<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number: 333-06489
THE MAJESTIC STAR CASINO, LLC
(Exact name of registrant as specified in its charter)
INDIANA 43-1664986
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
ONE BUFFINGTON HARBOR DRIVE
GARY, INDIANA 46406-3000
(219) 977-7823
(Registrant's address and telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to filing requirements
for the past 90 days.
Yes X No
------ -----
Shares outstanding of each of the registrant's classes of common stock as of
September 30, 1999:
Class Number of shares
- ----- ----------------
Not applicable Not applicable
<PAGE> 2
THE MAJESTIC STAR CASINO, LLC
INDEX
<TABLE>
<CAPTION>
Page No.
<S> <C>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets, as of September 30, 1999 (Unaudited) and
December 31, 1998................................................. 1
Statements of Income (Unaudited) for the three and nine months
ended September 30, 1999 and 1998 ................................ 2
Statements of Cash Flows (Unaudited) for the nine months ended
September 30, 1999 and 1998 ...................................... 3
Notes to Financial Statements (Unaudited) ........................ 4
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations ............................................ 7
Item 3. Quantitative and Qualitative Disclosures About Market Risk ....... 19
PART II OTHER INFORMATION
Item 1. Legal Proceedings ................................................ 19
Item 2. Changes in Securities and Use of Proceeds ........................ 19
Item 3. Defaults Upon Senior Securities .................................. 19
Item 4. Submission of Matters to a Vote of Security Holders .............. 19
Item 5. Other Information ................................................ 19
Item 6. Exhibits and Reports on Form 8-K ................................. 20
SIGNATURES ................................................................ 21
</TABLE>
i
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
THE MAJESTIC STAR CASINO, LLC
BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ........................................... $ 18,427,471 $ 17,295,401
Accounts receivable, less allowance for doubtful
accounts of $24,450 and $148,608, respectively ................. 960,137 850,086
Inventories ......................................................... 58,927 41,948
Prepaid expenses .................................................... 807,235 984,512
Restricted cash ..................................................... 7,491,175 --
------------- -------------
Total current assets ............................................ 27,744,945 19,171,947
Property, equipment, and vessel improvements, net ........................ 54,280,234 55,953,220
Other assets:
Deferred financing costs, less accumulated amortization
of $208,608 and $1,544,086, respectively ...................... 5,291,741 2,657,129
Deferred costs, less accumulated amortization
of $3,717,962 and $2,899,062, respectively ..................... 1,934,067 2,762,967
Investment in Buffington Harbor Riverboats, L.L.C ................... 38,834,030 40,748,887
Other assets and deposits ........................................... 3,981,710 3,966,710
------------- -------------
Total other assets .............................................. 50,041,548 50,135,693
------------- -------------
Total assets .................................................... $ 132,066,727 $ 125,260,860
============= =============
LIABILITIES AND MEMBERS' EQUITY
Current liabilities:
Current maturities of long-term debt ................................ $ 8,174,121 $ 1,945,724
Accounts payable .................................................... 670,567 428,070
Other accrued liabilities:
Payroll and related ............................................. 824,685 1,073,801
Interest ........................................................ 4,503,231 4,216,422
Other accrued liabilities ....................................... 3,842,998 3,039,970
Due to Buffington Harbor Riverboats, L.L.C ...................... 708,921 405,010
------------- -------------
Total current liabilities .................................. 18,724,523 11,108,997
Long-term debt, net of current maturities ................................ 129,394,964 108,390,332
Note to member ........................................................... -- 8,759,355
------------- -------------
Total long-term liabilities ................................ 129,394,964 117,149,687
------------- -------------
Total Liabilities .......................................... 148,119,487 128,258,684
------------- -------------
Members' Equity:
Members' contributions .............................................. 24,000,000 24,000,000
Retained earnings (accumulated deficit) ............................. (40,052,760) (26,997,824)
------------- -------------
Total members' equity ...................................... (16,052,760) (2,997,824)
Total Liabilities and Members' Equity ...................... $ 132,066,727 $ 125,260,860
============= =============
</TABLE>
1
<PAGE> 4
The accompanying notes are an integral part of these financial statements.
THE MAJESTIC STAR CASINO, LLC
Statements of Income
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
Casino .................................... $ 28,910,478 $ 27,358,289 $ 88,323,765 $ 82,577,717
Food and beverage ......................... 467,593 385,717 1,435,575 1,243,858
Other ..................................... 270,064 219,312 738,063 1,037,204
------------ ------------ ------------ ------------
Gross revenues ........................ 29,648,135 27,963,318 90,497,403 84,858,779
------------ ------------ ------------ ------------
less promotional allowances ........... (86,993) (61,632) (226,284) (272,489)
Net revenues .......................... 29,561,142 27,901,686 90,271,119 84,586,290
------------ ------------ ------------ ------------
Costs and Expenses:
Casino .................................... 5,100,062 4,850,343 15,315,611 13,820,706
Gaming and admission taxes ................ 8,151,686 8,136,091 24,814,655 24,442,951
Food and beverage ......................... 607,688 582,209 1,843,777 1,758,573
Advertising and promotion ................. 2,325,335 1,827,905 5,644,121 8,474,812
General and administrative ................ 5,973,380 5,945,731 18,352,857 18,084,074
Economic incentive - City of Gary ......... 900,297 857,951 2,735,689 2,564,468
Depreciation and amortization ............. 2,152,007 1,931,037 6,066,533 5,763,454
Loss on disposition of assets ............. -- 54,750 -- 958,425
------------ ------------ ------------ ------------
Total costs and expenses .............. 25,210,455 24,186,017 74,773,243 75,867,463
------------ ------------ ------------ ------------
Operating income ...................... 4,350,687 3,715,669 15,497,876 8,718,827
------------ ------------ ------------ ------------
Other Income (Expense):
Loss on investment in
Buffington Harbor Riverboats, L.L.C ... (706,687) (852,977) (2,110,678) (2,453,511)
Interest income ........................... 183,127 182,595 579,257 642,285
Interest expense .......................... (3,857,758) (3,819,693) (11,615,781) (11,449,356)
Interest expense to affiliate ............. -- (135,693) (167,454) (426,376)
------------ ------------ ------------ ------------
Total other income (expense) .......... (4,381,318) (4,625,768) (13,314,656) (13,686,958)
------------ ------------ ------------ ------------
Income (loss) before extraordinary item (30,631) (910,099) 2,183,220 (4,968,131)
Extraordinary Item:
Loss on bond redemption ................... -- -- (15,238,156) --
------------ ------------ ------------ ------------
Net (Loss) ............................ $ (30,631) $ (910,099) $(13,054,936) $ (4,968,131)
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE> 5
THE MAJESTIC STAR CASINO, LLC
Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1999 SEPTEMBER 30, 1998
------------------- -------------------
<S> <C> <C>
Cash Flows From Operating Activities
Net loss ................................................................... $ (13,054,936) $ (4,968,131)
Adjustments to reconcile net loss to net cash
provided by operating activities--
Depreciation .......................................................... 4,681,974 4,449,706
Amortization .......................................................... 1,384,559 1,313,748
Loss on investment in Buffington Harbor Riverboats, L.L.C ............. 2,110,678 2,453,511
Loss on disposal of assets ............................................ -- 958,425
Loss on bond redemption ............................................... 15,238,156 --
(Increase) decrease in accounts receivable, net ...................... (110,051) 24,433
Increase in inventories ............................................... (16,979) (2,110)
Decrease in prepaid expenses .......................................... 177,277 59,805
Increase in other assets .............................................. (3,090,051) (1,425)
Increase (decrease) in accounts payable .............................. 242,497 (763,809)
Increase (decrease) in accrued payroll and other expenses ............ (249,116) (637,605)
Increase in accrued interest .......................................... 286,809 4,024,540
Increase in other accrued liabilities ................................. 1,022,780 599,677
------------- -------------
Net cash provided by operating activities ................................. 8,623,597 7,510,765
------------- -------------
Cash Flows From Investing Activities
Acquisition of property, equipment and vessel improvements ............ (3,008,988) (1,852,177)
Increase in deposits ................................................. (15,000) (4,280,622)
Investment in Buffington Harbor Riverboats, L.L.C ..................... (195,822) (260,369)
Decrease in restricted cash ........................................... -- 11,904,716
------------- -------------
Net cash (used) provided by investment activities .......................... (3,219,810) 6,730,096
------------- -------------
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(decrease) in short-term debt ................................. 6,000,000 (100,694)
Cash paid to reduce long-term debt .................................... (10,271,718) (3,424,461)
------------- -------------
Net cash used by financing activities ...................................... (4,271,717) (3,525,155)
------------- -------------
Net increase in cash and cash equivalents .................................. 1,132,070 10,715,706
Cash and cash equivalents, beginning of period ............................. 17,295,401 8,083,594
------------- -------------
Cash and cash equivalents, end of period ................................... $ 18,427,471 $ 18,799,300
============= =============
Interest paid:
Principal Member ...................................................... $ 167,455 $ 576,827
Equipment Debt ........................................................ $ 367,392 $ 580,613
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.
3
<PAGE> 6
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 of 1999, a wholly owned
subsidiary, The Majestic Star Casino Capital Corp., was formed to facilitate the
offering of new debt. The Majestic Star Casino Capital Corp. has no assets,
liabilities or operations.
The accompanying unaudited financial statements 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 nine months ended
September 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.
4
<PAGE> 7
The following represents selected financial information of BHR:
Buffington Harbor Riverboats, L.L.C.
Statements of Income
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Gross Revenue ......................... $ 4,866,261 $ 4,698,117 $ 14,395,911 $ 14,598,640
Operating Income( Loss) ............... $ 89,302 $ (262,762) $ 269,403 $ (499,993)
Net Loss .............................. $ (1,413,374) $ (1,739,484) $ (4,221,356) $ (4,940,553)
</TABLE>
NOTE 3 -- DEBT REFINANCING
During the quarter ended June 30, 1999, the Company refinanced a substantial
portion of its long-term debt. $99.0 million of the 12-3/4% Senior Secured Notes
with Contingent Interest were redeemed and $130.0 million of 10-7/8% Senior
Secured Notes were issued. $7.5 million of cash has been restricted for the
payment of principal, premium, and interest related to the $6.0 million
principal amount of unredeemed 12-3/4% Senior Secured Notes with Contingent
Interest.
NOTE 4 -- EXTRAORDINARY ITEM - LOSS ON BOND REDEMPTION
In connection with the Company's refinancing of its long-term debt, the Company
charged $15.2 million 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, 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.
On October 6, 1999, the Company was issued notices of proposed assessment by the
Indiana Department of Revenue for sales and use tax deficiencies, plus interest,
for the years ended December 31, 1996 and December 31, 1997. The alleged
deficiencies relate primarily to the riverboat vessel constructed in 1997. The
tax deficiency assessed for 1996 is approximately
5
<PAGE> 8
$300,000 including interest. The tax deficiency assessed for 1997 is
approximately $2.1 million including interest. The Company believes that the
assessment incorrectly classifies the vessel as personal property when the
statute authorizing gaming in Indiana classifies the vessel as real property.
The Company is consulting with legal counsel and intends to file a written
protest and demand for a hearing with the Indiana Department of Revenue.
However, it is too early to determine the outcome of such a protest and the
effect, if any, on the Company's financial position.
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
relatively 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.
6
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
STATEMENT ON FORWARD-LOOKING INFORMATION
This quarterly report includes various "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended, which represent the
Company's expectations or beliefs concerning future events. Statements
containing expressions such as "believes," "anticipates" or "expects" used in
the Company's press releases and reports filed with the Securities and Exchange
Commission (including periodic reports on Form 10-K and Form 10-Q) are intended
to identify forward-looking statements. All forward-looking statements involve
risks and uncertainties. Although the Company believes its expectations are
based upon reasonable assumptions within the bounds of its knowledge of its
business and operations, there can be no assurances that actual results will not
materially differ from expected results. The Company cautions that these and
similar statements included in this report and in previously filed periodic
reports are further qualified by important factors that could cause actual
results to differ materially from those in the forward-looking statements. Such
factors include, without limitation, the following: the purchase of real estate
for, and the design and construction of, a covered parking facility located at
the Company's gaming complex; the ability to fund planned development needs and
to service debt from existing operations and from new financing; increased
competition in existing markets or the opening of new gaming jurisdictions; a
decline in the public acceptance of gaming; the limitation, conditioning or
suspension of the Company's gaming license; increases in or new taxes imposed on
gaming revenues or gaming devices; a finding of unsuitability by regulatory
authorities with respect to the Company's officers, or key employees; loss
and/or retirement of key executives; significant increase in fuel or
transportation prices; adverse economic conditions in the Company's markets;
severe and unusual weather in the Company's markets and adverse results of
significant litigation matters.
Readers are cautioned not to place undue reliance on forward-looking statements,
which speak only as of the date thereof. The Company undertakes no obligation to
publicly release any revisions to such forward-looking statements to reflect
events or circumstances after the date hereof.
OVERVIEW
The Company was formed in December 1993 as an Indiana limited liability company
to develop a riverboat casino in the City. The Company's efforts resulted in the
IGC granting the Company a five year riverboat owner's license on June 3, 1996.
The Company began operations on June 7, 1996.
The Company and the Joint Venture Partner, the holder of a second gaming license
to operate from the City, formed Buffington Harbor Riverboats, L.L.C. ("BHR") to
own and operate certain common facilities at Buffington Harbor (the "Gaming
Complex") such as the guest pavilion, vessel berths, parking lots and other
infrastructure. The Company and the Joint Venture Partner each have a
fifty-
7
<PAGE> 10
percent ownership interest in BHR.
The Company's operations through October 19, 1997, were conducted on the
Chartered Vessel. The Chartered Vessel was chartered pursuant to a five year
lease, which began in May 1996, and contained approximately 26,000 square feet
of gaming space, 932 slot machines and 50 table games.
In 1996, the Company entered into various agreements for the design, engineering
and construction of the Permanent Vessel. The Chartered Vessel was replaced with
the Permanent Vessel on October 27, 1997. The Permanent Vessel, which is owned
by the Company, contains approximately 43,000 square feet of casino space on
three decks, approximately 1,426 slot machines and 57 table games. The Permanent
Vessel has an atrium, escalators and elevators.
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 effective March 1, 1998, "as-is,
where-is" at Erie, Pennsylvania, from the Company, the lessee. The Company also
agreed to release a $500,000 escrow account with accrued interest thereon, free
and clear of any claims thereon, to New Yorker Acquisition Corporation in lieu
of restoring the Chartered Vessel back to its original condition. As of March 1,
1998, all obligations of New Yorker Acquisition Corporation and the Company have
been fully satisfied and the parties have no further obligations under the
original charter agreement. During the six months ended June 30, 1998, the
Company wrote-off assets previously utilized and/or left on board the Chartered
Vessel that had a net book value of approximately $755,000.
The federal law that prohibited cruising on federal waterways was amended during
the fourth quarter of 1996 to allow cruises and, as a result, the Indiana Gaming
Commission advised the Company that cruising could commence November 15, 1996,
subject to winter weather conditions. However, due primarily to winter weather
conditions during the first and second quarters of 1999, 1998 and 1997, the
Company conducted a significant amount of its gaming operations with the
Permanent Vessel or the Chartered Vessel docked. The Company resumed a regular
cruising schedule during the second quarter of 1999.
Because of the climate in the Chicago metropolitan area, the Company's
operations are expected to be seasonal with stronger results expected during the
period May through September. Accordingly, the Company's 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.
YEAR 2000 ISSUE
The approach of the year 2000 has become a potential problem for businesses
utilizing computers in their operations since many computer programs 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"). Management has undertaken a comprehensive assessment of the Company's
exposure to the Year 2000 Issue and what will be required to ensure that the
Company is year 2000 compliant.
8
<PAGE> 11
The primary computer programs utilized in the Company's operations and financial
reporting systems have been acquired from independent software vendors. The
Company has contacted these vendors to determine whether their systems are year
2000 compliant, and, if not, establish timelines as to when the Company will
receive the required upgrades that assure that these systems will be year 2000
compliant. As of September 30, 1999, the casino related computer programs
utilized in the Company's operations have been upgraded, and the software
vendors have represented that such programs are year 2000 compliant. Maintenance
or modification costs associated with the Year 2000 Issue will be expensed as
incurred, while the costs of any new software will be capitalized and amortized
over the software's useful life. The Company does not expect to incur costs in
connection with the Year 2000 Issue that would have a material impact on
operations. Although the Company presently believes that all of its software
programs are year 2000 compliant, there can be no assurances that the Company
will not be adversely affected by the Year 2000 Issue.
RESULTS OF OPERATIONS
The following discussions of the results of operations provides a comparison of
the nine and three month periods ended September 30, 1999, with the nine and
three month periods ended September 30, 1998. Gross revenues were approximately
$90.5 million and $29.6 million during the nine month and three month periods
ended September 30, 1999, compared to $84.9 million and $28.0 million during the
nine and three month periods ended September 30, 1998, respectively. Due to
winter weather conditions, the Company did not operate all or part of two days
during the three months ended March 31, 1999. The Company also did not operate
for three days during the nine month period ended September 30, 1998, due to
winter weather conditions and mechanical difficulties.
The following table sets forth: (i) summary information from the Company's
statements of income, and information relative to EBITDA (as defined below)
derived therefrom; and (ii) detailed information from the Company's statements
of income, as well as information relative to EBITDA, expressed as a percentage
of gross revenues.
STATEMENTS OF INCOME - - SUMMARY INFORMATION
(dollars in thousands)
<TABLE>
<CAPTION>
Three Months Ended September 30, Nine Months Ended September 30,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Gross Revenues (1)..................... $29,648 $27,963 $90,497 $ 4,859
Operating Income (2), (3).............. $ 4,351 $ 3,716 $15,498 $ 8,719
EBITDA (4)............................ $ 6,503 $ 5,701 $21,564 $16,196
</TABLE>
9
<PAGE> 12
<TABLE>
<CAPTION>
STATEMENTS OF INCOME --AS A PERCENTAGE OF GROSS REVENUES
Three Months Ended September 30, Nine Months Ended September 30,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
Casino............................ 97.5% 97.8% 97.6% 97.3%
Food and beverage................. 1.6% 1.4% 1.6% 1.5%
Other (1)......................... 0.9% 0.8% 0.8% 1.2%
----- ----- ----- -----
Gross Revenues................ 100.0% 100.0% 100.0% 100.0%
less promotional allowances... (0.3)% (0.2)% (0.3)% (0.3)%
Net Revenues.................. 99.7% 99.8% 99.7% 99.7%
Costs and Expenses:
Casino............................ 17.2% 17.3% 16.9% 16.3%
Gaming and admission taxes........ 27.5% 29.1% 27.4% 28.8%
Food and beverage................. 2.1% 2.1% 2.1% 2.1%
Advertising and promotion......... 7.8% 6.5% 6.2% 10.0%
General and administrative (2).... 20.1% 21.3% 20.3% 21.3%
Economic incentive-City of Gary... 3.0% 3.1% 3.0% 3.0%
Depreciation and amortization..... 7.3% 6.9% 6.7% 6.8%
Loss on disposition of assets (3) -- 0.2% -- 1.1%
----- ----- ----- -----
Total......................... 85.0% 86.5% 82.6% 89.4%
Operating Income:...................... 14.7% 13.3% 17.1% 10.3%
Other Income (Expense):
Loss on investment in BHR......... (2.4)% (3.1)% (2.3)% (2.9)%
Interest income................... 0.6% 0.7% 0.6% 0.8%
Interest expense.................. (13.0)% (13.7)% (12.8)% (13.5)%
Interest expense to affiliate..... -- (0.5)% (0.2)% 0.5)%
----- ----- ----- -----
Total......................... (14.8)% (16.6)% (14.7)% (16.1)%
----- ----- ----- -----
Net income(loss) before
extraordinary item................ (0.1)% -- 2.4% --
Extraordinary Item:
Loss on bond redemption........... -- -- (16.8)% --
Net Income (Loss):..................... (0.1)% (3.3)% (14.4)% (5.8)%
EBITDA: (4)............................ 21.9% 20.4% 23.8% 19.1%
</TABLE>
NOTES:
1. Includes a lump sum payment in March 1998 of approximately $314,000
from the Company's Joint Venture Partner to compensate the Company for the loss
of certain parking spaces to be utilized by the Joint Venture Partner for the
construction of a hotel facility.
2. Includes approximately $752,000 during the three month period ended March 31,
1998 in expenses associated with the lease and subsequent termination of the
charter vessel lease agreement effective March 1, 1998.
3. Includes losses on disposal of assets during the three months ended September
30, 1998, and the nine months ended September 30, 1998 of approximately $55,000
and $958,000, respectively.
4. EBITDA (defined as earnings before interest, income taxes, depreciation and
amortization and, for purposes hereof, does not include 1998 payments associated
with, and termination of, the Chartered Vessel lease) is presented solely as a
supplemental disclosure to assist in the evaluation of the Company's ability to
generate cash flow. In particular, the Company believes 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 the Company's operating performance or net cash provided by
operating activities as a measure of liquidity.
10
<PAGE> 13
Results for any one or more periods are not necessarily indicative of annual
results or continuing trends.
Comparison of the Three Months Ended September 30, 1999 and 1998
Gross revenues for the three months ended September 30, 1999, amounted to
approximately $29,648,000, an increase of approximately $1,685,000 from gross
revenues recorded in the third quarter ended September 30, 1998. The 6.0%
increase in gross revenues was primarily attributable to an increase in the win
per patron.
Casino revenues during the three months ended September 30, 1999, totaled
approximately $28,910,000, of which slot machines accounted for approximately
$22,222,000 (76.9%) and table games accounted for approximately $6,688,000
(23.1%). The average number of slot machines in operation decreased to 1,421
during the three months ended September 30, 1999, from 1,517 during the three
months ended September 30, 1998. The average win per slot machine per day
increased to approximately $170 for the three months ended September 30, 1999,
from approximately $153 during the three months ended September 30, 1998. The
average number of table games in operation during the three months ended
September 30, 1999, decreased to 57 from 61 during the three months ended
September 30, 1998. The average win per table game per day during the three
months ended September 30, 1999, increased to approximately $1,275 compared to
approximately $982 during the three months ended September 30, 1998. The average
daily win per state passenger count was approximately $37 and the average daily
win per patron was approximately $65 during the three months ended September 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 three months ended September 30, 1998.
Food and beverage revenues for the three months ended September 30, 1999,
totaled approximately $468,000 or 1.6% of gross revenues, compared to
approximately $386,000 or 1.4% of gross revenues for the three months ended
September 30, 1998. Other revenue, consisted primarily of commission income,
totaling approximately $270,000, or 0.9% of gross revenues compared to
approximately $219,000 or 0.8% of gross revenues for the three months ended
September 30, 1998.
Promotional allowances (complementaries) included in the Company's gross food
revenues for the three months ended September 30, 1999, and 1998, were
approximately $87,000 and $62,000, respectively. Promotional allowances provided
to the Company's gaming patrons at facilities located in, and/or owned by BHR
for the three months ended September 30, 1999, and 1998, totaled approximately
$196,000 and $146,000, respectively, and are characterized in the financial
statements as an expense to the casino. BHR invoices the Company monthly for
these promotional allowances at cost, which approximates the retail value of
these promotional allowances.
Casino operating expenses for the three months ended September 30, 1999, totaled
approximately $5,100,000, or 17.2% of gross revenues and 17.6% of casino
revenues, respectively, compared to approximately $4,850,000, or 17.3% of gross
revenues and 17.7% of casino revenues, respectively,
11
<PAGE> 14
for the three months ended September 30, 1998. These expenses were primarily
comprised of salaries, wages and benefits, and operating and promotional
expenses of the casino. The dollar increase of $250,000 in casino operating
expenses is primarily attributed to gaming equipment rental.
Gaming and admissions taxes totaled approximately $8,152,000 for the three
months ended September 30, 1999, compared to approximately $8,136,000 for the
three months ended September 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 $900,000 was paid during
the three months ended September 30, 1999, compared to approximately $858,000 in
the three months ended September 30, 1998, to the City under an agreement
whereby the Company principally pays 3% of the adjusted gross receipts directly
to the City.
Advertising and promotion expenses for the three months ended September 30,
1999, totaled approximately $2,325,000, or 7.8% of gross revenues, compared to
approximately $1,828,000, or 6.5% of gross revenues during the three months
ended September 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 $497,000 increase in advertising
and promotion expenses during the three months ended September 30, 1999, was
primarily the result of increased expenditures as a result of competitive
changes in the marketplace including dockside gaming in Illinois and the
introduction of a national competitor in northwest Indiana.
General and administrative expenses for the three months ended September 30,
1999, were approximately $5,973,000, or 20.1% of gross revenues, compared to
$5,946,000, or 21.3% of gross revenues, during the three months ended September
30, 1998. These expenses included approximately $1,805,000 for berthing fees
paid to BHR, $1,236,000 for marine operations and $610,000 for security and
surveillance operations during the third quarter of 1999.
Depreciation and amortization for the third quarter ended September 30, 1999,
was approximately $2,152,000, or 7.3% of gross revenues, compared to
approximately $1,931,000, or 6.9% of gross revenues, during the three months
ended September 30, 1998. The $221,000 increase in depreciation and amortization
expense for the three months ended September 30, 1999, is attributable to the
deferred financing costs associated with the issuance of $130.0 million of
10-7/8% Senior Secured Notes and increased expense associated with machinery and
equipment placed into service during the past year.
Operating income for the three months ended September 30, 1999, was
approximately $4,351,000, or 14.7% of gross revenues, compared to $3,716,000, or
13.3% of gross revenues for the three months ended September 30, 1998. During
the three months ended September 30, 1998, the Company disposed of assets (slot
machines) that had a net book value of approximately $55,000. The $635,000
increase in operating income is primarily attributable to the increase of the
average daily win per patron to $65 during the three months ended September 30,
1999 from $55 during the three months ended September 30, 1998.
12
<PAGE> 15
Net interest expense for the three months ended September 30, 1998, was
$3,675,000, or approximately 12.4% of gross revenues, compared to $3,773,000, or
approximately 13.5% for the same period last year. The $98,000 decrease is
principally attributed to the repayment of the $8.8 million demand note to
Barden Development. ("BDI").
The Company's loss relating to its investment in BHR for the three months ended
September 30, 1999, was approximately $707,000. The loss represents the
Company's 50% share of BHR's non-cash net loss (primarily depreciation and
amortization).
As a result of the foregoing, the Company experienced net losses of
approximately $31,000 and $910,000 during the three months ended September 30,
1999, and 1998, respectively.
Comparison of the Nine Months Ended September 30, 1999 and 1998
Gross revenues for the nine months ended September 30, 1999, amounted to
approximately $90,497,000, an increase of $5,639,000 over gross revenues
recorded in the nine months ended September 30, 1998. The 6.6% increase in gross
revenues was attributable to an increase in the daily win per patron.
Casino revenues during the nine months ended September 30, 1999, totaled
approximately $88,324,000, of which slot machines accounted for approximately
$67,632,000 (76.6%) and table games accounted for approximately $20,692,000
(23.4%). The average number of slot machines in operation decreased to 1,435
during the nine months ended September 30, 1999, from 1,522 during the nine
months ended September 30, 1998. The average win per slot machine per day
increased to approximately $174 for the nine months ended September 30, 1999,
from approximately $153 during the nine months ended September 30, 1998. The
average number of table games in operation during the nine months ended
September 30, 1999, decreased to 58 from 61 during the nine months ended
September 30, 1998. The average win per table game per day during the nine
months ended September 30,1999, increased to approximately $1,316, compared to
approximately $1,105 during the nine months ended September 30, 1998. The
average daily win per state passenger count was approximately $37 and the
average daily win per patron was approximately $67 during the nine months ended
September 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 nine months ended September 30, 1998.
Food and beverage revenues for the nine months ended September 30, 1999, totaled
approximately $1,436,000 or 1.6% of gross revenues, compared to approximately
$1,244,000 or 1.5% of gross revenues for the nine months ended September 30,
1998. The $192,000 increase in food and beverage revenues is attributed to an
overall increase in the number of customers served. Other revenue totaling
approximately $738,000, or 0.8% of gross revenues for the nine months ended
September 30, 1999, consisted primarily of commission income compared to
approximately $1,037,000 during the nine months ended September 30, 1998. Other
revenue during the nine months ended September 30, 1998 included a non-recurring
lump sum payment of $314,000 from
13
<PAGE> 16
the Company's Joint Venture Partner to compensate the Company for the loss of
certain parking spaces to be utilized by the Joint Venture Partner for the
construction of a hotel facility.
Promotional allowances (complementaries) included in the Company's gross food
revenues for the nine months ended September 30, 1999, and 1998, were
approximately $226,000 and $272,000, respectively. The $46,000 decrease on board
the vessel was offset by increased complementaries provided at BHR operated
facilities. Promotional allowances provided to the Company's gaming patrons at
facilities located in, and/or owned by BHR for the nine months ended September
30, 1999, and 1998, totaled approximately $582,000 and $384,000, respectively,
and are characterized in the financial statements as an expense to the casino.
BHR invoices the Company monthly for these promotional allowances at cost, which
approximates the retail value of these promotional allowances.
Casino operating expenses for the nine months ended September 30, 1999, totaled
approximately $15,316,000, or 16.9% of gross revenues and 17.3% of casino
revenues, respectively, compared to approximately $13,821,000, or 16.3% of gross
revenues and 16.7% of casino revenues, respectively, for the nine months ended
September 30, 1998. These expenses were primarily comprised of salaries, wages
and benefits, and operating and promotional expenses of the casino. The dollar
increase of $1,495,000 in casino operating expenses is primarily attributed to
an increase of approximately $833,000 for gaming equipment rental and
approximately $485,000 for expenses associated with the slot club.
Gaming and admissions taxes totaled approximately $24,815,000 for the nine
months ended September 30, 1999, compared to approximately $24,443,000 for the
nine months ended September 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 $2,736,000 was paid
during the nine months ended September 30, 1999, compared to approximately
$2,564,000 in the nine months ended September 30, 1998, to the City under an
agreement whereby the Company principally pays 3% of the adjusted gross receipts
directly to the City.
Advertising and promotion expenses for the nine months ended September 30, 1999,
totaled approximately $5,644,000, or 6.2% of gross revenues, compared to
approximately $8,475,000, or 10.0% of gross revenues during the nine months
ended September 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 $2,831,000 or 33.4% decrease in
advertising and promotion expenses as a percentage of gross revenues during the
nine months ended September 30, 1999, was primarily the result of redirecting
the Company's 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 nine months ended September 30,
1999, were approximately $18,353,000, or 20.3% of gross revenues, compared to
$18,084,000, or 21.3% of gross revenues, during the nine months ended September
30, 1998. These expenses included
14
<PAGE> 17
approximately $5,321,000 for berthing fees paid to BHR, $3,858,000 for marine
operations and $1,746,000 for security and surveillance operations during the
nine months ended September 30, 1999. The dollar increase of $269,000 in these
expenses is primarily attributed to an increase for property taxes during the
nine months ended September 30, 1999.
Depreciation and amortization for the nine months ended September 30, 1999, was
approximately $6,067,000, or 6.7% of gross revenues, compared to approximately
$5,763,000, or 6.8% of gross revenues, during the nine months ended September
30, 1998. The dollar increase of $304,000 in depreciation and amortization
expense for the nine months ended September 30, 1999, is primarily attributable
to the increased expense associated with machinery and equipment placed into
service during the past year and the increased deferred financing costs
associated with the issuance of the $130.0 million of 10-7/8% Senior Secured
Notes.
Operating income for the nine months ended September 30, 1999, was approximately
$15,498,000, or 17.1% of gross revenues, compared to an operating income for the
nine months ended September 30, 1998 of $8,719,000, or 10.3% of gross revenues.
During the nine months ended September 30, 1998, the Company had a net loss on
the disposition of assets totaling approximately $958,000. The $6,779,000 or
77.8% increase in operating income is principally attributable to the increase
of the average daily win per patron to $67 during the nine months ended
September 30, 1999 from $55 during the nine months ended September 30, 1998,
combined with a 33.4% decrease in overall marketing expenses.
Net interest expense for the nine months ended September 30, 1999, was
$11,204,000, or approximately 12.4% of gross revenues, compared to $11,233,000,
or approximately 13.2% for the same period last year. The slight decrease in net
interest expense is primarily attributed to the repayment of the $8.8 million
demand note to BDI and a reduction in equipment debt. For the nine months ended
September 30, 1999, the Company paid accrued contingent interest on its 12-3/4%
Senior Secured Notes of approximately $3,018,000.
The Company's loss on the redemption of its 12-3/4% Senior Secured Notes was
approximately $15,238,000 and the loss relating to its investment in BHR for the
nine months ended September 30, 1999, was approximately $2,111,000. The loss on
investment represents the Company's 50% share of BHR's non-cash net loss
(primarily depreciation and amortization).
As a result of the foregoing, the Company experienced income before the
extraordinary item of $2,183,000 and a loss of $4,968,000 during the nine months
ended September 30, 1999 and 1998, respectively. Net losses were approximately
$13,055,000 and $4,968,000 during the nine months ended September 30, 1999, and
1998, respectively.
Earnings Before Interest, Income Taxes, Depreciation and Amortization ("EBITDA")
EBITDA is presented solely as a supplemental disclosure and is used by the
Company to assist in the evaluation of the cash generating ability of its gaming
business. EBITDA (excluding loss on
15
<PAGE> 18
disposal of assets and Chartered Vessel lease and termination payments in 1998)
during the three and nine month periods ended September 30, 1999 was
approximately $6,503,000 and $21,564,000, respectively, or 21.9% and 23.8%,
respectively, of gross revenues, compared to approximately $5,701,000 and
$16,196,000, respectively, or 20.4% and 19.1%, respectively, of gross revenues,
during the three and nine month periods ended September 30, 1998. The increase
respectively, in EBITDA for the three and nine months ended September 30, 1999
is primarily the result of an increase in the win per patron combined with a
reduction in overall marketing expenditures and stronger operating margins.
EBITDA should be viewed only in conjunction with all of the Company's financial
data and statements, and should not be construed as an alternative either to
income from operations (as an indicator of the Company's operating performance)
or to cash flows from operating activities as a measure of liquidity.
LIQUIDITY AND CAPITAL RESOURCES
During the quarter ended June 30, 1999, the Company issued $130.0 million of
10-7/8% Senior Secured Notes due 2006. In October 1999, the Company successfully
competed an exchange of its privately placed $130.0 million 10-7/8% Senior
Secured Notes Series A for $130.0 million 10-7/8% Senior Secured Notes Series B
that are registered with the Securities and Exchange Commission. The net
proceeds from the offering were utilized to redeem $99.0 million principal
amount of the Company's 12-3/4% Senior Secured Notes due 2003 with Contingent
Interest. During June 1999, approximately $7.5 million was classified as
restricted cash to effect a covenant defeasance of the $6.0 million of remaining
12-3/4% Senior Secured Notes due 2003 with Contingent Interest. Holders of the
outstanding 10-7/8% Senior Secured Notes have the right to require that the
Company repurchase the notes at a premium under certain conditions including a
change in control of the Company.
At September 30, 1999, the Company had cash and cash equivalents of
approximately $18.4 million. During the nine months ended September 30, 1999,
the Company's capital expenditures were approximately $3.0 million.
Approximately $1.0 million 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 $532,000 was
expended for upgrading computer equipment and software, including the conversion
costs related to Year 2000 compliance and approximately $320,000 was expended
for the purchase of additional slot machines. The Company also contributed
approximately $196,000 from working capital to BHR for general enhancements
during this period.
The Company has met its capital requirements through net cash from operations,
capital contributions and loans. For the nine months ended September 30, 1999,
net cash provided from operations totaled approximately $8.6 million compared to
approximately $7.5 million for the nine months ended September 30, 1998. For the
nine months ended September 30, 1999, $3.2 million in cash was used by investing
activities, compared to $6.7 million provided by investing activities for the
nine months ended September 30, 1998. The majority of this change was caused by
cash being released from restriction (primarily the completion reserve account)
during the nine months ended September 30, 1998. Net cash used by financing
activities was $4.3 million for the nine month
16
<PAGE> 19
period ended September 30, 1999, compared to $3.5 million used by financing
activities for the nine month period ended September 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 nine months ended September 30,
1999, the Company also repaid an $8.8 million demand note originally borrowed
from BDI in 1996.
As of September 30, 1999, loans included: (i) $127.8 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; and (iii) approximately $3.8 million of equipment
financing. During June 1999, approximately $7.5 million was classified as
restricted cash to effect a covenant defeasance of the $6.0 million of remaining
12-3/4% Senior Secured Notes with Contingent Interest. The 10-7/8% Senior
Secured Notes are secured by substantially all current and future assets other
than certain excluded assets. On August 2, 1999, the Company established a new
$20.0 million credit facility, which is also secured by substantially all
current and future assets, other than certain excluded assets. The lien on the
collateral securing this proposed credit facility is structurally senior to the
lien securing the 10-7/8% Senior Secured Notes.
Under the terms of its development agreement with the City, the Company
committed, among other things, to make development expenditures of $116.0
million for its casino and associated infrastructure in the City over the next
five years. The Company has met or accrued a significant portion of these
commitments. The two principal components of the remaining portion of these
commitments are as follows: (1) $10.0 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 $12.0 million 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 the gaming complex. The Company has
already expended the $12.0 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, the Company
arranged for a $12.5 million surety bond which provides collateral for the
completion of this development. The Company has deposited $3.6 million with a
bank to guarantee a letter of credit which benefits the bonding company that
provided the surety bond. The date for the Company's off-site development
commitment has been extended by the City of Gary to February 9, 2000. The
off-site development commitment is anticipated to be satisfied with the purchase
of land described in the following paragraph by the Company or an affiliate of
the Company.
The Company anticipates that additional capital contributions, currently
estimated to be between $200,000 to $300,000, for an emergency back-up generator
and a food service area upgrade may be required for the BHR facilities. Don H.
Barden, Chairman and CEO of the Company, through an affiliated company has
entered into an agreement with the City of Gary to purchase approximately 190
acres adjacent to Buffington Harbor. The initial purchase of the ground is
subject to various approvals and is expected to close with the City of Gary by
February 2, 2000. It is anticipated that a portion of this acreage will be sold
by Mr. Barden to a joint venture to be formed by the Joint Venture Partner and
the Company to jointly develop a multi-level covered parking structure. The
parking structure is expected to provide customers with approximately 2,050
covered parking spaces
17
<PAGE> 20
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 $38.5 million, including
approximately $15.0 million for the land. The Company currently expects to
contribute approximately $3.5 to $5.0 million of capital toward the project and
to fund such further investments from operations and/or loans. The Company
believes 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 its net revenues and cash flow. 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 a facility will be constructed or that the
garage will be built on terms favorable to the Company or at all.
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 Company and its Joint Venture Partner. The lease places certain restrictions
on the use of the harbor by the Company and its 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 BHR has obtained
requisite regulatory permits and completed construction of its permanent harbor,
with a monthly payment of $125,000. BHR anticipates filing the requisite
regulatory permits during 1999. If the regulatory permits are obtained, the BHR
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. The property leased by BHR is included as
part of the 190 acres previously discussed herein.
Although BDI to date has contributed approximately $24 million to the Company,
the Members' Equity Account became negative during the first quarter of 1998 and
continues to be negative as of September 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 12-3/4% Senior Secured
Notes with Contingent Interest.
Based upon the Company's anticipated future operations on board the Permanent
Vessel and capital expenditures, management believes that the available cash
flow from the Company's future operations and certain planned equipment
financings, together with the proceeds from the 10-7/8% Senior Secured Notes and
the $20.0 million line of credit, will be adequate to meet the Company's
anticipated future requirements for working capital, the remaining development
obligations to the City, and its capital expenditures and scheduled payments of
interest and principal on the Senior Secured Notes and other permitted
indebtedness for 1999. No assurance can be given, however, that such proceeds
and, operating cash flow from the Permanent Vessel, in light of increased
competition, will be sufficient for such purposes. If necessary and to the
extent permitted under the Indenture, the Company 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 the Company, or that, if
available, the financing will be on terms favorable to the Company. In addition,
there is no
18
<PAGE> 21
assurance that the Company's estimate of its reasonably anticipated liquidity
needs is accurate or that unforeseen events will not occur, resulting in the
need to raise additional funds.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Various legal proceedings are pending against the Company. Management considers
all such pending proceedings, primarily personal injury and employment claims,
to be ordinary litigation incidental to the character of the Company's business.
Management believes that the resolution of these proceedings will not,
individually or in the aggregate, have a material effect on the Company's
financial condition or results of operations.
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 $11.0
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, 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.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
19
<PAGE> 22
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
No. Description
10.1 Loan and Security Agreement, dated as of August 2, 1999,
by and between the Registrant and Foothill Capital Corporation
27 Financial Data Schedule (Edgar only)
(b) REPORTS ON FORM 8-K
None
20
<PAGE> 23
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized, on November 12, 1999.
The Majestic Star Casino, LLC
By: Barden Development Inc., Manager
By: /s/ Don H. Barden
---------------------------------------
Don H. Barden
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ Don H. Barden President and Chief Executive Officer November 12,1999
- --------------------------- of the Manager and the Company
Don H. Barden (Principal Executive Officer)
/s/ Michael F. Kelly Vice President, Chief Operating Officer November 12,1999
- --------------------------- and Chief Financial Officer
Michael E. Kelly (Principal Financial and Accounting
Officer)
</TABLE>
21
<PAGE> 24
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
10.1 Loan and Security Agreement, dated as of August 2, 1999, by
and between the Registrant and Foothill Capital Corporation
27 Financial Data Schedule (Edgar only)
22
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EXHIBIT 10.1
LOAN AND SECURITY AGREEMENT
by and between
THE MAJESTIC STAR CASINO, LLC
and
FOOTHILL CAPITAL CORPORATION
Dated as of August 2, 1999
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TABLE OF CONTENTS
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1. DEFINITIONS AND CONSTRUCTION.............................................................................1
1.1 Definitions.....................................................................................1
1.2 Accounting Terms...............................................................................28
1.3 Code...........................................................................................28
1.4 Indenture......................................................................................28
1.5 Construction...................................................................................28
1.6 Schedules and Exhibits.........................................................................28
2. LOAN AND TERMS OF PAYMENT...............................................................................28
2.1 Revolving Advances.............................................................................28
2.2 [Intentionally Omitted]........................................................................28
2.3 [Intentionally Omitted]........................................................................29
2.4 [Intentionally Omitted]........................................................................29
2.5 Overadvances...................................................................................29
2.6 Interest: Rates, Payments, and Calculations...................................................30
2.7 [Intentionally Omitted]........................................................................31
2.8 Crediting Payments; Application of Collections.................................................31
2.9 Designated Account.............................................................................31
2.10 Maintenance of Loan Account; Statements of Obligations.........................................31
2.11 Fees...........................................................................................32
2.12 LIBOR Option...................................................................................32
3. CONDITIONS; TERM OF AGREEMENT...........................................................................35
3.1 Conditions Precedent to the Initial Advance....................................................35
3.2 Conditions Precedent to all Advances...........................................................38
3.3 Condition Subsequent...........................................................................38
3.4 Term; Automatic Renewal........................................................................38
3.5 Effect of Termination..........................................................................39
3.6 Early Termination by Borrower..................................................................39
3.7 Termination Upon Event of Default..............................................................39
4. CREATION OF SECURITY INTEREST...........................................................................39
4.1 Grant of Security Interest.....................................................................39
4.2 Negotiable Collateral..........................................................................40
4.3 Collection of Accounts, General Intangibles, and Negotiable Collateral.........................40
4.4 Delivery of Additional Documentation Required..................................................40
4.5 Power of Attorney..............................................................................40
4.6 Right to Inspect...............................................................................41
5. REPRESENTATIONS AND WARRANTIES..........................................................................41
5.1 No Encumbrances................................................................................41
5.2 Membership Interests...........................................................................41
5.3 [Intentionally Omitted]........................................................................41
5.4 Equipment......................................................................................41
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5.5 Location of Inventory and Equipment............................................................42
5.6 Inventory Records..............................................................................42
5.7 Location of Chief Executive Office; FEIN.......................................................42
5.8 Due Organization and Qualification; Subsidiaries...............................................42
5.9 Due Authorization; No Conflict.................................................................42
5.10 Litigation.....................................................................................43
5.11 No Material Adverse Change.....................................................................43
5.12 Solvency.......................................................................................44
5.13 Employee Benefits..............................................................................44
5.14 Environmental Condition........................................................................44
5.15 Brokerage Fees.................................................................................45
5.16 Governmental Authority.........................................................................45
5.17 Licenses and Permits. ...................................................45
5.18 Taxation as a Partnership......................................................................46
6. AFFIRMATIVE COVENANTS...................................................................................46
6.1 Accounting System..............................................................................46
6.2 Collateral Reporting...........................................................................46
6.3 Financial Statements, Reports, Certificates....................................................46
6.4 Tax Returns....................................................................................48
6.5 Guarantor Reports..............................................................................48
6.6 [Intentionally Omitted]........................................................................48
6.7 Title to Equipment.............................................................................48
6.8 Maintenance of Equipment.......................................................................48
6.9 Taxes..........................................................................................48
6.10 Insurance......................................................................................49
6.11 No Setoffs or Counterclaims....................................................................50
6.12 Location of Inventory and Equipment............................................................50
6.13 Compliance with Laws...........................................................................50
6.14 Employee Benefits..............................................................................51
6.15 Leases.........................................................................................51
6.16 Brokerage Commissions..........................................................................52
6.17 Government Authorization.......................................................................52
6.18 License Renewals...............................................................................52
6.19 Licenses and Permits...........................................................................52
6.20 Subsidiary Guarantees..........................................................................53
6.21 Development Agreement..........................................................................53
7. NEGATIVE COVENANTS......................................................................................53
7.1 Indebtedness...................................................................................53
7.2 Liens..........................................................................................54
7.3 Restrictions on Fundamental Changes............................................................54
7.4 Disposal of Assets.............................................................................55
7.5 Change Name....................................................................................56
7.6 Guarantee......................................................................................56
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7.7 Nature of Business.............................................................................56
7.8 Prepayments and Amendments.....................................................................57
7.9 Change of Control..............................................................................57
7.10 Consignments...................................................................................57
7.11 Distributions..................................................................................57
7.12 Accounting Methods.............................................................................57
7.13 Investments....................................................................................58
7.14 Transactions with Affiliates...................................................................59
7.15 Suspension.....................................................................................60
7.16 Compensation...................................................................................60
7.17 Use of Proceeds................................................................................61
7.18 Change in Location of Chief Executive Office; Inventory and
Equipment with Bailees.........................................................................61
7.19 No Prohibited Transactions Under ERISA.........................................................61
7.20 Financial Covenants............................................................................62
7.21 Membership Interests...........................................................................62
7.22 Permitted Tax Distributions....................................................................62
7.23 Operation of Majestic Star Casino Vessel.......................................................63
7.24 Limitation on Restrictions on Subsidiary Dividends.............................................63
7.25 Restrictions on Sale and Issuance of Subsidiary Stock..........................................64
7.26 Restrictions on BHR Joint Venture..............................................................65
8. EVENTS OF DEFAULT.......................................................................................66
9. FOOTHILL'S RIGHTS AND REMEDIES..........................................................................68
9.1 Rights and Remedies. ...................................................68
9.2 Remedies Cumulative............................................................................71
10. TAXES AND EXPENSES......................................................................................71
11. WAIVERS; INDEMNIFICATION................................................................................72
11.1 Demand; Protest; etc...........................................................................72
11.2 Foothill's Liability for Collateral............................................................72
11.3 Indemnification................................................................................72
12. NOTICES.................................................................................................73
13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER..............................................................74
14. DESTRUCTION OF BORROWER'S DOCUMENTS.....................................................................74
15. GENERAL PROVISIONS......................................................................................75
15.1 Effectiveness..................................................................................75
15.2 Successors and Assigns.........................................................................75
15.3 Section Headings...............................................................................75
15.4 Interpretation.................................................................................75
15.5 Severability of Provisions.....................................................................75
15.6 Amendments in Writing..........................................................................76
15.7 Counterparts; Telefacsimile Execution..........................................................76
15.8 Revival and Reinstatement of Obligations.......................................................76
15.9 Integration....................................................................................76
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15.10 Gaming Laws...........................................................................76
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SCHEDULES AND EXHIBITS
Schedule P-1 Permitted Indebtedness
Schedule P-2 Permitted Investments
Schedule P-3 Permitted Liens
Schedule P-4 Permitted FF&E Financing
Schedule R-1 Real Property Collateral
Schedule 5.8 Borrower's Subsidiaries
Schedule 5.10 Litigation
Schedule 5.13 ERISA Benefit Plans
Schedule 5.16 Governmental Authority
Schedule 5.17 Licenses and Permits
Schedule 6.12 Location of Inventory and Equipment
Exhibit C-1 Form of Compliance Certificate
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LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT (this "Agreement"), is entered into as
of August 2, 1999, between FOOTHILL CAPITAL CORPORATION, a California
corporation ("Foothill"), with a place of business located at 11111 Santa Monica
Boulevard, Suite 1500, Los Angeles, California 900253333 and THE MAJESTIC STAR
CASINO, LLC, an Indiana limited liability company ("Borrower"), with its chief
executive office located at One Buffington Harbor Drive, Gary, Indiana
46406-3000.
The parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION.
1.1 DEFINITIONS. As used in this Agreement, the following terms shall
have the following definitions:
"Account Debtor" means any Person who is or who may become obligated
under, with respect to, or on account of, an Account.
"Accounts" means all currently existing and hereafter arising accounts,
contract rights, and all other forms of obligations owing to Borrower arising
out of the sale or lease of goods or the rendition of services by Borrower,
irrespective of whether earned by performance, and any and all credit insurance,
guaranties, or security therefor.
"Acquired Debt" means Indebtedness of a Person existing at the time
such Person is merged with or into Borrower or a Restricted Subsidiary of
Borrower or becomes a Restricted Subsidiary of Borrower, other than Indebtedness
incurred in connection with, or in contemplation of, such Person merging with or
into Borrower or a Restricted Subsidiary of Borrower or becoming a Restricted
Subsidiary of Borrower.
"Advances" has the meaning set forth in Section 2.1(a).
"Affiliate" means, as applied to any Person, any other Person who,
directly or indirectly, controls, is controlled by, is under common control
with, or is a director or officer of such Person. For purposes of this
definition, "control" means the possession, directly or indirectly, of the power
to vote 10% or more of the Stock having ordinary voting power for the election
of directors (or comparable managers) or the direct or indirect power to direct
the management and policies of a Person.
"Agreement" has the meaning set forth in the preamble hereto.
"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
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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 Early Termination Premium" means, as of any date of
determination, an amount equal to the Maximum Amount times the Applicable Early
Termination Premium Rate, in each case, as of such date of determination.
"Applicable Early Termination Premium Rate" means, (a) during the
period of time from and after the date of the execution and delivery of this
Agreement up to the first anniversary of the Closing Date, 3.0%, (b) during the
period of time from and including the first anniversary of the Closing Date up
to the second anniversary of the Closing Date, 2.0%, (c) during the period of
time from and including the second anniversary of the Closing Date up to the
third anniversary of the Closing Date, 1.0%, and (c) thereafter, zero percent
(0.0%)
"Applicable Gaming Laws" has the meaning set forth in Section 9.1.
"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) sale, assignment, transfer, lease,
conveyance, or other disposition, other than in the ordinary course, of any
assets of Borrower or any of its Restricted Subsidiaries, (ii) direct or
indirect issuance or sale of any capital Stock of any Restricted Subsidiary of
the Borrower (other than directors' qualifying shares) to any Person (other than
the Borrower or any Restricted Subsidiary of the Borrower), or (iii) an Event of
Loss with respect to any assets of Borrower or any of its Subsidiaries. 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 any series of transactions (including any transaction or
series of transactions consummated prior to the Effective Date to the extent
such transaction or series of transactions are included in any "Asset Sale" (as
defined in the Indenture)) that have a fair market value (or result in gross
proceeds) of less than $1,000,000, until the aggregate fair market value and
gross proceeds of the transactions excluded from the definition of Asset Sale
pursuant to this clause (b) and any transactions consummated prior to the
Effective Date to the extent such transactions are included in any "Asset Sale"
(as defined in the Indenture) exceed $5,000,000.
"Authorized Person" means any officer or other employee of Borrower.
"Availability" means, as of any date of determination, determined at
the close of business on such date, if such date is a Business Day, and
determined at the close of business on the immediately preceding Business Day,
if such date of determination is not a Business Day, the
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amount that Borrower is entitled to borrow as Advances under Section 2.1 (after
giving effect to all previously outstanding Obligations and all sublimits and
reserves applicable hereunder).
"Average Unused Portion of Maximum Amount" means, for any period of
determination, the Maximum Amount, less the average Daily Balance of Advances
that were outstanding during such period.
"Bankruptcy Code" means the United States Bankruptcy Code (11 U.S.C.
ss. 101 et seq.), as amended, and any successor statute.
"Barden" means Don H. Barden, an individual.
"Base LIBOR Rate" means the rate per annum (rounded upwards, if
necessary, to the next 1/16%) at which United States dollar deposits are offered
to major banks in the London interbank market on or about 11:00 a.m. (California
time) 2 Business Days prior to the commencement of the applicable Interest
Period, for a term and in amounts comparable to the Interest Period and amount
of the LIBOR Rate Advance requested by Borrower in accordance with this
Agreement.
"Base Rate" means, the rate of interest announced within Wells Fargo
Bank, N.A. at its principal office in San Francisco as its "prime rate", with
the understanding that the "prime rate" is one of Wells Fargo's base rates (not
necessarily the lowest of such rates) and serves as the basis upon which
effective rates of interest are calculated for those loans making reference
thereto and is evidenced by the recording thereof after its announcement in such
internal publication or publications as Wells Fargo may designate.
"BDI" means Barden Development, Inc., an Indiana corporation.
"Benefit Plan" means a "defined benefit plan" (as defined in Section
3(35) of ERISA) for which Borrower, any Subsidiary of Borrower, or any ERISA
Affiliate has been an "employer" (as defined in Section 3(5) of ERISA) within
the past six years.
"Berthing Agreement" means that certain Majestic Berthing Agreement,
dated as of April 23, 1996, between Borrower and BHR Joint Venture.
"BHR Attributed Debt" shall have the meaning ascribed thereto in the
Indenture.
"BHR Joint Venture" means Buffington Harbor Riverboats, LLC, a Delaware
limited liability company, in which Borrower, as of the Closing Date, 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 that certain First Amended and Restated
Operating Agreement of the BHR Joint Venture, made as of October 31, 1995 (as
amended through the Effective Date) by and between Trump Indiana, Inc., a
Delaware corporation, and Borrower.
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"Borrower" has the meaning set forth in the preamble to this Agreement.
"Borrower's Books" means all of Borrower's books and records including:
ledgers; records indicating, summarizing, or evidencing Borrower's properties or
assets (including the Collateral) or liabilities; all information relating to
Borrower's business operations or financial condition; and all computer
programs, disk or tape files, printouts, runs, or other computer prepared
information.
"Borrower Stock Pledge Agreement" means that certain Stock Pledge
Agreement, dated as of the date hereof, between Borrower and Foothill, pursuant
to which Borrower grants Foothill a security interest in, among other things,
all of the issued and outstanding Stock of Borrower's Subsidiaries.
"Borrowing Base" has the meaning set forth in Section 2.1(a).
"Buffington Facility" means the Majestic Star Casino Vessel, the Real
Property, the Equipment, and other personal property, in each case, related
thereto.
"Business Day" means any day that is not a Saturday, Sunday, or other
day on which national banks are authorized or required to close and, with
respect to provisions of this Agreement dealing with LIBOR Rate Advances, also
means a day on which banks in London, England are open for the transaction of
banking business.
"Capital Corp." means The Majestic Star Casino Capital Corp., an
Indiana corporation.
"Capital Lease Obligation" means, with respect to any Person, the
obligations of such Person under a lease that is 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.
"Cash Equivalent" means (a) 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); (b) 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; (c) investments in money market funds substantially of
whose assets comprise securities of the type described in clauses (a) and (b)
above, and (d) repurchase obligations for underlying securities of the types an
with the maturities described above.
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"Casino" means a gaming establishment owned by Borrower or any
Restricted Subsidiary and any hotel, building, restaurant, theater, amusement
park, other entertainment facility, parking facilities, retail shops, land,
equipment, and other properties and assets directly ancillary thereto and used
or to be used in connection therewith.
"Change of Control" shall be deemed to have occurred at such time as
(a) Permitted Holders shall cease to own and control, beneficially, directly,
and of record more than 50% of the issued and outstanding Stock of Borrower, (b)
Borrower shall cease to own and control, beneficially, directly, and of record
all of the issued and outstanding Stock of each of the Guarantors, (c) Borrower
shall cease to own and control, beneficially, directly and of record 45% of the
issued and outstanding Stock of BHR Joint Venture; (d) any Person (including a
"person" or "group" within the meaning of Sections 13(d) and 14(d) of the
Exchange Act, whether or not applicable) owns a greater percentage interest in
the BHR Joint Venture than Borrower, (e) Barden, Family Members of Barden, and
Family Trusts of Barden, collectively, shall cease to own and control,
beneficially, directly and of record all of the issued and outstanding Stock of
BDI, or (f) a "Change of Control" (as that term is defined in the Indenture) has
occurred.
"Closing Date" means the date of the making of the initial Advance.
"Code" means the California Uniform Commercial Code.
"Collateral" means all of Borrower's right, title, and interest in and
to each of the following:
(a) the Accounts,
(b) Borrower's Books,
(c) the Equipment,
(d) the General Intangibles,
(e) the Inventory,
(f) the Investment Property,
(g) the Real Property Collateral,
(h) any money, or other assets of Borrower that now or hereafter come
into the possession, custody, or control of Foothill, and
(i) the proceeds and products, whether tangible or intangible, of any
of the foregoing, including proceeds of insurance covering any or all of the
Collateral, and any and all Accounts,
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Borrower's Books, Equipment, General Intangibles, Inventory, Investment
Property, Negotiable Collateral, Real Property, money, deposit accounts, or
other tangible or intangible property resulting from the sale, exchange,
collection, or other disposition of any of the foregoing, or any portion thereof
or interest therein, and the proceeds thereof.
The foregoing to the contrary notwithstanding, "Collateral" shall not include
Excluded Assets.
"Collateral Access Agreement" means a landlord waiver, mortgagee
waiver, bailee letter, or acknowledgement agreement of any warehouseman,
processor, lessor, consignee, or other Person in possession of, having a Lien
upon, or having rights or interests in the Collateral, in each case, in form and
substance satisfactory to Foothill.
"Collections" means all cash, checks, notes, instruments, and other
items of payment (including, insurance proceeds, proceeds of cash sales, rental
proceeds, and tax refunds).
"Compliance Certificate" means a certificate substantially in the form
of Exhibit C-1 and delivered by the chief accounting officer of Borrower to
Foothill.
"Consolidated Cash Flow" means with respect to any Person for any
period, the sum of:
(a) consolidated income (loss) from operation 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 operation 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 (as
such term is defined in the Indenture) 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 (as
such term is defined in the Indenture); provided, that (1) the income from
operations of any Person that is not a Wholly Owned Subsidiary of such 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 such Person or to a Wholly Owned Subsidiary of such Person, (2) the
income from operations of any Person acquired in a pooling of interest
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 such 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 such Restricted Subsidiary or its
owners.
"Consolidated Interest Expense" means, with respect to any Person for
any period, the result of (a) the consolidated interest expense of such Person
and its Subsidiaries for such period,
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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, minus, (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
including in the calculation made pursuant to clause (a) above.
"Consolidated Net Income" means, with respect to any 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, however that (i) the Net Income of any other Person relating to any
portion of such period that such other Person (a) is not a Wholly Owned
Subsidiary of such 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 such Person or a Wholly Owned Subsidiary of such Person
during such portion of such period, (ii) the Net Income of any other 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 such 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 such Restricted
Subsidiary or its owners.
"Daily Balance" means the amount of an Obligation owed at the end of a
given day.
"deems itself insecure" means that the Person deems itself insecure in
accordance with the provisions of Section 1208 of the Code.
"Default" means an event, condition, or default that, with the giving
of notice, the passage of time, or both, would be an Event of Default.
"Designated Account" means account number 000185010213733 of Borrower
maintained with Borrower's Designated Account Bank, or such other deposit
account of Borrower (located within the United States) that has been designated,
in writing and from time to time, by Borrower to Foothill.
"Designated Account Bank" means Bank One, whose office is located at
8585 Broadway, Merriville, Indiana 46410, and whose ABA number is 074000010.
"Development Agreement" means that certain Development Agreement, dated
March 26, 1996, by and between Borrower and the City of Gary, Indiana, as
amended through the date hereof.
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"Disbursement Letter" means an instructional letter executed and
delivered by Borrower to Foothill regarding the extensions of credit to be made
on the Closing Date, the form and substance of which shall be satisfactory to
Foothill.
"Disqualified Capital Stock" means any Stock 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.
"Distribution" means any dividends, distributions, payments or other
transfer by the Borrower to any Members (in cash or other property, other than
interests in the LLC) on or with respect to any interest of the Member in the
Borrower, or to purchase, acquire, redeem, or retire the interest in the
Borrower of any Member.
"Dollars or $" means United States dollars.
"EBITDA" means, with respect to any Person for any period, the sum of
(a) such Person's income (or loss) from operations for such period, plus (b) in
each case, to the extent such amounts are deducted in calculating such income
(or loss) from operations for such period, amortization, depreciation, and other
non-cash charges (including, without limitation, amortization of goodwill,
deferred financing fees, losses on disposition of assets in the ordinary course
of such Person's business, and other intangibles, but excluding (x) non-cash
charges incurred after the Closing Date that require an accrual of or a reserve
for any future period and (y) normally recurring accruals such as reserves
against accounts receivables), in each case, on a stand-alone basis for such
Person
"Effective Date" means the first date on which each of the conditions
set forth in Section 3.1 shall have been fulfilled or waived.
"Equipment" means all of Borrower's present and hereafter acquired
machinery, machine tools, motors, equipment, furniture, furnishings, fixtures,
vehicles (including motor vehicles and trailers), tools, parts, goods (other
than consumer goods, farm products, or Inventory), wherever located, including,
(a) any interest of Borrower in any of the foregoing, and (b) all attachments,
accessories, accessions, replacements, substitutions, additions, and
improvements to any of the foregoing.
"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 other entity, the owner of such entity.
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"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and any successor statute.
"Excluded Assets" means (a) cash, deposit accounts and other Cash
Equivalents; (b) assets securing Purchase Money Obligations or Capital Lease
Obligations owing in favor of any Person (other than Foothill or any Affiliate
of Borrower) permitted to be incurred hereunder and under the Indenture, and (c)
any General Intangible consisting of contract rights, permits, or licenses
(including Casino License) that is now or hereafter held by Borrower as licensee
or otherwise, solely in the event and to the extent that: (i) such General
Intangible cannot be subjected to a consensual security interest in favor of
Foothill without the consent of the licensor or other party to such contract,
permit, or license, (ii) any such restriction shall be effective and enforceable
under all applicable law, including Section 9318(4) of the Code; and (iii) such
consent is not obtainable by Borrower; provided, however, that Excluded Assets
shall not include (and, accordingly, the Collateral shall include) any and all
proceeds of any of assets described in clauses (b) and (c) above (unless and to
the extent such proceeds constitute cash, deposit accounts, or other Cash
Equivalents; provided, further, that, any General Intangible qualifying as an
Excluded Asset under clause (c) above no longer shall constitute an Excluded
Asset (and instead shall constitute Collateral) from and after such time as such
licensor or other applicable party consents to the grant of a consensual
security in favor of Foothill in such General Intangible; provided, further,
that, anything in this definition to the contrary notwithstanding, any property
or asset acquired by Borrower for cash or Cash Equivalents, or otherwise
received by Borrower in exchange for cash or Cash Equivalents, shall not
constitute Excluded Assets so long as such acquired or received property or
asset is not an asset described in clause (a) 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.
"ERISA" means the Employee Retirement Income Security Act of 1974, 29
U.S.C. Sections 1000 et seq., amendments thereto, successor statutes, and
regulations or guidance promulgated thereunder.
"ERISA Affiliate" means (a) any corporation subject to ERISA whose
employees are treated as employed by the same employer as the employees of
Borrower under IRC Section 414(b), (b) any trade or business subject to ERISA
whose employees are treated as employed by the same employer as the employees of
Borrower under IRC Section 414(c), (c) solely for purposes of Section 302 of
ERISA and Section 412 of the IRC, any organization subject to ERISA that is a
member of an affiliated service group of which Borrower is a member under IRC
Section 414(m), or (d) solely for purposes of Section 302 of ERISA and Section
412 of the IRC, any party subject to ERISA that is a party to an arrangement
with Borrower and whose employees are aggregated with the employees of Borrower
under IRC Section 414(o).
"ERISA Event" means (a) a Reportable Event with respect to any Benefit
Plan or Multiemployer Plan, (b) the withdrawal of Borrower, any of its
Subsidiaries or ERISA Affiliates
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<PAGE> 15
from a Benefit Plan during a plan year in which it was a "substantial employer"
(as defined in Section 4001(a)(2) of ERISA), (c) the providing of notice of
intent to terminate a Benefit Plan in a distress termination (as described in
Section 4041(c) of ERISA), (d) the institution by the PBGC of proceedings to
terminate a Benefit Plan or Multiemployer Plan, (e) any event or condition (i)
that provides a basis under Section 4042(a)(1), (2), or (3) of ERISA for the
termination of, or the appointment of a trustee to administer, any Benefit Plan
or Multiemployer Plan, or (ii) that may result in termination of a Multiemployer
Plan pursuant to Section 4041A of ERISA, (f) the partial or complete withdrawal
within the meaning of Sections 4203 and 4205 of ERISA, of Borrower, any of its
Subsidiaries or ERISA Affiliates from a Multiemployer Plan, or (g) providing any
security to any Plan under Section 401(a)(29) of the IRC by Borrower or its
Subsidiaries or any of their ERISA Affiliates.
"Event of Default" has the meaning set forth in Section 8.
"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.
"Excess Availability" means the amount, as of the date any
determination thereof is to be made, equal to Availability minus the aggregate
amount, if any, of all trade payables of Borrower in excess of their historical
levels with respect thereto and all book overdrafts in excess of their
historical practices with respect thereto, in each case as determined by
Foothill.
"Family Members" means, with respect to any individual, any other
individual having a relationship by blood (to the second degree of
consanguinity), marriage, or adoption to such individual.
"Family Trusts" means, with respect to any individual, trusts or other
estate planning vehicles established for the benefit of Family Members of such
individual.
"FEIN" means Federal Employer Identification Number.
"FF&E" means furniture, fixture, and Equipment acquired by Borrower or
any Restricted Subsidiary of Borrower 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 Borrower and
is a lender under FF&E Financing.
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"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 IRC), (ii) a "qualified subchapter S subsidiary" (as defined in Section
1361(b)(3)(B) of the IRC), (iii) a "partnership" (within the meaning of Section
7701(a)(2) of the IRC), or (iv) a business entity that is disregarded as an
entity separate from its owners under the IRC, the Treasury Regulations, or any
published administrative guidance of the Internal Revenue Service (each of the
entities described in the preceding clauses (i), (ii), (iii), and (iv), a
"Federal Flow Through Entity"), and (b) for state and local jurisdictions is
subject to treatment on a basis under applicable state or local income tax law
substantially similar to a Federal Flow Through Entity.
"Foothill" has the meaning set forth in the preamble to this Agreement.
"Foothill Account" has the meaning set forth in Section 2.8.
"Foothill Expenses" means all: costs or expenses (including taxes, and
insurance premiums) required to be paid by Borrower under any of the Loan
Documents that are paid or incurred by Foothill; fees or charges reasonably paid
or incurred by Foothill in connection with Foothill's transactions with
Borrower, including, fees or charges for photocopying, notarization, couriers
and messengers, telecommunication, public record searches (including tax lien,
litigation, and UCC searches and including searches with the patent and
trademark office, the copyright office, or the department of motor vehicles),
filing, recording, publication, appraisal (including periodic Personal Property
Collateral or Real Property Collateral appraisals), real estate surveys, real
estate title policies and endorsements, and environmental audits; costs and
expenses incurred by Foothill in the disbursement of funds to Borrower (by wire
transfer or otherwise); charges paid or incurred by Foothill resulting from the
dishonor of checks; costs and expenses paid or incurred by Foothill to correct
any default or enforce any provision of the Loan Documents, or in gaining
possession of, maintaining, handling, preserving, storing, shipping, selling,
preparing for sale, or advertising to sell the Collateral, or any portion
thereof, irrespective of whether a sale is consummated; reasonable costs and
expenses paid or incurred by Foothill in examining Borrower's Books; costs and
expenses of third party claims or any other suit paid or incurred by Foothill in
enforcing or defending the Loan Documents or in connection with the transactions
contemplated by the Loan Documents or Foothill's relationship with Borrower or
any guarantor; and Foothill's reasonable attorneys fees and expenses incurred in
advising, structuring, drafting, reviewing, administering, amending,
terminating, enforcing (including reasonable attorneys fees and expenses
incurred in connection with a "workout," a "restructuring," or an Insolvency
Proceeding concerning Borrower or any guarantor of the Obligations), defending,
or concerning the Loan Documents, irrespective of whether suit is brought.
"GAAP" means generally accepted accounting principles as in effect from
time to time in the United States, consistently applied.
"Gaming Authority" means any agency, authority, board, bureau,
commission,
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<PAGE> 17
department, office, or instrumentality of any nature whatsoever of the United
States of America or foreign government (including Native American governments),
any state, province, city, or other political subdivision thereof, whether now
or hereafter existing, or any officer or official thereof, including the Indiana
Gaming Commission, and any other agency with authority to regulate any gaming
operation (or proposed gaming authority) owned, managed, or operated by Borrower
or any of its Subsidiaries.
"Gaming License" means any material license, franchise, or other
approval or authorization required to own, lease, or operate a Casino, or
otherwise conduct gaming in any jurisdiction in which Borrower or any Restricted
Subsidiary conducts or proposes in good faith to conduct gaming business
(including, without limitation, all such licenses granted by the Indiana Gaming
Commission under the Indiana Riverboat Gambling Act), including any applicable
liquor license.
"Gaming Vessel" means a water-based casino (a) that is substantially
similar in size and space to the Majestic Star Casino Vessel, (b) with at least
the same overall qualities and amenities as the Majestic Star Casino Vessel, and
(c) that is developed, constructed, and equipped to be in compliance with all
Federal, state, and local laws, including 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 (a), (b), and (c) above.
"General Intangibles" means all of Borrower's present and future
general intangibles and other personal property (including, without limitation,
the Berthing Agreement and other contract rights, rights arising under common
law, statutes, or regulations, choses or things in action, goodwill, patents,
trade names, trademarks, servicemarks, copyrights, blueprints, drawings,
purchase orders, customer lists, monies due or recoverable from pension funds,
route lists, rights to payment and other rights under any royalty or licensing
agreements, infringement claims, computer programs, information contained on
computer disks or tapes, literature, reports, catalogs, deposit accounts,
insurance premium rebates, tax refunds, and tax refund claims), other than
goods, Accounts, and Negotiable Collateral.
"Governmental Authority" shall mean any federal, state, local, or other
governmental or administrative body, instrumentality, department, or agency or
any court, tribunal, administrative hearing body, arbitration panel, commission,
or other similar dispute-resolving panel or body.
"Governing Documents" means the certificate or articles of
incorporation, by-laws, or other organizational or governing documents of any
Person.
"Guarantors" means all of the Restricted Subsidiaries of Borrower,
including Capital Corp., and all other Persons executing a guaranty of the
Obligations in favor of Foothill.
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"Guaranty" means that certain General Continuing Guaranty, dated as of
the date hereof, in form and substance satisfactory to Foothill, executed by
each of the Guarantors in favor of Foothill.
"Guarantor Security Agreement" means that certain Security Agreement,
dated as of the date hereof, in form and substance satisfactory to Foothill,
among Foothill and each of the Guarantors
"Harbor Lease" means that certain Harbor Lease Agreement, dated as of
June 29, 1995, by and between Trump Indiana, Inc., a Delaware corporation
("Trump"), and Lehigh Portland Cement Company, as assigned by Trump to BHR Joint
Venture pursuant to the Harbor Lease Assignment.
"Harbor Lease Assignment" means that certain Assignment of Harbor Lease
Agreement, dated as of October 31, 1995, by and between Trump Indiana, Inc., a
Delaware corporation, and the BHR Joint Venture.
"Hazardous Materials" means (a) substances that are defined or listed
in, or otherwise classified pursuant to, any applicable laws or regulations as
"hazardous substances," "hazardous materials," "hazardous wastes," "toxic
substances," or any other formulation intended to define, list, or classify
substances by reason of deleterious properties such as ignitability,
corrosivity, reactivity, carcinogenicity, reproductive toxicity, or "EP
toxicity", (b) oil, petroleum, or petroleum derived substances, natural gas,
natural gas liquids, synthetic gas, drilling fluids, produced waters, and other
wastes associated with the exploration, development, or production of crude oil,
natural gas, or geothermal resources, (c) any flammable substances or explosives
or any radioactive materials, and (d) asbestos in any form or electrical
equipment that contains any oil or dielectric fluid containing levels of
polychlorinated biphenyls in excess of 50 parts per million.
"Hedging Obligations" means, with respect to any Person, the
obligations of such Person under (a) interest rate swap agreements, interest
rate cap agreements, and interest rate collar agreements, and (b) other
agreements or arrangements designed to protect such Person against fluctuations
in interest rates.
"Indebtedness" means, with respect to any Person (without duplication):
(a) all liabilities and obligations, contingent or otherwise, of such Person (i)
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), (ii)
evidenced by bonds, debentures, notes or other similar instruments, (iii)
representing the deferred purchase price of property or services (other than
trade payables on customary terms incurred in the ordinary course of business),
(iv) 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), (v) representing
Capital
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Lease Obligations, (vi) under bankers' acceptance and letter of credit
facilities, (vii) to purchase, redeem, retire, defease or otherwise acquire for
value any Disqualified Capital Stock, or (viii) in respect of Hedging
Obligations; (b) all Indebtedness of others that is guaranteed by such Person;
and (c) 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 (i) the fair
market value of such property at the time of determination and (ii) 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 that certain Indenture, dated as of June 18, 1999,
among Borrower, Guarantor, and the Indenture Trustee.
"Indenture Reserve" means a reserve against the Maximum Amount in the
amount of $1,000,000, as of the Closing Date, as such reserve may be adjusted
from time to time in Foothill's sole and absolute discretion; provided, however,
that at no time shall such reserve be in an amount greater than $1,000,000.
"Indenture Trustee" means (a) IBJ Whitehall Bank & Trust, a New York
banking corporation, in its capacity as trustee under the Indenture, or (b) any
successor trustee under the Indenture from time to time.
"Insolvency Proceeding" means any proceeding commenced by or against
any Person under any provision of the Bankruptcy Code or under any other
bankruptcy or insolvency law, assignments for the benefit of creditors, formal
or informal moratoria, compositions, extensions generally with creditors, or
proceedings seeking reorganization, arrangement, liquidation or other similar
relief.
"Intangible Assets" means, with respect to any Person, that portion of
the book value of all of such Person's assets that would be treated as
intangibles under GAAP.
"Intercreditor Agreement" means that certain Intercreditor Agreement
between Foothill and the Indenture Trustee, in the form of Exhibit I-1 attached
hereto.
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"Interest Coverage Ratio" means with respect to any Person for any
period, the ratio of (a) such Person's Consolidated Cash Flow, to (b)
Consolidated Interest Expense of such Person, in each case, 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 such Person 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 such period. For purposes of making the computation referred to above,
acquisitions that have been made by Borrower or any Restricted Subsidiary,
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 Borrower
with respect to any portion of such period that falls before the Issue Date (as
such term is defined in the Indenture) 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.
"Interest Period" means, with respect to each LIBOR Rate Advance, a
period commencing on the date of the making of such LIBOR Rate Advance and
ending 1 or 2 months thereafter; provided, however, that (a) if any Interest
Period would end on a day that is not a Business Day, such Interest Period shall
be extended (subject to clauses (c)-(e) below) to the next succeeding Business
Day, (b) interest shall accrue from and including the first day of each Interest
Period to, but excluding, the day on which any Interest Period expires, (c) any
Interest Period that would end on a day that is not a Business Day shall be
extended to the next succeeding Business Day unless such Business Day falls in
another calendar month, in which case such Interest Period shall end on the next
preceding Business Day, (d) with respect to an Interest Period that begins on
the last Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of such Interest
Period), the Interest Period shall end on the last Business Day of the calendar
month that is 1 or 2 months after the date on which the Interest Period began,
as applicable, and (e) Borrower may not elect an Interest Period which will end
after the Renewal Date or, during any Renewal Term, the next succeeding
anniversary of the Renewal Date.
"Inventory" means all present and future inventory in which Borrower
has any interest, including goods held for sale or lease or to be furnished
under a contract of service and all of Borrower's present and future raw
materials, work in process, finished goods, and packing and shipping materials,
wherever located.
"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 (a) payroll
commission, travel, and similar advances to officers and employees of such
Person made in the ordinary course of business, and (b) 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, Stock or other
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<PAGE> 21
securities, and any other items that are or would be classified as investments
on a balance sheet prepared in accordance with GAAP.
"Investment Property" means "investment property" as that term is
defined in Section 9115 of the Code.
"IRC" means the Internal Revenue Code of 1986, as amended, and the
regulations thereunder.
"LIBOR Notice" means a written notice in the form of Exhibit L-1
attached hereto.
"LIBOR Rate" means, for each Interest Period for each LIBOR Rate
Advance, the rate per annum determined by Foothill (rounded upwards, if
necessary, to the next 1/16%) determined by dividing (a) the Base LIBOR Rate for
such Interest Period, by (b) 100% minus the Reserve Percentage. The LIBOR Rate
shall be adjusted on and as of the effective day of any change in the Reserve
Percentage.
"LIBOR Rate Advance" means each Advance, or portion thereof, bearing
interest at a rate determined by reference to the LIBOR Rate.
"Lien" means (a) any interest in property securing an obligation owed
to, or a claim by, any Person other than the owner of the property, whether such
interest shall be based on the common law, statute, or contract, whether such
interest shall be recorded or perfected, and whether such interest shall be
contingent upon the occurrence of some future event or events or the existence
of some future circumstance or circumstances, including the lien or security
interest arising from a mortgage, deed of trust, encumbrance, pledge,
hypothecation, assignment, deposit arrangement, security agreement, adverse
claim or charge, conditional sale or trust receipt, or from a lease,
consignment, or bailment for security purposes and also including reservations,
exceptions, encroachments, easements, rightsofway, covenants, conditions,
restrictions, leases, and other title exceptions and encumbrances affecting Real
Property, and (b) 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 Code (or equivalent statutes of any jurisdiction)
"Loan Account" has the meaning set forth in Section 2.10.
"Loan Documents" means this Agreement, the Disbursement Letter, the
Majestic Star Ship Mortgage, the Trademark Security Agreement, the Member Stock
Pledge Agreement, the Borrower Stock Pledge Agreement, the Guaranty, the
Guarantor Security Agreement, the Intercreditor Agreement, any note or notes
executed by Borrower and payable to Foothill, and any other agreement entered
into, now or in the future, in connection with this Agreement.
"Majestic Star Casino Vessel" means that certain Majestic Star
riverboat casino owned and operated by Borrower as of the Effective Date
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<PAGE> 22
"Majestic Star Ship Mortgage" means, collectively, one or more
preferred ship mortgages, each in form and substance satisfactory to Foothill,
relative to the Majestic Star Casino Vessel and related personal property.
"Management Agreement" means that certain Management Agreement, dated
as of June 18, 1999, by and between Borrower and BDI.
"Managers" means (a) for so long as Borrower is a limited liability
company, the Managers of Borrower appointed pursuant to the Operating Agreement
of such Person, or (b) otherwise, the Board of Directors of Borrower.
"Material Adverse Change" means (a) a material adverse change in the
business, prospects, operations, results of operations, assets, liabilities or
condition (financial or otherwise) of Borrower, (b) the material impairment of
Borrower's ability to perform its obligations under the Loan Documents to which
it is a party or of Foothill to enforce the Obligations or realize upon the
Collateral, (c) a material adverse effect on the value of the Collateral or the
amount that Foothill would be likely to receive (after giving consideration to
delays in payment and costs of enforcement) in the liquidation of such
Collateral, or (d) a material impairment of the priority of Foothill's Liens
with respect to the Collateral.
"Maximum Amount" means $20,000,000, as such amount shall be reduced
from time to time pursuant to Section 7.4(b)(iv).
"Member" shall mean any Person having any interest in or to the assets
or earnings of a limited liability company within the meaning of the Indiana
Business Flexibility Act.
"Member Stock Pledge Agreement" means a Stock Pledge Agreement, dated
as of the date hereof, among each Member of Borrower and Foothill, pursuant to
which such members grant Foothill a security interest in, among other things,
all of the issued and outstanding Stock of Borrower.
"Multiemployer Plan" means a "multiemployer plan" (as defined in
Section 4001(a)(3) of ERISA) to which Borrower, any of its Subsidiaries, or any
ERISA Affiliate has contributed, or was obligated to contribute, within the past
six years.
"Mortgages" means one or more mortgages, deeds of trust, or deeds to
secure debt, executed by Borrower in favor of Foothill, the form and substance
of which shall be satisfactory to Foothill, that encumber Real Property
Collateral and the related improvements thereto.
"Negotiable Collateral" means all of a Person's present and future
letters of credit to which such Person is the beneficiary, notes, drafts,
instruments, documents, personal property leases (wherein such Person is the
lessor), chattel paper, and Books relating to any of the foregoing.
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<PAGE> 23
"Net Proceeds" means, with respect to any Asset Sale, the aggregate
amount of proceeds received in the form of cash or Cash Equivalents (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 other disposition of any non-cash consideration received in such Asset
Sale, in each case when received), net of:
(a) the reasonable and customary direct out-of-pocket costs
relating to such Asset Sale;
(b) taxes required to be paid by Borrower, any of its
Subsidiaries, or any Equity Holder of Borrower (or, in the case of any
Equity Holder of Borrower 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 in which 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
(c) amounts required to be applied to the permanent repayment
of Indebtedness (other than Indebtedness under this Agreement) in
connection with such Asset Sale; and
(d) appropriate amounts provided as a reserve by Borrower or
any Restricted Subsidiary of Borrower, in accordance with GAAP, against
any liabilities associated with such Asset Sale and retained by
Borrower or such Restricted Subsidiary, as applicable, after such Asset
Sale (including, as applicable, pension and other post-employment
benefit liabilities, liabilities related to environmental matters, and
liabilities under any indemnification arising from such Asset Sale).
"Note" and "Notes" shall have the meanings ascribed thereto in the
Indenture.
"Obligations" means all loans, Advances, debts, principal, interest
(including any interest that, but for the provisions of the Bankruptcy Code,
would have accrued), premiums (including the Applicable Early Termination
Premium), liabilities (including all amounts charged to Borrower's Loan Account
pursuant hereto), obligations, fees, charges, costs, or Foothill Expenses
(including any fees or expenses that, but for the provisions of the Bankruptcy
Code, would have accrued), lease payments, guaranties, covenants, and duties
owing by Borrower to Foothill of any kind and description (whether pursuant to
or evidenced by the Loan Documents or pursuant to any other agreement between
Foothill and Borrower, and irrespective of whether for the payment of money),
whether direct or indirect, absolute or contingent, due or to become due, now
existing or hereafter arising, and including any debt, liability, or obligation
owing from Borrower to others that Foothill may have obtained by assignment or
otherwise, and further including all interest not paid when due and all Foothill
Expenses that Borrower is required to
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<PAGE> 24
pay or reimburse by the Loan Documents, by law, or otherwise.
"Overadvance" has the meaning set forth in Section 2.5.
"Participant" means any Person to which Foothill has sold a
participation interest in its rights under the Loan Documents.
"PBGC" means the Pension Benefit Guaranty Corporation as defined in
Title IV of ERISA, or any successor thereto.
"Permitted Discretion", with respect to any determination by Foothill,
means a determination made in good faith and in the exercise of reasonable (from
the perspective of a secured asset-based lender) business judgment.
"Permitted Holders" means, individually and collectively, BDI, Barden,
Family Members of Barden, and Family Trusts of Barden.
"Permitted Indebtedness" means:
(a) Indebtedness evidenced by this Agreement;
(b) Purchase Money Obligations in an aggregate principal
amount outstanding, at any one time, not to exceed the product of (i)
$2,500,000, times (ii) the number of Qualifying Casinos owned by the
Company and its Restricted Subsidiaries;
(c) Indebtedness in respect of FF&E Financing in an aggregate
amount outstanding, at any one time, not to exceed the sum of (i)
$4,800,000 (such amount being the aggregate principal amount of
Indebtedness in respect of FF&E Financing outstanding as of the Issue
Date (as defined in the Indenture), as set forth on Schedule P-4), plus
(ii) the sum of (A) $5,000,000, times (B) the number of Qualifying
Casinos owned by the Company and its Restricted Subsidiaries;
(d) Indebtedness in respect of performance bonds, appeal
bonds, surety bonds, insurance obligations or bonds, and other similar
bonds and obligations 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 Agreement,
provided, that the notional principal amount of each such Hedging
Obligation does not exceed the principal amount of the Indebtedness to
which such Hedging Obligations relates;
(f) Indebtedness set forth in Schedule P-1;
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(g) Indebtedness of Borrower in an aggregate principal amount
outstanding, at any one time, not to exceed $3,000,000;
(h) Indebtedness secured by Permitted Liens;
(i) BHR Attributed Debt;
(j) Indebtedness outstanding under the Notes in an aggregate
principal amount not to exceed $130,000,000 at any one time
outstanding;
(k) refinancings, renewals, or extensions of Indebtedness
permitted under clauses (b)-(j) of this definition, or otherwise
permitted under Section 7.1 (and continuance or renewal of any
Permitted Liens associated therewith) so long as: (i) the terms and
conditions of such refinancings, renewals, or extensions do not
materially impair the prospects of repayment of the Obligations by
Borrower, (ii) the net cash proceeds of such refinancings, renewals, or
extensions do not result in an increase in the aggregate principal
amount of the Indebtedness so refinanced, renewed, or extended, (iii)
such refinancings, renewals, refundings, or extensions do not result in
a shortening of the average weighted maturity of the Indebtedness so
refinanced, renewed, or extended, and (iv) to the extent that
Indebtedness that is refinanced was subordinated in right of payment to
the Obligations, then the subordination terms and conditions of the
refinancing Indebtedness must be at least as favorable to Foothill as
those applicable to the refinanced Indebtedness.
"Permitted Investments" means:
(a) Investments in Borrower or any Wholly Owned Subsidiary of
Borrower;
(b) Investments in Cash Equivalents;
(c) Investments in a Person, if, as a result of such
Investment, such Person (A) becomes a Wholly Owned Subsidiary of
Borrower, or (B) is, subject to the terms and conditions of Section
7.3, merged, consolidated, or amalgamated with or into, or transfers or
conveys substantially all of its assets to, or is liquidated into,
Borrower or a Wholly Owned Subsidiary of Borrower;
(d) Hedging Obligations;
(e) Investments as a result of consideration received in
connection with an Asset Sale made in compliance with Section 7.4.
(f) Investments existing as of the Effective Date and set
forth on Schedule P-2 attached hereto;
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(g) credit extensions to gaming customers in the ordinary
course of business consistent with industry practices;
(h) Investments paid for solely with common Stock of Borrower;
(i) stock, obligations, or securities received in settlement
of debts created in the ordinary course of business and owing to
Borrower in satisfaction of judgments;
(j) loans or advances to employees of Borrower and its
Subsidiaries made in the ordinary course of business in an aggregate
amount not to exceed $500,000 at any one time outstanding;
(k) 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 (a)
concurrently with any 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, and (b) at
the time of such contribution, loan, or advance, and after giving
effect thereto, Borrower shall have unrestricted cash (it being
understood that all cash Borrower is required to maintain on its
premises pursuant to Applicable Gaming Laws shall be deemed to be
restricted cash), cash equivalents, or Availability of not less than
$1,000,000 in the aggregate;
(l) 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;
provided, that at the time of such capital contribution, and after
giving effect thereto, Borrower shall have unrestricted cash (it being
understood that all cash Borrower is required to maintain on its
premises pursuant to Applicable Gaming Laws shall be deemed to be
restricted cash), cash equivalents, or Availability of not less than
$1,000,000 in the aggregate; and
(m) Investments to satisfy Borrower's off-site development
obligation under the Development Agreement, in an aggregate amount not
to exceed the result of (i) $10,000,000, minus (ii) the aggregate
amount paid by a Person other than Borrower in respect of such off-site
development obligation.
"Permitted Liens" means:
(a) Liens held by Foothill;
(b) Liens for unpaid taxes (other than Liens in favor of the
United States Government) that either (i) are not overdue by more than
30 days or (ii) are the subject of
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Permitted Protests;
(c) Liens set forth on Schedule P3;
(d) (i) the interests of lessors under operating leases, and
(ii) purchase money Liens or the interests of lessors under leases
classified as capital leases under GAAP to the extent that such Liens
or interests secure Purchase Money Obligations permitted under Section
7.1 hereof and so long as such Liens (other than Permitted Vessel
Liens) attach only to the asset purchased or acquired and the proceeds
thereof and only secures the purchase price of the asset;
(e) Liens arising by operation of law in favor of
warehousemen, landlords, carriers, mechanics, materialmen, laborers, or
suppliers, incurred in the ordinary course of business of Borrower and
not in connection with the borrowing of money, and which Liens either
(i) are not overdue for a period of more than 30 days, or (ii) are the
subject of Permitted Protests;
(f) Liens arising from pledges or deposits made in the
ordinary course of business in connection with obtaining worker's
compensation, unemployment insurance, or other types of social security
legislation;
(g) Liens or deposits to secure performance of bids, tenders,
trade, contracts (other than contracts for the payment of money), or
leases (to the extent permitted under this Agreement), surety bonds,
and other obligations of a like nature, in each case, incurred in the
ordinary course of business of Borrower and not in connection with the
borrowing of money;
(h) Liens of or resulting from any judgment or award for an
amount and for a period not resulting in an Event of Default with
respect thereto, so long as such judgment or award 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 and adversely
terminated or the period within which such proceedings may be initiated
shall not have expired;
(i) Liens with respect to the Real Property Collateral that
are exceptions to the commitments for title insurance issued in
connection with the Mortgages, as accepted by Foothill;
(j) with respect to any Real Property that is not part of the
Real Property Collateral, easements, rights of way, zoning and similar
covenants and restrictions, and similar encumbrances that customarily
exist on properties of Persons engaged in similar activities and
similarly situated and that in any event do not materially interfere
with or impair the use or operation of the Collateral by Borrower or
the value of Foothill's Lien
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thereon or therein, or materially interfere with the ordinary conduct
of the business of Borrower;
(k) Liens in favor of the Indenture Trustee relative to the
Senior Note Documents, so long as and to the extent such Liens remain
the subject of the Intercreditor Agreement;
(l) with respect to any vessel included in the Collateral,
certain maritime liens including liens crew's wages and salvage;
(m) Liens securing Purchase Money Obligations or Capital Lease
Obligations, in each case, permitted to be incurred hereunder, and
provided, that such Liens (other than Permitted Vessel Liens) do not
attach to any assets other than the assets being acquired or developed;
(n) 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;
(o) Liens securing Indebtedness refinanced pursuant to clause
(k) of the definition of Permitted Indebtedness, incurred in compliance
with the terms hereof to refinance Indebtedness secured by Permitted
Liens, provided, that (i) such Liens do not extend to any property or
assets other than such property or assets as were subject to Liens in
respect of the Indebtedness being refinanced, (ii) if the Liens
securing the Indebtedness being refinanced were subordinated to or pari
passu with the Liens of Foothill or any intercompany loans, 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 on terms reasonably satisfactory
to Foothill; and (c) such Liens are no more adverse to the interests of
Foothill than the Liens replaced or extended thereby; and
(p) Liens on the BHR Joint Venture's rights as lessor under
leases (it being understood for the purposes of this clause, the
Berthing Agreement is not a lease), 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 Protest" means the right of Borrower to protest any Lien
other than any such Lien that secures the Obligations, tax (other than payroll
taxes or taxes that are the subject of a United States federal tax lien), or
rental payment, provided that (a) a reserve with respect to such obligation is
established on the books of Borrower in an amount that is established in
accordance with GAAP, (b) any such protest is instituted and diligently
prosecuted by Borrower in good faith, and (c) Foothill is satisfied that, while
any such protest is pending, there will be no impairment of the enforceability,
validity, or priority of any of the Liens of Foothill in and to the
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Collateral.
"Permitted Tax Distributions" in respect of Borrower 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 Borrower to its Equity
Holders for such year over (B) all items of taxable deduction or loss (other
than capital loss) allocated to such Equity Holders by Borrower, 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
Borrower to 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 Borrower to Equity Holders for such year and (ii) the Applicable
Income Tax Rate, minus
(d) the aggregate Tax Loss Benefit Amount for Borrower 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 of Borrower that is a Flow
Through Entity shall be included in determining the taxable income, gain,
deduction, or loss (including capital gain or loss) of Borrower.
"Permitted Vessel Liens" 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 Liens of Foothill to the Majestic Star Ship
Mortgage on the hull and other equipment constituting the Majestic Star Casino
Vessel (other than the related FF&E) on terms and conditions satisfactory to
Foothill, and (b) such Lien shall not have an adverse impact on Foothill.
"Person" means and includes natural persons, corporations, limited
liability companies, limited partnerships, general partnerships, limited
liability partnerships, joint ventures, trusts, land trusts, business trusts, or
other organizations, irrespective of whether they are legal entities,
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and governments and agencies and political subdivisions thereof.
"Personal Property Collateral" means all Collateral other than the Real
Property Collateral.
"Plan" means any employee benefit plan, program, or arrangement
maintained or contributed to by Borrower or with respect to which it may incur
liability.
"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.
"Purchase Money Obligations" means, with respect to any Person,
Indebtedness of such Person representing, or incurred to finance, the cost (a)
of acquiring any assets, and (b) 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 Borrower), provided,
that (i) the principal amount of such Indebtedness does not exceed 80% of such
cost, including construction charges, (ii) 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, and (iii) such Indebtedness is incurred, and any
Liens with respect thereto are granted, within 180 days of the acquisition of
such property or asset.
"Qualifying Casino" means a Casino owned by Borrower or a Restricted
Subsidiary of Borrower that contains at least 500 slot machines and at least
10,000 square feet of space dedicated to the operation of games of chance.
"Real Property" means any estates or interests in real property now
owned or hereafter acquired by Borrower.
"Real Property Collateral" means the parcel or parcels of real property
owned by Borrower and the related improvements thereto identified on Schedule
R-1, and any Real Property hereafter acquired by Borrower.
"Related Business" means (a) the gaming and hotel businesses conducted
by Borrower as of the Closing Date and any and all businesses that in the good
faith judgment of Borrower's Managers are materially related businesses or (b) a
business necessary to satisfy Borrower's off-site development obligation under
the Development Agreement.
"Renewal Date" has the meaning set forth in Section 3.4.
"Renewal Period" has the meaning set forth in Section 3.4.
"Reportable Event" means any of the events described in Section 4043(c)
of ERISA or the regulations thereunder other than a Reportable Event as to which
the provision of 30 days
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notice to the PBGC is waived under applicable regulations.
"Reserve Percentage" means, on any day, that percentage prescribed by
the Board of Governors of the Federal Reserve System (or any successor
Governmental Authority) for determining the reserve requirements (including any
basic, supplemental, marginal, or emergency reserves) that is in effect on such
date with respect to deposits of Dollars in a non-United States or an
international banking office of a bank used to fund a LIBOR Rate Advance.
"Restricted Subsidiary" means a Subsidiary of Borrower other than an
Unrestricted Subsidiary.
"Retiree Health Plan" means an "employee welfare benefit plan" within
the meaning of Section 3(1) of ERISA that provides benefits to individuals after
termination of their employment, other than as required by Section 601 of ERISA.
"Return from Unrestricted Subsidiaries" means (a) 50% of any dividends
or distributions received by Borrower 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 Borrower, plus (b) to the
extent not otherwise included in Consolidated Net Income of Borrower, 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 Borrower 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 is designated to be a Restricted
Subsidiary, the fair market value of Borrower's Investment in such Unrestricted
Subsidiary on the date of such designation.
"Senior Note Documents" means, collectively, the Indenture, the Notes,
and the Security Documents (as such term is defined in the Indenture)
"Solvent" means, with respect to any Person on a particular date, that
on such date (a) at fair valuations, all of the properties and assets of such
Person are greater than the sum of the debts, including contingent liabilities,
of such Person, (b) the present fair salable value of the properties and assets
of such Person is not less than the amount that will be required to pay the
probable liability of such Person on its debts as they become absolute and
matured, (c) such Person is able to realize upon its properties and assets and
pay its debts and other liabilities, contingent obligations and other
commitments as they mature in the normal course of business, (d) such Person
does not intend to, and does not believe that it will, incur debts beyond such
Person's ability to pay as such debts mature, and (e) such Person is not engaged
in business or a transaction, and is not about to engage in business or a
transaction, for which such Person's properties and assets would constitute
unreasonably small capital after giving due consideration to the prevailing
practices in the industry in which such Person is engaged. In computing the
amount of contingent liabilities at any time, it is intended that such
liabilities will be computed at the amount that, in light of all the facts and
circumstances existing at such time, represents the
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amount that reasonably can be expected to become an actual or matured liability.
"Stock" means all shares, options, warrants, interests, participations,
or other equivalents (regardless of how designated) of or in a corporation,
limited liability company, or equivalent entity, whether voting or nonvoting,
including common stock, preferred stock, or any other "equity security" (as such
term is defined in Rule 3a11-1 of the General Rules and Regulations promulgated
by the SEC under the Exchange Act); provided, however, that Stock shall not
include any debt security that is convertible into or exchangeable for Stock.
"Subsidiary" means with respect to any Person, (a) a corporation,
partnership, limited liability company, or other entity in which such Person
directly or indirectly owns or controls more than 50% of the shares of Stock
having ordinary voting power to elect the board of directors (or appoint other
comparable managers) of such corporation, partnership, limited liability
company, or other entity, and (b) any partnership in which such person or any of
its Subsidiaries is a general partner.
"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 Borrower ending
subsequent to the Effective 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 of Borrower that is a Flow Through Entity for a taxable year of such
Subsidiary ending subsequent to the Effective Date shall be included in
determining the amount of net operating loss or net capital loss of Borrower.
"Trademark Security Agreement" means that certain Trademark Security
Agreement, dated as of the date hereof, in form and substance reasonably
satisfactory to Foothill, executed and delivered by Borrower and Foothill.
"Unrestricted Subsidiary" means any Subsidiary of Borrower 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, Borrower or any
Restricted Subsidiary of Borrower. If, at any time, any Unrestricted Subsidiary
of Borrower would fail to meet the foregoing requirements as an Unrestricted
Subsidiary, it shall thereafter cease to be an Unrestricted Subsidiary for
purposes of this Agreement 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 Section 7.1 hereof calculated on a
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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 a certificate from an officer of Borrower
certifying that such designation complies with the foregoing conditions and is
permitted by Section 7.1 hereof.
"Upper Tier Equity Holder" means, in the case of any Flow Through
Entity, the Equity Holder of which is, in turn, another 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 such Flow Through Entity.
"Voidable Transfer" has the meaning set forth in Section 15.8.
"Wholly Owned Subsidiary" means, with respect to any Person, 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 Borrower, Wholly Owned Subsidiary shall exclude
Unrestricted Subsidiaries, (ii) with respect to Borrower, the BHR Joint Venture
shall be a Wholly Owned Subsidiary of Borrower so long as Borrower owns 90% or
more of the outstanding Stock of the BHR Joint Venture, and the BHR Joint
Venture is a Restricted Subsidiary.
"Year 2000 Compliant" means, with regard to any Person, that all
software in goods produced or sold by, or utilized by and material to the
business operations or financial condition of, such Person are able to interpret
and manipulate data on and involving all calendar dates correctly and without
causing any abnormal ending scenario, including in relation to dates on and
after the year 2000.
1.2 ACCOUNTING TERMS. All accounting terms not specifically defined
herein shall be construed in accordance with GAAP. When used herein, the term
"financial statements" shall include the notes and schedules thereto. Whenever
the term "Borrower" is used in respect of a financial covenant or a related
definition, it shall be understood to mean Borrower on a consolidated basis
unless the context clearly requires otherwise.
1.3 CODE. Any terms used in this Agreement that are defined in the Code
shall be construed and defined as set forth in the Code unless otherwise defined
herein.
1.4 INDENTURE. Any terms defined in the Indenture that are incorporated
herein by reference shall be construed and defined as set forth in the Indenture
as in effect on the Effective Date (as amended, supplemented, or otherwise
modified from time to time with Foothill's
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consent).
1.5 CONSTRUCTION. Unless the context of this Agreement clearly requires
otherwise, references to the plural include the singular, references to the
singular include the plural, the term "including" is not limiting, and the term
"or" has, except where otherwise indicated, the inclusive meaning represented by
the phrase "and/or." The words "hereof," "herein," "hereby," "hereunder," and
similar terms in this Agreement refer to this Agreement as a whole and not to
any particular provision of this Agreement. An Event of Default shall "continue"
or be "continuing" until such Event of Default has been waived in writing by
Foothill. Section, subsection, clause, schedule, and exhibit references are to
this Agreement unless otherwise specified. Any reference in this Agreement or in
the Loan Documents to this Agreement or any of the Loan Documents shall include
all alterations, amendments, changes, extensions, modifications, renewals,
replacements, substitutions, and supplements, thereto and thereof, as
applicable.
1.6 SCHEDULES AND EXHIBITS. All of the schedules and exhibits attached
to this Agreement shall be deemed incorporated herein by reference.
2. LOAN AND TERMS OF PAYMENT.
2.1 REVOLVING ADVANCES.
(a) Subject to the terms and conditions of this Agreement,
Foothill agrees to make advances ("Advances") to Borrower in an amount
outstanding not to exceed at any one time the lesser of (i) the result of (A)
the Maximum Amount, minus (B) the BHR Attributed Debt, if any, minus (C) the
Indenture Reserve, or (ii) the Borrowing Base. For purposes of this Agreement,
"Borrowing Base", as of any date of determination, shall mean the result of
(y) the product of (i) Borrower's EBITDA for the 12 month
period ending as of the last day of the month immediately preceding
such date of determination, times (ii) (A) from the Effective Date to,
but not including, the first anniversary of the Effective Date, 150%,
(B) from the first anniversary of the Effective Date to, but not
including, the second anniversary of the Effective Date, 125%, and (C)
from the second anniversary of the Effective Date and thereafter, 100%;
minus
(z) the aggregate amount of reserves, if any, established by
Foothill under Section 2.1(b).
(b) Anything to the contrary in this Section 2.1
notwithstanding, Foothill shall have the right to establish reserves in such
amounts, and with respect to such matters as Foothill in its Permitted
Discretion shall deem necessary or appropriate, against the Borrowing Base,
including reserves with respect to (i) sums that the Borrower is required to pay
(such as taxes, assessments, insurance premiums, or, in the case of leased
assets, rents or other amounts payable
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under such leases) and have failed to pay under any Section of this Agreement or
any other Loan Document, and (ii) amounts owing by Borrower to the extent
secured by a Lien (other than any existing Permitted Lien set forth on Schedule
P-3 that specifically is identified thereon as entitled to have priority over
Foothill's Liens) on, or trust over, any of the Collateral, which Lien or trust,
in the Permitted Discretion of Foothill, would be likely to have a priority
superior to the Liens of Foothill (such as landlord liens, ad valorem taxes,
property taxes, or sales taxes where given priority under applicable law) in and
to such item of the Collateral.
(c) [Intentionally Omitted].
(d) Amounts borrowed pursuant to this Section 2.1 may be
repaid and, subject to the terms and conditions of this Agreement, reborrowed at
any time during the term of this Agreement.
2.2 [INTENTIONALLY OMITTED].
2.3 [INTENTIONALLY OMITTED].
2.4 [INTENTIONALLY OMITTED].
2.5 OVERADVANCES. If, at any time or for any reason, the amount of
Obligations owed by Borrower to Foothill pursuant to Section 2.1 is greater than
either the Dollar or percentage limitations set forth in Section 2.1 (an
"Overadvance"), Borrower immediately shall pay to Foothill, in cash, the amount
of such excess to be used by Foothill to repay Advances outstanding under
Section 2.1.
2.6 INTEREST: RATES, PAYMENTS, AND CALCULATIONS.
(a) Interest Rate. Except as provided in clause (c) below, all
Obligations shall bear interest as follows (i) if a LIBOR Rate Advance, at a per
annum rate of 3.75 percentage points above the LIBOR Rate, and (ii) otherwise at
a per annum rate of 1.50 percentage points above the Base Rate.
(b) [Intentionally Omitted].
(c) Default Rate. Upon the occurrence and during the
continuation of an Event of Default, all Obligations shall bear interest at a
per annum rate equal to 3.0 percentage points above the rate otherwise
applicable thereto.
(d) Minimum Interest. In no event shall the rate of interest
chargeable hereunder for any day be less than 8.50% per annum. To the extent
that interest accrued hereunder at the rate set forth herein would be less than
the foregoing minimum daily rate, the interest rate chargeable hereunder for
such day automatically shall be deemed increased to the
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minimum rate.
(e) Payments. Interest payable hereunder shall be due and
payable, in arrears, on the first day of each month during the term hereof.
Borrower hereby authorizes Foothill, at its option, without prior notice to
Borrower, to charge such interest, all Foothill Expenses (as and when incurred),
the fees and charges provided for in Section 2.11 (as and when accrued or
incurred), and all installments or other payments due under any Loan Document to
Borrower's Loan Account, which amounts thereafter shall accrue interest at the
rate then applicable to Advances hereunder. Any interest not paid when due shall
be compounded and shall thereafter accrue interest at the rate then applicable
to Advances hereunder.
(f) Computation. In the event the Base Rate is changed from
time to time hereafter, the applicable rate of interest hereunder automatically
and immediately shall be increased or decreased by an amount equal to such
change in the Base Rate. All interest and fees chargeable under the Loan
Documents shall be computed on the basis of a 360 day year for the actual number
of days elapsed.
(g) Intent to Limit Charges to Maximum Lawful Rate. In no
event shall the interest rate or rates payable under this Agreement, plus any
other amounts paid in connection herewith, exceed the highest rate permissible
under any law that a court of competent jurisdiction shall, in a final
determination, deem applicable. Borrower and Foothill, in executing and
delivering this Agreement, intend legally to agree upon the rate or rates of
interest and manner of payment stated within it; provided, however, that,
anything contained herein to the contrary notwithstanding, if said rate or rates
of interest or manner of payment exceeds the maximum allowable under applicable
law, then, ipso facto as of the date of this Agreement, Borrower is and shall be
liable only for the payment of such maximum as allowed by law, and payment
received from Borrower in excess of such legal maximum, whenever received, shall
be applied to reduce the principal balance of the Obligations to the extent of
such excess.
2.7 [INTENTIONALLY OMITTED].
2.8 CREDITING PAYMENTS; APPLICATION OF COLLECTIONS. The receipt of
any Collections by Foothill immediately shall be applied provisionally to reduce
the Obligations outstanding under Section 2.1, but shall not be considered a
payment on account unless such Collection item is a wire transfer of immediately
available federal funds and is made to an account maintained by Foothill with a
depositary selected by Foothill (the "Foothill Account") or unless and until
such Collection item is honored when presented for payment. Should any
Collection item not be honored when presented for payment, then Borrower shall
be deemed not to have made such payment, and interest shall be recalculated
accordingly. Anything to the contrary contained herein notwithstanding, any
Collection item shall be deemed received by Foothill only if it is received into
the Foothill Account on a Business Day on or before 11:00 a.m. California time.
If any Collection item is received into the Foothill Account on a nonBusiness
Day or after 11:00 a.m. California time on a Business Day, it shall be deemed to
have been received by Foothill as of the
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opening of business on the immediately following Business Day.
2.9 DESIGNATED ACCOUNT. Foothill is authorized to make the
Advances under this Agreement based upon telephonic or other instructions
received from anyone purporting to be an Authorized Person, or without
instructions if pursuant to Section 2.6(e). Borrower agrees to establish and
maintain the Designated Account with the Designated Account Bank for the purpose
of receiving the proceeds of the Advances requested by Borrower and made by
Foothill hereunder. Unless otherwise agreed by Foothill and Borrower, any
Advance requested by Borrower and made by Foothill hereunder shall be made to
the Designated Account.
2.10 MAINTENANCE OF LOAN ACCOUNT; STATEMENTS OF OBLIGATIONS.
Foothill shall maintain an account on its books in the name of Borrower (the
"Loan Account") on which Borrower will be charged with all Advances made by
Foothill to Borrower or for Borrower's account, including, accrued interest,
Foothill Expenses, and any other payment Obligations of Borrower. In accordance
with Section 2.8, the Loan Account will be credited with all payments received
by Foothill from Borrower or for Borrower's account, including all amounts
received in the Foothill Account. Foothill shall render statements regarding the
Loan Account to Borrower, including principal, interest, fees, and including an
itemization of all charges and expenses constituting Foothill Expenses owing,
and such statements shall be conclusively presumed to be correct and accurate
and constitute an account stated between Borrower and Foothill unless, within 30
days after receipt thereof by Borrower, Borrower shall deliver to Foothill
written objection thereto describing the error or errors contained in any such
statements.
2.11 FEES. Borrower shall pay to Foothill the following fees:
(a) Closing Fee. On September 3, 1999, a closing fee of
$200,000;
(b) Unused Line Fee. On the first day of each calendar quarter
during the term of this Agreement and on the termination date of this Agreement
(whether by its terms or acceleration), an unused line fee in an amount equal to
0.50% per annum times the Average Unused Portion of the Maximum Amount for the
immediately preceding calendar quarter or portion thereof, such unused line fee
to payable for the period commencing on the Effective Date and continuing
thereafter until the termination date of this Agreement;
(c) Annual Facility Fee. On each anniversary of the Effective
Date, an annual facility fee in an amount equal to $50,000;
(d) Financial Examination Fees. (i) Foothill's customary fee
of $650 per day per examiner (each such day for each such examiner, an
"Examiner-Day"), plus outofpocket expenses for each financial analysis and
examination (i.e., audits) of Borrower performed by personnel employed by
Foothill, provided, however, that, so long as no Event of Default has occurred
or is continuing, Borrower shall not be obligated to pay such fees, expenses,
and charges for more than 5 Examiner-Days during any 12 month period; and (ii)
the charges paid or
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incurred by Foothill if Foothill elects to employ the services of one or more
third Persons to appraise the Collateral; provided, however, that so long as no
Event of Default has occurred or is continuing, Borrower shall have no
obligation to reimburse Foothill for more than 1 appraisal of the Collateral in
any 12 month period, and the reimbursement amount for each such appraisal shall
not exceed $15,000.
2.12 LIBOR OPTION.
(a) INTEREST AND INTEREST PAYMENT DATES. In lieu of having
interest charged at the rate based upon the Base Rate, Borrower shall have the
option (the "LIBOR Option") to have interest on a portion of the Advances be
charged at the LIBOR Rate. Interest on LIBOR Rate Advances shall be payable on
the last day of each month and on the last day of each Interest Period
applicable thereto. On the last day of each applicable Interest Period, unless
Borrower has properly exercised the LIBOR Option with respect thereto, the
interest rate applicable to such LIBOR Rate Advances automatically shall convert
to the rate of interest then applicable to non-LIBOR Rate Advances under Section
2.6 hereof. At any time that an Event of Default has occurred and is continuing,
Lender shall have the right to convert the interest rate on all outstanding
LIBOR Rate Advances to the rate then applicable to non-LIBOR Rate Advances under
Section 2.6 hereof.
(b) LIBOR ELECTION.
(i) Borrower may, at any time and from time to time, so
long as no Event of Default has occurred and is continuing,
elect to exercise the LIBOR Option by notifying Lender prior
to 11:00 a.m. (California time) at least 3 Business Days prior
to the commencement of the proposed Interest Period (the
"LIBOR Deadline"). Notice of Borrower's election of the LIBOR
Option for a permitted portion of the Advances and an Interest
Period pursuant to this Section shall be made by delivery to
Lender of a LIBOR Notice received by Lender before the LIBOR
Deadline, or by telephonic notice received by Lender before
the LIBOR Deadline (to be confirmed by delivery to Lender of a
LIBOR Notice received by Lender prior to 5:00 _p.m.
(California time) on the same day; provided, however, that
Borrower's failure to deliver such confirming LIBOR Notice
shall not affect the applicability of such rate if Borrower's
election is implemented by Lender.
(ii) Each LIBOR Notice shall be irrevocable and binding on
Borrower. In connection with each LIBOR Rate Advance, Borrower
shall indemnify, defend, and hold Lender harmless against any
loss, cost, or expense incurred by Lender as a result of any
failure to fulfill, on or before the date specified in the
LIBOR Notice, the applicable conditions set forth herein or
the termination, prior to the end of the applicable Interest
Period, of the applicability of interest at the LIBOR Rate, as
provided hereunder, including any loss (including loss of
anticipated
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profits), cost, or expense incurred by reason of the
liquidation or reemployment of deposits or other funds
acquired or committed to be acquired by Lender or its
participants to fund the requested LIBOR Rate Advances that,
as a result of such failure, are not so employed on such date
(such losses, costs, and expenses, collectively, "Funding
Losses").
(iii) Borrower shall have not more than 5 Interest Periods
in effect at any given time. Borrower only may exercise the
LIBOR Option for LIBOR Rate Advances of at least $1,000,000
and integral multiples of $500,000 in excess thereof.
(c) PREPAYMENTS. Borrower may prepay LIBOR Rate Advances at
any time; provided, however, that in the event that Advances are prepaid on any
date that is not the last day of the Interest Period applicable thereto,
including as a result of any automatic prepayment through the required
application by Lender of proceeds of Collections or for any other reason,
including early termination of the term of this Agreement or acceleration of the
Obligations pursuant to the terms hereof, Borrower shall indemnify, defend, and
hold Lender and its participants harmless against any and all Funding Losses
that arise in connection with such prepayment.
(d) SPECIAL PROVISIONS APPLICABLE TO LIBOR RATE.
(i) The LIBOR Rate may be adjusted by Lender on a
prospective basis to take into account any additional or
increased costs to Lender of maintaining or obtaining any
eurodollar deposits or increased costs due to changes in
applicable law occurring subsequent to the commencement of the
then applicable Interest Period, including but not limited to
changes in tax laws (except changes of general applicability
in corporate income tax laws) and changes in the reserve
requirements imposed by the Board of Governors of the Federal
Reserve System (or any successor), excluding the Reserve
Percentage, which additional or increased costs would increase
the cost of funding loans bearing interest at the LIBOR Rate.
Lender shall give Borrower notice of such a determination and
adjustment and Borrower may, by notice to Lender (y) require
Lender to furnish to Borrower a statement setting forth the
basis for adjusting such LIBOR Rate and the method for
determining the amount of such adjustment, or (z) repay the
LIBOR Rate Advances with respect to which such adjustment is
made, which repayment shall not be subject to any breakage
fees.
(ii) In the event that any change in market conditions or
any law, regulation, treaty, or directive, or any change
therein or in the interpretation of application thereof, shall
at any time after the date hereof, in the reasonable opinion
of Lender, make it unlawful or impractical for Lender to fund
or maintain LIBOR Advances or to continue such funding or
maintaining, or to determine or
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charge interest rates at the LIBOR Rate, Lender shall give
notice of such changed circumstances to the Borrower and (y)
in the case of any LIBOR Rate Advances that are outstanding,
the date specified in Lender's notice shall be deemed to be
the last day of the Interest Period of such LIBOR Rate
Advances, and interest upon the LIBOR Advances then
outstanding shall thereafter accrue as provided in Section 1.3
hereof, and (z) Borrower shall not be entitled to elect the
LIBOR Option until Lender determines that it would no longer
be unlawful or impractical to do so.
(e) NO REQUIREMENT OF MATCHED FUNDING. Anything to the
contrary contained herein notwithstanding, neither Lender nor any participant is
required actually to acquire eurodollar deposits to fund or otherwise match fund
any Advances as to which interest accrues at the LIBOR Rate. The provisions of
this Section shall apply as if Lender or its participants had match funded any
Advances as to which interest is accruing at the LIBOR Rate by acquiring
eurodollar deposits for each Interest Period in the amount of the LIBOR Rate
Advances.
3. CONDITIONS; TERM OF AGREEMENT.
3.1 CONDITIONS PRECEDENT TO THE INITIAL ADVANCE.
The obligation of Foothill to make the initial Advance is subject to
the fulfillment, to the satisfaction of Foothill and its counsel, of each of the
following conditions on or before the Effective Date (except as expressly set
forth below):
(a) the Effective Date shall have occurred on or before the
Closing Date and the Closing Date shall occur on or before September 30, 1999;
(b) Foothill shall have received searches reflecting the
filing of its financing statements and fixture filings;
(c) Foothill shall have received each of the following
documents, duly executed, and each such document shall be in full force and
effect:
(i) the Disbursement Letter;
(ii) [intentionally omitted];
(iii) the Majestic Star Ship Mortgage;
(iv) the Borrower Stock Pledge Agreement, together
with the original certificates of Stock that are the subject
of the Liens created thereunder as well as stock powers
executed in blank with respect thereto;
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(v) the Trademark Security Agreement;
(vi) the Guaranty;
(vii) the Guarantor Security Agreement;
(viii) the Member Stock Pledge Agreement; and
(ix) the Intercreditor Agreement;
(d) Foothill shall have received a certificate from the
Secretary of Borrower attesting to the resolutions of Borrower's Manager
authorizing its execution, delivery, and performance of this Agreement and the
other Loan Documents to which Borrower is a party and authorizing specific
officers of Borrower to execute the same;
(e) Foothill shall have received copies of Borrower's
Governing Documents, as amended, modified, or supplemented to the Effective
Date, certified by the Secretary of Borrower;
(f) Foothill shall have received a certificate of status with
respect to Borrower, dated within 10 days of the Effective Date, such
certificate to be issued by the appropriate officer of the jurisdiction of
organization of Borrower, which certificate shall indicate that Borrower is in
good standing in such jurisdiction;
(g) Foothill shall have received certificates of status with
respect to Borrower, each dated within 15 days of the Effective Date, such
certificates to be issued by the appropriate officer of the jurisdictions in
which its failure to be duly qualified or licensed would constitute a Material
Adverse Change, which certificates shall indicate that Borrower is in good
standing in such jurisdictions;
(h) Foothill shall have received a certificate of insurance,
together with the endorsements thereto, as are required by Section 6.10, the
form and substance of which shall be satisfactory to Foothill and its counsel;
(i) Foothill shall have received duly executed certificates of
title with respect to that portion of the Collateral that is subject to
certificates of title;
(j) [intentionally omitted];
(k) Foothill shall have received an opinion of Borrower's
counsel in form and substance satisfactory to Foothill in its sole discretion,
such opinion to include, without limitation, an opinion as to the due issuance
and valid existence of Borrower's Gaming Licenses;
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(l) Foothill shall have received appraisals of the Real
Property Collateral, the Equipment and Borrower's Casino operations, in each
case satisfactory to Foothill, and (ii) mortgagee title insurance policies (or
marked commitments to issue the same) for the Real Property Collateral issued by
a title insurance company satisfactory to Foothill (each a "Mortgage Policy"
and, collectively, the "Mortgage Policies") in amounts satisfactory to Foothill
assuring Foothill that the Mortgages on such Real Property Collateral are valid
and enforceable first priority mortgage Liens on such Real Property Collateral
free and clear of all defects and encumbrances except Permitted Liens, and the
Mortgage Policies shall otherwise be in form and substance reasonably
satisfactory to Foothill;
(m) [Intentionally omitted];
(n) Foothill shall have received satisfactory evidence that
all tax returns required to be filed by Borrower have been timely filed and all
taxes upon Borrower or its properties, assets, income, and franchises (including
real property taxes and payroll taxes) have been paid prior to delinquency,
except such taxes that are the subject of a Permitted Protest;
(o) Foothill shall have received copies of each of the
following agreements, in each case, certified by the Secretary of Borrower as
being true, correct, and complete as of the Effective Date, and the same shall
have been reviewed by Foothill and its counsel and the results of such review
shall be satisfactory to Foothill in its sole discretion:
(i) the Senior Note Documents;
(ii) the BHR Operating Agreement;
(iii) the Berthing Agreement;
(iv) [intentionally omitted];
(v) the Harbor Lease;
(vi) the Harbor Lease Assignment;
(vii) the Development Agreement; and
(viii) the Management Agreement;
(p) Foothill shall have received evidence, satisfactory to
Foothill and its counsel that Borrower has made all necessary registrations
with, obtained all necessary consent or approvals of, given all necessary
notices to, and taken all other necessary actions required by, each applicable
Gaming Authority (including, without limitation, the Indiana Gaming Commission)
relative to the execution, delivery, and performance of the Loan Documents by
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Borrower;
(q) Foothill shall have received background checks on Barden
and Michael Kelly, and the results of such background checks shall be
satisfactory to Foothill in its sole discretion;
(r) Foothill shall have received evidence, satisfactory to
Foothill in its sole discretion, that, as of the Effective Date, Borrower is in
compliance with the Development Agreement;
(s) The Majestic Star Ship Mortgage shall have been recorded
in the applicable filing office of the United States Coast Guard and such other
governmental agency as shall be necessary, and Foothill shall have received
confirmation, satisfactory to Foothill, of such recordation;
(t) Borrower shall have Excess Availability, as of the
Effective Date, after giving effect to the initial Advances of not less than
$5,000,000; and
(u) all other documents and legal matters in connection with
the transactions contemplated by this Agreement shall have been delivered,
executed, or recorded and shall be in form and substance satisfactory to
Foothill and its counsel.
3.2 CONDITIONS PRECEDENT TO ALL ADVANCES.
The following shall be conditions precedent to all Advances hereunder:
(a) the representations and warranties contained in this
Agreement and the other Loan Documents shall be true and correct in all respects
on and as of the date of such extension of credit, as though made on and as of
such date (except to the extent that such representations and warranties relate
solely to an earlier date);
(b) no Default or Event of Default shall have occurred and be
continuing on the date of such extension of credit, nor shall either result from
the making thereof, and
(c) no injunction, writ, restraining order, or other order of
any nature prohibiting, directly or indirectly, the extending of such credit
shall have been issued and remain in force by any governmental authority against
Borrower, Foothill, or any of their Affiliates.
3.3 CONDITION SUBSEQUENT. As a condition subsequent to initial
closing hereunder, Borrower shall perform or cause to be performed the following
(the failure by Borrower to so perform or cause to be performed constituting an
Event of Default):
(a) within 30 days of the Effective Date, deliver to Foothill
the certified copies
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of the policies of insurance, together with the endorsements thereto, as are
required by Section 6.10, the form and substance of which shall be satisfactory
to Foothill and its counsel.
3.4 TERM; AUTOMATIC RENEWAL. This Agreement shall become effective
upon the execution and delivery hereof by Borrower and Foothill and shall
continue in full force and effect for a term ending on the date (the "Renewal
Date") that is 4 years from the Effective Date and automatically shall be
renewed for successive 1 year periods (each a "Renewal Period") thereafter,
unless sooner terminated pursuant to the terms hereof. The foregoing to the
contrary notwithstanding, Borrower may terminate this Agreement effective on the
Renewal Date or on any 1 year anniversary of the Renewal Date by giving Foothill
at least 45 days prior written notice, and (b) Foothill may terminate this
Agreement (i) immediately and without notice upon the occurrence and during the
continuation of an Event of Default, and (ii) effective on the Renewal Date or
on any 1 year anniversary of the Renewal Date by giving Borrower at least 120
days prior written notice; provided, however, that if Foothill gives Borrower
written notice less than 120 days and at least 45 days prior to the Renewal Date
or any 1 year anniversary of the Renewal Date, then Foothill may terminate this
Agreement effective on a date that is not less than 120 days after the date such
written notice is given to Borrower, nor more than 75 days after the Renewal
Date or such 1 year anniversary of the Renewal Date, as applicable.
3.5 EFFECT OF TERMINATION. On the date of termination of this
Agreement, all Obligations immediately shall become due and payable without
notice or demand. No termination of this Agreement, however, shall relieve or
discharge Borrower of Borrower's duties, Obligations, or covenants hereunder,
and Foothill's continuing security interests in the Collateral shall remain in
effect until all Obligations have been fully and finally discharged and
Foothill's obligation to provide additional credit hereunder is terminated. If
Borrower has sent a notice of termination pursuant to the provisions of Section
3.4, but fails to pay the Obligations in full on the date set forth in said
notice, then Foothill may, but shall not be required to, renew this Agreement
for an additional term of 1 year.
3.6 EARLY TERMINATION BY BORROWER. The provisions of Section 3.4
that allow termination of this Agreement by Borrower only on the Renewal Date
and certain anniversaries thereof notwithstanding, Borrower has the option, at
any time upon 90 days prior written notice to Foothill, to terminate this
Agreement by paying to Foothill, in cash, the Obligations, in full, together
with the Applicable Early Termination Premium. The Applicable Early Termination
Premium provided for in this Section 3.6 shall be deemed included in the
Obligations.
3.7 TERMINATION UPON EVENT OF DEFAULT. If Foothill terminates this
Agreement upon the occurrence of an Event of Default, in view of the
impracticability and extreme difficulty of ascertaining actual damages and by
mutual agreement of the parties as to a reasonable calculation of Foothill's
lost profits as a result thereof, Borrower shall pay to Foothill upon the
effective date of such termination, a premium in an amount equal to the
Applicable Early Termination Premium. The Applicable Early Termination Premium
shall be presumed to be the amount of damages sustained by Foothill as the
result of the early termination and Borrower
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agrees that it is reasonable under the circumstances currently existing. The
Applicable Early Termination Premium provided for in this Section 3.7 shall be
deemed included in the Obligations.
4. CREATION OF SECURITY INTEREST.
4.1 GRANT OF SECURITY INTEREST. Borrower hereby grants to Foothill
a continuing security interest in all currently existing and hereafter acquired
or arising Personal Property Collateral in order to secure prompt repayment of
any and all Obligations and in order to secure prompt performance by Borrower of
each of its covenants and duties under the Loan Documents. Foothill's security
interests in the Personal Property Collateral shall attach to all Personal
Property Collateral without further act on the part of Foothill or Borrower.
Anything contained in this Agreement or any other Loan Document to the contrary
notwithstanding, except for the sale of Inventory to buyers in the ordinary
course of business and Asset Sales permitted under Section 7.4, Borrower has no
authority, express or implied, to dispose of any item or portion of the Personal
Property Collateral or the Real Property Collateral.
4.2 NEGOTIABLE COLLATERAL. In the event that any Collateral,
including proceeds, is evidenced by or consists of Negotiable Collateral,
Borrower, immediately upon the request of Foothill, shall endorse and deliver
physical possession of such Negotiable Collateral to Foothill.
4.3 COLLECTION OF ACCOUNTS, GENERAL INTANGIBLES, AND NEGOTIABLE
COLLATERAL.
At any time after an Event of Default has occurred, Foothill or
Foothill's designee may (a) notify customers or Account Debtors of Borrower that
the Accounts, General Intangibles, or Negotiable Collateral have been assigned
to Foothill or that Foothill has a security interest therein, and (b) collect
the Accounts, General Intangibles, and Negotiable Collateral directly and charge
the collection costs and expenses to the Loan Account. Borrower agrees that it
will hold in trust for Foothill, as Foothill's trustee, any Collections that it
receives and immediately will deliver said Collections to Foothill in their
original form as received by Borrower.
4.4 DELIVERY OF ADDITIONAL DOCUMENTATION REQUIRED. At any time
upon the request of Foothill, Borrower shall, and shall cause the Restricted
Subsidiaries to, execute and deliver to Foothill all financing statements,
continuation financing statements, fixture filings, security agreements,
pledges, assignments, endorsements of certificates of title, applications for
title, affidavits, reports, notices, schedules of accounts, letters of
authority, and all other documents that Foothill reasonably may request, in form
satisfactory to Foothill, to perfect and continue perfected Foothill's security
interests in the Collateral, and in order to fully consummate all of the
transactions contemplated hereby and under the other the Loan Documents.
4.5 POWER OF ATTORNEY. Borrower hereby irrevocably makes,
constitutes, and appoints Foothill (and any of Foothill's officers, employees,
or agents designated by Foothill) as Borrower's true and lawful attorney, with
power to (a) if Borrower refuses to, or fails timely to
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execute and deliver any of the documents described in Section 4.4, sign the name
of Borrower on any of the documents described in Section 4.4, (b) at any time
that an Event of Default has occurred and is continuing or Foothill deems itself
insecure, sign Borrower's name on any invoice or bill of lading relating to any
Account, drafts against Account Debtors, schedules and assignments of Accounts,
verifications of Accounts, and notices to Account Debtors, (c) after an Event of
Default has occurred, send requests for verification of Accounts, (d) endorse
Borrower's name on any Collection item that may come into Foothill's possession,
(e) at any time that an Event of Default has occurred and is continuing or
Foothill deems itself insecure, notify the post office authorities to change the
address for delivery of Borrower's mail to an address designated by Foothill, to
receive and open all mail addressed to Borrower, and to retain all mail relating
to the Collateral and forward all other mail to Borrower, (f) at any time that
an Event of Default has occurred and is continuing, make, settle, and adjust all
claims under Borrower's policies of insurance and make all determinations and
decisions with respect to such policies of insurance, and (g) at any time that
an Event of Default has occurred and is continuing or Foothill deems itself
insecure, settle and adjust disputes and claims respecting the Accounts directly
with Account Debtors, for amounts and upon terms that Foothill determines to be
reasonable, and Foothill may cause to be executed and delivered any documents
and releases that Foothill determines to be necessary. The appointment of
Foothill as Borrower's attorney, and each and every one of Foothill's rights and
powers, being coupled with an interest, is irrevocable until all of the
Obligations have been fully and finally repaid and performed and Foothill's
obligation to extend credit hereunder is terminated.
4.6 RIGHT TO INSPECT. Foothill (through any of its officers,
employees, or agents) shall have the right, from time to time hereafter to
inspect Borrower's Books and to check, test, and appraise the Collateral in
order to verify Borrower's financial condition or the amount, quality, value,
condition of, or any other matter relating to, the Collateral.
5. REPRESENTATIONS AND WARRANTIES.
In order to induce Foothill to enter into this Agreement, Borrower
makes the following representations and warranties which shall be true, correct,
and complete in all respects as of the date hereof, and shall be true, correct,
and complete in all respects as of the Effective Date, as of the Closing Date,
and at and as of the date of the making of each Advance made thereafter, as
though made on and as of the date of such Advance (except to the extent that
such representations and warranties relate solely to an earlier date) and such
representations and warranties shall survive the execution and delivery of this
Agreement:
5.1 NO ENCUMBRANCES. Borrower has good and indefeasible title to
the Collateral, free and clear of Liens except for Permitted Liens.
5.2 MEMBERSHIP INTERESTS. Certificates evidencing membership
interests in Borrower have not been authorized or issued.
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5.3 [INTENTIONALLY OMITTED].
5.4 EQUIPMENT. All of the Equipment is used or held for use in
Borrower's business and is fit for such purposes.
5.5 LOCATION OF INVENTORY AND EQUIPMENT. The Inventory and
Equipment are not stored with a bailee, warehouseman, or similar party (without
Foothill's prior written consent) and are located only at the locations
identified on Schedule 6.12 or otherwise permitted by Section 6.12.
5.6 INVENTORY RECORDS. Borrower keeps correct and accurate records
itemizing and describing the kind, type, quality, and quantity of the Inventory,
and Borrower's cost therefor.
5.7 LOCATION OF CHIEF EXECUTIVE OFFICE; FEIN. The chief executive
office of Borrower is located at the address indicated in the preamble to this
Agreement and Borrower's FEIN is 43-1664986.
5.8 DUE ORGANIZATION AND QUALIFICATION; SUBSIDIARIES.
(a) Borrower is duly organized and existing and in good
standing under the laws of the jurisdiction of its incorporation and qualified
and licensed to do business in, and in good standing in, any state where the
failure to be so licensed or qualified reasonably could be expected to have a
Material Adverse Change.
(b) Set forth on Schedule 5.8, is a complete and accurate list
of Borrower's direct and indirect Subsidiaries, showing: (i) the jurisdiction of
their incorporation; (ii) the number of shares of each class of common and
preferred Stock authorized for each of such Subsidiaries; and (iii) the number
and the percentage of the outstanding shares of each such class owned directly
or indirectly by Borrower. All of the outstanding Stock of each such Subsidiary
has been validly issued and is fully paid and nonassessable.
(c) Except as set forth on Schedule 5.8, no Stock (or any
securities, instruments, warrants, options, purchase rights, conversion or
exchange rights, calls, commitments or claims of any character convertible into
or exercisable for Stock) of any direct or indirect Subsidiary of Borrower is
subject to the issuance of any security, instrument, warrant, option, purchase
right, conversion or exchange right, or call.
5.9 DUE AUTHORIZATION; NO CONFLICT.
(a) The execution, delivery, and performance by Borrower of
this Agreement and the Loan Documents to which it is a party have been duly
authorized by all necessary action.
(b) The execution, delivery, and performance by Borrower of
this Agreement
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and the Loan Documents to which it is a party do not and will not (i) violate
any provision of federal, state, or local law or regulation (including
Regulations T, U, and X of the Federal Reserve Board) applicable to Borrower,
the Governing Documents of Borrower, or any order, judgment, or decree of any
court or other Governmental Authority binding on Borrower, (ii) conflict with,
result in a breach of, or constitute (with due notice or lapse of time or both)
a default under any material contractual obligation or material lease of
Borrower, (iii) result in or require the creation or imposition of any Lien of
any nature whatsoever upon any properties or assets of Borrower, other than
Permitted Liens, or (iv) other than the approval and consent of the Indiana
Gaming Commission, which approval and consent has been obtained prior to the
Closing Date, require any approval of stockholders or any approval or consent of
any Person under any material contractual obligation of Borrower.
(c) Other than the filing of appropriate financing statements,
fixture filings, and mortgages, and the approval and consent of the Indiana
Gaming Commission, which approval and consent has been obtained prior to the
Closing Date, the execution, delivery, and performance by Borrower of this
Agreement and the Loan Documents to which Borrower is a party do not and will
not require any registration with, consent, or approval of, or notice to, or
other action with or by, any federal, state, foreign, or other Governmental
Authority or other Person.
(d) This Agreement and the Loan Documents to which Borrower is
a party, and all other documents contemplated hereby and thereby, when executed
and delivered by Borrower will be the legally valid and binding obligations of
Borrower, enforceable against Borrower in accordance with their respective
terms, except as enforcement may be limited by equitable principles or by
bankruptcy, insolvency, reorganization, moratorium, or similar laws relating to
or limiting creditors' rights generally.
(e) The Liens granted by Borrower to Foothill in and to its
properties and assets pursuant to this Agreement and the other Loan Documents
are validly created, perfected, and have the priority set forth in the
Intercreditor Agreement, subject only to Permitted Liens.
5.10 LITIGATION. There are no actions or proceedings pending by or
against Borrower or any Subsidiary of Borrower before any court or
administrative agency and Borrower does not have knowledge or belief of any
pending, threatened, or imminent litigation, governmental investigations, or
claims, complaints, actions, or prosecutions involving Borrower or any Guarantor
of the Obligations, except for: (a) ongoing collection matters in which Borrower
or such Subsidiary is the plaintiff; (b) matters disclosed on Schedule 5.10; and
(c) matters arising after the date hereof that, if decided adversely to Borrower
or such Subsidiary, reasonably could not be expected to result in a Material
Adverse Change.
5.11 NO MATERIAL ADVERSE CHANGE. All financial statements relating
to Borrower or any Guarantor of the Obligations that have been delivered by
Borrower to Foothill have been prepared in accordance with GAAP (except, in the
case of unaudited financial statements, for the
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lack of footnotes and being subject to year end audit adjustments) and fairly
present Borrower's (or such Guarantor's, as applicable) financial condition as
of the date thereof and Borrower's results of operations for the period then
ended. There has not been a Material Adverse Change with respect to Borrower (or
such Guarantor, as applicable) since the date of the latest financial statements
submitted to Foothill on or before the Effective Date.
5.12 SOLVENCY. Borrower and each of its Restricted Subsidiaries,
other than Capital Corp., is Solvent. No transfer of property is being made by
Borrower or any of its Subsidiaries and no obligation is being incurred by
Borrower or any of its Subsidiaries in connection with the transactions
contemplated by this Agreement or the other Loan Documents with the intent to
hinder, delay, or defraud either present or future creditors of Borrower or any
of its Subsidiaries. Employee Benefits.
5.13 EMPLOYEE BENEFITS. None of Borrower, any of its Subsidiaries,
or any of their ERISA Affiliates maintains or contributes to any Benefit Plan,
other than those listed on Schedule 5.13. Borrower, each of its Subsidiaries and
each ERISA Affiliate have satisfied the minimum funding standards of ERISA and
the IRC with respect to each Benefit Plan to which it is obligated to
contribute. No ERISA Event has occurred nor has any other event occurred that
may result in an ERISA Event that reasonably could be expected to result in a
Material Adverse Change. None of Borrower or its Subsidiaries, any ERISA
Affiliate, or any fiduciary of any Plan is subject to any direct or indirect
liability with respect to any Plan under any applicable law, treaty, rule,
regulation, or agreement. None of Borrower or its Subsidiaries or any ERISA
Affiliate is required to provide security to any Plan under Section 401(a)(29)
of the IRC.
5.14 ENVIRONMENTAL CONDITION. None of the properties or assets of
Borrower or any of its Subsidiaries has ever been used by Borrower, any of its
Subsidiaries, or, to the best of Borrower's knowledge, by previous owners or
operators in the disposal of, or to produce, store, handle, treat, release, or
transport, any Hazardous Materials. None of the properties or assets of Borrower
or any of its Subsidiaries has ever been designated or identified in any manner
pursuant to any environmental protection statute as a Hazardous Materials
disposal site, or a candidate for closure pursuant to any environmental
protection statute. No Lien arising under any environmental protection statute
has attached to any revenues or to any real or personal property owned or
operated by Borrower or any of its Subsidiaries. Neither Borrower nor any of its
Subsidiaries has received a summons, citation, notice, or directive from the
Environmental Protection Agency or any other federal or state governmental
agency concerning any action or omission by Borrower or any of its Subsidiaries
resulting in the releasing or disposing of Hazardous Materials into the
environment.
5.15 BROKERAGE FEES. No brokerage commission or finders fees has or
shall be incurred or payable in connection with or as a result of Borrower's
obtaining financing from Foothill under this Agreement, and Borrower has not
utilized the services of any broker or finder in connection with Borrower's
obtaining financing from Foothill under this Agreement.
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5.16 GOVERNMENTAL AUTHORITY. Except as set forth on Schedule 5.16,
no consent, authorization, approval or other action by, and no notice to or
filing with, any governmental authority or regulatory body or any other Person
is required (a) for the grant by Borrower of the security interest in the
Collateral granted hereby or for the execution, delivery or performance of this
Agreement and the other Loan Documents by Borrower, (b) for the perfection of
such security interest or the exercise by Foothill of the rights and remedies
provided for in this Agreement or the other Loan Documents, or (c) except for
the consents, authorizations, approvals, actions, notices and filings with the
Gaming Authorities, all of which have been duly obtained, taken, given or made
and are in full force and effect and are not subject to any conditions (other
than those conditions generally applicable to entities holding licenses,
permits, consents or authorizations granted or issued by the Gaming
Authorities).
5.17 LICENSES AND PERMITS.
(a)(i) All material licenses, permits, and consents and
similar rights required from any federal, state, or local governmental body
(including the Gaming Authorities), including all necessary Gaming Licenses, for
the ownership, use, or operation of the businesses or properties now owned or
operated by Borrower and each of its Subsidiaries, including all necessary
Gaming Licenses, have been validly issued and are in full force and effect; (ii)
Borrower and each of its Subsidiaries is in compliance, in all material
respects, with all of the provisions thereof applicable to it; and (iii) none of
such licenses, permits, or consents is the subject of any pending or, threatened
proceeding for the revocation, cancellation, suspension, or non-renewal thereof.
As of the Effective Date or of each subsequent date on which Borrower delivers
to Foothill an updated schedule pursuant to Section 6.18, set forth on Schedule
5.17 is a complete and accurate list of all such licenses, permits, and
consents, and such schedule identifies the date by which an application for the
renewal of such license, permit, or consent must be filed and describes the
status of each such pending application.
(b) Borrower has obtained (i) all material licenses,
permits, and consents necessary or appropriate to conduct its business and
operations located at the Buffington Facility, and (ii) as of the Effective
Date, all required approvals from the Gaming Authorities of the transactions
contemplated hereby and by the other Loan Documents.
(c) Borrower owns or possesses all patents, trademarks,
trade names, copyrights, and other similar rights necessary for the conduct of
its business as now carried on or proposed to be conducted, without any known
conflict of the rights of others.
5.18 TAXATION AS A PARTNERSHIP. Borrower is and for all taxable
years has been a limited liability company taxable for federal income tax
purposes as a partnership in accordance with applicable provisons of the IRC and
Treasury Regulations promulgated in connection therewith. In particular,
Borrower is not and has not been an association within the meaning of Internal
Revenue Code Section 7701, a publicly traded partnership within the meaning of
Internal Revenue Code Section 7704. In addition, Borrower is and has been
treated as a partnership for
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purposes of income taxation in Indiana under the [Indiana Revenue and Taxation
Code] and applicable regulation promulgated in connection therewith. The
Borrower has not and will not elect to be subject to taxation as a corporation
for federal or any state income tax purposes.
6. AFFIRMATIVE COVENANTS.
Borrower covenants and agrees that, so long as any credit hereunder
shall be available and until full and final payment of the Obligations, and
unless Foothill shall otherwise consent in writing, Borrower shall do all of the
following:
6.1 ACCOUNTING SYSTEM. Maintain a standard and modern system of
accounting that enables Borrower to produce financial statements in accordance
with GAAP, and maintain records pertaining to the Collateral that contain
information as from time to time may be requested by Foothill.
6.2 COLLATERAL REPORTING. Provide Foothill with the following
documents at the following times in form satisfactory to Foothill: (a) copies of
each report in respect of Borrower's business issued by a Gaming Authority or
made by Borrower to a Gaming Authority within 15 days of their respective
issuance or filing date; and (b) copies of all operating and capital budgets,
and all other budgets, summaries of sources and uses of funds, projections, and
financial information prepared by or on behalf of Borrower (including in respect
of any Casino operated by Borrower or its Restricted Subsidiaries) promptly upon
the preparation and delivery thereof by the chief financial officer of Borrower
to any third party, but in any event operating and capital budgets shall be
delivered to Foothill no less frequently that annually.
6.3 FINANCIAL STATEMENTS, REPORTS, CERTIFICATES. Deliver to
Foothill: (a) as soon as available, but in any event within 30 days after the
end of each month during each of Borrower's fiscal years, a company prepared
balance sheet, income statement, and statement of cash flow covering Borrower's
operations during such period; (b) as soon as available, but in any event within
45 days after the end of each of the first 3 fiscal quarters during each of
Borrower's fiscal years, a company prepared balance sheet, income statement, and
statement of cash flow covering Borrower's operation during such period, and (c)
as soon as available, but in any event within 90 days after the end of each of
Borrower's fiscal years, financial statements of Borrower for each such fiscal
year, audited by independent certified public accountants reasonably acceptable
to Foothill and certified, without any qualifications, by such accountants to
have been prepared in accordance with GAAP, together with a certificate of such
accountants addressed to Foothill stating that such accountants do not have
knowledge of the existence of any Default or Event of Default. Such audited
financial statements shall include a balance sheet, profit and loss statement,
and statement of cash flow and, if prepared, such accountants' letter to
management. If Borrower is a parent company of one or more Restricted
Subsidiaries, then, in addition to the financial statements referred to above,
Borrower agrees to deliver financial statements prepared on a consolidating
basis so as to present Borrower and each such Restricted Subsidiary separately,
and on a consolidated basis.
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Together with the above, Borrower also shall deliver to Foothill (a)
Borrower's Form 10Q Quarterly Reports, Form 10K Annual Reports, and Form 8K
Current Reports, and any other filings made by Borrower with the Securities and
Exchange Commission, if any, within 15 days after the same are filed, or any
other information that is provided by Borrower to its shareholders, (b) any
report, notice, or document delivered to the Indenture Trustee or to the holders
of the Notes by or on behalf of Borrower or any of its Subsidiaries and (c) any
other report reasonably requested by Foothill relating to the financial
condition of Borrower.
Each month, together with the financial statements provided pursuant to
Section 6.3, Borrower shall deliver to Foothill a certificate signed by its
chief financial officer to the effect that: (i) all financial statements
delivered or caused to be delivered to Foothill hereunder have been prepared in
accordance with GAAP (except, in the case of unaudited financial statements, for
the lack of footnotes and being subject to yearend audit adjustments), are
correct in all material respects, and fairly present in all material respects
the financial condition of Borrower, (ii) the representations and warranties of
Borrower contained in this Agreement and the other Loan Documents are true and
correct in all material respects on and as of the date of such certificate, as
though made on and as of such date (except to the extent that such
representations and warranties relate solely to an earlier date), and (iii) on
the date of delivery of such certificate to Foothill there does not exist any
condition or event that constitutes a Default or Event of Default (or to the
extent of any noncompliance, describing such noncompliance as to which he or she
may have knowledge and what action Borrower has taken, is taking, or proposes to
take with respect thereto). For each month that also is the date on which a
financial covenant in Section 7.20 is to be tested Borrower shall deliver to
Foothill a Compliance Certificate demonstrating in reasonable detail compliance
at the end of such period with the applicable financial covenants contained in
Section 7.20, a calculation of Borrower's Interest Coverage Ratio for the
Borrower's most recently ended four fiscal quarters, and a calculation of BHR
Attributed Indebtedness as of the date of such Compliance Certificate.
Borrower shall have issued written instructions to its independent
certified public accountants authorizing them to communicate with Foothill and
to release to Foothill whatever financial information concerning Borrower that
Foothill may reasonably request.
6.4 TAX RETURNS. Deliver to Foothill copies of each of Borrower's future
federal income tax returns, and any amendments thereto, within 30 days of the
filing thereof with the Internal Revenue Service.
6.5 GUARANTOR REPORTS. Cause any Guarantor of any of the Obligations to
deliver its annual financial statements at the time when Borrower provides its
audited financial statements to Foothill and copies of all federal income tax
returns as soon as the same are available and in any event no later than 30 days
after the same are required to be filed by law.
6.6 [INTENTIONALLY OMITTED].
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6.7 TITLE TO EQUIPMENT. Upon Foothill's request, Borrower immediately shall
deliver to Foothill, properly endorsed, any and all evidences of ownership of,
certificates of title, or applications for title to any items of Equipment
(including, without limitation, the Majestic Star Casino Vessel).
6.8 MAINTENANCE OF EQUIPMENT. Maintain the Equipment (including, without
limitation, the Majestic Star Casino Vessel) in good operating condition and
repair (reasonable wear and tear excepted), and make all necessary replacements
thereto as shall be necessary for the proper conduct of Borrower's business.
Other than those items of Equipment that constitute fixtures on the Effective
Date, Borrower shall not permit any item of Equipment to become a fixture to
real estate or an accession to other property (other than accessions to the
Majestic Star Casino Vessel) and such Equipment shall at all times remain
personal property.
6.9 TAXES. Cause all assessments and taxes, whether real, personal, or
otherwise, due or payable by, or imposed, levied, or assessed against Borrower
or any of its property to be paid in full, before delinquency or before the
expiration of any extension period, except to the extent that the validity of
such assessment or tax shall be the subject of a Permitted Protest. Borrower
shall make due and timely payment or deposit of all such federal, state, and
local taxes, assessments, or contributions required of it by law, and will
execute and deliver to Foothill, on demand, appropriate certificates attesting
to the payment thereof or deposit with respect thereto. Borrower will make
timely payment or deposit of all tax payments and withholding taxes required of
it by applicable laws, including those laws concerning F.I.C.A., F.U.T.A., state
disability, and local, state, and federal income taxes, and will, upon request,
furnish Foothill with proof satisfactory to Foothill indicating that Borrower
has made such payments or deposits.
6.1 INSURANCE.
(a) At its expense, keep the Collateral insured against loss or damage by
fire, theft, explosion, sprinklers, and all other hazards and risks, and in such
amounts, as are ordinarily insured against by other owners in similar
businesses. Borrower also shall maintain business interruption, public
liability, product liability, and property damage insurance relating to
Borrower's ownership and use of the Collateral, as well as insurance against
larceny, embezzlement, and criminal misappropriation.
(b) At its expense, obtain and maintain (i) insurance of the type necessary
to insure the Real Property Collateral, for the full replacement cost thereof,
against any loss by fire, lightning, windstorm, hail, explosion, aircraft, smoke
damage, vehicle damage, earthquakes, elevator collision, and other risks from
time to time included under "extended coverage" polices, in such amounts as
Foothill may reasonably require, but in any event in amounts sufficient to
prevent Borrower from becoming a co-insurer under such policies, (ii) combined
single limit bodily injury and property damages insurance against any loss,
liability, or damages on, about, or relating to each parcel of Real Property
Collateral, in such amounts as may be reasonably satisfactory to Foothill; (iii)
business rental insurance covering annual receipts for a 12-month
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period for each parcel of Real Property Collateral; and (iv) insurance for such
other risks as Foothill may require. Replacement costs, at Foothill's option,
may be redetermined by an insurance appraiser, satisfactory to Foothill, not
more frequently than once every 12 months at Borrower's cost.
(c) [Intentionally Omitted];
(d) All such policies of insurance shall be in such form, with such
companies, and in such amounts as may be reasonably satisfactory to Foothill.
All insurance required herein shall be written by companies which are authorized
to do insurance business in the State of Indiana. All hazard insurance and such
other insurance as Foothill shall specify, shall contain a California Form
438BFU (NS) mortgagee endorsement, or an equivalent endorsement satisfactory to
Foothill, showing Foothill a loss payee thereof as its interest may appear, and
shall contain a waiver of warranties. Every policy of insurance referred to in
this Section 6.10 shall contain an agreement by the insurer that it will not
cancel such policy except after 30 days prior written notice to Foothill and
that any loss payable thereunder shall be payable notwithstanding any act or
negligence of Borrower or Foothill which might, absent such agreement, result in
a forfeiture of all or a part of such insurance payment and notwithstanding (i)
occupancy or use of the Real Property Collateral for purposes more hazardous
than permitted by the terms of such policy, (ii) any foreclosure or other action
or proceeding taken by Foothill pursuant to the Mortgages upon the happening of
an Event of Default, or (iii) any change in title or ownership of the Real
Property Collateral. Borrower shall deliver to Foothill certified copies of such
policies of insurance and evidence of the payment of all premiums therefor.
(e) Original policies or certificates thereof satisfactory to Foothill
evidencing such insurance shall be delivered to Foothill at least 30 days prior
to the expiration of the existing or preceding policies. Borrower shall give
Foothill prompt notice of any loss covered by such insurance, and Foothill shall
have the right to adjust any loss in excess of $1,000,000. Foothill shall have
the exclusive right to adjust all such losses payable under any such insurance
policies without any liability to Borrower whatsoever in respect of such
adjustments. Any monies received as payment for any loss under any insurance
policy including the insurance policies mentioned above, shall be paid over to
Foothill to be applied at the option of Foothill either to the prepayment of the
Obligations without premium, in such order or manner as Foothill may elect, or
shall be disbursed to Borrower under stage payment terms satisfactory to
Foothill for application to the cost of repairs, replacements, or restorations.
All repairs, replacements, or restorations shall be effected with reasonable
promptness and shall be of a value at least equal to the value of the items or
property destroyed prior to such damage or destruction. Upon the occurrence of
an Event of Default, Foothill shall have the right to apply all prepaid premiums
to the payment of the Obligations in such order or form as Foothill shall
determine.
(f) Borrower shall not take out separate insurance concurrent in form or
contributing in the event of loss with that required to be maintained under this
Section 6.10, unless Foothill is included thereon as named insured with the loss
payable to Foothill under a
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standard California 438BFU (NS) Mortgagee endorsement, or its local equivalent.
Borrower immediately shall notify Foothill whenever such separate insurance is
taken out, specifying the insurer thereunder and full particulars as to the
policies evidencing the same, and originals of such policies immediately shall
be provided to Foothill.
6.11 NO SETOFFS OR COUNTERCLAIMS. Make payments hereunder and under the
other Loan Documents by or on behalf of Borrower without setoff or counterclaim
and free and clear of, and without deduction or withholding for or on account
of, any federal, state, or local taxes.
6.12 LOCATION OF INVENTORY AND EQUIPMENT. Keep the Inventory and Equipment
only at the locations identified on Schedule 6.12; provided, however, that
Borrower may amend Schedule 6.12 so long as such amendment occurs by written
notice to Foothill not less than 15 days prior to the date on which the
Inventory or Equipment is moved to such new location, so long as such new
location is within the continental United States, and so long as, at the time of
such written notification, Borrower provides any financing statements or fixture
filings necessary to perfect and continue perfected Foothill's security
interests in such assets and also provides to Foothill a Collateral Access
Agreement.
6.13 COMPLIANCE WITH LAWS. Comply with the requirements of all applicable
laws, rules, regulations, and orders of any governmental authority, including
the Fair Labor Standards Act and the Americans With Disabilities Act, other than
laws, rules, regulations, and orders the noncompliance with which, individually
or in the aggregate, would not result in and reasonably could not be expected to
result in a Material Adverse Change.
6.14 EMPLOYEE BENEFITS.
(a) Cause to be delivered to Foothill, each of the following: (i)
promptly, and in any event within 10 Business Days after Borrower or any of its
Restricted Subsidiaries knows or has reason to know that an ERISA Event has
occurred that reasonably could be expected to result in a Material Adverse
Change, a written statement of the chief financial officer of Borrower
describing such ERISA Event and any action that is being taking with respect
thereto by Borrower, any such Restricted Subsidiary or ERISA Affiliate, and any
action taken or threatened by the IRS, Department of Labor, or PBGC. Borrower or
such Restricted Subsidiary, as applicable, shall be deemed to know all facts
known by the administrator of any Benefit Plan of which it is the plan sponsor,
(ii) promptly, and in any event within 3 Business Days after the filing thereof
with the IRS, a copy of each funding waiver request filed with respect to any
Benefit Plan and all communications received by Borrower, any of its Restricted
Subsidiaries or, to the knowledge of Borrower, any ERISA Affiliate with respect
to such request, and (iii) promptly, and in any event within 3 Business Days
after receipt by Borrower, any of its Restricted Subsidiaries or, to the
knowledge of Borrower, any ERISA Affiliate, of the PBGC's intention to terminate
a Benefit Plan or to have a trustee appointed to administer a Benefit Plan,
copies of each such notice.
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(b) Cause to be delivered to Foothill, upon Foothill's request, each of the
following: (i) a copy of each Plan (or, where any such plan is not in writing,
complete description thereof) (and if applicable, related trust agreements or
other funding instruments) and all amendments thereto, all written
interpretations thereof and written descriptions thereof that have been
distributed to employees or former employees of Borrower or its Restricted
Subsidiaries; (ii) the most recent determination letter issued by the IRS with
respect to each Benefit Plan; (iii) for the three most recent plan years, annual
reports on Form 5500 Series required to be filed with any governmental agency
for each Benefit Plan; (iv) all actuarial reports prepared for the last three
plan years for each Benefit Plan; (v) a listing of all Multiemployer Plans, with
the aggregate amount of the most recent annual contributions required to be made
by Borrower or any ERISA Affiliate to each such plan and copies of the
collective bargaining agreements requiring such contributions; (vi) any
information that has been provided to Borrower or any ERISA Affiliate regarding
withdrawal liability under any Multiemployer Plan; and (vii) the aggregate
amount of the most recent annual payments made to former employees of Borrower
or its Restricted Subsidiaries under any Retiree Health Plan.
6.15 LEASES. Pay when due all rents and other amounts payable under any
leases to which Borrower is a party or by which Borrower's properties and assets
are bound, unless such payments are the subject of a Permitted Protest. To the
extent that Borrower fails timely to make payment of such rents and other
amounts payable when due under its leases, Foothill shall be entitled, in its
discretion, to reserve an amount equal to such unpaid amounts against the
Borrowing Base.
6.16 BROKERAGE COMMISSIONS. Pay any and all brokerage commission or finders
fees, if any, incurred by in connection with or as a result of Borrower's
obtaining financing from Foothill under this Agreement.
6.17 GOVERNMENT AUTHORIZATION. Borrower shall deliver to Foothill, as soon
as practicable, and in any event within ten (10) days after the receipt by
Borrower or any of its Restricted Subsidiaries from any Gaming Authority or
other governmental authority having jurisdiction over the operations of Borrower
or any such Subsidiary or filing or receipt thereof by Borrower or any such
Restricted Subsidiary, (i)_copies of any order or notice of such Gaming
Authority or such other governmental authority or court of competent
jurisdiction which designates any Gaming License or other material franchise,
permit, or other governmental operating authorization of Borrower or any such
Restricted Subsidiary, or any application therefor, for a hearing or which
refuses renewal or extension of, or revokes or suspends the authority of
Borrower or any such Restricted Subsidiary to construct, own, manage, or operate
a Casino (or portion thereof), and (ii) a copy of any competing application
filed with respect to any such Gaming License or other authorization, or
application therefor, of Borrower or any such Restricted Subsidiary, or any
citation, notice of violation, or order to show cause issued by any Gaming
Authority or other governmental authority or any complaint filed by any Gaming
Authority or other governmental authority which is available to Borrower or any
such Restricted Subsidiary.
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6.18 LICENSE RENEWALS. Commencing on the date six months following the
Effective Date and continuing every six months thereafter, Borrower shall
deliver to Foothill an updated Schedule 5.17 reflecting thereon, as of the date
of such delivery, the information described in Section 5.17.
6.19 LICENSES AND PERMITS. (a) Ensure that all material licenses, permits,
and consents and similar rights required from any federal, state, or local
governmental body (including the Gaming Authorities) for the ownership, use, or
operation of the businesses or properties now owned or operated by Borrower or
any of its Restricted Subsidiaries, including all necessary Gaming Licenses,
have been validly issued and are in full force and effect, and (b) comply, in
all material respects, with all of the provisions thereof applicable to it.
6.20 SUBSIDIARY GUARANTEES. Borrower shall cause (i) each Restricted
Subsidiary of Borrower that is formed or acquired after the date hereof,
concurrently therewith, to (i) become a Guarantor hereunder and execute and
deliver to Foothill a guaranty substantially in the form of the Guaranty
pursuant to which such Restricted Subsidiary shall unconditionally guarantee all
of the Obligations; and (ii) execute a security agreement substantially in the
form of the Guarantor Security Agreement and such other agreements or documents
necessary or reasonably requested by Foothill to grant Foothill a valid,
enforceable, perfected Lien on the collateral described therein, subject only to
Permitted Liens; and (iii) cause such Restricted Subsidiary to deliver to
Foothill an opinion of counsel, in form reasonably satisfactory to Foothill,
that (i) such guaranty, security, agreement, and other agreements and documents
have been duly authorized, executed and delivered by such Restricted Subsidiary
and (ii) such guaranty, security agreement, and such other agreements and
documents constitute a legal, valid, binding and enforceable obligation of such
Restricted Subsidiary, subject to customary assumptions and exceptions,
including for bankruptcy, fraudulent transfer and equitable principles.
6.21 DEVELOPMENT AGREEMENT. From time to time, upon the request of
Foothill, deliver to Foothill evidence, reasonably satisfactory to Foothill,
that Borrower is in compliance with the Development Agreement.
7. NEGATIVE COVENANTS.
Borrower covenants and agrees that, so long as any credit hereunder shall
be available and until full and final payment of the Obligations, Borrower will
not, and will not permit any of its Restricted Subsidiaries to, do any of the
following without Foothill's prior written consent:
7.1 INDEBTEDNESS. Create, incur, assume, permit, guarantee, or otherwise
become or remain, directly or indirectly, liable with respect to any
Indebtedness, except for Permitted Indebtedness and guarantees permitted under
Section 7.6. The foregoing to the contrary notwithstanding, Borrower may create,
incur, assume, permit, guarantee, or otherwise become and remain, directly or
indirectly, liable with respect to any Indebtedness if (a) Borrower's Interest
Coverage Ratio for Borrower's most recently ended four full fiscal quarters for
which
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internal financial statements are available immediately preceding the date on
which such additional Indebtedness is incurred would have been not less than
2.0:1.0, determined on a pro forma basis (including the pro forma application of
the net proceeds therefrom), as if such additional Indebtedness had been
incurred at the beginning of such four-quarter period, (b) the final stated
maturity of such Indebtedness is after the Renewal Date or, during any Renewal
Term, the next succeeding anniversary of the Renewal Date (except for Purchase
Money Obligations, Capital Lease Obligations, or Acquired Debt), and (c) no
Event of Default shall have occurred and be continuing at the time such
Indebtedness is incurred, or would occur after giving effect on a pro forma
basis to such incurrence.
7.2 LIENS. Create, incur, assume, or permit to exist, directly or
indirectly, any Lien on or with respect to any of its property or assets, of any
kind, whether now owned or hereafter acquired, or any income or profits
therefrom, except for Permitted Liens (including Liens that are replacements of
Permitted Liens to the extent that the original Indebtedness is refinanced under
Section 7.1(a)(vii) and so long as the replacement Liens only encumber those
assets or property that secured the original Indebtedness).
7.3 RESTRICTIONS ON FUNDAMENTAL CHANGES. Enter into any merger,
consolidation, reorganization, or recapitalization, or reclassify its Stock, or
liquidate, wind up, or dissolve itself (or suffer any liquidation or
dissolution), or convey, sell, assign, lease, transfer, or otherwise dispose of,
in one transaction or a series of transactions, all or substantially all of its
property or assets; provided, however, that Borrower or any Restricted
Subsidiary may enter into a merger or consolidation so long as:
(a) Borrower or such Restricted Subsidiary, as applicable, is the
surviving Person;
(b) immediately after giving effect to such transaction on a pro forma
basis, no Default or Event of Default exists;
(c) 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;
(d)(i) Borrower or such Restricted Subsidiary, as applicable, 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 Borrower or such Restricted
Subsidiary, as applicable, immediately preceding such transaction and (ii)
Borrower shall have an Interest Coverage Ratio of not less than 2.0:1.0 for
Borrower's most recently ended four full fiscal quarters for which internal
financial statements are available immediately preceding the date 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; and
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(e) Borrower and any such Restricted Subsidiary, prior to the
consummation of any proposed transaction, a certificate of an officer of
Borrower and such Restricted Subsidiary to the foregoing effect, an opinion of
counsel, stating that all conditions precedent to the proposed transaction
provided for herein and in the Indenture have been complied with and a written
statement from a firm of independent public accountants of established national
reputation reasonably satisfactory to Lender that the proposed transaction
complies with the foregoing clause (d).
7.4 DISPOSAL OF ASSETS.
(a) Make any Asset Sale of the Majestic Star Casino Vessel;
(b) Make any Asset Sale of any assets other than the Majestic Star
Casino Vessel unless:
(i) other than with respect to an Event of Loss, no Default or Event
of Default shall have occurred and be continuing or would result therefrom;
(ii) other than with respect to an Event of Loss, Borrower or such
Restricted Subsidiary, as applicable, receives consideration of not less
than the fair market value, as of the time of such Asset Sale, of the
assets that are the subject of such Asset Sale;
(iii) other than with respect to an Event of Loss, Borrower or such
Restricted Subsidiary, as applicable, receives at least 75% of the
consideration for such Asset Sale in the form of cash or Cash Equivalents
or the assumption by the transferee of such assets of liabilities (other
than liabilities that, by their terms, are subordinated to the Obligations)
of Borrower or such Restricted Subsidiary, as applicable (provided, that
following such Asset Sale there is no further recourse to Borrower or its
Restricted Subsidiaries with respect to such liabilities); and
(iv) within 260 days of such Asset Sale, the Net Proceeds thereof
are (A) invested in assets related to the business of Borrower or its
Restricted Subsidiaries, (B) applied to repay Indebtedness under Purchase
Money Obligations incurred in connection with the asset sold, (C) at the
option of Foothill, to the extent not invested or applied as provided in
clauses (A) or (B) above (Net Proceeds not being so invested or applied,
"Excess Proceeds"), applied to repay Indebtedness under this Agreement and
to permanently reduce the Maximum Amount by the amount of Indebtedness so
repaid, provided that Borrower shall have no obligation to so prepay
Indebtedness under this Agreement and to so permanently reduce the Maximum
Amount unless the aggregate amount of Excess Proceeds shall exceed
$5,000,000; or (D) applied to make an offer to purchase Notes as provided
in the Indenture, provided, that
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Borrower shall not make an offer to so purchase Notes unless the aggregate
amount of Excess Proceeds minus the amount applied to repay Indebtedness
under this Agreement pursuant to the foregoing clause (C) shall exceed
$5,000,000.
(c) Pending the final application of any Net Proceeds of any Asset Sale
in accordance with Section 7.4(b)(iv), Borrower shall apply such Net Proceeds to
the outstanding Obligations or retain such Net Proceeds, in each case, in
accordance with the terms hereof.
(d) At any time that the Maximum Amount shall be permanently reduced
pursuant to Section 7.4(b)(iv)(C), then Borrower shall pay Lender a fee, at the
time of any such reduction in the Maximum Amount, in an amount equal to the
product of (i) the amount of such reduction in the Maximum Amount times (ii) the
Applicable Early Termination Premium Rate.
7.5 CHANGE NAME. Change Borrower's name, FEIN, corporate structure (within
the meaning of Section 9402(7) of the Code), or identity, or add any new
fictitious name without at least 15 days prior written notice to Foothill of
such change and at the time of such written notification, Borrower provides any
financing statements or fixture filings necessary to perfect and continue
perfected Foothill's security interests in the Collateral.
7.6 GUARANTEE. Guarantee or otherwise become in any way liable with
respect to the obligations of any third Person except (a) by, endorsement of
instruments or items of payment for deposit to the account of Borrower or which
are transmitted or turned over to Foothill, (b) guarantees by Subsidiaries of
Borrower of the obligations of Borrower under the Indenture provided that (i)
any such Subsidiary shall have guaranteed the Obligations in accordance with
Section 6.20, and (ii) such guarantee of the obligations under the Indenture
shall be subordinate in right of payment to such guarantee of the Obligations on
terms and conditions reasonably satisfactory to Foothill, (c) guarantees
constituting Investments permitted under Section 7.13, and (d) guarantees
constituting Indebtedness permitted under Section 7.1.
7.7 NATURE OF BUSINESS. Directly or indirectly, or 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.
7.8 PREPAYMENTS AND AMENDMENTS.
(a) Except in connection with a refinancing permitted by clause (k) of
the definition of Permitted Indebtedness, prepay, redeem, retire, defease,
purchase, or otherwise acquire any Indebtedness of Borrower or its Subsidiaries
owing to any third Person, other than the Obligations in accordance with this
Agreement, the repurchase of Notes in accordance with Section 7.4(b)(iv), and
the repurchase of Notes in an aggregate amount not to exceed $20,000,000,
pursuant to and in accordance with Section 3.8 of the Indenture; and
(b) Directly or indirectly, amend, modify, alter, increase, or change
any of the
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terms or conditions of (i) any Senior Note Document, provided, however,
that additional Notes may be issued pursuant to the terms thereof to the extent
the Indebtedness evidenced by such Notes is permitted hereunder, (ii) the BHR
Operating Agreement, except such amendments or modifications as are not
materially adverse to Borrower, or (iii) any agreement, instrument, document,
indenture, or other writing evidencing or concerning (A) Indebtedness permitted
under clause (f) of the definition of "Permitted Indebtedness", or (B)
Indebtedness refinanced in accordance with clause (k) of the definition of
Permitted Indebtedness in respect of any Indebtedness permitted under clause (f)
of the definition of Permitted Indebtedness.
7.9 CHANGE OF CONTROL. Cause, permit, or suffer, directly or indirectly,
any Change of Control.
7.10 CONSIGNMENTS. Consign any Inventory or sell any Inventory on bill and
hold, sale or return, sale on approval, or other conditional terms of sale.
7.11 DISTRIBUTIONS. Except as set forth in Section 7.22, make any
distribution or declare or pay any dividends (in cash or other property, other
than Stock) on, or purchase, acquire, redeem, or retire any of Borrower's Stock,
of any class, whether now or hereafter outstanding; provided, however, that (a)
Borrower may redeem, purchase, retire, or otherwise acquire Borrower's Stock in
exchange for, or out of the proceeds of, the substantially concurrent sale
(other than to a Subsidiary of Borrower) of, other Stock of Borrower (other than
Disqualified Capital Stock of Borrower), (b) Borrower may make distributions or
pay dividends to its Members in an amount not to exceed the amount of
Investments that Borrower could otherwise make pursuant to Section 7.13(b) at
the time such distribution or dividend is made, provided, that after giving
effect to such distribution or dividend, Borrower shall have Availability of not
less than $2,500,000, and (c) Restricted Subsidiaries may make distributions and
pay dividends to Borrower or to other Restricted Subsidiaries.
7.12 ACCOUNTING METHODS. Modify or change its method of accounting or enter
into, modify, or terminate any agreement currently existing, or at any time
hereafter entered into with any third party accounting firm or service bureau
for the preparation or storage of Borrower's accounting records without said
accounting firm or service bureau agreeing to provide Foothill information
regarding the Collateral or Borrower's financial condition. Borrower waives the
right to assert a confidential relationship, if any, it may have with any such
accounting firm or service bureau in connection with any information requested
by Foothill pursuant to or in accordance with this Agreement, and agrees that
Foothill may contact directly any such accounting firm or service bureau in
order to obtain such information.
7.13 INVESTMENTS.
(a) Other than Permitted Investments and guarantees permitted under
Section 7.6, directly or indirectly make, acquire, or incur any liabilities
(including contingent obligations) for or in connection with any Investment
(including, without limitation, (i) the acquisition of the
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securities (whether debt or equity) of, or other interests in, a Person, (ii)
loans, advances, capital contributions, or transfers of property to a Person, or
(iii) the acquisition of all or substantially all of the properties or assets of
a Person).
(b) The foregoing to the contrary notwithstanding, Borrower may make
or acquire an Investment if:
(i) Borrower's Interest Coverage Ratio for Borrower's
most recently ended four full fiscal quarters for which internal
financial statements are available immediately preceding the date
on which such Investment is made would have been not less than
2.0:1.0, determined on a pro forma basis, as if such Investment
had been made at the beginning of such four-quarter period;
(ii) no Event of Default shall have occurred and be
continuing at the time such Investment is made or would occur as a
consequence thereof; and
(iii) the amount of such Investment, together with all
other Investments made pursuant to this Section 7.13(b) and
dividends or distributions made pursuant to Section 7.11(b), in
each case, after the Closing Date, is less than the lesser of (A)
the amount of Investments Borrower is then permitted to make
pursuant to Section 4.7 of the Indenture (without regard to any
waiver of the restrictions contained in such section), and (B) the
sum of (1) 50% of the Consolidated Net Income of Borrower for the
period (taken as one accounting period) from the beginning of the
first fiscal quarter commencing immediately after the Closing Date
to the end of Borrower's then most recently ended fiscal quarter
for which internal financial statements are available (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 Borrower from the issuance or
sale, other than to a Subsidiary of Borrower, of Stock of Borrower
(other than Disqualified Capital Stock) after the Closing Date and
on or prior to the time of such Investment, 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
Borrower from the issuance or sale, other than to a Subsidiary of
Borrower, of any convertible or exchangeable debt security of
Borrower that has been converted or exchanged into Stock of
Borrower (other than Disqualified Capital Stock) pursuant to the
terms thereof after the Closing Date and on or prior to the time
of such Investment (including any additional net cash proceeds
received by Borrower upon such conversion or exchange), plus (4)
the aggregate Return from Unrestricted Subsidiaries after the
Closing Date and on or prior to the time of such Investment.
7.14 TRANSACTIONS WITH AFFILIATES. Directly or indirectly sell, lease,
transfer, or
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otherwise dispose of any of its properties or assets to, or purchase any
property or assets from, or enter into or permit to exist any contract,
agreement, understanding, loan, advance or guaranty with, or for the benefit of,
any Affiliate of Borrower or any Affiliate of any Restricted Subsidiary (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 (A) such transactions are
conducted in good faith and on terms that are no less
favorable to Borrower or the relevant Restricted Subsidiary
than those that would have been obtained in a comparable
transaction at such time by Borrower or such Restricted
Subsidiary on an arm's-length basis from a Person that is not
an Affiliate of Borrower or such Restricted Subsidiary and (B)
prior to entering into such transaction Borrower shall have
delivered to the Foothill a certificate from an officer of
Borrower 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 (A) a majority of the
disinterested Managers determine that such transactions are
conducted in good faith and on terms that are no less
favorable to Borrower or the relevant Restricted Subsidiary
than those that would have been obtained in a comparable
transaction at such time by Borrower or such Restricted
Subsidiary on an arm's-length basis from a Person that is not
an Affiliate of Borrower or such Restricted Subsidiary and (B)
prior to entering into such transaction Borrower shall have
delivered to Foothill a certificate from an officer of
Borrower certifying to such effect;
(iii) Affiliate Transactions for which Borrower
delivers to Foothill an opinion as to the fairness to Borrower
or such Restricted Subsidiary from a financial point of view
issued by an accounting, appraisal or investment banking firm
of national standing; or
(iv) Dividends or distributions permitted under
Section 7.11.
(b) Anything in Section 7.14(a) to the contrary
notwithstanding, the following shall be deemed not to be Affiliate Transactions:
(i) Permitted Investments permitted by Section 7.13
hereof;
(ii) payments pursuant to the Berthing Agreement;
(iii) the non-exclusive licensing of any service mark
of Borrower to an Affiliate or Affiliates of Borrower; and
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(iv) the payment to BDI of management fees pursuant to the
Management Agreement in an aggregate amount not to exceed 5.0% of
Borrower's Consolidated Cash Flow during any fiscal year, so long as
(A) no Default or Event of Default shall have occurred and be
continuing or would result from any such payment, (B) the Interest
Coverage Ratio for Borrower's most recently ended four full fiscal
quarters for which internal financial statements are available
immediately preceding the date on which any such payment is made would
have been not less than 1.75 to 1.00, determined on a pro forma basis,
as if such payment had been made during such four-quarter period, and
(C) such management fees shall be payable, in arrears, in equal
installments not more frequently than at the end of each calendar
month during such fiscal year.
7.15 SUSPENSION. Suspend or go out of a substantial portion of its
business.
7.16 COMPENSATION. Increase the annual fee or permeeting fees paid to
directors during any year by more than 15% over the prior year; pay or accrue
total cash compensation, during any year, to Barden and Family Members of Barden
in an aggregate amount in excess of 115% of that paid or accrued in the prior
year; provided, however, that if as a result of the acquisition by Borrower of
another Person or substantially all of the assets of another Person, Barden's
responsibilities have been substantially increased, then the total cash
compensation payable to Barden may be increased to such reasonable amount as
Foothill consents.
7.17 USE OF PROCEEDS. Use the proceeds of the Advances made hereunder for
any purpose other than (i) on the Closing Date, to pay transactional costs and
expenses incurred in connection with this Agreement, and (ii) thereafter,
consistent with the terms and conditions hereof, for its lawful and permitted
purposes.
7.18 CHANGE IN LOCATION OF CHIEF EXECUTIVE OFFICE; INVENTORY AND EQUIPMENT
WITH BAILEES. Relocate its chief executive office to a new location without
providing 30 days prior written notification thereof to Foothill and so long as,
at the time of such written notification, Borrower provides any financing
statements or fixture filings necessary to perfect and continue perfected
Foothill's security interests and also provides to Foothill a Collateral Access
Agreement with respect to such new location. The Inventory and Equipment shall
not at any time now or hereafter be stored with a bailee, warehouseman, or
similar party without Foothill's prior written consent.
7.19 NO PROHIBITED TRANSACTIONS UNDER ERISA. Directly or indirectly:
(a) engage, or permit any Restricted Subsidiary of Borrower to engage, in
any prohibited transaction which is reasonably likely to result in a civil
penalty or excise tax described in Sections 406 of ERISA or 4975 of the IRC for
which a statutory or class exemption is not available or a private exemption has
not been previously obtained from the Department of Labor;
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(b) permit to exist with respect to any Benefit Plan any accumulated
funding deficiency (as defined in Sections 302 of ERISA and 412 of the IRC),
whether or not waived;
(c) fail, or permit any Restricted Subsidiary of Borrower to fail, to
pay timely required contributions or annual installments due with respect to any
waived funding deficiency to any Benefit Plan;
(d) terminate, or permit any Restricted Subsidiary of Borrower to
terminate, any Benefit Plan where such event would result in any liability of
Borrower, any of its Restricted Subsidiaries or any ERISA Affiliate under Title
IV of ERISA;
(e) fail, or permit any Restricted Subsidiary of Borrower to fail, to
make any required contribution or payment to any Multiemployer Plan;
(f) fail, or permit any Restricted Subsidiary of Borrower to fail, to
pay any required installment or any other payment required under Section 412 of
the IRC on or before the due date for such installment or other payment;
(g) amend, or permit any Restricted Subsidiary of Borrower to amend, a
Plan resulting in an increase in current liability for the plan year such that
either of Borrower, any Restricted Subsidiary of Borrower or any ERISA Affiliate
is required to provide security to such Plan under Section 401(a)(29) of the
IRC; or
(h) withdraw, or permit any Restricted Subsidiary of Borrower to
withdraw, from any Multiemployer Plan where such withdrawal is reasonably likely
to result in any liability of any such entity under Title IV of ERISA;
which, individually or in the aggregate, results in or reasonably would be
expected to result in a claim against or liability of Borrower, any of its
Restricted Subsidiaries or any ERISA Affiliate in excess of $50,000.
7.20 FINANCIAL COVENANTS. Fail to maintain: EBITDA. EBITDA of Borrower as
of the end of each calendar month for the immediately preceding 12 month period
of at least $10,000,000;
7.21 MEMBERSHIP INTERESTS. Authorize or issue certificates evidencing the
membership interests in Borrower.
7.22 PERMITTED TAX DISTRIBUTIONS.
(a) Notwithstanding Section 7.11, Borrower, at its option, may declare
and pay Permitted Tax Distributions to its Members; provided, that (i) no Event
of Default shall have occurred and be continuing at the time of any such
Permitted Tax Distribution or would result
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therefrom, (ii) prior to the payment of any such Permitted Tax Distribution,
Borrower shall provide Foothill with a certificate from an officer of Borrower
and an opinion of counsel to the effect that Borrower and each Subsidiary of the
Borrower in respect of which such Permitted Tax 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 (iii) at the
time of any such Permitted Tax Distribution, the most recent audited financial
statements of Borrower provided to Foothill pursuant to Section 6.3 provide that
Borrower and each such Subsidiary were treated as Flow Through Entities for the
period of such financial statements.
(b) Estimated tax distributions shall be made not later than fifteen
days following March 31, May 31, August 31, and December 31 based upon an
estimate of the excess of (i) 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, as applicable, if such period were a taxable year
(computed as provided above) over (ii) distributions attributable to all prior
periods during such taxable year.
(c) Prior to making any estimated tax distribution, Borrower shall
require each Equity Holder to agree that (i) promptly after Borrower and each
Subsidiary of the Borrower file their respective annual tax return, (A) such
Equity Holder shall reimburse Borrower 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 (B) Borrower shall make a
further payment to such Equity Holder to the extent such estimated tax
distributions made to such Equity Holder were less than the tax distributions
actually payable to such Equity Holder with respect to such taxable year and
(ii) 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 Borrower or any Subsidiary of the Borrower
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 (A) such Equity Holder shall reimburse Borrower 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 (B) Borrower 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.
(d) 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 Borrower pursuant to Section 7.1(c) remains outstanding, the amount
of any tax distribution to be made shall be reduced by the amounts such Equity
Holder is obligated to pay Borrower.
7.23 OPERATION OF MAJESTIC STAR CASINO VESSEL. At any time operate the
Majestic Star Casino Vessel outside the navigation limits of the insurance
carried pursuant to Article I,
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Section 1.16 of the Majestic Star Ship Mortgage.
7.24 LIMITATION ON RESTRICTIONS ON SUBSIDIARY DIVIDENDS. 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:
(a) pay dividends or make any other distributions to Borrower or any
of its Restricted Subsidiaries (i) on such Restricted Subsidiary's Capital Stock
or (i) with respect to any other interest or participation in, or measured by,
such Restricted Subsidiary's profits, or
(b) pay any Indebtedness owed to Borrower or any of its Restricted
Subsidiaries, or
(c) make loans or advances to Borrower or any of its Restricted
Subsidiaries, or
(d) transfer any of its assets to Borrower or any of its Restricted
Subsidiaries, except, with respect to clauses (a) through (d) above, for such
encumbrances or restrictions existing under or by reason of:
(t) this Agreement or the other Loan Documents;
(u) the Senior Note Documents;
(v) applicable law;
(w) 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;
(x) customary non-assignment and net worth provisions of any
contract, lease or license entered into in the ordinary course of
business;
(y) customary restrictions on the transfer of assets subject to a
Permitted Lien imposed by the holder of such Lien; and
(z) 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.
7.25 RESTRICTIONS ON SALE AND ISSUANCE OF SUBSIDIARY STOCK. Sell, nor
permit any Restricted Subsidiary to issue or sell, any Stock (other than
directors" qualifying shares) of any
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Restricted Subsidiary to any Person other than Borrower or a Wholly Owned
Subsidiary of Borrower; provided, that Borrower and its Restricted Subsidiaries
may sell all (but not less than all) of the capital Stock of a Restricted
Subsidiary owned by Borrower and its Restricted Subsidiaries if the Net Proceeds
from such Asset Sale are used in accordance with the terms of Section 7.4
hereof.
7.26 RESTRICTIONS ON BHR JOINT VENTURE. Borrower 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 Borrower's Interest Coverage Ratio for
Borrower'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 would have been
not less than 2.0:1.0, determined on a pro forma basis (including the
pro forma application of the net proceeds therefrom), as if such
additional Indebtedness had been incurred at the beginning of such
four-quarter period;
(ii) Indebtedness if, that after giving effect to the incurrence
of such Indebtedness, the aggregate principal amount of BHR Attributed
Debt does not exceed the result of (A) the Maximum Amount, minus (B)
the BHR Attributed Debt, if any, minus (C) the Indenture Reserve; and
(iii) Indebtedness incurred to Refinance any Indebtedness
incurred pursuant to clause (i) above or Indebtedness of the BHR Joint
Venture outstanding on the Closing 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 Stock 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
Stock of the BHR Joint Venture (other than any such Stock owned by Borrower or
any Restricted Subsidiary); or
(e) transfer, other than in the ordinary course of business,
any assets of the BHR Joint Venture, unless:
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(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.
8. EVENTS OF DEFAULT.
Any one or more of the following events shall constitute an event of
default (each, an "Event of Default") under this Agreement:
8.1 If Borrower fails to pay when due and payable or when declared due and
payable, any portion of the Obligations (whether of principal, interest
(including any interest which, but for the provisions of the Bankruptcy Code,
would have accrued on such amounts), fees and charges due Foothill,
reimbursement of Foothill Expenses, or other amounts constituting Obligations);
8.2 If Borrower fails or neglects to perform, keep, or observe (a) any
term, provision, condition, covenant, or agreement: (i) contained in Sections
6.2 (Collateral Reporting), 6.3 (Financial Statements, Reports, Certificates),
6.4 (Tax Returns), 6.7 (Title to Equipment), 6.13 (Compliance with Laws), or
6.15 (Leases) of this Agreement and such failure continues for a period of 5
Business Days; (ii) contained in Sections 6.1 (Accounting System), 6.8
(Maintenance of Equipment), or 6.12 (Location of Inventory and Equipment) of
this Agreement and such failure continues for a period of 15 Business Days; or
(b) any other term, provision, condition, covenant, or agreement contained in
this Agreement or any material term, provision, condition, covenant or agreement
contained in any of the other Loan Documents (giving effect to any grace
periods, cure periods, or required notices, if any, expressly provided for in
such other Loan Documents; in each case, other than any term, provision,
condition, covenant, or agreement that is the subject of another provisions of
this Section 8, in which event such other provision of this Section 8 shall
govern); provided, that, during any period of time that any such failure or
neglect of Borrower referred to in this Section 8.2 exists, even if such failure
or neglect is not yet an Event of Default by virtue of the existence of a grace
or cure period or the pre-condition of the giving of a notice, Foothill shall
not be required to make Advances;
8.3 If there is a Material Adverse Change;
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<PAGE> 70
8.4 If any material portion of Borrower's properties or assets is
attached, seized, subjected to a writ or distress warrant, or is levied upon, or
comes into the possession of any third Person;
8.5 If an Insolvency Proceeding is commenced by Borrower;
8.6 If an Insolvency Proceeding is commenced against Borrower and any of
the following events occur: (a) Borrower consents to the institution of the
Insolvency Proceeding against it; (b) the petition commencing the Insolvency
Proceeding is not timely controverted; (c) the petition commencing the
Insolvency Proceeding is not dismissed within 45 calendar days of the date of
the filing thereof; provided, however, that, during the pendency of such period,
Foothill shall be relieved of its obligation to extend credit hereunder; (d) an
interim trustee is appointed to take possession of all or a substantial portion
of the properties or assets of, or to operate all or any substantial portion of
the business of, Borrower; or (e) an order for relief shall have been issued or
entered therein;
8.7 If Borrower is enjoined, restrained, or in any way prevented by court
order from continuing to conduct all or any material part of its business
affairs;
8.8 If a notice of Lien, levy, or assessment is filed of record with
respect to any of Borrower's properties or assets by the United States
Government, or any department, agency, or instrumentality thereof, or by any
state, county, municipal, or governmental agency, or if any taxes or debts owing
at any time hereafter to any one or more of such entities becomes a Lien,
whether choate or otherwise, upon any of Borrower's properties or assets and the
same is not paid on the payment date thereof;
8.9 If 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 of competent jurisdiction
against Borrower or any of its Subsidiaries and such judgment or judgments
remain undischarged, unbonded, or unstayed for a period of 60 days after entry;
provided, that the aggregate amount of all such judgments exceeds $5,000,000;
8.10 If there is a default in one or more agreements to which Borrower or
any Restricted Subsidiary is a party with one or more third Persons relative to
Indebtedness of Borrower or such Restricted Subsidiary involving an aggregate
amount of $2,500,000 or more, or any other material agreement to which Borrower
or any Restricted Subsidiary is a party with one or more third Persons and, in
either case, such default (a) occurs at the final maturity of the obligations
thereunder, or (b) results in a right by such third Person(s), irrespective of
whether exercised, to accelerate the maturity of Borrower's or such Restricted
Subsidiary's obligations thereunder or to terminate such agreement;
8.11 If Borrower makes any payment on account of Indebtedness that has been
contractually subordinated in right of payment to the payment of the
Obligations, except to the
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extent such payment is permitted by the terms of the subordination provisions
applicable to such Indebtedness;
8.12 If any misstatement or misrepresentation exists now or hereafter in
any warranty, representation, statement, or report made to Foothill by Borrower
or any officer, employee, agent, or director of Borrower, or if any such
warranty or representation is withdrawn;
8.13 If the obligation of any Guarantor under its guaranty or other
third Person under any Loan Document is limited or terminated by operation of
law or by the Guarantor or other third Person thereunder, or any such Guarantor
or other third Person becomes the subject of an Insolvency Proceeding; or
8.14 If there is (i) an "Event of Default" under, and as defined in, the
Indenture, (ii) there is a default under the Harbor Lease that results in a
right by any party thereto (other than Borrower), irrespective of whether
exercised, to terminate the Harbor Lease, or (iii) if the Harbor Lease is not
renewed or is otherwise terminated for a reason other than that the land
underlying the Harbor Lease is purchased by the BHR Joint Venture.
8.15 If Borrower or any of its Restricted Subsidiaries fails to keep in
full force and effect, suffers the termination, revocation, or suspension of,
terminates, forfeits, or suffers a material adverse amendment to, any Gaming
License of Borrower or such Restricted Subsidiary.
9. FOOTHILL'S RIGHTS AND REMEDIES.
9.1 RIGHTS AND REMEDIES. Upon the occurrence, and during the continuation,
of an Event of Default Foothill may, at its election, without notice of its
election and without demand, do any one or more of the following, all of which
are authorized by Borrower:
(a) Declare all Obligations, whether evidenced by this Agreement, by
any of the other Loan Documents, or otherwise, immediately due and payable;
(b) Cease advancing money or extending credit to or for the benefit of
Borrower under this Agreement, under any of the Loan Documents, or under any
other agreement between Borrower and Foothill;
(c) Terminate this Agreement and any of the other Loan Documents as to
any future liability or obligation of Foothill, but without affecting Foothill's
rights and security interests in the Collateral and without affecting the
Obligations;
(d) Settle or adjust disputes and claims directly with Account Debtors
for amounts and upon terms which Foothill considers advisable, and in such
cases, Foothill will credit Borrower's Loan Account with only the net amounts
received by Foothill in payment of such disputed Accounts after deducting all
Foothill Expenses incurred or expended in connection therewith;
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<PAGE> 72
(e) Borrower agrees that, upon the occurrence of and during the
continuance of an Event of Default and at Foothill's request, Borrower
will, and will cause each Restricted Subsidiary of Borrower to (and, by its
execution and delivery of the Guaranty or a joinder thereto, each of
Borrower's Restricted Subsidiaries hereby agrees to), immediately file such
applications for approval and shall take all other and further actions
required by Foothill to obtain such approvals or consents of regulatory
authorities as are necessary to transfer ownership and control to Foothill,
of the Gaming Licenses held by it, or its interest in any Person holding
any such Gaming License. To enforce the provisions of this Section 9.1(e),
Foothill is empowered to request the appointment of a receiver from any
court of competent jurisdiction. Such receiver shall be instructed to seek
from the applicable Gaming Authority an involuntary transfer of control of
any Gaming License for the purpose of seeking a bona fide purchaser to whom
control will ultimately be transferred. Borrower hereby agrees to
authorize, and shall cause each Restricted Subsidiary of Borrower to
authorize (and, by its execution and delivery of the Guaranty or a joinder
thereto, each of Borrower's Restricted Subsidiaries hereby agrees to
authorize), such an involuntary transfer of control upon the request of the
receiver so appointed and, if Borrower or any such Restricted Subsidiary
shall refuse to authorize the transfer, its approval may be required by the
court. Upon the occurrence and continuance of an Event of Default, Borrower
shall, and shall cause each Restricted Subsidiary of Borrower to (and, by
its execution and delivery of the Guaranty or a joinder thereto, each of
Borrower's Subsidiaries hereby agrees to), further use its reasonable best
efforts to assist in obtaining approval of the applicable Gaming Authority,
if required, for any action or transactions contemplated by this Agreement
or the Loan Documents, including, preparation, execution, and filing with
the applicable Gaming Authority of the assignor's or transferor's portion
of any application or applications for consent to the assignment of any
Gaming License or transfer of control necessary or appropriate under the
applicable Gaming Authority's rules and regulations for approval of the
transfer or assignment of any portion of the Collateral, together with any
Gaming License or other authorization. Borrower acknowledges, and shall
cause each of its Restricted Subsidiaries to acknowledge (and, by its
execution and delivery of the Guaranty or a joinder thereto, each of
Borrower's Restricted Subsidiaries hereby acknowledges), that the
assignment or transfer of Gaming Licenses is integral to Foothill's
realization of the value of the Collateral, that there is no adequate
remedy at law for failure by Borrower or any such Restricted Subsidiary to
comply with the provisions of this Section 9.1(e) and that such failure
would not be adequately compensable in damages, and therefore agrees that
the agreements contained in this Section 9.1(e) may be specifically
enforced.;
(f) Without notice to or demand upon Borrower or any Guarantor, make
such payments and do such acts as Foothill considers necessary or
reasonable to protect its security interests in the Collateral. Borrower
agrees to assemble the Personal Property Collateral if Foothill so
requires, and to make the Personal Property Collateral available to
Foothill as Foothill may designate. Borrower authorizes Foothill to enter
the premises where the Personal Property Collateral is located, to take and
maintain possession of the Personal Property Collateral, or any part of it,
and to pay, purchase, contest, or compromise any encumbrance, charge, or
Lien that in Foothill's determination appears to conflict with its security
interests and to pay all expenses
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<PAGE> 73
incurred in connection therewith. With respect to any of Borrower's owned
or leased premises, Borrower hereby grants Foothill a license to enter into
possession of such premises and to occupy the same, without charge, for up
to 120 days in order to exercise any of Foothill's rights or remedies
provided herein, at law, in equity, or otherwise;
(g) Without notice to Borrower (such notice being expressly waived),
and without constituting a retention of any collateral in satisfaction of
an obligation (within the meaning of Section 9505 of the Code), set off and
apply to the Obligations any and all (i) balances and deposits of Borrower
held by Foothill, or (ii) indebtedness at any time owing to or for the
credit or the account of Borrower held by Foothill;
(h) Hold, as cash collateral, any and all balances and deposits of
Borrower held by Foothill to secure the full and final repayment of all of
the Obligations;
(i) Ship, reclaim, recover, store, finish, maintain, repair, prepare
for sale, advertise for sale, and sell (in the manner provided for herein)
the Collateral. Foothill is hereby granted a license or other right to use,
without charge, Borrower's labels, patents, copyrights, rights of use of
any name, trade secrets, trade names, trademarks, service marks, 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 and Borrower's rights under all licenses and all
franchise agreements shall inure to Foothill's benefit;
(j) Sell the Collateral at either a public or private sale, or both,
by way of one or more contracts or transactions, for cash or on terms, in
such manner and at such places (including Borrower's premises) as Foothill
determines is commercially reasonable. It is not necessary that the
Collateral be present at any such sale;
(k) Foothill shall give notice of the disposition of the Collateral as
follows:
(1) Foothill shall give Borrower and each holder of a security
interest in the Personal Property Collateral who has filed with
Foothill a written request for notice, a notice in writing of the time
and place of public sale, or, if the sale is a private sale or some
other disposition other than a public sale is to be made of the
Personal Property Collateral, then the time on or after which the
private sale or other disposition is to be made;
(2) The notice shall be personally delivered or mailed, postage
prepaid, to Borrower as provided in Section 12, at least 10 days
before the date fixed for the sale, or at least 10 days before the
date on or after which the private sale or other disposition is to be
made; no notice needs to be given prior to the disposition of any
portion of the Personal Property Collateral that is perishable or
threatens to decline speedily in value or that is of a type
customarily sold on a recognized market. Notice to Persons other than
Borrower claiming an interest in
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<PAGE> 74
the Personal Property Collateral shall be sent to such addresses as
they have furnished to Foothill;
(3) If the sale is to be a public sale, Foothill also shall give
notice of the time and place by publishing a notice one time at least
10 days before the date of the sale in a newspaper of general
circulation in the county in which the sale is to be held;
(l) Foothill may credit bid and purchase at any public sale; and
(m) Any deficiency that exists after disposition of the Personal Property
Collateral as provided above will be paid immediately by Borrower. Any excess
will be returned, without interest and subject to the rights of third Persons,
by Foothill to Borrower.
All right, remedies, and powers provided in this Agreement relative to the
Collateral may be exercised only to the extent that the exercise thereof does
not violate any applicable mandatory provision of the applicable gaming laws,
rules, and regulations enacted by the applicable Gaming Authority (the
"Applicable Gaming Laws") and all provisions of this Agreement relative to the
Collateral are intended to be subject to all applicable mandatory provisions of
the Applicable Gaming Laws and to be limited solely to the extent necessary to
not render the provisions of this Agreement invalid or unenforceable, in whole
or in part. Foothill will timely apply for and receive all required approvals of
the applicable Gaming Authority for the sale or other disposition of gaming
Equipment regulated by Applicable Gaming Laws (including any such sale or
disposition of gaming Equipment consisting of slot machines, gaming tables,
cards, dice, gaming chips, player tracking systems, and all other "gaming
devices" (as such term or words of like import referring thereto are defined in
the Applicable Gaming Laws), and "associated equipment" (as such term or words
of like import referring thereto are defined in the Applicable Gaming Laws).
9.2 REMEDIES CUMULATIVE. Foothill's rights and remedies under this
Agreement, the Loan Documents, and all other agreements shall be cumulative.
Foothill shall have all other rights and remedies not inconsistent herewith as
provided under the Code, by law, or in equity. No exercise by Foothill of one
right or remedy shall be deemed an election, and no waiver by Foothill of any
Event of Default shall be deemed a continuing waiver. No delay by Foothill shall
constitute a waiver, election, or acquiescence by it.
10. TAXES AND EXPENSES.
If Borrower fails to pay any monies (whether taxes, assessments,
insurance premiums, or, in the case of leased properties or assets, rents or
other amounts payable under such leases) due to third Persons, or fails to make
any deposits or furnish any required proof of payment or deposit, all as
required under the terms of this Agreement, then, to the extent that Foothill
determines that such failure by Borrower could result in a Material Adverse
Change, in its discretion and without
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<PAGE> 75
prior notice to Borrower, Foothill may do any or all of the following: (a) make
payment of the same or any part thereof; (b) set up such reserves in Borrower's
Loan Account as Foothill deems necessary to protect Foothill from the exposure
created by such failure; or (c) obtain and maintain insurance policies of the
type described in Section 6.10, and take any action with respect to such
policies as Foothill deems prudent. Any such amounts paid by Foothill shall
constitute Foothill Expenses. Any such payments made by Foothill shall not
constitute an agreement by Foothill to make similar payments in the future or a
waiver by Foothill of any Event of Default under this Agreement. Foothill need
not inquire as to, or contest the validity of, any such expense, tax, or Lien
and the receipt of the usual official notice for the payment thereof shall be
conclusive evidence that the same was validly due and owing.
11. WAIVERS; INDEMNIFICATION.
11.1 DEMAND; PROTEST; ETC. Borrower waives demand, protest, notice of
protest, notice of default or dishonor, notice of payment and nonpayment,
nonpayment at maturity, release, compromise, settlement, extension, or renewal
of accounts, documents, instruments, chattel paper, and guarantees at any time
held by Foothill on which Borrower may in any way be liable.
11.2 FOOTHILL'S LIABILITY FOR COLLATERAL. So long as Foothill complies with
its obligations, if any, under Section 9207 of the Code, Foothill shall not in
any way or manner be liable or responsible for: (a) the safekeeping of the
Collateral; (b) any loss or damage thereto occurring or arising in any manner or
fashion from any cause; (c) any diminution in the value thereof; or (d) any act
or default of any carrier, warehouseman, bailee, forwarding agency, or other
Person. All risk of loss, damage, or destruction of the Collateral shall be
borne by Borrower.
11.3 INDEMNIFICATION. Borrower shall pay, indemnify, defend, and hold
Foothill, each Participant, and each of their respective officers, directors,
employees, counsel, agents, and attorneysinfact (each, an "Indemnified Person")
harmless (to the fullest extent permitted by law) from and against any and all
claims, demands, suits, actions, investigations, proceedings, and damages, and
all reasonable attorneys fees and disbursements and other costs and expenses
actually incurred in connection therewith (as and when they are incurred and
irrespective of whether suit is brought), at any time asserted against, imposed
upon, or incurred by any of them in connection with or as a result of or related
to the execution, delivery, enforcement, performance, and administration of this
Agreement and any other Loan Documents or the transactions contemplated herein,
and with respect to any investigation, litigation, or proceeding related to this
Agreement, any other Loan Document, or the use of the proceeds of the credit
provided hereunder (irrespective of whether any Indemnified Person is a party
thereto), or any act, omission, event or circumstance in any manner related
thereto (all the foregoing, collectively, the "Indemnified Liabilities").
Borrower shall have no obligation to any Indemnified Person under this Section
11.3 with respect to any Indemnified Liability that a court of competent
jurisdiction finally determines to have resulted from the gross negligence or
willful misconduct
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<PAGE> 76
of such Indemnified Person. This provision shall survive the termination of this
Agreement and the repayment of the Obligations.
12. NOTICES.
Unless otherwise provided in this Agreement, all notices or demands by
any party relating to this Agreement or any other Loan Document shall be in
writing and (except for financial statements and other informational documents
which may be sent by firstclass mail, postage prepaid) shall be personally
delivered or sent by registered or certified mail (postage prepaid, return
receipt requested), overnight courier, or telefacsimile to Borrower or to
Foothill, as the case may be, at its address set forth below:
If to Borrower: THE MAJESTIC STAR CASINO, LLC
One Buffington Harbor Drive
Gary, Indiana 46406-3000
Attn: Michael E. Kelly
Fax No. 219.977.7811
With copies to: DYKEMA GOSSET PLLC
400 Renaissance Center
Detroit, Michigan 48243-1668
Attn: Judy O'Neill, Esq.
Fax No. 313.568.6915
and: BARDEN DEVELOPMENT, INC.
400 Renaissance Center, Suite 2400
Detroit, Michigan 48243-1668
Attn: Michelle Sherman
Fax No. 313.259.0154
If to Foothill: FOOTHILL CAPITAL CORPORATION
11111 Santa Monica Boulevard
Suite 1500
Los Angeles, California 90025-3333
Attn: Business Finance Division Manager
Fax No. 310.478.9788
With copies to: BROBECK, PHLEGER & HARRISON LLP
550 South Hope Street
Los Angeles, California 90071
Attn: John Francis Hilson, Esq.
Fax No. 213.745.3345
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<PAGE> 77
The parties hereto may change the address at which they are to receive
notices hereunder, by notice in writing in the foregoing manner given to the
other. All notices or demands sent in accordance with this Section 12, other
than notices by Foothill in connection with Sections 9504 or 9505 of the Code,
shall be deemed received on the earlier of the date of actual receipt or 3 days
after the deposit thereof in the mail. Borrower acknowledges and agrees that
notices sent by Foothill in connection with Sections 9504 or 9505 of the Code
shall be deemed sent when deposited in the mail or personally delivered, or,
where permitted by law, transmitted telefacsimile or other similar method set
forth above.
13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.
THE VALIDITY OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS (UNLESS
EXPRESSLY PROVIDED TO THE CONTRARY IN AN ANOTHER LOAN DOCUMENT), THE
CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT HEREOF AND THEREOF, AND THE RIGHTS
OF THE PARTIES HERETO AND THERETO WITH RESPECT TO ALL MATTERS ARISING HEREUNDER
OR THEREUNDER OR RELATED HERETO OR THERETO SHALL BE DETERMINED UNDER, GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA. THE
PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE TRIED AND LITIGATED ONLY IN THE
STATE AND FEDERAL COURTS LOCATED IN THE COUNTY OF LOS ANGELES, STATE OF
CALIFORNIA OR, AT THE SOLE OPTION OF FOOTHILL, IN ANY OTHER COURT IN WHICH
FOOTHILL SHALL INITIATE LEGAL OR EQUITABLE PROCEEDINGS AND WHICH HAS SUBJECT
MATTER JURISDICTION OVER THE MATTER IN CONTROVERSY. EACH OF BORROWER AND
FOOTHILL WAIVES, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, ANY RIGHT EACH
MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO VENUE TO
THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION 13.
BORROWER AND FOOTHILL HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF
ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF ANY OF THE LOAN
DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING CONTRACT
CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR
STATUTORY CLAIMS. EACH OF BORROWER AND FOOTHILL REPRESENTS THAT IT HAS REVIEWED
THIS WAIVER AND EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS
FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, A COPY OF
THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
14. DESTRUCTION OF BORROWER'S DOCUMENTS.
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<PAGE> 78
All documents, schedules, invoices, agings, or other papers delivered
to Foothill may be destroyed or otherwise disposed of by Foothill 4 months after
they are delivered to or received by Foothill, unless Borrower requests, in
writing, the return of said documents, schedules, or other papers and makes
arrangements, at Borrower's expense, for their return.
15. GENERAL PROVISIONS.
15.1 EFFECTIVENESS. This Agreement shall be binding and deemed effective
when executed by Borrower and Foothill.
15.2 SUCCESSORS AND ASSIGNS. This Agreement shall bind and inure to the
benefit of the respective successors and assigns of each of the parties;
provided, however, that Borrower may not assign this Agreement or any rights or
duties hereunder without Foothill's prior written consent and any prohibited
assignment shall be absolutely void. No consent to an assignment by Foothill
shall release Borrower from its Obligations. Foothill may assign this Agreement
and its rights and duties hereunder and no consent or approval by Borrower is
required in connection with any such assignment. Foothill reserves the right to
sell, assign, transfer, negotiate, or grant participations in all or any part
of, or any interest in Foothill's rights and benefits hereunder. In connection
with any such assignment or participation, Foothill may disclose all documents
and information which Foothill now or hereafter may have relating to Borrower or
Borrower's business. To the extent that Foothill assigns its rights and
obligations hereunder to a third Person, Foothill thereafter shall be released
from such assigned obligations to Borrower and such assignment shall effect a
novation between Borrower and such third Person.
15.3 SECTION HEADINGS. Headings and numbers have been set forth herein for
convenience only. Unless the contrary is compelled by the context, everything
contained in each section applies equally to this entire Agreement.
15.4 INTERPRETATION. Neither this Agreement nor any uncertainty or
ambiguity herein shall be construed or resolved against Foothill or Borrower,
whether under any rule of construction or otherwise. On the contrary, this
Agreement has been reviewed by all parties and shall be construed and
interpreted according to the ordinary meaning of the words used so as to fairly
accomplish the purposes and intentions of all parties hereto.
15.5 SEVERABILITY OF PROVISIONS. Each provision of this Agreement shall be
severable from every other provision of this Agreement for the purpose of
determining the legal enforceability of any specific provision.
15.6 AMENDMENTS IN WRITING. This Agreement can only be amended by a writing
signed by both Foothill and Borrower.
15.7 COUNTERPARTS; TELEFACSIMILE EXECUTION. This Agreement may be executed
in any number of counterparts and by different parties on separate counterparts,
each of which,
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<PAGE> 79
when executed and delivered, shall be deemed to be an original, and all of
which, when taken together, shall constitute but one and the same Agreement.
Delivery of an executed counterpart of this Agreement by telefacsimile shall be
equally as effective as delivery of an original executed counterpart of this
Agreement. Any party delivering an executed counterpart of this Agreement by
telefacsimile also shall deliver an original executed counterpart of this
Agreement but the failure to deliver an original executed counterpart shall not
affect the validity, enforceability, and binding effect of this Agreement.
15.8 REVIVAL AND REINSTATEMENT OF OBLIGATIONS. If the incurrence or payment
of the Obligations by Borrower or any Guarantor of the Obligations or the
transfer by either or both of such parties to Foothill of any property of either
or both of such parties should for any reason subsequently be declared to be
void or voidable under any state or federal law relating to creditors' rights,
including provisions of the Bankruptcy Code relating to fraudulent conveyances,
preferences, and other voidable or recoverable payments of money or transfers of
property (collectively, a "Voidable Transfer"), and if Foothill is required to
repay or restore, in whole or in part, any such Voidable Transfer, or elects to
do so upon the reasonable advice of its counsel, then, as to any such Voidable
Transfer, or the amount thereof that Foothill is required or elects to repay or
restore, and as to all reasonable costs, expenses, and attorneys fees of
Foothill related thereto, the liability of Borrower or such Guarantor
automatically shall be revived, reinstated, and restored and shall exist as
though such Voidable Transfer had never been made.
15.9 INTEGRATION. This Agreement, together with the other Loan Documents,
reflects the entire understanding of the parties with respect to the
transactions contemplated hereby and shall not be contradicted or qualified by
any other agreement, oral or written, before the date hereof.
15.10 GAMING LAWS. 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
Borrower, 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
Borrower, under any of the Applicable Gaming Laws, including Indiana Code 4-33.
[Remainder of page left intentionally blank.]
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<PAGE> 80
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in Los Angeles, California.
THE MAJESTIC STAR CASINO, LLC
an Indiana limited liability company
By /S/ MICHAEL KELLY
Name: Michael Kelly
Title: Chief Operating and Financial Officer
FOOTHILL CAPITAL CORPORATION,
a California corporation
By /S/ BRIAN G. DUFFY
Name: Brian G. Duffy
Title: Vice President
S-1
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 18,427,471
<SECURITIES> 0
<RECEIVABLES> 984,587
<ALLOWANCES> 24,450
<INVENTORY> 58,927
<CURRENT-ASSETS> 27,744,945
<PP&E> 69,068,462
<DEPRECIATION> 14,788,228
<TOTAL-ASSETS> 132,066,727
<CURRENT-LIABILITIES> 18,724,523
<BONDS> 129,394,964
0
0
<COMMON> 0
<OTHER-SE> (16,052,760)
<TOTAL-LIABILITY-AND-EQUITY> 132,066,727
<SALES> 90,497,403
<TOTAL-REVENUES> 90,497,403
<CGS> 0
<TOTAL-COSTS> 74,999,527
<OTHER-EXPENSES> 2,110,678
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,203,978
<INCOME-PRETAX> 2,183,220
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,183,220
<DISCONTINUED> 0
<EXTRAORDINARY> (15,238,156)
<CHANGES> 0
<NET-INCOME> (13,054,936)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
