rate or rates borne by the Notes surrendered in exchange
therefor from time to time during such period.
(f) The Issuers shall include within the Prospectus contained in the
Exchange Offer Registration Statement a section entitled "Plan of Distribution,"
containing a summary statement of the positions taken or policies made by the
staff of the SEC with respect to the potential "underwriter" status of any
broker-dealer that is the beneficial owner (as defined in Rule 13d-3 under the
Exchange Act) of Exchange Securities received by such broker-dealer in the
Exchange Offer (a "Participating Broker-Dealer"). Such "Plan of Distribution"
section shall also allow the use of the Prospectus by all Persons subject to the
prospectus delivery requirements of the Securities Act, including (without
limitation) all Participating Brokers-Dealers, and include a statement
describing the means by which Participating Broker-Dealers may resell the
Exchange Securities. The Issuers shall use their best efforts to keep the
Exchange Offer Registration Statement effective and to amend and supplement the
Prospectus to be lawfully delivered by all Persons subject to the prospectus
delivery requirement of the Securities Act for such period of time as such
Persons must comply with such requirements in order to resell the Exchange
Securities (the "Applicable Period").
(g) If, prior to consummation of the Exchange Offer, the Purchaser holds
any Notes acquired by it and having the status as an unsold allotment in the
initial distribution, the Issuers shall, upon the request of the Purchaser,
simultaneously with the delivery of the Exchange Securities in the Exchange
Offer, issue (pursuant to the same indenture as the Exchange Securities and
subject to transfer restrictions thereon) and deliver to the Purchaser, in
exchange for the Notes held by the Purchaser (the "Private Exchange"), a like
principal amount of debt securities of the Issuers that are identical to the
Exchange Securities (the "Private Exchange Securities"). The Private Exchange
Securities shall bear the same CUSIP number as the Exchange Securities.
(h) The Issuers may require each Holder participating in the Exchange
Offer to represent to the Issuers that, at the time of the consummation of the
Exchange Offer, (i) any Exchange Securities received by such Holder in the
Exchange Offer will be acquired in the ordinary course of its business, (ii)
such Holder will have no arrangement or understanding with any Person to
participate in the distribution of the Exchange Securities within the meaning of
the Securities Act or resale of the Exchange Securities in violation of the
Securities Act, (iii) if such Holder is not a broker-dealer, that it is not
engaged in and does not intend to engage in, the distribution of the Exchange
Securities, (iv) if such Holder is a broker-dealer that will receive Exchange
Securities for its own account in exchange for Notes that were acquired as a
result of market-making or other trading activities, that it will deliver a
prospectus, as required by law, in
6
<PAGE>
connection with any resale of such Exchange Securities, and (v) if such Holder
is an affiliate of the Issuers, that it will comply with the registration and
prospectus delivery requirements of the Securities Act applicable to it.
(i) If (i) prior to the consummation of the Exchange Offer, either of the
Issuers or the Holders of a majority in aggregate principal amount of
Registrable Securities determines in its or their reasonable judgment that the
Exchange Securities would not, upon receipt, be tradeable by the Holders thereof
without restriction under the Securities Act and the Exchange Act and without
material restrictions under applicable Blue Sky or state securities laws, (ii)
applicable interpretations of the staff of the SEC would not permit the
consummation of the Exchange Offer prior to the Effectiveness Date, (iii)
subsequent to the consummation of the Private Exchange, the Purchaser so
requests, (iv) the Exchange Offer is not consummated within 150 days of the
Closing Date for any reason or (v) in the case of any Holder not permitted to
participate in the Exchange Offer or of any Holder participating in the Exchange
Offer that receives Exchange Securities that may not be sold without restriction
under state and federal securities laws (other than due solely to the status of
such Holder as an affiliate of either of the Issuers within the meaning of the
Securities Act) and, in either case contemplated by this clause (v), such Holder
notifies the Issuers within 120 days of consummation of the Exchange Offer, then
the Issuers shall promptly deliver to the Holders (or in the case of any
occurrence of the event described in clause (v) hereof, to any such Holder) and
the Trustee notice thereof (the "Shelf Notice") and shall as promptly as
possible thereafter file an Initial Shelf Registration pursuant to Section 3;
provided, that no Holder (other than the Purchaser) shall be entitled to have
- --------
Securities held by it covered by such Shelf Registration Statement unless such
Holder agrees to be bound by all of the provisions of this Agreement applicable
to such Holder.
3. Shelf Registration
------------------
If a Shelf Notice is required to be delivered pursuant to Section 2(i)(i),
(ii), (iii) or (iv), then this Section 3 shall apply to all Registrable
Securities. Otherwise, upon consummation of the Exchange Offer in accordance
with Section 2, the provisions of this Section 3 shall apply solely with respect
to (i) Notes held by any Holder thereof not permitted to participate in the
Exchange Offer and (ii) Exchange Securities that are not freely tradeable as
contemplated by Section 2(i)(v) hereof.
(a) Initial Shelf Registration. The Issuers shall prepare and file with
--------------------------
the SEC a Registration Statement for an offering to be made on a continuous
basis pursuant to Rule 415 covering all of the Registrable Securities (the
"Initial Shelf Registration"). If the Issuers have not yet filed an Exchange
Offer Registration Statement, the Issuers shall file with the SEC the Initial
Shelf Registration on or prior to the Filing Date. Otherwise, the Issuers shall
use their best efforts to file the Initial Shelf Registration within 45 days of
the delivery of the Shelf Notice or as promptly as possible following the
request of the Purchaser. The Initial Shelf Registration shall be on Form S-1
or another appropriate form permitting registration of such Registrable
Securities for resale by such Holders in the manner or manners designated by
them (including,
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without limitation, one or more underwritten offerings). The Issuers shall (i)
not permit any securities other than the Registrable Securities to be included
in any Shelf Registration, and (ii) use their best efforts to cause the Initial
Shelf Registration to be declared effective under the Securities Act as promptly
as practicable after the filing thereof, and to keep the Initial Shelf
Registration continuously effective under the Securities Act until the date that
is 24 months after the date it is declared effective (subject to extension
pursuant to the last paragraph of Section 6 hereof) (the "Effectiveness
Period"), or such shorter period ending when (i) all Registrable Securities
covered by the Initial Shelf Registration have been sold, (ii) a Subsequent
Shelf Registration covering all of the Registrable Securities has been declared
effective under the Securities Act, or (iii) such Registrable Securities are
eligible for resale pursuant to Rule 144(k) under the Securities Act.
(b) Subsequent Shelf Registrations. If any Shelf Registration ceases to be
------------------------------
effective for any reason at any time during the Effectiveness Period (other than
because of the sale of all of the Registrable Securities registered thereunder),
the Issuers shall use their best efforts to obtain the prompt withdrawal of any
order suspending the effectiveness thereof, and in any event shall within 30
days of such cessation of effectiveness amend the Shelf Registration in a manner
reasonably expected to obtain the withdrawal of the order suspending the
effectiveness thereof, or file an additional "shelf" Registration Statement
pursuant to Rule 415 covering all of the Registrable Securities (a "Subsequent
Shelf Registration"). If a Subsequent Shelf Registration is filed, the Issuers
shall use their best efforts to cause the Subsequent Shelf Registration to be
declared effective as soon as practicable after such filing and to keep such
Subsequent Shelf Registration continuously effective for a period equal to the
number of days in the Effectiveness Period less the aggregate number of days
during which the Initial Shelf Registration, and any Subsequent Shelf
Registration, was previously effective.
(c) Provision of Information. The Issuers may exclude from any Shelf
------------------------
Registration the Registrable Securities of any Holder who unreasonably fails to
furnish, within 20 days after receipt of a written request therefor, the
information specified in Item 507 or 508, as applicable, of Regulation S-K under
the Securities Act for use in connection with any Shelf Registration or
Prospectus or preliminary prospectus included therein. No such Holder of
Registrable Securities shall be entitled to liquidated damages pursuant to
Section 4 hereof unless and until such Holder shall have provided such
information. Each selling Holder agrees to promptly furnish additional
information required to be disclosed in order to make the information previously
furnished to the Issuers by such Holder not materially misleading.
4. Liquidated Damages.
------------------
(a) The Issuers acknowledge and agree that the Holders will suffer
damages, and that it would not be feasible to ascertain the extent of such
damages with precision, if the Issuers fail to fulfill their obligations
hereunder. Accordingly, in the event of such failure, the Issuers agree to pay
liquidated damages to each Holder under the circumstances and to the extent set
forth below:
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(i) if neither the Exchange Offer Registration Statement nor the
Initial Shelf Registration has been filed with the SEC on or prior to the Filing
Date; or
(ii) if neither the Exchange Offer Registration Statement nor the
Initial Shelf Registration is declared effective by the SEC on or prior to the
Effectiveness Date; or
(iii) if the Issuers have not exchanged Exchange Securities for all
Notes validly tendered in accordance with the terms of the Exchange Offer within
30 days after the date on which an Exchange Offer Registration Statement is
declared effective by the SEC; or
(iv) if a Shelf Registration is filed and declared effective by the
SEC but thereafter ceases to be effective without being succeeded within 30 days
by a Subsequent Shelf Registration filed and declared effective;
(each of the foregoing an "Event," and the date on which the Event occurs being
referred to herein as an "Event Date").
Upon the occurrence of any Event, the Issuers shall pay, or cause to be
paid, in addition to amounts otherwise due under the Indenture and the
Registrable Securities, as liquidated damages, and not as a penalty, to each
Holder for each weekly period beginning on the Event Date an amount equal to the
Weekly Liquidated Damages Amount per $1,000 principal amount of Registrable
Securities held by such Holder; provided, that such liquidated damages will, in
--------
each case, cease to accrue (subject to the occurrence of another Event) on the
date on which all Events have been cured. An Event under clause (i) above shall
be cured on the date that either the Exchange Offer Registration Statement or
the Initial Shelf Registration is filed with the SEC; an Event under clause (ii)
above shall be cured on the date that either the Exchange Offer Registration
Statement or the Initial Shelf Registration is declared effective by the SEC; an
Event under clause (iii) above shall be cured on the earlier of the date (A) the
Exchange Offer is consummated with respect to all Notes validly tendered or (B)
the Issuers deliver a Shelf Notice to the Holders; and an Event under clause
(iv) above shall be cured on the earlier of (A) the date on which the applicable
Shelf Registration is no longer subject to an order suspending the effectiveness
thereof or proceedings relating thereto or (B) a new Subsequent Shelf
Registration is declared effective.
(b) The Issuers shall notify the Trustee within five Business Days after
each Event Date. The Issuers shall pay the liquidated damages due on the
Registrable Securities by depositing with the Trustee, in trust, for the benefit
of the Holders thereof, by 12:00 noon, New York City time, on or before the
applicable semi-annual interest payment date for the Registrable Securities,
immediately available funds in sums sufficient to pay the liquidated damages
then due. The liquidated damages amount due shall be payable on each interest
payment date to the record Holder entitled to receive the interest payment to be
made on such date as set forth in the Indenture.
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5. Gaming Consents.
---------------
Prior to consummating the Exchange Offer or filing the Initial Shelf
Registration, as the case may be, the Issuers shall make or obtain all Permits
necessary or desirable for the consummation of the transactions contemplated
hereby.
6. Registration Procedures
-----------------------
In connection with the registration of any Securities pursuant to Sections
2 or 3 hereof, each of the Issuers shall effect such registrations to permit the
sale of such Securities in accordance with the intended method or methods of
disposition thereof, and pursuant thereto the Issuers shall:
(a) Prepare and file with the SEC, as soon as practicable after the date
hereof but in any event on or prior to the Filing Date, a Registration Statement
or Registration Statements as prescribed by Section 2 or 3, and use their best
efforts to cause each such Registration Statement to become effective and remain
effective as provided herein; provided, that, if (i) such filing is pursuant to
--------
Section 3 or (ii) a Prospectus contained in an Exchange Offer Registration
Statement filed pursuant to Section 2 is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell Exchange
Securities during the Applicable Period, before filing any Registration
Statement or Prospectus or any amendments or supplements thereto, the Issuers
shall, if requested, furnish to and afford the Holders of the Registrable
Securities covered by such Registration Statement, their Special Counsel, each
Participating Broker-Dealer, the managing underwriters, if any, and their
counsel a reasonable opportunity to review and make available for inspection by
such Persons copies of all such documents (including copies of any documents to
be incorporated by reference therein and all exhibits thereto) proposed to be
filed, such financial and other information and books and records of the
Issuers, and cause the members, managers, officers, directors and employees of
the Issuers, counsel to the Issuers and independent certified public accountants
of the Issuers, to respond to such inquiries, as shall be necessary, in the
opinion of the respective counsel to such Holders, Participating Broker-Dealer
and underwriters, to conduct a reasonable investigation within the meaning of
the Securities Act. The Issuers may require each Holder to agree to keep
confidential any non-public information relating to the Issuers received by such
Holder and not disclose such information (other than to an Affiliate or
prospective purchaser who agrees to respect the confidentiality provisions of
this Section 6(a)) until such information has been made generally available to
the public unless the release of such information is required by law or
necessary to respond to inquiries of regulatory authorities (including the
National Association of Insurance Commissioners, or similar organizations or
their successors). Neither of the Issuers shall file any Registration Statement
or Prospectus or any amendments or supplements thereto in respect of which the
Holders must be afforded an opportunity to review prior to the filing of such
document, if the Holders of a majority in aggregate principal amount of the
Registrable Securities covered by such Registration Statement, their Special
Counsel, any Participating Broker-Dealer or the managing underwriters, if any,
or their counsel shall reasonably object.
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(b) Provide an indenture trustee for the Registrable Securities or the
Exchange Securities, as the case may be, and cause the Indenture (or other
indenture relating to the Registrable Securities) to be qualified under the TIA
not later than the effective date of the first Registration Statement; and in
connection therewith, to effect such changes to such indenture as may be
required for such indenture to be so qualified in accordance with the terms of
the TIA; and execute, and use their best efforts to cause such trustee to
execute, all documents as may be required to effect such changes, and all other
forms and documents required to be filed with the SEC to enable such indenture
to be so qualified in a timely manner.
(c) Prepare and file with the SEC such amendments and post-effective
amendments to the Registration Statement as may be necessary to keep such
Registration Statement continuously effective for the time periods required
hereby; cause the related Prospectus to be supplemented by any Prospectus
supplement required by Applicable Law, and as so supplemented to be filed
pursuant to Rule 424 (or any similar provisions then in force) under the
Securities Act; and comply in all material respects with the provisions of the
Securities Act and the Exchange Act applicable thereto with respect to the
disposition of all securities covered by such Registration Statement, as so
amended, or in such Prospectus, as so supplemented, in accordance with the
intended methods of distribution set forth in such Registration Statement or
Prospectus as so amended.
(d) Furnish to such selling Holders and Participating Broker-Dealers who
so request (i) upon the Issuers' receipt, a copy of the order of the SEC
declaring such Registration Statement and any post-effective amendment thereto
effective and (ii) such reasonable number of copies of such Registration
Statement and of each amendment and supplement thereto (in each case including
any documents incorporated therein by reference and all exhibits), (iii) such
reasonable number of copies of the Prospectus included in such Registration
Statement (including each preliminary Prospectus), and such reasonable number of
copies of the final Prospectus as filed by the Issuers pursuant to Rule 424(b)
under the Securities Act, in conformity with the requirements of the Securities
Act, and (iv) such other documents (including any amendments required to be
filed pursuant to clause (c) of this Section), as any such Person may reasonably
request. The Issuers hereby consent to the use of the Prospectus by each of the
selling Holders of Registrable Securities or each such Participating Broker-
Dealer, as the case may be, and the underwriters or agents, if any, and dealers
(if any), in connection with the offering and sale of the Registrable Securities
covered by, or the sale by Participating Broker-Dealers of the Exchange
Securities pursuant to, such Prospectus and any amendment thereto.
(e) If (i) a Shelf Registration is filed pursuant to Section 3 or (ii) a
Prospectus contained in an Exchange Offer Registration Statement filed pursuant
to Section 2 is required to be delivered under the Securities Act by any
Participating Broker-Dealer who seeks to sell Exchange Securities during the
Applicable Period, notify the selling Holders of Registrable Securities, their
Special Counsel, each Participating Broker-Dealer and the managing underwriters,
if any, promptly (but in any event within two Business Days), and confirm such
notice in writing, (A) when a Prospectus has been filed, and, with respect to a
Registration Statement or
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<PAGE>
any post-effective amendment, when the same has become effective under the
Securities Act, (B) of the issuance by the SEC of any stop order suspending the
effectiveness of a Registration Statement or of any order preventing or
suspending the use of any Prospectus or the initiation of any proceedings for
that purpose, (C) if, at any time when a Prospectus is required by the
Securities Act to be delivered in connection with sales of the Registrable
Securities, the representations and warranties of the Issuers contained in any
agreement (including any underwriting agreement) contemplated by Section 6(n)
below cease to be true and correct in any material respect, (D) of the receipt
by the Issuers of any notification with respect to the suspension of the
qualification or exemption from qualification of a Registration Statement or any
of the Registrable Securities or the Exchange Securities to be sold by any
Participating Broker-Dealer for offer or sale in any jurisdiction, or the
contemplation, initiation or threatening of any proceeding for such purpose, (E)
of the happening of any event that makes any statement made in such Registration
Statement or related Prospectus or any document incorporated or deemed to be
incorporated therein by reference untrue in any material respect or that
requires the making of any changes in such Registration Statement, Prospectus or
documents so that it will not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, and (F) of the Issuers' reasonable determination that a
post-effective amendment to a Registration Statement would be appropriate.
(f) Use their best efforts to register or qualify, and, if applicable, to
cooperate with the selling Holders of Registrable Securities, the underwriters,
if any, and their respective counsel in connection with the registration or
qualification (or exemption from such registration or qualification) of,
Securities to be included in a Registration Statement for offer and sale under
the securities or Blue Sky laws of such jurisdictions within the United States
as any selling Holder, Participating Broker-Dealer or the managing underwriters
reasonably request in writing; and, if Securities are offered other than through
an Underwritten Offering, the Issuers shall cause their counsel to perform Blue
Sky investigations and file registrations and qualifications required to be
filed pursuant to this Section 6(f) at the expense of the Issuers; keep each
such registration or qualification (or exemption therefrom) effective during the
period such Registration Statement is required to be kept effective and do any
and all other acts or things necessary or advisable to enable the disposition in
such jurisdictions of the Securities covered by the applicable Registration
Statement, provided, however, that neither of the Issuers shall be required to
-------- -------
(i) qualify generally to do business in any jurisdiction where it is not then so
qualified, (ii) take action that would subject it to general service of process
in any jurisdiction where it is not so subject or (iii) take action that would
subject it to taxation in respect of doing business in any such jurisdiction
where it is not then so subject.
(g) Use their best efforts to prevent the issuance of any order suspending
the effectiveness of a Registration Statement or of any order preventing or
suspending the use of a Prospectus or suspending the qualification (or exemption
from qualification) of any of the Securities for sale in any jurisdiction, and,
if any such order is issued, to use their best efforts to obtain the withdrawal
of any such order at the earliest possible time.
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<PAGE>
(h) If (i) a Shelf Registration is filed pursuant to Section 3 or (ii) a
Prospectus contained in an Exchange Offer Registration Statement filed pursuant
to Section 2 is required to be delivered under the Securities Act by any
Participating Broker-Dealer who seeks to sell Exchange Securities during the
Applicable Period, and if requested by the managing underwriters, if any, or the
Holders of a majority in aggregate principal amount of the Registrable
Securities, (i) promptly incorporate in a Prospectus or post-effective amendment
such information as the managing underwriters, if any, or such Holders
reasonably request to be included therein as required to comply with any
Applicable Law and (ii) make all required filings of such Prospectus or such
post-effective amendment as soon as practicable after the Issuers have received
notification of such matters required by Applicable Law to be incorporated in
such Prospectus or post-effective amendment.
(i) If (i) a Shelf Registration is filed pursuant to Section 3 or (ii) a
Prospectus contained in an Exchange Offer Registration Statement filed pursuant
to Section 2 is required to be delivered under the Securities Act by any
Participating Broker-Dealer who seeks to sell Exchange Securities during the
Applicable Period, cooperate with the selling Holders and the managing
underwriters, if any, to facilitate the timely preparation and delivery of
certificates representing Registrable Securities to be sold, which certificates
shall not bear any restrictive legends and shall be in a form eligible for
deposit with The Depository Trust Company ("DTC"); and enable such Registrable
Securities to be in such denominations and registered in such names as the
managing underwriters, if any, or Holders may request.
(j) If (i) a Shelf Registration is filed pursuant to Section 3 or (ii) a
Prospectus contained in an Exchange Offer Registration Statement filed pursuant
to Section 2 is required to be delivered under the Securities Act by any
Participating Broker-Dealer who seeks to sell Exchange Securities during the
Applicable Period, upon the occurrence of any event contemplated by paragraph
6(e)(E) or 6(e)(F) above, as promptly as practicable prepare a supplement or
post-effective amendment to the Registration Statement or a supplement to the
related Prospectus or any document incorporated or deemed to be incorporated
therein by reference, or file any other required document so that, as thereafter
delivered to the purchasers of the Registrable Securities being sold thereunder
or to the purchasers of the Exchange Securities to whom such Prospectus will be
delivered by a Participating Broker-Dealer, such Prospectus will not contain an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(k) Use their best efforts to cause the Securities covered by a
Registration Statement to be rated with the appropriate rating agencies, if
appropriate, if so requested by the holders of a majority in aggregate principal
amount of Securities covered by such Registration Statement or the managing
underwriters, if any.
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<PAGE>
(l) Prior to the effective date of the first Registration Statement
relating to the Securities, (i) provide the applicable trustee with printed
certificates for the Securities in a form eligible for deposit with DTC and (ii)
provide a CUSIP number for each of the Securities.
(m) Use their best efforts to cause all Securities covered by such
Registration Statement to be listed on each securities exchange, if any, on
which similar debt securities issued by the Issuers are then listed.
(n) If a Shelf Registration is filed pursuant to Section 3, enter into
such agreements (including an underwriting agreement in form, scope and
substance as is customary in Underwritten Offerings) and take all such other
actions in connection therewith (including those reasonably requested by the
managing underwriters, if any, or the Holders of a majority in aggregate
principal amount of Registrable Securities being sold) in order to expedite or
facilitate the registration or the disposition of such Registrable Securities,
and in such connection, whether or not an underwriting agreement is entered into
and whether or not the registration is an Underwritten Registration, (i) make
such representations and warranties to the Holders and the underwriters, if any,
with respect to the business of the Issuers and their respective subsidiaries,
if any, and the Registration Statement, Prospectus and documents, if any,
incorporated or deemed to be incorporated by reference therein, in each case, in
form, substance and scope as are customarily made by issuers to underwriters in
Underwritten Offerings, and confirm the same if and when reasonably requested;
(ii) obtain opinions of counsel to the Issuers and updates thereof (which
counsel and opinions (in form, scope and substance) shall be reasonably
satisfactory to the managing underwriters, if any, and the Holders of a majority
in aggregate principal amount of the Registrable Securities being sold),
addressed to each selling Holder and each of the underwriters, if any, covering
the matters customarily covered in opinions requested in Underwritten Offerings;
(iii) obtain "cold comfort" letters and updates thereof (which letters and
updates (in form, scope and substance) shall be reasonably satisfactory to the
managing underwriters) from the independent certified public accountants of the
Issuers (and, if necessary, any other independent certified public accountants
of any subsidiary of the Issuers or of any business acquired by the Issuers for
which financial statements and financial data are, or are required to be,
included in the Registration Statement), addressed to each of the underwriters
and each selling Holder, such letters to be in customary form and covering
matters of the type customarily covered in "cold comfort" letters in connection
with Underwritten Offerings and such other matters as reasonably requested by
underwriters; and (iv) deliver such documents and certificates as may be
reasonably requested by the Holders of a majority in principal amount of the
Registrable Securities being sold and the managing underwriters, if any, to
evidence the continued validity of the representations and warranties of the
Issuers and their respective subsidiaries made pursuant to clause (i) above and
to evidence compliance with any conditions contained in the underwriting
agreement or other similar agreement entered into by the Issuers.
(o) Comply with all applicable rules and regulations of the SEC and make
generally available to their respective security holders earnings statements
satisfying the provisions of Section 11(a) of the Securities Act and Rule 158
thereunder (or any similar rule promulgated
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<PAGE>
under the Securities Act) no later than 45 days after the end of any 12-month
period (or 90 days after the end of any 12-month period if such period is a
fiscal year) (i) commencing on the first day of the fiscal quarter following
each fiscal quarter in which Registrable Securities are sold to underwriters in
a firm commitment or best efforts underwritten offering and (ii) if not sold to
underwriters in such an offering, commencing on the first day of the first
fiscal quarter of the Issuers after the effective date of a Registration
Statement, which statements shall cover said 12-month periods.
(p) Upon consummation of an Exchange Offer or Private Exchange, obtain an
opinion of counsel to the Issuers (in form, scope and substance reasonably
satisfactory to the Purchaser), addressed to all Holders participating in the
Exchange Offer or Private Exchange, as the case may be, to the effect that (i)
the Issuers have duly authorized, executed and delivered the Exchange Securities
or the Private Exchange Securities, as the case may be, and the Indenture, (ii)
the Exchange Securities or the Private Exchange Securities, as the case may be,
and the Indenture constitute legal, valid and binding obligations of the
Issuers, enforceable against the Issuers in accordance with their respective
terms, except as such enforcement may be subject to (A) applicable bankruptcy,
insolvency, reorganization, moratorium and similar laws affecting creditors'
rights and remedies generally and (B) general principles of equity (regardless
of whether such enforcement is sought in a proceeding in equity or at law), and
(iii) all obligations of the Issuers under the Exchange Securities or the
Private Exchange Securities, as the case may be, and the Indenture are secured
by Liens on the assets securing the obligations of the Issuers under the Notes.
(q) If an Exchange Offer or Private Exchange is to be consummated, upon
delivery of the Registrable Securities by such Holders to the Issuers (or to
such other Person as directed by the Issuers) in exchange for the Exchange
Securities or the Private Exchange Securities, as the case may be, the Issuers
shall mark, or caused to be marked, on such Registrable Securities that such
Registrable Securities are being cancelled in exchange for the Exchange
Securities or the Private Exchange Securities, as the case may be, and in no
event shall such Registrable Securities be marked as paid or otherwise
satisfied.
(r) Cooperate with each seller of Registrable Securities covered by any
Registration Statement and each underwriter, if any, participating in the
disposition of such Registrable Securities and their respective counsel in
connection with any filings required to be made with the NASD.
(s) Use their best efforts to take all other steps necessary to effect the
registration of the Registrable Securities covered by a Registration Statement
contemplated hereby.
Each Holder and each Participating Broker-Dealer agrees by acquisition of
such Registrable Securities or Exchange Securities of any Participating Broker-
Dealer that, upon receipt of written notice from the Issuers of the happening of
any event of the kind described in Section 6(e)(B), 6(e)(D), 6(e)(E) or 6(e)(F),
such Holder will forthwith discontinue disposition
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<PAGE>
(in the jurisdictions specified in a notice of a 6(e)(D) event, and elsewhere in
a notice of a 6(e)(B), 6(e)(E) or 6(e)(F) event) of such Securities covered by
such Registration Statement or Prospectus until such Holder's receipt of the
copies of the supplemented or amended Prospectus contemplated by Section 6(j),
or until it is advised in writing (the "Advice") by the Issuers that offers or
sales in a particular jurisdiction may be resumed or that the use of the
applicable Prospectus may be resumed, as the case may be, and has received
copies of any amendments or supplements thereto. If the Issuers shall give such
notice, each of the Effectiveness Period and the Applicable Period shall be
extended by the number of days during such periods from and including the date
of the giving of such notice to and including the date when each seller of such
Securities covered by such Registration Statement shall have received (i) the
copies of the supplemented or amended Prospectus contemplated by Section 6(j) or
(ii) the Advice.
7. Registration Expenses
---------------------
(a) All fees and expenses incident to the performance of or compliance
with this Agreement by the Issuers shall be borne by the Issuers whether or not
the Exchange Offer or a Shelf Registration is filed or becomes effective,
including, without limitation:
(i) all registration and filing fees including, without limitation,
(A) fees with respect to filings required to be made with the NASD and (B) fees
and expenses of compliance with state securities or Blue Sky laws (including,
without limitation, reasonable fees and disbursements of counsel in connection
with Blue Sky qualifications of the Registrable Securities or Exchange
Securities and determination of the eligibility of the Registrable Securities or
Exchange Securities for investment under the laws of such jurisdictions (x)
where the Holders are located, in the case of the Exchange Securities, or (y) as
provided in Section 6(f), in the case of Registrable Securities or Exchange
Securities to be sold by a Participating Broker-Dealer during the Applicable
Period);
(ii) printing expenses (including, without limitation, expenses of
printing certificates for Registrable Securities or Exchange Securities in a
form eligible for deposit with DTC and of printing prospectuses if the printing
of prospectuses is requested by the managing underwriters, if any, or, in
respect of Registrable Securities or Exchange Securities to be sold by a
Participating Broker-Dealer during the Applicable Period, by the Holders of a
majority in aggregate principal amount of the Registrable Securities included in
any Registration Statement or of such Exchange Securities, as the case may be);
(iii) messenger, telephone, duplication, word processing and delivery
expenses incurred by the Issuers in the performance of their obligations
hereunder;
(iv) fees and disbursements of counsel for the Issuers;
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(v) fees and disbursements of all independent certified public
accountants referred to in Section 6(n)(iii) (including, without limitation, the
expenses of any special audit and "cold comfort" letters required by or incident
to such performance);
(vi) fees and expenses of any "qualified independent underwriter" or
other independent appraiser participating in an offering pursuant to Section 3
of Schedule E to the By-laws of the NASD, but only where the need for such a
"qualified independent underwriter" arises due to a relationship with the
Issuers;
(vii) Securities Act liability insurance, if the Issuers so desire
such insurance;
(viii) fees and expenses of all other Persons retained by the
Issuers; internal expenses of the Issuers (including, without limitation, all
salaries and expenses of officers and employees of the Issuers performing legal
or accounting duties); and the expense of any annual audit; and
(ix) rating agency fees and the fees and expenses incurred in
connection with the listing of the Securities to be registered on any securities
exchange.
(b) The Issuers shall reimburse the Holders for the reasonable fees and
disbursements of not more than one counsel (in addition to appropriate local
counsel) chosen by the Holders of a majority in aggregate principal amount of
the Registrable Securities to be included in any Registration Statement and
other reasonable and necessary out-of-pocket expenses of the Holders incurred in
connection with the registration of the Registrable Securities.
8. Indemnification
---------------
(a) Indemnification by the Issuers. The Issuers shall, without limitation
------------------------------
as to time, indemnify and hold harmless each Holder and each Participating
Broker-Dealer, each Person who controls each such Holder (within the meaning of
Section 15 of the Securities Act or Section 20(a) of the Exchange Act) and the
officers, directors, partners, employees, representatives and agents of each
such Holder, Participating Broker-Dealer and controlling person, to the fullest
extent lawful, from and against any and all losses, claims, damages,
liabilities, costs (including, without limitation, costs of preparation and
reasonable attorneys' fees) and expenses (including, without limitation, costs
and expenses incurred in connection with investigating, preparing, pursuing or
defending against any of the foregoing) (collectively, "Losses"), as incurred,
directly or indirectly caused by, related to, based upon, arising out of or in
connection with any untrue or alleged untrue statement of a material fact
contained in any Registration Statement, Prospectus or form of prospectus, or in
any amendment or supplement thereto, or in any preliminary prospectus, or any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, except insofar as such
Losses are based upon information relating to such Holder or Participating
Broker-Dealer and furnished in writing to the Issuers by
17
<PAGE>
such Holder or Participating Broker-Dealer expressly for use therein; provided,
--------
that the Issuers shall not be liable under the indemnity agreement provided in
this subsection (a) to any Holder, Participating Broker-Dealer or controlling
person (or their respective officers, directors, partners, employees,
representatives and agents) to the extent that such Loss results solely from an
untrue statement of a material fact contained in, or the omission of a material
fact from, any preliminary prospectus, which untrue statement or omission was
completely corrected in the Prospectus (as then amended or supplemented) if it
shall have been determined by a court of competent jurisdiction by final and
nonappealable judgment that (i) such Holder or Participating Broker-Dealer sold
the Securities concerned to the person alleging such Loss and failed to send or
give, at or prior to the written confirmation of such sale, a copy of the
Prospectus (as then amended or supplemented), if required by law to have so
delivered it, and (ii) the Issuers had previously furnished copies thereof to
such Holder or Participating Broker-Dealer within a reasonable amount of time
prior to such sale or such confirmation, and (iii) the corrected Prospectus, if
delivered, would have been a complete defense against the person asserting such
Loss. The Issuers shall also indemnify underwriters, selling brokers, dealer
managers and similar securities industry professionals participating in the
distribution, their officers, directors, agents and employees and each Person
who controls such Persons (within the meaning of Section 15 of the Securities
Act or Section 20(a) of the Exchange Act) to the same extent as provided above
with respect to the indemnification of the Holders or the Participating Broker-
Dealer.
(b) Indemnification by Holders of Registrable Securities. In connection
----------------------------------------------------
with any Registration Statement, Prospectus or form of prospectus, any amendment
or supplement thereto, or any preliminary prospectus in which a Holder is
participating, such Holder shall furnish to the Issuers in writing such
information as the Issuers reasonably request for use in connection with any
Registration Statement, Prospectus or form of prospectus, any amendment or
supplement thereto, or any preliminary prospectus and shall, without limitation
as to time, indemnify and hold harmless the Issuers, their respective members,
managers, directors, officers, agents and employees, each Person, if any, who
controls either of the Issuers (within the meaning of Section 15 of the
Securities Act and Section 20(a) of the Exchange Act), and the members,
managers, directors, officers, agents or employees of such controlling persons,
to the fullest extent lawful, from and against all Losses, as incurred, arising
out of or based upon any untrue or alleged untrue statement of a material fact
contained in any Registration Statement, Prospectus or form of prospectus or in
any amendment or supplement thereto or in any preliminary prospectus, or any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading to the extent, but only
to the extent, that such untrue statement or alleged untrue statement of a
material fact or omission or alleged omission of a material fact is contained in
or omitted from any information so furnished in writing by such Holder to the
Issuers expressly for use therein. In no event shall the liability of any
selling Holder be greater in amount than the dollar amount of the proceeds (net
of payment of all expenses) received by such Holder upon the sale of the
Registrable Securities giving rise to such indemnification obligation.
18
<PAGE>
(c) Conduct of Indemnification Proceedings. If any Proceeding shall be
--------------------------------------
brought or asserted against any Person entitled to indemnity hereunder (an
"indemnified party"), such indemnified party shall promptly notify the party or
parties from which such indemnity is sought (the "indemnifying parties") in
writing; provided, that the failure to so notify the indemnifying parties shall
--------
not relieve the indemnifying parties from any obligation or liability except to
the extent (but only to the extent) that it shall be finally determined by a
court of competent jurisdiction (which determination is not subject to appeal)
that the indemnifying parties have been prejudiced materially by such failure.
The indemnifying party shall have the right, exercisable by giving written
notice to an indemnified party, within 20 business days after receipt of written
notice from such indemnified party of such Proceeding, to assume, at its
expense, the defense of any such Proceeding, provided, that an indemnified party
--------
shall have the right to employ separate counsel in any such Proceeding and to
participate in the defense thereof, but the fees and expenses of such counsel
shall be at the expense of such indemnified party or parties unless: (i) the
indemnifying party has agreed to pay such fees and expenses; or (ii) the
indemnifying party shall have failed promptly to assume the defense of such
Proceeding or shall have failed to employ counsel reasonably satisfactory to
such indemnified party; or (iii) the named parties to any such Proceeding
(including any impleaded parties) include both such indemnified party and the
indemnifying party or any of its affiliates or controlling persons, and such
indemnified party shall have been advised by counsel that there may be one or
more defenses available to such indemnified party that are in addition to, or in
conflict with, those defenses available to the indemnifying party or such
affiliate or controlling person (in which case, if such indemnified party
notifies the indemnifying parties in writing that it elects to employ separate
counsel at the expense of the indemnifying parties, the indemnifying parties
shall not have the right to assume the defense thereof and the reasonable fees
and expenses of such counsel shall be at the expense of the indemnifying party;
it being understood, however, that, the indemnifying party shall not, in
connection with any one such Proceeding or separate but substantially similar or
related Proceedings in the same jurisdiction, arising out of the same general
allegations or circumstances, be liable for the fees and expenses of more than
one separate firm of attorneys (together with appropriate local counsel) at any
time for such indemnified party).
No indemnifying party shall be liable for any settlement of any such
Proceeding effected without its written consent, but if settled with its written
consent, or if there be a final judgment for the plaintiff in any such
Proceeding, each indemnifying party jointly and severally agrees, subject to the
exceptions and limitations set forth above, to indemnify and hold harmless each
indemnified party from and against any and all Losses by reason of such
settlement or judgment. The indemnifying party shall not consent to the entry of
any judgment or enter into any settlement that does not include as an
unconditional term thereof the giving by the claimant or plaintiff to each
indemnified party of a release, in form and substance reasonably satisfactory to
the indemnified party, from all liability in respect of such Proceeding for
which such indemnified party would be entitled to indemnification hereunder
(whether or not any indemnified party is a party thereto).
19
<PAGE>
(d) Contribution. If the indemnification provided for in this Section 8 is
------------
unavailable to an indemnified party or is insufficient to hold such indemnified
party harmless for any Losses in respect of which this Section 8 would otherwise
apply by its terms (other than by reason of exceptions provided in this Section
8), then each applicable indemnifying party, in lieu of indemnifying such
indemnified party, shall have a joint and several obligation to contribute to
the amount paid or payable by such indemnified party as a result of such Losses,
in such proportion as is appropriate to reflect the relative benefits received
by the indemnifying party, on the one hand, and such indemnified party, on the
other hand, from the offering of the Notes, or (ii) if the allocation provided
by clause (i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the indemnifying party, on the one hand,
and such indemnified party, on the other hand, in connection with the actions,
statements or omissions that resulted in such Losses as well as any other
relevant equitable considerations. The relative fault of such indemnifying
party, on the one hand, and indemnified party, on the other hand, shall be
determined by reference to, among other things, whether any untrue or alleged
untrue statement of a material fact or omission or alleged omission to state a
material fact relates to information supplied by such indemnifying party or
indemnified party, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent any such statement or
omission. The amount paid or payable by an indemnified party as a result of any
Losses shall be deemed to include any legal or other fees or expenses incurred
by such party in connection with any Proceeding, to the extent such party would
have been indemnified for such fees or expenses if the indemnification provided
for in Section 8(a) or 8(b) was available to such party.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 8(d) were determined by pro rata
allocation or by any other method of allocation that does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 8(d), an indemnifying party that
is a selling Holder shall not be required to contribute, in the aggregate, any
amount in excess of such Holder's Maximum Contribution Amount. A selling
Holder's "Maximum Contribution Amount" shall equal the excess of (i) the
aggregate proceeds received by such Holder pursuant to the sale of such
Registrable Securities over (ii) the aggregate amount of damages that such
Holder has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any Person who was not
guilty of such fraudulent misrepresentation.
The indemnity and contribution agreements contained in this Section 8 are
in addition to any liability that the indemnifying parties may have to the
indemnified parties.
9. Rule 144 and Rule 144A
----------------------
Each of the Issuers covenants that it shall (a) file the reports required
to be filed by it (if so required) under the Securities Act and the Exchange Act
in a timely manner and, if at any time
20
<PAGE>
any such Person is not required to file such reports, it will, upon the request
of any Holder, make publicly available other information necessary to permit
sales pursuant to Rule 144 and Rule 144A and (b) take such further action as any
Holder may reasonably request, all to the extent required from time to time to
enable such Holder to sell Registrable Securities without registration under the
Securities Act pursuant to the exemptions provided by Rule 144 and Rule 144A.
Upon the request of any Holder, each of the Issuers shall deliver to such Holder
a written statement as to whether it has complied with such information
requirements. Nothing in this Section 9 shall be deemed to require the Issuers
to register any Securities pursuant to the Exchange Act.
10. Underwritten Registrations
--------------------------
If any of the Registrable Securities covered by any Shelf Registration are
to be sold in an Underwritten Offering, the investment banker or investment
bankers and manager or managers that will manage the offering will be selected
by the Holders of a majority in aggregate principal amount of such Registrable
Securities included in such offering.
No Holder may participate in any Underwritten Registration hereunder unless
such Holder (a) agrees to sell such Holder's Registrable Securities on the basis
provided in any underwriting arrangements approved by the Persons entitled
hereunder to approve such arrangements and (b) completes and executes all
questionnaires, underwriting agreements and other documents reasonably required
under the terms of such underwriting arrangements.
11. Miscellaneous
-------------
(a) Remedies. In the event of a breach by either of the Issuers of any of
--------
their respective obligations under this Agreement, each Holder, in addition to
being entitled to exercise all rights provided herein, in the Indenture or, in
the case of the Purchaser, in the Purchase Agreement, or granted by law,
including recovery of damages, will be entitled to specific performance of its
rights under this Agreement. The Issuers agree that monetary damages would not
be adequate compensation for any loss incurred by reason of a breach by either
of them of any of the provisions of this Agreement and hereby further agree
that, in the event of any action for specific performance in respect of such
breach, they shall waive the defense that a remedy at law would be adequate.
(b) No Inconsistent Agreements. Neither of the Issuers has entered into,
--------------------------
as of the date hereof, and neither of them shall enter into, after the date of
this Agreement, any agreement with respect to any of their respective securities
that is inconsistent with the rights granted to the Holders in this Agreement or
otherwise conflicts with the provisions hereof.
(c) Amendments and Waivers. The provisions of this Agreement, including
----------------------
the provisions of this sentence, may not be amended, modified or supplemented,
and waivers or consents to departures from the provisions hereof may not be
given, unless the Issuers have
21
<PAGE>
obtained the written consent of Holders of at least a majority of the then
outstanding aggregate principal amount of Registrable Securities; provided, that
--------
Sections 6(a) and 8 shall not be amended, modified or supplemented, and waivers
or consents to departures from this proviso may not be given, unless the Issuers
have obtained the written consent of each Holder. Notwithstanding the foregoing,
a waiver or consent to depart from the provisions hereof with respect to a
matter that relates exclusively to the rights of Holders whose securities are
being sold pursuant to a Registration Statement and that does not directly or
indirectly affect the rights of other Holders may be given by Holders of at
least a majority in aggregate principal amount of the Registrable Securities
being sold by such Holders pursuant to such Registration Statement, provided
--------
that the provisions of this sentence may not be amended, modified or
supplemented except in accordance with the provisions of the immediately
preceding sentence.
(d) Notices. All notices and other communications (including, without
-------
limitation, any notices or other communications to the Trustee) provided for or
permitted hereunder shall be made in writing by hand-delivery, certified first-
class mail, return receipt requested, next-day air courier or facsimile:
(i) if to a Holder, at the most current address given by such Holder
to the Issuers in accordance with the provisions of this Section 11(d), which
address initially is, with respect to each Holder, the address of such Holder
maintained by the Registrar under the Indenture, with a copy to Skadden, Arps,
Slate, Meagher & Flom, 300 South Grand Avenue, Los Angeles, California 90071,
telecopy number (213) 687-5600, Attention: Michael A. Woronoff, Esq.; and
(ii) if to the Issuers, initially at One Buffington Harbor Drive,
Gary, Indiana 46406, Attention: Chief Operating and Financial Officer, telecopy
number (219) 944-9137, with a copy to Michelle R. Sherman, CPA, Vice
President/Controller, Barden Companies, Inc., 400 Renaissance Center, Suite
2400, Detroit, MI 48243, telecopy number (313) 259-0154, and thereafter at such
other address, notice of which is given in accordance with the provisions of
this Section 11(d).
All such notices and communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; five business days after
being deposited in the mail, postage prepaid, if mailed; one business day after
being timely delivered to a next-day air courier; and when receipt is
acknowledged by the addressee, if telecopied.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee under the
Indenture at the address specified in such Indenture.
(e) Successors and Assigns. This Agreement shall inure to the benefit of
----------------------
and be binding upon the successors and assigns of each of the parties,
including, without limitation and without the need for an express assignment,
subsequent Holders.
22
<PAGE>
(f) Counterparts. This Agreement may be executed in any number of
------------
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(g) Headings. The headings in this Agreement are for convenience of
--------
reference only and shall not limit or otherwise affect the meaning hereof.
(h) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
-------------
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, INCLUDING, WITHOUT
LIMITATION, SECTION 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW
AND NEW YORK CIVIL PRACTICE LAWS AND RULES 327(b). EACH OF THE ISSUERS HEREBY
IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY NEW YORK STATE COURT SITTING IN
THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK OR ANY FEDERAL COURT SITTING IN
THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK IN RESPECT OF ANY SUIT, ACTION
OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, AND IRREVOCABLY
ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND
UNCONDITIONALLY, JURISDICTION OF THE AFORESAID COURTS. EACH OF THE ISSUERS
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO UNDER
APPLICABLE LAW, TRIAL BY JURY AND ANY OBJECTION THAT IT MAY NOW OR HEREAFTER
HAVE TO THE LAYING OF THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT
IN ANY SUCH COURT AND ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT
IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. EACH OF THE ISSUERS
IRREVOCABLY CONSENTS, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO UNDER
APPLICABLE LAW, TO THE SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN
ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR
CERTIFIED MAIL, POSTAGE PREPAID, TO THE ISSUERS AT THE ADDRESS SET FORTH HEREIN,
SUCH SERVICE TO BECOME EFFECTIVE 30 DAYS AFTER SUCH MAILING. NOTHING HEREIN
SHALL AFFECT THE RIGHT OF ANY HOLDER TO SERVE PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST
THE ISSUERS IN ANY OTHER JURISDICTION.
(i) Severability. If any term, provision, covenant or restriction of this
------------
Agreement is held by a court of competent jurisdiction to be invalid, illegal,
void or unenforceable, the remainder of the terms, provisions, covenants and
restrictions set forth herein shall remain in full force and effect and shall in
no way be affected, impaired or invalidated, and the parties hereto shall use
their best efforts to find and employ an alternative means to achieve the same
or
23
<PAGE>
substantially the same result as that contemplated by such term, provision,
covenant or restriction. It is hereby stipulated and declared to be the
intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such that may be
hereafter declared invalid, illegal, void or unenforceable.
(j) Entire Agreement. This Agreement is intended by the parties as a final
----------------
expression of their agreement, and is intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein,
with respect to the registration rights granted by the Issuers in respect of
securities sold pursuant to the Purchase Agreement. This Agreement supersedes
all prior agreements and understandings between the parties with respect to such
subject matter.
(k) Attorneys' Fees. In any Proceeding brought to enforce any provision of
---------------
this Agreement, or where any provision hereof is validly asserted as a defense,
the prevailing party, as determined by the courts, shall be entitled to recover
reasonable attorneys' fees in addition to its costs and expenses and any other
available remedy.
(l) Securities Held by Either of the Issuers or their Respective
------------------------------------------------------------
Affiliates. Whenever the consent or approval of Holders of a specified
- ----------
percentage of Registrable Securities is required hereunder, Registrable
Securities held by either of the Issuers or their respective affiliates (as such
term is defined in Rule 405 under the Securities Act) (other than Holders deemed
to be such affiliates solely by reason of their holdings of such Registrable
Securities) shall not be counted in determining whether such consent or approval
was given by the Holders of such required percentage.
24
<PAGE>
REGISTRATION RIGHTS AGREEMENT
-----------------------------
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
THE MAJESTIC STAR CASINO, LLC
By: Barden Development, Inc., its manager
By: _________________________________________
Name:
Title:
THE MAJESTIC STAR CASINO CAPITAL CORP.
By: _________________________________________
Name:
Title:
ACCEPTED AND AGREED TO:
JEFFERIES & COMPANY, INC.
By: ____________________________
Name:
Title:
<PAGE>
EXHIBIT 5.1
August 12, 1999
The Majestic Star Casino, LLC
The Majestic Star Casino Capital Corp.
One Buffington Harbor Drive
Gary, Indiana 46406-3000
Re: Registration Statement on Form S-4 in Connection With
the Exchange Offer of 107/8% Senior Secured Notes due
2006, Series B for all of its outstanding 107/8%
Senior Secured Notes due 2006, Series A
Gentlemen:
We have acted as counsel for The Majestic Star Casino, LLC, an Indiana
limited liability company (the "Company") and The Majestic Star Casino Capital
Corp., an Indiana corproation ("Capital" and together with the Company, the
"Issuers"), in connection with the preparation and filing with the Securities
and Exchange Commission under the Securities Act of 1933, as amended (the
"Act"), of a Registration Statement on Form S-4 (the "Registration Statement")
relating to the exchange offer by the Issuers of 107/8% Senior Secured Notes due
2006, Series B (the "New Notes") for all of its outstanding 107/8% Senior
Secured Notes due 2006, Series A (the "Old Notes"). The Old Notes were issued
and the New Notes will be issued under an Indenture, dated as of June 18, 1999,
among the Issuers and IBJ Whitehall Bank & Trust Company, as trustee (the
"Indenture").
In so acting, we have examined and relied upon the originals, or copies
certified or otherwise identified to our satisfaction, of such of the Issuers'
records, documents, certificates and other instruments as in our judgment are
necessary or appropriate to enable us to render the opinions expressed below.
Based upon the foregoing, we are of the opinion that the New Notes,
when executed and authenticated in accordance with the terms of the Indenture,
and upon issuance in accordance with the terms of the exchange offer described
in the prospectus constituting a part of the Registration Statement (the
"Prospectus"), will be valid and binding obligations of the Issuers, enforceable
against the Issuers in accordance with their terms, except as (a) the
enforceability thereof may be limited by or subject to bankruptcy, insolvency,
fraudulent conveyance, reorganization, arrangement, moratorium, usury or similar
laws now or hereafter affecting creditors' rights generally and (b) rights or
remedies (including, without limitation, acceleration, specific performance and
injunctive relief)
<PAGE>
The Majestic Star Casino, LLC
The Majestic Star Capital Corp.
August 12, 1999
Page 2
may be limited by equitable principles of general applicability (including,
without limitation, standards of materiality, good faith, fair dealing and
reasonableness) whether such principles are considered in a proceeding in equity
or at law, and may be subject to the discretion of the court before which any
proceedings therefor may be brought.
We hereby consent to the use of this opinion as Exhibit 5.1 of the
Registration Statement, and to the reference to our firm under the heading
"Legal Matters" in the Prospectus. In giving such consent, we do not concede
that we are experts within the meaning of the Act or the rules or regulations
thereunder or that this consent is required by Section 7 of the Act.
Very truly yours,
DYKEMA GOSSETT PLLC
<PAGE>
EXHIBIT 12.1
MAJESTIC STAR CASINO, LLC
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Amounts in thousands of dollars)
<TABLE>
<CAPTION>
(UNAUDITED)
Fiscal year ended Six months ended June 30,
-------------------------------- -------------------------
1996(B) 1997 1998 1998 1999
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net Income
(loss) ($ 8,887) ($13,887) ($ 4,473) -4058 ($13,024)
Extraordinary Item:
Loss on bond
redemption(C) 15,238
Interest Expense and
amortization of debt discount
and premium
on all indebtedness 8,598 12,877 15851 7920 7925
-------- -------- -------- -------- --------
Earnings (loss) before fixed charges ($ 289) ($ 1,010) $ 11,378 $ 3,862 $ 10,139
Fixed Charges:
Interest Expense 8,598 12,877 15,851 7,920 7,925
Capitalized Interest 213 2,317
-------- -------- -------- -------- --------
Total Fixed Charges 8,811 15,194 15,851 7,920 7,925
Ratio of earnings to fixed charges (A) (A) (A) (A) 1.28
</TABLE>
(A) As a result of the losses incurred, the company was unable to fully
cover the indicated fixed charges.
(B) The Company had 205 days of gaming operations during 1996.
(C) The loss on bond redemption was excluded from earnings (loss) before
fixed charges. If the loss on bond redemption was included, the
Company would have been unable to fully cover the indicated fixed
charges.
<PAGE>
EXHIBIT 21.1
SUBSIDIARIES OF THE REGISTRANTS
Set forth below are the directly and indirectly owned subsidiaries of The
Majestic Star casino, LLC including those subsidiaries that are co-registrants.
All subsidiaries are wholly owned by The Majestic Star Casino, LLC. Also listed
below is the state or other jurisdiction of incorporation of each subsidiary,
and the names under which such subsidiaries do business.
Name Jurisdiction Other name(s) under which
---- ------------ the company does business
-------------------------
The Majestic Star Casino Indiana None
Capital Corp.
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-4 of our
report dated February 22, 1999, on our audits of the financial statements of The
Majestic Star Casino, LLC. We also consent to the references to our firm under
the captions "Summary Financial and Operating Data," "Selected Financial
Information," and "Independent Accountants."
PricewaterhouseCoopers LLP
Chicago, Illinois
August 12, 1999
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANT
As independent public accountants, we hereby consent to the use of our report on
Buffington Harbor Riverboats, LLC financial statements dated January 29, 1999,
included in The Majestic Star Casino, LLC Form S-4 and to all references to our
Firm included in this registration statement.
/s/Arthur Andersen LLP
Roseland, New Jersey
August 9, 1999
D1\181122.1
ID\ JKK
<PAGE>
EXHIBIT 25.1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
----------
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939, AS AMENDED, OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305-(b) (2)
---------
IBJ WHITEHALL BANK & TRUST COMPANY
(Exact name of trustee as specified in its charter)
New York 13-5375195
(State of Incorporation (I.R.S. Employer
if not a U.S. national bank) Identification No.)
One State Street, New York, New York 10004
(Address of principal executive offices) (Zip code)
IBJ Whitehall Bank & Trust Company
One State Street
New York, New York 10004
(212) 858-2000
(Name, Address and Telephone Number of Agent for Service)
The Majestic Star Casino, LLC
(Exact name of each registrant as specified in its charter)
Indiana 43-1664986
(State or jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Buffington Harbor Drive 46406-3000
Gary, Indiana (Zip Code)
(Address of principal executive office)
10-7/8% Senior Notes due 2006
(Title of Indenture Securities)
<PAGE>
Item 1. General information
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to
which it is subject.
New York State Banking Department, Two
Rector Street, New York, New York
Federal Deposit Insurance Corporation,
Washington, D.C.
Federal Reserve Bank of New York Second District,
33 Liberty Street, New York, New York
(b) Whether it is authorized to exercise corporate trust powers.
Yes
Item 2. Affiliations with the Obligors.
If the obligors are an affiliate of the trustee, describe
each such affiliation.
The obligors are not an affiliate of the trustee.
<PAGE>
Item 13. Defaults by the Obligors.
(a) State whether there is or has been a default with respect to the
securities under this indenture. Explain the nature of any such
default.
None
(b) If the trustee is a trustee under another indenture under which
any other securities, or certificates of interest or participation
in any other securities, of the obligors are outstanding, or is
trustee for more than one outstanding series of securities under
the indenture, state whether there has been a default under any
such indenture or series, identify the indenture or series
affected, and explain the nature of any such default.
None
Item 16. List of exhibits.
List below all exhibits filed as part of this statement of
eligibility.
*1. A copy of the Charter of IBJ Whitehall Bank & Trust Company as
amended to date. (See Exhibit 1A to Form T-1, Securities and
Exchange Commission File No. 22-18460 & 333-46849).
*2. A copy of the Certificate of Authority of the trustee to Commence
Business (Included in Exhibit 1 above).
*3. A copy of the Authorization of the trustee to exercise corporate
trust powers, as amended to date (See Exhibit 4 to Form T-1,
Securities and Exchange Commission File No. 22-19146).
<PAGE>
*4. A copy of the existing By-Laws of the trustee, as amended to date
(See Exhibit 4 to Form T-1, Securities and Exchange Commission
File No. 333-46849).
5. Not Applicable
6. The consent of United States institutional trustee required by
Section 321(b) of the Act.
7. A copy of the latest report of condition of the trustee published
pursuant to law or the requirements of its supervising or
examining authority.
* The Exhibits thus designated are incorporated herein by reference as
exhibits hereto. Following the description of such Exhibits is a reference
to the copy of the Exhibit heretofore filed with the Securities and
Exchange Commission, to which there have been no amendments or changes.
NOTE
In answering any item in this Statement of Eligibility which relates to
matters peculiarly within the knowledge of the obligors and its directors
or officers, the trustee has relied upon information furnished to it by the
obligors.
Inasmuch as this Form T-1 is filed prior to the ascertainment by the
trustee of all facts on which to base responsive answers to Item 2, the
answer to said Item is based on incomplete information.
Item 2, may, however, be considered as correct unless amended by an
amendment to this Form T-1.
Pursuant to General Instruction B, the trustee has responded to Items 1, 2
and 16 of this form since to the best knowledge of the trustee as indicated
in Item 13, the obligors are not in default under any indenture under which
the applicant is trustee.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the
trustee, IBJ Whitehall Bank & Trust Company, a corporation organized and
existing under the laws of the State of New York, has duly caused this
statement of eligibility to be signed on its behalf by the undersigned,
thereunto duly authorized, all in the City of New York, and State of New
York, on the 5th day August, 1999.
IBJ WHITEHALL BANK & TRUST COMPANY
By: /s/ Stephen J. Giurlando
-------------------------------
Stephen J. Giurlando
Vice President
<PAGE>
Exhibit 6
CONSENT OF TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture
Act of 1939, as amended, in connection with the issue by The Majestic Star
Casino, LLC of it's 10 7/8% Senior Notes due 2006, we hereby consent that
reports of examinations by Federal, State, Territorial, or District
authorities may be furnished by such authorities to the Securities and
Exchange Commission upon request therefor.
IBJ WHITEHALL BANK & TRUST COMPANY
By: /s/ Stephen J. Giurlando
---------------------------------------
Stephen J. Giurlando
Vice President
Dated: August 5, 1999
<PAGE>
EXHIBIT 7
CONSOLIDATED REPORT OF CONDITION OF
IBJ WHITEHALL BANK & TRUST COMPANY
of New York, New York
And Foreign and Domestic Subsidiaries
Report as of March 31, 1999
<TABLE>
<CAPTION>
Dollar Amounts
in Thousands
---------------
ASSETS
<S> <C> <C>
1. Cash and balance due from depository institutions:
a. Non-interest-bearing balances and currency and coin ................................................$ 21,794
b. Interest-bearing balances.............................................................................$ 24,039
2. Securities:
a. Held-to-maturity securities...........................................................................$ -0-
b. Available-for-sale securities.........................................................................$ 192,664
3. Federal funds sold and securities purchased under agreements to resell in
domestic offices of the bank and of its Edge and Agreement subsidiaries and
in IBFs
Federal Funds sold and Securities purchased under agreements to resell....................................$ 90,207
4. Loans and lease financing receivables:
a. Loans and leases, net of unearned income................................................$ 2,045,440
b. LESS: Allowance for loan and lease losses...............................................$ 64,777
c. LESS: Allocated transfer risk reserve...................................................$ -0-
d. Loans and leases, net of unearned income, allowance, and reserve......................................$ 1,980,663
5. Trading assets held in trading accounts...................................................................$ 783
6. Premises and fixed assets (including capitalized leases)..................................................$ 6,188
7. Other real estate owned...................................................................................$ -0-
8. Investments in unconsolidated subsidiaries and associated companies.......................................$ -0-
9. Customers' liability to this bank on acceptances outstanding..............................................$ 615
10. Intangible assets.........................................................................................$ 12,786
</TABLE>
<PAGE>
<TABLE>
<S> <C>
11. Other assets.........................................................................................$ 61,758
12. TOTAL ASSETS.........................................................................................$ 2,391,497
LIABILITIES
13. Deposits:
a. In domestic offices..................................................................................$ 722,967
(1) Noninterest-bearing ....................................................................$ 155,445
(2) Interest-bearing ....................................................................................$ 567,522
b. In foreign offices, Edge and Agreement subsidiaries, and IBFs........................................$ 1,111,757
(1) Noninterest-bearing .................................................................................$ 14,819
(2) Interest-bearing ....................................................................................$ 1,096,938
14. Federal funds purchased and securities sold under agreements to repurchase
in domestic offices of the bank and of its Edge and Agreement subsidiaries,
and in IBFs:
Federal Funds purchased and Securities sold under agreements to repurchase...............................$ 105,000
15. a. Demand notes issued to the U.S. Treasury.............................................................$ 3,000
b. Trading Liabilities..................................................................................$ 468
16. Other borrowed money:
a. With a remaining maturity of one year or less........................................................$ 25,002
b. With a remaining maturity of more than one year......................................................$ 1,375
c. With a remaining maturity of more than three years...................................................$ 3,550
17. Not applicable.
18. Bank's liability on acceptances executed and outstanding.................................................$ 615
19. Subordinated notes and debentures........................................................................$ 100,000
20. Other liabilities........................................................................................$ 68,528
21. TOTAL LIABILITIES........................................................................................$ 2,142,262
22. Limited-life preferred stock and related surplus.........................................................$ N/A
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EQUITY CAPITAL
<S> <C> <C>
23. Perpetual preferred stock and related surplus............................................................$ -0-
24. Common stock.............................................................................................$ 28,958
25. Surplus (exclude all surplus related to preferred stock).................................................$ 210,319
26. a. Undivided profits and capital reserves...............................................................$ 9,707
b. Net unrealized gains (losses) on available-for-sale securities.......................................$ 251
c. Accumulated net gains (losses) on cash flow hedges...................................................$ -0-
27. Cumulative foreign currency translation adjustments......................................................$ -0-
28. TOTAL EQUITY CAPITAL.....................................................................................$ 249,235
29. TOTAL LIABILITIES AND EQUITY CAPITAL.....................................................................$ 2,391,497
</TABLE>
<PAGE>
EXHIBIT 99.1
LETTER OF TRANSMITTAL
for
Tender of
107/8% Senior Secured Notes due 2006, Series B
in Exchange for all Outstanding
107/8% Senior Secured Notes due 2006, Series A
THE MAJESTIC STAR CASINO, LLC
THE MAJESTIC STAR CASINO CAPITAL CORP.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON________,
1999, UNLESS EXTENDED (THE "EXPIRATION DATE"). OUTSTANDING SENIOR SECURED NOTES
TENDERED IN THE EXCHANGE OFFER MAY BE WITHDRAWN AT ANY TIME PRIOR TO THE
EXPIRATION DATE.
Deliver to the Exchange Agent:
IBJ WHITEHALL BANK & TRUST COMPANY
<TABLE>
<S> <C> <C>
By Facsimile (for eligible
By Registered or Certified Mail: By Hand or Overnight Courier institutions only)
P.O. Box 84 One State Street (212) 858-2611
Bowling Green Station New York, New York 10004 To confirm
Att: Reorganizing Operations Department Attn: Securities Processing Window, transmission call:
Subcellar One, (SC-1) (212) 858-2103
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR
TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN THE ONE LISTED
ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. THE INSTRUCTIONS ACCOMPANYING THIS
LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL
IS COMPLETED.
The undersigned hereby acknowledges receipt and review of the Prospectus
dated ________, 1999 (the "Prospectus") of The Majestic Star Casino, LLC, an
Indiana limited liability company (the "Company") and The Majestic Star Casino
Capital Corp., an Indiana corporation ("Capital" and together with the Company,
the "Issuers"), and this Letter of Transmittal (the "Letter of Transmittal"),
which together describe the Issuers' offer (the "Exchange Offer") to exchange
its 107/8% Senior Secured Notes due 2006, Series B (the "New Notes"), which have
been registered under the Securities Act of 1933, as amended (the "Securities
Act"), for a like principal amount of its issued and outstanding 107/8% Senior
Secured Notes due 2006, Series A (the "Old Notes"), pursuant to a Registration
Statement of which the Prospectus is a part. Capitalized terms used but not
defined herein have the respective meaning given to them in the Prospectus.
The Issuers reserve the right, at any time or from time to time, to extend
the Exchange Offer at their discretion, in which event the term "Expiration
Date" shall mean the latest time and date in which the Exchange Offer is
extended. The Issuers shall notify the Exchange Agent of any extension no later
than 9:00 a.m., New York City time, on the next business day after the
previously scheduled Expiration Date.
This Letter of Transmittal is to be used by a Holder of Old Notes either if
original Old Notes are to be forwarded
<PAGE>
herewith or if delivery of Old Notes, if available, is to be made by book-entry
transfer to the account maintained by the Exchange Agent at The Depository Trust
Company (the "Book-Entry Transfer Facility") pursuant to the procedures set
forth in the Prospectus under the caption "The Exchange Offer -- Procedures for
Tendering Old Notes." Holders of Old Notes whose Old Notes are not immediately
available, or who are unable to deliver their Old Notes and all other documents
required by this Letter of Transmittal to the Exchange Agent on or prior to the
Expiration Date, or who are unable to complete the procedure for book entry
transfer on a timely basis, must tender their Old Notes according to the
guaranteed delivery procedures set forth in the Prospectus under the caption
"The Exchange Offer -- Guaranteed Delivery." See Instruction 1. Delivery of
documents to the Book-Entry Transfer Facility does not constitute delivery to
the Exchange Agent.
The term "Holder" with respect to the Exchange Offer means any person in
whose name Old Notes are registered on the books of the Issuers or any other
person who has obtained a properly completed bond power from the registered
Holder. The undersigned has completed, executed and delivered this Letter of
Transmittal to indicate the action the undersigned desires to take with respect
to the Exchange Offer. Holders who wish to tender their Old Notes must complete
this Letter of Transmittal in its entirety.
The undersigned has checked the appropriate boxes below and signed this
Letter of Transmittal to indicate the action the undersigned desires to take
with respect to the Exchange Offer.
PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL AND THE PROSPECTUS CAREFULLY
BEFORE CHECKING ANY BOX BELOW.
THE INSTRUCTIONS INCLUDED WITH THIS LETTER OF TRANSMITTAL MUST BE FOLLOWED.
QUESTIONS AND REQUESTS FOR ASSISTANCE OR FOR ADDITIONAL COPIES OF THE PROSPECTUS
AND THIS LETTER OF TRANSMITTAL MAY BE DIRECTED TO THE EXCHANGE AGENT.
List below the Old Notes to which this Letter of Transmittal relates. If the
space below is inadequate, list the registered numbers and principal amounts on
a separate signed schedule and affix the list to this Letter of Transmittal.
<TABLE>
<CAPTION>
DESCRIPTION OF OUTSTANDING SENIOR SUBORDINATED NOTES TENDERED
- ----------------------------------------------------------------------------------------------------------
Name(s) and Address(es) of Registered Holder(s) Aggregate Aggregate Principal
Exactly as Name(s) Appear(s) on Old Note Registered Principal Amount Amount Tendered**
Number(s)* Represented by
(Please fill in, if blank) Note(s)
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
Total
- ----------------------------------------------------------------------------------------------------------
*Need not be completed by book-entry Holders.
</TABLE>
**Unless otherwise indicated, any tendering Holder of Old Notes Notes will be
deemed to have tendered the entire aggregate principal amount represented by
such Old Notes. All tenders must be in integral multiples of $1,000.
- -------------------------------------------------------------------------------
2
<PAGE>
[ ] CHECK HERE IF TENDERED OLD NOTES ARE ENCLOSED HEREWITH.
[ ] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK ENTRY
TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE
BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING (FOR USE BY
ELIGIBLE INSTITUTIONS ONLY):
Name of Tendering Institution:_______________________________________________
Account Number:______________________________________________________________
Transaction Code Number:_____________________________________________________
[ ] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY ENCLOSED HEREWITH AND COMPLETE THE
FOLLOWING (FOR USE BY ELIGIBLE INSTITUTIONS ONLY):
Name(s) of Registered Holder(s) of Old Notes:________________________________
Date of Execution of Notice of Guaranteed Delivery:__________________________
Window Ticket Number (if available):_________________________________________
Name of Eligible Institution that Guaranteed Delivery:_______________________
Account Number (if delivered by book-entry transfer):________________________
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
Name:________________________________________________________________________
Address:_____________________________________________________________________
If the undersigned is not a broker-dealer, the undersigned represents
that it is not engaged in, and does not intend to engage in, a distribution of
New Notes. If the undersigned is a broker-dealer that will receive New Notes for
its own account in exchange for Old Notes, it acknowledges that the Old Notes
were acquired as a result of market-making activities or other trading
activities and that it will deliver a prospectus in connection with any resale
of such New Notes; however, by so acknowledging and by delivering a prospectus,
the undersigned will not be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act.
3
<PAGE>
SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Subject to the terms and conditions of the Exchange Offer, the
undersigned hereby tenders to the Issuers for exchange the principal amount of
the Old Notes indicated above. Subject to and effective upon the acceptance for
exchange of the principal amount of the Old Notes tendered in accordance with
this Letter of Transmittal, the undersigned hereby exchanges, assigns and
transfers to the Issuers all right, title and interest in and to the Old Notes
tendered for exchange hereby. The undersigned hereby irrevocably constitutes and
appoints the Exchange Agent, the agent and attorney-in-fact of the undersigned
(with full knowledge that the Exchange Agent also acts as the agent of the
Issuers in connection with the Exchange Offer) with respect to the tendered Old
Notes with full power of substitution to (i) deliver such Old Notes, or transfer
ownership of such Old Notes on the account books maintained by the Book- Entry
Transfer Facility, to the Issuers and deliver all accompanying evidences of
transfer and authenticity, and (ii) present such Old Notes for transfer on the
books of the Issuers and receive all benefits and otherwise exercise all rights
of beneficial ownership of such Old Notes, all in accordance with the terms of
the Exchange Offer. The power of attorney granted in this paragraph shall be
deemed to be irrevocable and coupled with an interest.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, exchange, assign and transfer the Old Notes
tendered hereby and to acquire the New Notes issuable upon the exchange of such
tendered Old Notes, and that the Issuers will acquire good and unencumbered
title thereto, free and clear of all liens, restrictions, charges and
encumbrances and not subject to any adverse claim, when the same are accepted
for exchange by the Issuers.
The undersigned acknowledges that this Exchange Offer is being made on
the Issuers' belief, based upon interpretations contained in no-action letters
issued to third parties by the staff of the Securities and Exchange Commission
(the "Commission"), that the New Notes issued in exchange for the Old Notes
pursuant to the Exchange Offer may be offered for resale, resold and otherwise
transferred by Holders thereof (other than any such Holder that is an
"affiliate" of the Issuers within the meaning of Rule 405 under the Securities
Act), without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that such New Notes are acquired in
the ordinary course of such Holders' business and such Holders are not engaging
in and do not intend to engage in a distribution of the New Notes and have no
arrangement or understanding with any person to participate in a distribution of
such New Notes. The undersigned hereby further represent(s) to the Company that
(i) any New Notes acquired in exchange for Old Notes tendered hereby are being
acquired in the ordinary course of business of the person receiving such New
Notes, (ii) the undersigned is not engaging in and does not intend to engage in
a distribution of the New Notes, (iii) the undersigned has no arrangement or
understanding with any person to participate in the distribution of such New
Notes, and (iv) the undersigned is not an "affiliate," as defined in Rule 405
under the Securities Act, of the Issuers.
If the undersigned or the person receiving the New Notes is a
broker-dealer that is receiving New Notes for its own account in exchange for
Old Notes that were acquired as a result of market-making activities or other
trading activities, the undersigned acknowledges that it or such other person
will deliver a Prospectus in connection with any resale of such New Notes;
however, by so acknowledging and by delivering a Prospectus, the undersigned
will not be deemed to admit that the undersigned or such other person is an
"underwriter" within the meaning of the Securities Act. The undersigned
acknowledges that if the undersigned is participating in the Exchange Offer for
the purpose of distributing the New Notes (i) the undersigned cannot rely on the
position of the staff of the Commission in certain no- action letters and, in
the absence of an exemption therefrom, must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with a
secondary resale transaction of the New Notes, in which case the registration
statement must contain the information required by the Securities Act, and (ii)
failure to comply with such requirements in such instance could result in the
undersigned incurring liability under the Securities Act for which the
undersigned is not indemnified by the Issuers.
4
<PAGE>
If the undersigned or the person receiving the New Notes is an
"affiliate" (as defined in Rule 405 under the Securities Act) of the Issuers,
the undersigned represents to the Issuers that the undersigned understands and
acknowledges that the New Notes may not be offered for resale, resold or
otherwise transferred by the undersigned or such other person without
registration under the Securities Act or an exemption therefrom.
The undersigned will, upon request, execute and deliver any additional
documents deemed by the Exchange Agent or the Issuers to be necessary or
desirable to complete the exchange, assignment and transfer of the Old Notes
tendered hereby, including the transfer of such Old Notes on the account books
maintained by the Book-Entry Transfer Facility.
For purposes of the Exchange Offer, the Issuers shall be deemed to have
accepted for exchange validly tendered Old Notes when, as and if the Issuers
give oral or written notice thereof to the Exchange Agent. Any tendered Old
Notes that are not accepted for exchange pursuant to the Exchange Offer for any
reason will be returned, without expense, to the undersigned at the address
shown below or at a different address as may be indicated herein under "Special
Delivery Instructions" as promptly as practicable after the Expiration Date.
All authority conferred or agreed to be conferred by this Letter of
Transmittal shall survive the death, incapacity or dissolution of the
undersigned, and every obligation of the undersigned under this Letter of
Transmittal shall be binding upon the undersigned's heirs, personal
representatives, successors and assigns.
The undersigned acknowledges that the Issuers' acceptance of properly
tendered Old Notes pursuant to the procedures described under the caption "The
Exchange Offer - Valid Tender" in the Prospectus and in the instructions hereto
will constitute a binding agreement between the undersigned and the Issuers upon
the terms and subject to the conditions of the Exchange Offer.
Unless otherwise indicated under "Special Issuance Instructions,"
please issue the New Notes issued in exchange for the Old Notes accepted for
exchange and return any Old Notes not tendered or not exchanged, in the name(s)
of the undersigned. Similarly, unless otherwise indicated under "Special
Delivery Instructions," please mail or deliver the New Notes issued in exchange
for the Old Notes accepted for exchange and any Old Notes not tendered or not
exchanged (and accompanying documents, as appropriate) to the undersigned at the
address shown below the undersigned's signatures. In the event that both
"Special Issuance Instructions" and "Special Delivery Instructions" are
completed, please issue the New Notes issued in exchange for the Old Notes
accepted for exchange in the name(s) of, and return any Outstanding Senior
Subordinated Notes not tendered or not exchanged to, the person(s) so indicated.
The undersigned recognizes that the Issuers have no obligation pursuant to the
"Special Issuance Instructions" and "Special Delivery Instructions" to transfer
any Outstanding Senior Subordinated Notes from the name of the registered
holder(s) thereof if the Issuers do not accept for exchange any of the
Outstanding Senior Subordinated Notes so tendered for exchange.
5
<PAGE>
SPECIAL ISSUANCE
INSTRUCTIONS
(See Instructions 5 and 6)
To be completed ONLY (i) if Old Notes in a principal amount not tendered,
or New Notes issued in exchange for Old Notes accepted for exchange, are to be
issued in the name of someone other than the undersigned, or (ii) if Old Notes
tendered by book-entry transfer which are not exchanged are to be returned for
credit to an account maintained at the Book-Entry Transfer Facility. Issue New
Notes and/or Old Notes to:
Name(s):.............................................
(Please Type or Print)
Address:.............................................
.....................................................
(Include Zip Code)
.....................................................
(Tax Identification or Social Security No.)
(Complete Substitute Form W-9)
[ ] Credit unexchanged Outstanding Senior Subordinated Notes delivered by
book-entry transfer to the Book-Entry Transfer Facility set forth below:
.....................................................
(Book-Entry Transfer Facility Account Number,
if applicable)
SPECIAL DELIVERY
INSTRUCTIONS
(See Instructions 5 and 6)
To be completed ONLY if Old Notes in a principal amount not tendered, or
New Notes issued in exchange for Old Notes accepted for exchange, are to be
mailed or delivered to someone other than the undersigned, or to the undersigned
at an address other than that shown below the undersigned's signature.
Mail or deliver New Notes and/or
Old Notes to:
Name:.......................................
(Please Type or Print)
Address: ..................................
............................................
(Include Zip Code)
............................................
(Tax Identification or Social Security
No.)
6
<PAGE>
PLEASE SIGN HERE WHETHER OR NOT
OLD NOTES ARE BEING PHYSICALLY TENDERED HEREBY
(Complete Accompanying Substitute Form W-9)
X...............................................................................
Date
X...............................................................................
Date
Area Code and Telephone Number:.................................................
The above lines must be signed by the registered Holder(s) of Old Note as
name(s) appear(s) on the Old Notes or on a security position listing, or by
person(s) authorized to become registered Holder(s) by a properly completed bond
power from the registered Holder(s), a copy of which must be transmitted with
this Letter of Transmittal. If Old Notes to which this Letter of Transmittal
relate are held of record by two or more joint Holders, then all such Holders
must sign this Letter of Transmittal. If signature is by a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation or other
person acting in a fiduciary or representative capacity, then such person must
(i) set forth his or her full title below and (ii) unless waived by the Issuers,
submit evidence satisfactory to the Issuer of such person's authority so to act.
See Instruction 5 regarding the completion of this Letter of Transmittal,
printed below.
Name(s):........................................................................
................................................................................
(Please Type or Print)
Capacity:.......................................................................
Address:........................................................................
(Include Zip Code)
MEDALLION SIGNATURE GUARANTEE (If
Required by Instruction 5)
Certain signatures must be Guaranteed by an Eligible Institution.
Signature(s) Guaranteed by an Eligible Institution:.............................
(Authorized Signature)
................................................................................
(Title)
................................................................................
(Name of Firm)
................................................................................
(Address, Include Zip Code)
................................................................................
(Area Code and Telephone Number)
7
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. Delivery of this Letter of Transmittal and Old Notes or Book-Entry
Confirmations. All physically delivered Old Notes or any confirmation of a
book-entry transfer to the Exchange Agent's account at the Book-Entry Transfer
Facility of Old Notes tendered by book-entry transfer (a "Book-Entry
Confirmation"), as well as a properly completed and duly executed copy of this
Letter of Transmittal or facsimile hereof, and any other documents required by
this Letter of Transmittal, must be received by the Exchange Agent at its
address set forth herein prior to 5:00 p.m., New York City time, on the
Expiration Date. The method of delivery of the Old Notes, this Letter of
Transmittal and all other required documents to the Exchange Agent is at the
election and risk of the Holder and, except as otherwise provided below, the
delivery will be deemed made only when actually received or confirmed by the
Exchange Agent. Instead of delivery by mail, it is recommended that the Holder
use an overnight or hand delivery service. In all cases, sufficient time should
be allowed to assure delivery to the Exchange Agent before the Expiration Date.
No Letter of Transmittal or Old Notes should be sent to the Issuers.
2. Guaranteed Delivery Procedures. Holders who wish to tender their Old
Notes and (a) whose Old Notes are not immediately available, or (b) who cannot
deliver their Old Notes, this Letter of Transmittal or any other documents
required hereby to the Exchange Agent prior to the Expiration Date or (c) who
are unable to complete the procedure for book-entry transfer on a timely basis,
must tender their Old Notes according to the guaranteed delivery procedures set
forth in the Prospectus. Pursuant to such procedures: (i) such tender must be
made by or through a firm which is a member of a registered national securities
exchange or of the National Association of Securities Dealers Inc. or a
commercial bank or a trust company having an office or correspondent in the
United States (an "Eligible Institution"); (ii) the Holder must deliver a
properly completed and signed Notice of Guaranteed Delivery (by facsimile
transmission, mail or hand delivery) to the Exchange Agent, setting on or prior
to the Expiration Date, setting forth the name and address of the Holder of the
Old Notes, the registration number(s) of such Old Notes and the principal amount
of Old Notes tendered; and (iii) the Holder must deliver the certificates for
all physically tendered shares of Old Notes, in proper form for transfer, or
Book-Entry Confirmation, as the case may be, this Letter of Transmittal, and all
other documents required by this Letter to the Exchange Agent within three (3)
New York Stock Exchange trading days after the Notice of Guaranteed Delivery is
executed.
Any Holder of Old Notes who wishes to tender Old Notes pursuant to the
guaranteed delivery procedures described above must ensure that the Exchange
Agent receives the Notice of Guaranteed Delivery prior to 5:00 p.m., New York
City time, on the Expiration Date. Upon request of the Exchange Agent, a Notice
of Guaranteed Delivery will be sent to Holders who wish to tender their Old
Notes according to the guaranteed delivery procedures set forth above.
See "The Exchange Offer - Guaranteed Delivery" section of the Prospectus.
3. Tender by Holder. Only a Holder of Outstanding Senior Subordinated Notes
may tender such Old Notes in the Exchange Offer. Any beneficial Holder of Old
Notes who is not the registered Holder and who wishes to tender should arrange
with the registered Holder to execute and deliver this Letter of Transmittal on
his behalf or must, prior to completing and executing this Letter of Transmittal
and delivering his Old Notes, either make appropriate arrangements to register
ownership of the Old Notes in such Holder's name or obtain a properly completed
bond power from the registered Holder.
4. Partial Tenders. Tenders of Old Notes will be accepted only in integral
multiples of $1,000. If less than the entire principal amount of any Old Notes
is tendered, the tendering Holder should fill in the principal amount tendered
in the fourth column, entitled "Principal Amount Tendered," of the box entitled
"Description of Old Notes Tendered" above. The entire principal amount of Old
Notes delivered to the Exchange Agent will be deemed to have been tendered
unless otherwise indicated. If the entire principal amount of all Old Notes is
not tendered, then Old Notes for the
8
<PAGE>
principal amount of Old Notes not tendered and New Notes issued in exchange for
any Old Notes accepted will be sent to the Holder at his or her registered
address, unless a different address is provided in the appropriate box on this
Letter of Transmittal, promptly after the Old Notes are accepted for exchange.
5. Signatures on This Letter of Transmittal; Bond Powers and Endorsements;
Medallion Guarantee of Signatures. If this Letter of Transmittal (or facsimile
hereof) is signed by the record Holder(s) of the Old Notes tendered hereby, the
signature must correspond with the name(s) as written on the face of the Old
Notes without alteration, enlargement or any change whatsoever. If this Letter
of Transmittal is signed by a participant in the Book-Entry Transfer Facility,
the signature must correspond with the name as it appears on the security
position listing as the Holder of the Old Notes.
If this Letter of Transmittal (or facsimile hereof) is signed by the
registered Holder or Holders of Old Notes listed and tendered hereby and the
Senior Subordinated Exchange Notes issued in exchange therefor is to be issued
(or any untendered principal amount of Old Notes are to be reissued) to the
registered Holder, the said Holder need not and should not endorse any tendered
Old Notes, nor provide a separate bond power. In any other case, such Holder
must either properly endorse the Old Notes tendered or transmit a properly
completed separate bond power with this Letter of Transmittal, with the
signatures on the endorsement or bond power guaranteed by an Eligible
Institution.
If this Letter of Transmittal (or facsimile hereof) is signed by a person
other than the registered Holder or Holders of any Old Notes listed, such Old
Notes must be endorsed or accompanied by appropriate bond powers, in each case
signed as the name of the registered Holder or Holders appears on the Old Notes.
If this Letter of Transmittal (or facsimile hereof) or any Old Notes or bond
powers are signed by trustees, executors, administrators, guardians,
attorneys-in-fact, or officers of corporations or others acting in a fiduciary
or representative capacity, such persons should so indicate when signing, and,
unless waived by the Issuers, evidence satisfactory to the Issuers of their
authority so to act must be submitted with this Letter of Transmittal.
Endorsements on Old Notes or signatures on bond powers required by this
Instruction 5 must be guaranteed by an Eligible Institution.
No signature guarantee is required if (i) this Letter of Transmittal is
signed by the registered holder(s) of the Old Notes tendered herewith (or by a
participant in the Book-Entry Transfer Facility whose name appears on a security
position listing as the owner of the tendered Old Notes) and the issuance of New
Notes (and any Old Notes not tendered or not accepted) are to be issued directly
to such registered holder(s) (or, if signed by a participant in the Book-Entry
Transfer Facility, any New Notes or Old Notes not tendered or not accepted are
to be deposited to such participant's account at such Book-Entry Transfer
Facility) and neither the box entitled "Special Delivery Instructions" nor the
box entitled "Special Issuance Instructions" has been completed, or (ii) such
Old Notes are tendered for the account of an Eligible Institution. In all other
cases, all signatures on this Letter of Transmittal must be guaranteed by an
Eligible Institution.
6. Special Registration and Delivery Instructions. Tendering holders should
indicate, in the applicable box or boxes, the name and address (or account at
the Book-Entry Transfer Facility) to which New Notes or substitute Old Notes for
principal amounts not tendered or not accepted for exchange are to be issued or
sent, if different from the name and address of the person signing this Letter
of Transmittal. In the case of issuance in a different name, the taxpayer
identification or social security number of the person named must also be
indicated.
7. Transfer Taxes. The Issuers will pay all transfer taxes, if any,
applicable to the exchange of Old Notes pursuant to the Exchange Offer. If,
however, New Notes or Old Notes for principal amounts not tendered or accepted
for exchange are to be delivered to, or are to be registered or issued in the
name of, any person other than the registered Holder of the Old Notes tendered
hereby, or if tendered Old Notes are registered in the name of any person other
than the person signing this Letter of Transmittal, or if a transfer tax is
imposed for any reason other than the exchange of Old Notes pursuant to the
Exchange Offer, then the amount of any such transfer taxes (whether imposed on
the
9
<PAGE>
registered Holder or any other persons) will be payable by the tendering Holder.
If satisfactory evidence of payment of such taxes or exemption therefrom is not
submitted with this Letter of Transmittal, the amount of such transfer taxes
will be billed directly to such tendering Holder.
EXCEPT AS PROVIDED IN THIS INSTRUCTION 7, IT WILL NOT BE NECESSARY FOR
TRANSFER TAX STAMPS TO BE AFFIXED TO THE OLD NOTES LISTED IN THIS LETTER OF
TRANSMITTAL.
8. Tax Identification Number. Federal income tax law requires that a holder
of any Old Notes which are accepted for exchange must provide the Issuers (as
payors) with its correct taxpayer identification number ("TIN"), which, in the
case of a Holder who is an individual is his or her social security number. If
the Issuers are not provided with the correct TIN, the Holder may be subject to
a $50 penalty imposed by Internal Revenue Service. (If withholding results in an
over-payment of taxes, a refund may be obtained.) Certain holders (including,
among others, all corporations and certain foreign individuals) are not subject
to these backup withholding and reporting requirements. See the enclosed
"Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9" for additional instructions.
To prevent backup withholding, each tendering Holder must provide such
Holder's correct TIN by completing the Substitute Form W-9 set forth herein,
certifying that the TIN provided is correct (or that such Holder is awaiting a
TIN), and that (i) the Holder has not been notified by the Internal Revenue
Service that such Holder is subject to backup withholding as a result of failure
to report all interest or dividends or (ii) the Internal Revenue Service has
notified the Holder that such Holder is no longer subject to backup withholding.
If the Old Notes are registered in more than one name or are not in the name of
the actual owner, see the enclosed "Guidelines for Certification of Taxpayer
Identification Number of Substitute Form W-9" for information on which TIN to
report.
The Issuers reserve the right in their sole discretion to take whatever
steps are necessary to comply with the Issuers' obligation regarding backup
withholding.
9. Validity of Tenders. All questions as to the validity, form, eligibility
(including time of receipt), and acceptance of tendered Old Notes will be
determined by the Issuers, in their sole discretion, which determination will be
final and binding. The Issuers reserve the right to reject any and all Old Notes
not validly tendered or any Old Notes, the Issuers' acceptance of which would,
in the opinion of the Issuers or their counsel, be unlawful. The Issuers also
reserve the right to waive any conditions of the Exchange Offer or defects or
irregularities in tenders of Old Notes as to any ineligibility of any Holder who
seeks to tender Old Notes in the Exchange Offer. The interpretation of the terms
and conditions of the Exchange Offer (including this Letter of Transmittal and
the instructions hereto) by the Issuers shall be final and binding on all
parties. Unless waived, any defects or irregularities in connection with tenders
of Old Notes must be cured within such time as the Issuers shall determine. The
Issuers will use reasonable efforts to give notification of defects or
irregularities with respect to tenders of Old Notes, but shall not incur any
liability for failure to give such notification.
10. Waiver of Conditions. The Issuers reserve the absolute right to waive,
in whole or in part, any of the conditions to the Exchange Offer set forth in
the Prospectus.
11. No Conditional Tender. No alternative, conditional, irregular or
contingent tender of Old Notes or transmittal of this Letter of Transmittal will
be accepted.
12. Mutilated, Lost, Stolen or Destroyed Outstanding Senior Subordinated
Notes. Any Holder whose Old Notes have been mutilated, lost, stolen or destroyed
should contact the Exchange Agent at the address indicated above for further
instructions.
13. Requests for Assistance or Additional Copies. Requests for assistance or
for additional copies of the Prospectus or this Letter of Transmittal may be
directed to the Exchange Agent at the address or telephone number set forth on
the cover page of this Letter of Transmittal. Holders may also contact their
broker, dealer, commercial bank, trust company
10
<PAGE>
or other nominee for assistance concerning the Exchange Offer.
14. Acceptance of Tendered Old Notes and issuance of New Notes; Return of
Old Notes. Subject to the terms and conditions of the Exchange Offer, the
Issuers will accept for exchange all validly tendered Old Notes as soon as
practicable after the Exchange Date and will issue New Notes therefor as soon as
practicable thereafter. For purposes of the Exchange Offer, the Issuers shall be
deemed to have accepted tendered Old Notes when, as and if the Issuers have
given written and oral notice thereof to the Exchange Agent. If any tendered Old
Notes are not exchanged pursuant to the Exchange Offer for any reason, such
unexchanged Old Notes will be returned, without expense, to the undersigned at
the address shown above (or credited to the undersigned's account at the
Book-Entry Transfer Facility designated above) or at a different address as may
be indicated under the box entitled "Special Delivery Instructions."
15. Withdrawal. Tenders may be withdrawn only pursuant to the limited
withdrawal rights set forth in the Prospectus under the caption "The Exchange
Offer - Withdrawal Rights."
IMPORTANT: This Letter of Transmittal or a manually signed facsimile hereof
(together with the Old Notes (which must be delivered by Book-Entry Transfer or
in original hard copy form)) or the Notice of Guaranteed Delivery must be
received by the Exchange Agent prior to the Expiration Date.
11
<PAGE>
(TO BE COMPLETED BY ALL TENDERING HOLDERS (SEE INSTRUCTION 5))
PAYOR'S NAME: THE MAJESTIC STAR CASINO, LLC
<TABLE>
<S> <C> <C>
SUBSTITUTE Part I-Taxpayer Identification Number Part II-For Payees Exempt From
FORM W-9 For all accounts, enter your Backup Withholding, (see enclosed
taxpayer identification number in Guidelines)
Payer's Request for the appropriate box. For most indi-
Taxpayer Identification viduals and sole proprietors, this is
Number your social security number. For
other entities, it is your Employer
Department of the Treasury, Identification Number. If you do not
Internal Revenue Service have a number, see How to Obtain a
TIN in the enclosed Guidelines.
Note: If the account is in more than
one name, see the chart on page 2 of
the enclosed Guidelines to deter-
mine what number to enter.
-------------------------------------------------------------------
Social Security or Employer Identification Number
</TABLE>
Certification - Under penalties of perjury, I certify that:
(1) The number shown on this form is my correct Taxpayer Identification
Number (or I am waiting for a number to be issued to me), and either (a) I have
mailed or delivered an application to receive a taxpayer identification number
to the appropriate Internal Revenue Service Center or Social Security
Administration Office or (b) I intend to mail or deliver an application in the
near future. I understand that if I do not provide a taxpayer identification
number within sixty (60) days, 31 % of all reportable payments made to me
thereafter will be withheld until I provide a number;
(2) I am not subject to backup withholding either because (a) I am
exempt from backup withholding, or (b) I have not been notified by the Internal
Revenue Service ("IRS") that I am subject to backup withholding as a result of a
failure to report all interest or dividends, or (c) the IRS has notified me that
I am no longer subject to backup withholding; and
(3) Any other information provided on this form is true, correct and
complete.
SIGNATURE ______________________________________ DATE _____________, 1999
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITH
HOLDING OF 31% OF ANY PAYMENTS MADE TO YOU WITH RESPECT TO THE NEW
NOTES. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF
TAX PAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR
ADDITIONAL DETAILS.
12
<PAGE>
EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY
for
Tender of
107/8% Senior Secured Notes due 2006, Series B
in Exchange for all Outstanding
107/8% Senior Secured Notes due 2006, Series A
THE MAJESTIC STAR CASINO, LLC
THE MAJESTIC STAR CASINO CAPITAL CORP.
This form or one substantially equivalent hereto must be used by a holder, to
accept the Exchange Offer of The Majestic Star Casino, LLC, an Indiana limited
liability company (the "Company"), and The Majestic Star Casino Capital Corp.,
an Indiana corporation ("Capital" and together with the Company, the "Issuers"),
who wishes to tender 107/8% Senior Secured Notes due 2006, Series A (the "Old
Notes") to the Exchange Agent pursuant to the guaranteed delivery procedures
described in "The Exchange Offer -- Guaranteed Delivery" of the Issuer's
Prospectus dated ________, 1999 (the "Prospectus") and in Instruction 2 to the
related Letter of Transmittal. Any holder who wishes to tender Old Notes
pursuant to such guaranteed delivery procedures must ensure that the Exchange
Agent receives this Notice of Guaranteed Delivery prior to the Expiration Date
(as defined below) of the Exchange Offer. Capitalized terms used but not defined
herein have the meanings ascribed to them in the Prospectus or the Letter of
Transmittal.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON __________,
1999, UNLESS EXTENDED (THE "EXPIRATION DATE"). OLD NOTES TENDERED IN THE
EXCHANGE OFFER MAY BE WITHDRAWN AT ANY TIME PRIOR TO THE EXPIRATION DATE.
The Exchange Agent for the Exchange Offer is:
IBJ WHITEHALL BANK & TRUST COMPANY
<TABLE>
<S> <C> <C>
By Facsimile (for eligible
By Registered or Certified Mail: By Hand or Overnight Courier institutions only)
P.O. Box 84 One State Street (212) 858-2611
Bowling Green Station New York, New York 10004 To confirm
Att: Reorganizing Operations Department Attn: Securities Processing Window, transmission call:
Subcellar One, (SC-1) (212) 858-2103
</TABLE>
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE, OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN
THE ONE LISTED ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
THIS NOTICE OF GUARANTEED DELIVERY IS NOT TO BE USED TO GUARANTEE SIGNATURES. IF
A SIGNATURE ON A LETTER OF TRANSMITTAL IS REQUIRED TO BE GUARANTEED BY AN
"ELIGIBLE INSTITUTION" UNDER THE INSTRUCTIONS THERETO, SUCH SIGNATURE GUARANTEE
MUST APPEAR IN THE APPLICABLE SPACE PROVIDED IN THE BOX ON THE LETTER OF
TRANSMITTAL FOR GUARANTEE OF SIGNATURES.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to the Issuers, upon the terms and subject to
the conditions set forth in the Prospectus and the related Letter of
Transmittal, receipt of which is hereby acknowledged, the principal amount of
Old Notes set forth below pursuant to the guaranteed delivery procedures set
forth in the Prospectus and in Instruction 2 of the Letter of Transmittal.
The undersigned hereby tenders the Old Notes listed below:
<TABLE>
<S> <C>
AGGREGATE
CERTIFICATE NUMBERS(S) (IF KNOWN) OF OLD NOTES PRINCIPAL AMOUNT AGGREGATE
OR ACCOUNT NUMBER REPRESENTED PRINCIPAL
AT THE BOOK-ENTRY FACILITY BY NOTE AMOUNT TENDERED
PLEASE SIGN AND COMPLETE
Signatures of Registered Holder(s) or Date: . . . . . . . . . . . . . . . . . .
Authorized Signatory: . . . . . . . . . . . . . . . . . . . . Address: . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Area Code and Telephone No. . . . . . . .
Name(s) of Registered Holder(s):. . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
</TABLE>
This Notice of Guaranteed Delivery must be signed by the Holder(s) exactly
as their name(s) appear on certificates for Old Notes or on a security position
listing as the owner of Old Notes, or by person(s) authorized to become
Holder(s) by endorsements and documents transmitted with this Notice of
Guaranteed Delivery. If signature is by a trustee, executor, administrator,
guardian, attorney-in-fact, officer or other person acting in a fiduciary or
representative capacity, such person must provide the following information.
PLEASE PRINT NAME(S) AND ADDRESS(ES)
Name(s):
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capacity:
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Address(es):
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
<PAGE>
GUARANTEE
(Not To Be Used for Signature Guarantee)
The undersigned, a firm which is a member of a registered national
Securities Exchange or of the National Association of Securities Dealers, Inc.,
or is a commercial bank or trust company having an office or correspondence in
the United States, or is otherwise an "eligible guarantor institution" within
the meaning of Rule 17Ad-15 under the Securities Exchange Act of 1934,
guarantees deposit with the Exchange Agent of the Letter of Transmittal (or
facsimile thereof), together with the Old Notes tendered hereby in proper form
for transfer (or confirmation of the book-entry transfer of such Old Notes into
the Exchange Agent's account at the Book-Entry Transfer Facility described in
the Prospectus under the caption "The Exchange Offer -- Guaranteed Delivery" and
in the Letter of Transmittal and any other required documents, all by 5:00 p.m.,
New York City time, within three (3) New York Stock Exchange trading days
following the date hereof.
Name of Firm:___________________________________________________________________
Address:________________________________________________________________________
(Include Zip Code)
Area Code and Telephone Number:_________________________________________________
Authorized Signature:___________________________________________________________
Name:___________________________________________________________________________
Title:__________________________________________________________________________
(Please Type or Print)
Date:____________________, 1999
DO NOT SEND OLD NOTES WITH THIS FORM. ACTUAL SURRENDER OF OLD NOTES MUST BE MADE
PURSUANT TO, AND BE ACCOMPANIED BY A PROPERLY COMPLETED AND DULY EXECUTED LETTER
OF TRANSMITTAL AND ANY OTHER REQUIRED DOCUMENTS.
INSTRUCTIONS FOR NOTICE OF GUARANTEED DELIVERY
1. Delivery of this Notice of Guaranteed Delivery. A properly completed and
duly executed copy of this Notice of Guaranteed Delivery and any other documents
required by this Notice of Guaranteed Delivery must be received by the Exchange
Agent at its address set forth herein prior to the Expiration Date. The method
of delivery of this Notice of Guaranteed Delivery and any other required
documents to the Exchange Agent is at the election and sole risk of the holder,
and the delivery will be deemed made only when actually received by the Exchange
Agent. If delivery is by mail, registered mail with return receipt requested,
properly insured, is recommended. As an alternative to delivery by mail the
holders may wish to consider using an overnight or hand delivery service. In all
cases, sufficient time should be allowed to assure timely delivery. For a
description of the guaranteed delivery procedures, see Instruction 2 of the
Letter of Transmittal.
2. Signatures on this Notice of Guaranteed Delivery. If this Notice of
Guaranteed Delivery is signed by the registered holder(s) of the Old Notes
referred to herein, the signature must correspond with the name(s) written on
the face of the Old Notes without alteration, enlargement, or any change
whatsoever. If this Notice of Guaranteed Delivery is signed by a participant of
the Book-Entry Transfer Facility whose name appears on a security position
listing as the owner of the Old Notes, the signature must correspond with the
name shown on the security position listing as the owner of the Old Notes.
<PAGE>
If this Notice of Guaranteed Delivery is signed by a person other than the
registered holder(s) of any Old Notes listed or a participant of the Book-Entry
Transfer Facility, this Notice of Guaranteed Delivery must be accompanied by
appropriate bond powers, signed as the name of the registered holder(s) appears
on the Old Notes or signed as the name of the participant shown on the
Book-Entry Transfer Facility's security position listing.
If this Notice of Guaranteed Delivery is signed by a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation, or other
person acting in a fiduciary or representative capacity, such person should so
indicate when signing and submit with the Letter of Transmittal evidence
satisfactory to the Issuer of such person's authority to so act.
3. Requests for Assistance or Additional Copies. Questions and requests for
assistance and requests for additional copies of the Prospectus may be directed
to the Exchange Agent at the address specified in the Prospectus. Holders may
also contact their broker, dealer, commercial bank, trust company, or other
nominee for assistance concerning the Exchange Offer.
